We forecast that both PCHEM and LCT's 3Q17 results would be in-line with market expectations with an upward bias. Key point is both managed to turnaround their facilities within stipulated plan and ASPs have crept up higher due to the global production disruption. We are positive on the sector on favourable demand-supply dynamics and undemanding valuations. We have BUY calls on PCHEM and LCT; LCT is the top pick on cheaper valuations.
SHSZ300 Index – Major Recovery Intact by Nik Ihsan Raja Abdullah
FBMKLCI failed to hold onto its early gains as profit taking activities accelerated. At day's end, the benchmark declined 5.33pts to settle at 1,736.14, led by declines in YTL, GENM and IJM. Market breadth was bearish with losers outpacing gainers by 599 to 276. A total of 2.49b shares worth MYR2.13b changed hands. As global equities continue to rally, downside risk for FBMKLCI remains limited. Note that the 2018 Budget will be unveiled on Friday, which may boost the local stock market.
Continued robust GDP growth in 3Q2017 by Suhaimi Ilias
The rise in index of leading economic indicators was sustained at +2.6% YoY in Aug 2017 (July 2017: +2.7% YoY), and together with the performance of key economic indicators in July-Aug 2017, suggests continued robust real GDP growth in 3Q 2017 after the +5.7% expansion in 1H 2017.
E.U: Euro-Area companies expand workforce as order growth picks up. The euro-area economy maintained its strong momentum at the start of the final quarter of this year, with rising workloads encouraging companies to take on new staff at the sharpest pace in more than a decade. A Purchasing Managers' Index for manufacturing and services slipped to 55.9 in October from 56.7 in September, IHS Markit said. While the reading weakened to a two-month low, job creation in manufacturing rose to the highest level since data collection started in 1997, reflecting strong order inflows that were buoyed by export demand. Service-sector employment also strengthened. (Source: Bloomberg)
Germany: Companies boosted hiring and raised prices in response to surging orders even as growth slowed slightly at the start of the fourth quarter. A composite Purchasing Managers' Index slipped to 56.9 in October from 57.7 in September, IHS Markit said. "The fundamentals remained strong and the economy has carried robust growth momentum into the closing stages of the year," said Phil Smith, an economist at IHS Markit. "Inflationary pressures continued to revive during the month." The combination of rising prices and falling unemployment in the euro area's largest economy should come as good news for the European Central Bank as it prepares to gradually reduce stimulus. (Source: Bloomberg)
U.K: Brings Brexit transition push into line with EU stance. The U.K. has shifted its approach to the transition agreement it wants to put in place for after Brexit, falling into line with the European Union's long-held stance. Businesses have been demanding an urgent deal with the EU that would allow trade to continue as usual for two years after Brexit day in March 2019. Chancellor of the Exchequer Phil p Hammond had championed their calls, saying the longer it took to secure such an accord, the less it was worth. He backed away from those comments, a day after Prime Minister Theresa May surprised lawmakers by saying that transition would only be part of the final Brexit deal, which isn't expected for another year. (Source: Bloomberg)
Singapore: MAS needs to be proactive if CPI pressures pick up, Menon says. Ravi Menon, managing director of Monetary Authority of Singapore, says inflation is still well below the historical average, but policy makers need to be proactive if a stronger economy results in a pickup in price pressures. "Our track record shows that we are keenly focused on inflation, keeping inflation under control," Menon says in interview in Singapore. "And as long as inflation remains benign, the current policy stance has been appropriate." "Being proactive has been our track record for the last 40 years, it is not going to be different this time around," he says. (Source: Bloomberg)
Glove: Top Glove, Adventa, Supermax shares fall. The shares of the three company plunged yesterday after Top Glove said it was not acquiring its two smaller rivals. The world's largest rubber glove manufacturer told Bursa Malaysia yesterday that its board of directors is constantly evaluating M&A opportunities as part of its business expansion strategy. However, it said it is not acquiring Adventa or Supermax. "Top Glove is currently in negotiations to acquire a glove manufacturer, the terms and conditions of which has not been finalized at this juncture," it added. The transaction will be announced in bursa once a definitive agreement has been entered into. (Source: The Edge Financial Daily)
Sunway: Plans to buy EPF's 20% in Sunway South Quay. The company plans to buy the remaining 20% stake held by the Employees Provident Fund (EPF) in Sunway South Quay Sdn Bhd (SSQ) for MYR136.64m cash plus payment of MYR73.35m for the settlement of the Musyarakah Capital invested by EPF in SSQ. Sunway said its subsidiary, Sunway Lagoon Sdn Bhd (SLSB) signed a share sale agreement (SSA) with EPF today for the stake purchase that would enable the group to have full ownership of the mixed development project and its landbank. (Source: The Edge Markets)
SP Setia: Targets 90% take-up rate at KLEC Mall. The company unveiled the "Bangsar Market by Jaya Grocer" concept yesterday, expects the take-up rate at its high-end retail mall in KL Eco City here to reach 90% by 1Q18, mainly driven by its prime location. According to divisional general manager, the current take up rate is at 60%. The Bangsar Market will occupy the entire second floor of KLEC Mall, measuring 54,000 sq ft, and set to be the biggest integrated urban grocery market once it is open for business. (Source: The Edge Financial Daily)
Edaran: Bagged MYR150m system upgrade job. The company has bagged an MYR149.97m contract from the Royal Malaysian Customs Department, for the enhancement of the department's information systems. It said that Customs has accepted the proposal by its subsidiary Edaran IT Services Sdn Bhd to undertake the service continuity project of "Sistem Maklumat Kastam" for two years with effect from September 2017. (Source: The Edge Markets)
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