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| | | SECTOR RESEARCH | | | | | | Revving up the recovery
by Ivan Yap |
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| | | | | | We take the view that the sector has bottomed, in both TIV and earnings, and is en route to a cyclical recovery. We are thrilled on the possibility that the overall sector would finally see a strong earnings rebound in 2018 (after two years of double-digit contraction), boosted by MYR's sustained strength against USD and JPY in the last three months. We project a 30% YoY jump in cumulative earnings for net USD/JPY importers within our auto universe for 2018. Our Top BUY pick is BAuto. | |
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| | | | | | Commendable short term pre-emptive steps
by Chee Ting Ong |
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| | | | | | To strengthen palm oil prices and reduce the relatively high palm oil stockpile, the Malaysian government has suspended the export taxes on CPO for a period of 3 mths. We view this pre-emptive move positively as market anticipates Dec 2017 stockpile to be even higher at 2.7m MT. The scheme may temporarily impact refiners' margin negatively, but positive for upstream players. We make no changes to our MYR2,600/t CPO ASP f'cast for 2018. We keep our 12M NEUTRAL sector call. BUYs on IOI and SOP. | |
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| | | | | | Standards moving up
by Mohshin Aziz |
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| | | | | | MAVCOM will impose stringent service quality measures for airports in 3Q18. Failure to comply will result in a financial penalty of up to a maximum of 5% of revenue. On balance, we think MAVCOM is good for the industry but may have short-term negative implication for industry's earnings-MAHB in the near term and airlines later; airlines will likely be next on MAVCOM's service quality measure effort. Remain NEUTRAL on the sector with AirAsia as BUY, followed with HOLD calls on MAHB and AirAsia X. | |
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| | MACRO RESEARCH | | | | | | Slower double-digit growth
by Suhaimi Ilias |
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| | | | | | Export and import growth moderated in Nov 2017 to +14.4% YoY (Oct 2017: +18.7% YoY) and +15.2% YoY (Oct 2017: +20.9% YoY) respectively as trade surplus was sustained at +MYR9.95b (Oct 2017: +MYR10.45b). External trade outlook at end-2017 and early-2018 remains positive, taking cue from the rise in Dec 2017's global manufacturing PMI. | |
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| | | | | | External reserves ends 2017 at 30-month high
by Suhaimi Ilias |
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| | | | | | External reserves was USD102.4b at end-Dec 2017 (mid-Dec 2017: USD102.2b; end-Nov 2017: USD101.9b), highest since mid-July 2015, supported by positive portfolio capital and trade flows. The external reserves' retained import covers fell slightly to 7.2 months (end-Nov 2017: 7.5 months) while its ratio to short-term external debt was stable at 1.1x. External reserves increased by +8.2% in 2017 (2016: -0.7%). | |
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| | | | | | Soft core inflation, steady headline inflation
by Suhaimi Ilias |
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| | | | | | Headline inflation rate in Dec 2017 was steady at +3.3% YoY (Nov 2017: +3.3% YoY) while core inflation rate eased to +3.0% YoY (Nov 2017: +3.3% YoY). As expected, inflation for full year 2017 came in at +3.2% while core inflation settled at +2.9%. We maintain our full-year 2018 headline inflation rate at +3.6%. | |
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| | | | | | Global Equity Is Still On The Run
by Nik Ihsan Raja Abdullah |
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| | | | | | The MSCI World Index (MXWO Index) is on its uptrend. The rally from Mar 2009 low of 684 is still intact with the candles surging past the 138.2% Fibonacci Extension level at 2,100. Momentum remains strong despite hovering in overbought territory. In the near-term, the index may undergo some consolidation to neutralize the "expensive" technical readings but this should not stop the MXWO Index from challenging the following resistances at 2,250 and 2,315 in the medium term. | |
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| NEWS | | | Outside Malaysia:
U.K: Consumer curbed their spending for the first time in five years in 2017 as surging inflation and falling real wages took their toll on high street retailers. Visa's U.K. consumer spending index slipped 0.3% last year from 2016. It also fell an annual 1% in December, the crucial Christmas shopping period for stores. It's unlikely to recover this year, the credit card company said. Online sales growth slowed to an annual 2% last month, from 2.4% in November, while face-to-face spending slumped 2.7%, declining for an eighth straight month, Visa said. (Source: Bloomberg)
China: Foreign reserves extend gains amid capital curbs. China's foreign-exchange reserves posted an 11th straight monthly increase, capping a year of recovery amid tighter capital controls, a stronger yuan and resilient economic growth. The reserves climbed USD20.7b to USD3.14tr in December, according to a People's Bank of China statement. That brought the full-year increase to USD129b. (Source: Bloomberg)
Crude Oil: Scores best opening week in half a decade as supply tightens. Oil had its strongest opening week for any year since 2013 as refiners and exporters whittled away at crude inventories tucked away in U.S. storage tanks. The pull on oil stockpiles in the world's biggest economy accelerated to 7.42 million barrels last week, a level last seen in early August. U.S. inventories are shrinking at a time when OPEC and allies producers including Russia are working to trim a global glut that triggered the 2014 market crash. Brent for March settlement closed at USD67.62/bbl on the London-based ICE Futures Europe exchange. (Source: Bloomberg) | |
| | | | | Other News:
Eduspec: Partners Shenzhen-Hong Kong's PKU to promote STEM education in China. The group is teaming up with PKU-HKUST Shenzhen-Hong Kong Institution to promote Science, Technology, Engineering, and Mathematics (STEM) education in schools in China. Eduspec said the three-year collaboration is for the promotion of STEM with Computer Science and also STEM with Robotics Programs in Chinese schools. Under the collaboration, Eduspec — being a certified STEM programmes distributor in Asia for the Carnegie Mellon University Robotics Academy (CMRA) — will provide PKU with the relevant authorisation documents and confirm that PKU is the teacher training and student examination and certification center for CMRA-Certified STEM Programs in China, including Hong Kong and Macau. (Source: The Edge Financial Daily)
MCT: Gets unconditional takeover offer from Ayala after Bursa waiver. The group has received notice of an unconditional takeover offer at 88sen per share from Philippine-listed Ayala Land Inc, after the latter raised its stake in MCT to 50.19%. This came after the share purchase agreement for the stake buy became unconditional today following the receipt of a waiver from Bursa Malaysia, MCT said in a stock exchange filing. As such, Ayala, which is undertaking the takeover via its wholly-owned unit Regent Wise Investments Ltd (RWIL), is obliged to extend the takeover offer. (Source: The Edge Financial Daily)
Scomi Engineering: Merger to proceed with engineering unit. The group's three-way-turned-two merger will now proceed with its engineering unit, after shareholders of Scomi Engineering agreed to the proposal during a court convened meeting today. Those who voted for the proposed merger represent 93.52% of the total value of votes held by non-interested Scomi Engineering shareholders, against 6.48% that voted against. The proposed merger, to reduce cost and strengthen its balance sheet, would have resulted in the privatisation of the two units after all shareholders in the respective units swap their shares for Scomi Group shares. (Source: The Edge Financial Daily) | |
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