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| | | SECTOR RESEARCH | | | | | | Earnings momentum sustained in 1Q18
by Desmond Ch'ng |
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| | | | | | 1Q18 was a decent quarter for the banks, with aggregate core net profit expanding 12% YoY. We continue to project cumulative earnings growth of 7.7% into 2018 and ROEs of about 10.8%. We have since added AMMB to our BUY list, this being our preferred mid-cap stock. Our BUYs on HLFG, Alliance Bank and BIMB are maintained. | |
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| | MACRO RESEARCH | | | | | | Volatile external trade stats
by Suhaimi Ilias |
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| | | | | | Exports growth accelerated by +14.0% YoY in Apr 2018 (Mar 2018: +2.2% YoY), imports rebounded by +9.1% YoY (Mar 2018: -9.6% YoY), and healthy trade surplus was sustained at +MYR13.06b, up +50.9% YoY (Mar 2018: +MYR 14.68b or +172% YoY). External trade outlook is clouded by decline in intermediate goods imports and manufacturing PMI as well as re-escalation of US-China trade tension. Unscheduled public holidays due to general election last month may also affect trade figures in May 2018 | |
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| | | | | | Sustained rise in inflation
by Suhaimi Ilias |
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| | | | | | Headline inflation rate continued to pick up in May 2018 to +4.6% YoY (Apr 2018: +4.5% YoY) on sustained inflationary impact of the Package 1 of the tax reform measures as well as elevated food, beverages, utility and transport costs. Our full-year 2018 inflation rate forecast under the new CPI series (2012=100) is +4.2% (YTD 2018: +4.1%; 2017: +2.9%). | |
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| | | | | | MSCI Asia Ex.Japan Index – Consolidation Has Ended
by Nik Ihsan Raja Abdullah |
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| | | | | | Late buying support helped narrow losses. At day's end, the benchmark eased 0.03pts to 1,755.14. Decliners were led by MAYBANK, MISC, and SIME. Broader market, however, remained bullish with gainers outpacing losers by 534 to 369. A total of 2.76b shares worth MYR2.69b changed hands. Taking cue from the mixed performances in overnight US markets, FBMKLCI could remain choppy today. | |
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| NEWS | | | Outside Malaysia:
U.S: Service industries expand at faster rate than forecast in May on stronger orders and sales, while a gauge of materials prices continued to advance, a survey from the Institute for Supply Management showed. Non-manufacturing index rose to 58.6 from 56.8; readings above 50 indicate growth. Measure of business activity climbed to 61.3 from 59.1; gauge of new orders improved to 60.5 from 60. Employment index advanced to 54.1 from April's 53.6. Gauge of prices paid increased to 64.3 from 61.8. (Source: Bloomberg)
E.U: Services in the Euro Area slowed more than expected in May, led by the region's two biggest economies. A purchasing managers' index of services fell to 53.8, slightly below the initial estimate and down from 54.7 in April. While still above 50, indicating expansion, the report adds to signs that growth in the 19-nation currency bloc may be losing momentum. "The region is on course for its worst quarter since 2016," said Chris Williamson, chief business economist at IHS Markit. The readings indicate growth of 0.4% to 0.5% in the second quarter, "but there is much uncertainty as to whether the pace will continue to weaken in coming months." The composite PMI index was unchanged from its flash estimate of 54.1, an 18-month low. (Source: Bloomberg)
U.K: Consumer spending grew strongly last month as the warmest May on record saw shoppers flock to the stores in droves. Spending increased 5.1% YoY, the most since April 2017, Barclaycard said. In a separate report, the British Retail Consortium said total sales jumped 4.1% YoY, the biggest gain since January 2014 when distortions caused by the timing of Easter are excluded. A scorching early May bank holiday and above-average temperatures throughout the month prompted Britons to splash out on everything from summer clothes to barbecues, delivering a boost to retailers after snowstorms hit sales in the first quarter and brought economic growth to a near standstill. Same-store sales rose 2.8% YoY last month, the BRC said. (Source: Bloomberg)
China: Said to offer to boost U.S. goods purchases by USD25b this year to fulfil President Donald Trump's desire to shrink the U.S. trade deficit with the world's second-largest economy, according to two people familiar with the matter. President Xi Jinping's government has started to quantify its commitment to import more U.S. products as trade talks between the two nations progress, said the people, who spoke on condition of anonymity because the negotiations aren't public. In particular, China has shown willingness to step up purchases of U.S. goods including crude oil, coal and farm products, according to the people briefed on the talks. Commerce Secretary Wilbur Ross was in Beijing from June 2-3 for the third round of high-level trade negotiations, which focused on China agreeing to buying more U.S. energy and farming goods, according to the White House. China has warned it would cancel any promises over trade with the U.S. if the Trump administration moves ahead with planned tariffs. (Source: Bloomberg)
Crude Oil: U.S. said to ask OPEC for 1 million barrel a day output hike. The U.S. government has quietly asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day, according to people familiar with the matter. The rare request came after U.S. retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising oil prices on Twitter. It also follows Washington's decision to re-impose sanctions on Iran's crude exports that had previously displaced about 1 million barrels a day, or just over 1 percent of global production. While U.S. lawmakers have habitually criticized the Organization of Petroleum Exporting Countries at times of high oil prices, and the government has on occasion encouraged the cartel to pump more, it's unusual for Washington to ask for a specific output hike, the same people said, asking not to be named discussing private conversations. It's not clear precisely how the request was communicated. (Source: Bloomberg) | |
| | | | | Other News:
Kerjaya Prospek: Secures MYR138.7m contract for works on STP2 bridge. Its wholly-owned subsidiary has been awarded the construction works for a marine bridge crossing the sea linking Jalan Seri Tanjung Pinang on Penang Island to Seri Tanjung Pinang Phase 2 Island, for a contract sum of MYR138.65m. Construction works will take approximately 27 months, starting on June 11, 2018 and targeting completion by Sept 10, 2020. (Source: The Edge Financial Daily)
Scomi: Proposes private placement to raise up to MYR19.02m. The group has proposed to place out new shares — up to 10% of its total number of issued shares at a price to be fixed later — to third party investors to be identified later to raise up to MYR19.02m, which will be used mainly for working capital for the group and its subsidiaries. (Source: The Edge Financial Daily)
Ekovest: Loses MYR2b Pan Borneo Highway job. The group has lost the much-coveted MYR2.11b contract to build the longest stretch of the Pan Borneo Highway after the project delivery partner, Lebuhraya Borneo Utara S/B (LBU), vetoed the sub-contracting of the award obtained by Samling Resources Bhd in 2016. In a filing with Bursa Malaysia, Ekovest said it received a letter on Monday from Samling Resources, informing them that LBU has not consented for the project to be sub-contracted to the JV company. (Source: The Sun Daily) | |
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