Economy
US: Jobless claims drop as confidence picks up. Fewer Americans are filing applications for unemployment benefits, consumer confidence is rising and manufacturing is picking up as the world’s largest economy shows additional signs of strengthening. Jobless claims fell by 6,000 to 312,000 in the week ended June 14. Households this month were the most optimistic about the economic outlook in a year, factories in the Philadelphia region expanded at a faster pace and the index of leading indicators rose in May for the fourth straight month. (Bloomberg)US: American consumers most optimistic on economic outlook in a year. Americans’ outlook of the US economy rose in June to a one-year high, driven by an improving job market that has the potential to boost spending. Gains in payrolls that have exceeded 200,000 workers in each of the past four months will probably give households the confidence to spend, bolstering the economy in the second half of the year. A pickup in hiring, and the wages that go with it, will be needed to help consumers cope with the biggest increase in consumer prices in more than a year. (Bloomberg)
EU: ECB’s Dombret urges banks to lead revival of asset-backed debt. Banks should drive the revival of Europe’s asset-backed securities market as they stand to profit from it, ECB supervisory board member Andreas Dombret said. The stigmatization of many ABS following the 2008 financial crisis is not justified and it’s “very important” to revitalize the market, Dombret said. Banks “are profiting from this, they are making the market in this,” he said. (Bloomberg)
UK: Retail sales drop as food slump offsets World Cup. UK retail sales fell for the first time in four months in May as a World Cup boost failed to offset a slump in demand at food stores. Sales including auto fuel declined 0.5% from April. Food sales slid 2.4% after surging the previous month during the Easter holiday. Sales at other retailers jumped 2.2%, helped by demand for replica football jerseys before the World Cup tournament that started this month. (Bloomberg)
Markets
KPJ (Neutral, TP: RM3.62): KPJ to invest RM1bn in seven to eight new hospitals. KPJ Healthcare is looking to add seven to eight more new hospitals to its stable in the next five years. President and MD Amiruddin Abdul Satar said the new hospitals would be in states such as Perlis, Pahang, Sarawak, Malacca, Johor, Perak and the Klang Valley, among others. From its existing base of 25 hospitals, this would mean that in five years’ time, KPJ could have around 33 hospitals. Amiruddin said that the expansion could cost a total of RM1bn. Meanwhile, he said that KPJ could spend about RM100m per year in capex. “Spending about RM100m per year is common for us, both in buying equipment and paying for progress of instruction for new hospitals,” said Amiruddin. (StarBiz)Kimlun: To launch second project in Medini Iskandar with GDV of RM420m. Kimlun Corp aims to launch its second property project in Medini Iskandar, Johor, with an estimated GDV of RM420m by the end of the year. The two-phase project will consist of about 800 units of SOHO (small office, home office) and some retails properties sited on 13.6ha of freehold land. “We are going to launch Opus Medini Phase 1 around the end of this year and expect it to be completed by the end of 2017,” CEO and executive director Sim Tian Liang said. (StarBiz)
SapuraKencana: Bags 2 EPCIC jobs worth RM1.3bn. SapuraKencanca Petroleum (SKPetro) has bagged two new engineering, procurement, construction, installation and commissioning (EPCIC) contracts worth USD415m (RM1.3bn), boosting the group’s order book to RM28.7bn. SKPetro said the contracts were awarded by Carigali-PTTEPI Operating SB (CPOC) and Hess Exploration and Production Malaysia BV. The award from CPOC is for four wellhead platforms and associated subsea pipelines for Block N-17 and B-17 01 Field Phase 3 development project in the Thailand-Malaysia Joint Development Area. The contract period is 39 months from this month, and is expected to be completed in September 2017. (Financial Daily)
Pestech: Clinches RM1.2m contract. Pestech International has bagged a RM1.2m contract to supply digital-telecommunication equipment to Tenaga Nasional (TNB). Pestech's wholly owned unit, Pestech SB, will supply utility synchronous digital hierarchy (SDH) telecommunications equipment for TNB's 'Phase 1 eastern region'. "The project mainly involves the design, manufacture, inspection and testing, installation, integration with existing facilities, testing and commissioning and maintenance of utility SDH equipment system and required accessories." Pestech said. (SunDaily)
Plantations (Overweight): Seven, including four Malaysians, set sights on NBPO. The race to acquire a major stake in New Britain Palm Oil Ltd (NBPOL) has further intensified, with seven parties expressing interest, including four Malaysian plantation giants. The others are two plantation groups from Indonesia and Singapore’s Wilmar International Ltd. The Indonesian companies are the Sinar Mas group and RGE Group, said sources. Apart from Felda Global Ventures Holdings (FGV), sources said the other Malaysian companies are Sime Darby, Kuala Lumpur Kepong (KLK) and IOI Corp. The parties have expressed interest following a competitive bidding exercise that was conducted by bankers appointed by Kulim (M), which is keen on divesting its 48.97% interest in listed NBPOL. (StarBiz)
MARKET UPDATE
The power of words – Janet Yellen’s, more specifically. Markets worldwide rallied, albeit not overly-robust, on account of her statements following the US Federal Reserve’s policy meeting, in that accommodative monetary policy, rising property and equity price and the improving global economy would lead to above-trend growth in the country. More importantly, she stressed on the importance of putting more Americans back to work, fuelling optimism that low interest rates would remain an ever-present for the foreseeable future, beyond the anticipated mid-2015 hikes. Separately, an index of leading indicators rose in May for the fourth straight month while there were also lesser unemployment benefit claims last week. The Dow Jones Industrial Average and S&P 500 were both 0.1% higher for the day.Gains over in Europe were more pronounced however, spurred on by optimism west of the Atlantic and partially by the European Central Bank’s plans to make large-scale asset purchases if the inflation outlook worsens. On a more specific note, Rolls-Royce Holdings Plc spiked 8.1% after saying it will buy back GBP1bn of its own shares. Maybe more companies should announce share buybacks? For the day, benchmark indices in Spain, France and Germany all gained 0.7% while Italy’s as a notch higher at 0.8%. UK’s FTSE 100 rose 0.4%.
Earlier in the day, Asian markets didn’t celebrate Yellen’s statement with much gusto, mostly closing mixed for the day. Chinese Premier Li Keqiang’s pledge to meet its GDP growth targets were overwhelmed by concerns that new IPOs would divert funds and a slowing property market would hurt economic growth, consequently sending the Shanghai Composite Index 1.6% lower for the day. The Hang Seng Index and Straits Times Index were down 0.1% and 0.2% respectively while the FBM KLCI gained 0.3%.
The contracts keep rolling in for SapuraKencana Petroleum, with another RM1.3bn snagged just three days after announcing about RM2.3bn secured for drilling-related works. The Group’s total order book now stands at a whopping RM27bn, with some projects carrying it up to 2024. The current one entails works on two different sites for Hess Exploration and Carigali-PTTEPI respectively. Separately, it also announced a 5-fold rise in its 1QFY15 net profit to RM509.4m primarily due to the inclusion of its recently-acquired tender rig business. A one-off gain of RM177.8m arising from the acquisition was also recognized.
Source: PublicInvest Research - 20 Jun 2014
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