Economy
US: Sales of existing homes rose more than forecast in May. Purchases of previously owned US homes rose more than projected in May, a sign the industry is stabilizing after a weather-depressed quarter. Sales climbed 4.9% to a 4.9m annualized rate, the most since Oct, after a 4.7m pace in April. The median forecast of 70 economists in a Bloomberg survey called for a rise to 4.7m. Prices increased at the slowest pace in more than two years. (Bloomberg)US: Infrastructure projects threatened by funding row. The US Congress is struggling to reach a deal on funding for America’s highways and bridges, jeopardising thousands of infrastructure projects and construction jobs across the country over the next few months, as an increasingly tense political brawl unfolds. The stand-off is unnerving corporate America because it could have a significant economic impact. The need to finance the Highway Trust Fund is urgent because it is running out of cash and many projects could slow or be halted by the end of the summer. (Financial Times)
EU: Survey suggests pace of eurozone recovery slowing. The pace of the eurozone’s recovery has slowed this month, despite more signs that conditions in the currency bloc’s hard-hit periphery are improving. A flash estimate of a closely watched poll of purchasing managers in the region fell to its lowest level this year on the back of indications of a deepening downturn in its second-largest economy, France. The composite purchasing managers’ index, compiled by data company Markit, fell to 52.8 but below the May reading of 53.5. (Financial Times)
China: Manufacturing gauge climbs in sign of pickup. A Chinese manufacturing gauge rose to a seven-month high in June, supporting Premier Li Keqiang’s contention that the economy will avoid a hard landing as the government steps up efforts to spur growth. A preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 50.8, exceeding the 49.7 median estimate of analysts surveyed by Bloomberg News and a final reading of 49.4 in May. (Bloomberg)
Markets
Fututech: Goes into property with launch of RM300m project in Genting Highlands. Fututech, which provides products and services for the construction and property sectors, is venturing into property development with its maiden project in Gohtong Jaya, Genting Highlands. Executive chairman Tee Eng Ho said that the mixed development project, Vista Residences@Genting Highlands, had a GDV of RM300m and was targeted to be launched by the 4Q of this year. The integrated service apartment building comprising 378 residential units and 28 retail lots will sit on 0.57ha and is expected to be priced from RM700 per sq ft. (StarBiz)Ivory: Plans RM1.4bn projects, developing 80-acre land bank in Penang. Ivory Properties Group plans to develop high-end residential properties with a GDV of RM1.4bn to RM2bn on its 80-acre land bank in Penang over the next couple of years. Group CEO Datuk Low Eng Hock said the new projects were planned for the group’s land bank in Tanjung Tokong, Batu Ferringhi, Jesselton and other parts of the Penang island. For the fiscal year 2014, the group aims to generate about RM180m in revenue from new and ongoing projects such as The Latitude, Taman Bukit Erskine, City Mall & City Residences, and The Wave on the island. (StarBiz)
Sentoria: Secures RM80m PRIMA project in Kuantan. Sentoria Group has bagged a RM80m contract from Grinterra SB to undertake the main contract for the 1Malaysia Housing Programme (1PRIMA) in Kuantan. It said its unit Sentoria Bina SB had accepted the letter of award for the main building and infrastructure of the project on 79.185 acres of government land. Sentoria said work on the project was expected to start on July 1, 2014 and completed by Dec 31, 2016. “Sentoria intends to fund the contract works through internally generated funds as well as bank borrowings. (StarBiz)
Hibiscus Petroleum: Buying Talisman Resources for RM59m. Hibiscus Petroleum is acquiring Talisman Resources Pty Ltd in a deal worth USD18m (RM59m) that also includes the latter’s 25% stake in the Kitan producing oilfield. The company said wholly owned subsidiary Timor Hibiscus Ltd had executed a share-sale agreement to acquire all the shares of Talisman Resources, a wholly owned subsidiary of Toronto Stock Exchange and New York Exchange-listed Talisman Energy Inc. “Under the deal, which was executed on June 23, Hibiscus Petroleum will acquire Talisman’s stake of the oilfield with an effective date of Jan 1, 2014 with all existing assets and liabilities, as well as absorb the risk of well projects to be executed post-agreement, upon the completion of the transaction.” (StarBiz)
Sumatec: Finds more oil at Kazakhstan field. Sumatec Resources says fresh review of its oil and gas field in Rakushechnoye, Kazakhstan has yielded a 14.5% increase in proven oil reserves to 129m barrels. “The increase in reserves is the first significant achievement for Sumatec with this asset,’’ Sumatec CEO Christopher Layton Dalton said. “An additional 10 million barrels of oil is now available under 2P reserves to Sumatec (worth USD175m in net profit from oil sale) without paying any more than the initial USD95m,’’ he said. The estimated net profit of US175m was based on Brent price of US100 (RM321) per barrel and USD35 per barrel net profit of which Sumatec is entitled to 50% of, after two million barrels of oil has been produced. (StarBiz)
MARKET UPDATE
US markets eased off marginally as investors took stock of developments domestic and abroad, and opting to take their feet off the pedal to send the Dow Jones Industrial Average and S&P 500 marginally lower by 0.1% and 0.01% respectively. Readings are good at home, but concerns are rising away from it. Data released yesterday showed sales of existing US homes rising 4.9% to a 4.89mn annualized rate last month, the most since October last year, though home prices also rose at the slowest pace in more than two years. A separate report from Markit Economics showed US manufacturing growth expanding ahead of expectations in June, with an index reading of 57.5 (May: 56.4) and contrary to consensus forecast of 56.0. Markit’s measure of euro-area manufacturing showed declines however, slipping to 51.9 this month from the 52.2 registered in May, consequently having a dampening effect on markets in the region. With the Iraqi conflict continuing to rage on (the latest development being the Iraqi army fighting a breakaway militant group to recapture territories near the borders with Jordan and Syria) and having an impact on oil prices, market sentiment will likely remain jittery. For the day, the key benchmarks of Spain, Germany, France and UK were lower by 0.3%, 0.7%, 0.6% and 0.4% respectively. Italy’s FTSE MIB recorded another >1% decline, closing 1.3% lower at 21,694.75.Asian equities traded mixed despite reports of China’s manufacturing activity as measured by HSBC Holdings/Markit Economics expanding ahead of expectations and coming in above 50 (signaling expansion) for the first time in many months. Investors are now wary that falling property prices and tighter liquidity in the banking system will weigh on economic growth. The Hang Seng Index and Shanghai Composite Index fell 1.7% and 0.1% respectively, the former a little more affected by concerns that a democracy poll may strain ties with the mainland. Elsewhere, the Straits Times Index, FBM KLCI and Jakarta Composite Index all slipped 0.1%.
Various contract announcements and expansionary plans dominated news flows post-market close yesterday, though not particularly huge in quantum or eye-catching. CB Industrial Product secured a contract worth RM18.8mn to supply engineering equipment in relation to its Modipalm technology in Guatemala while Sentoria announced that it has been awarded the main contract for the building and infrastructure works for the PR1MA project worth RM80mn. Meanwhile, Sime Darby announced the acquisition of a Thai-based edible oil company for RM80.4mn while Perdana Petroleum will buy two new work barges for USD84mn (see accompany report today for details). What could be interesting however is who UDA Holdings chooses as its partners for the Pudu Jail development project, with market speculation heavily tipping Eco World Development and the Employees Provident Fund as part of a consortium. The project reportedly has a gross development value of RM7bn.
Source: PublicInvest Research - 24 Jun 2014
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