Economy
US: Factory, auto sales data bolster growth outlook. US manufacturing activity rose at a steady clip in June and automobile sales raced to their highest level in almost eight years, pointing to momentum in the economy after a turbulent start to the year. The data on Tuesday painted an upbeat picture for the 2Q and underscored the strength in the economy heading into the last half of the year. (Reuters)US: Manufacturing expands in June at fastest rate in over four years. The US manufacturing sector expanded further in June, driven by the fastest growth in output and new orders in over four years. Financial data firm Markit said its final US Manufacturing PMI rose to 57.3 in June, the highest reading since May 2010. The preliminary read for the index was 57.5. The output subindex rose to 61 from 59.6 while a read on new orders rose to 61.2 from May's final read of 58.8. Both marked the highest level for the indexes since April 2010. (Reuters)
China: Record bond sales show Li focused on GDP over debt. China’s Premier Li Keqiang has promised to cut excessive credit while also meeting a 7.5% economic growth target. Record bond sales last quarter show which pledge he’s prioritizing. Issuance jumped 54% from the previous three months to CNY1.5trn (USD250bn). Yields on two-year AAA rated corporate notes have dropped 137 basis points this year to near a 10-month low of 4.9%, as authorities eased after tightening that had sparked credit crunches in 2013. (Bloomberg)
Japan: Firms see bigger spending, outlook mixed. Major Japanese companies plan to increase spending more than expected this year, BoJ’s "tankan" survey showed, adding to signs the country's economic recovery will get back on track after an expected slip in the 2Q. Business sentiment among big manufacturers' worsened in the three months to June but is poised to improve in the following quarter, the central bank survey found, reinforcing a growing market view the economy will shrug off April's sales tax hike. (Reuters)
Markets
TM (T MK, Underperform, TP: RM5.78), UEM Sunrise (UEMS MK, Outperform, TP: RM2.60): Smart pact. Telekom Malaysia (TM) has teamed up with UEM Sunrise and Iskandar Investment to set up a joint venture, offering smart services in Nusajaya, Johor. The pact is one of the areas that was identified in the collaboration agreement between TM, UEM Sunrise and IIB signed in 2012 for the development and management of the smart and connected Nusajaya. The joint-venture, in which TM will be the majority shareholder, will operate as a managed services company, where it will design and build the smart city infrastructure as well as provide smart building and smart city services that will include security, energy and facility management services. UEM Sunrise executive director Datuk Izzaddin Idris said the company is excited with the collaboration as it paves way for a digital eco-system towards realising its vision of a smart and connected Nusajaya, which is envisioned to be one of the leading modern living communities with world-class telecommunications and ICT services. (Business Times)KPJ (KPJ MK, Neutral, TP: RM3.62): Perlis hospital to open mid- 2015. KPJ Healthcare expects its 26th hospital in Perlis to be ready by the middle of next year. KPJ MD Amiruddin Abdul Satar said the 125-bed hospital holds huge potential as it is set to attract medical tourists from the northern region, such as Thailand and Bangladesh. “Medical tourism is growing and this will augur well for the group,” said Amiruddin, adding that the RM60m Perlis hospital is part of KPJ’s RM1bn capital expenditure over the next five years to build nine hospitals. (Business Times)
AirAsia: The return of AirAsia Japan. AirAsia, which will invest USD35m (RM115m) in its second attempt at a budget airline in Japan, is confident that having full control of the airline operations will ensure the airline's success the second time around. In an effort to re-enter the Japanese market, AirAsia, which will take a 49% stake in the venture, announced it is teaming up with local partners- Rakuten Inc (18%), Octave Japan Co. Ltd (19%), Noevir Holdings Co. Ltd (9%) and Alpen Co. Ltd (5%) to set up AirAsia Japan. Group CEO Tan Sri Tony Fernandes said the fact that its partners are not from the aviation industry would work to AirAsia's advantage rather than be a disadvantage. "Better one guy who knows the business," Fernandes said, adding that the breakup with All Nippon Airways (ANA) last year was due to different management styles. (SunBiz)
Favelle Favco: Gets RM69.2m contracts. Favelle Favco has clinched contracts worth RM69.2m to supply offshore cranes and tower cranes to various customers. The company announced that its wholly-owned subsidiaries, Favelle Favco Cranes (M) SB, Favelle Favco Cranes (USA), Inc and Kroll Cranes A/S had received the letter of intent. “The contracts are expected to contribute positively to the earnings and net assets of Favelle Favco for the FYE Dec31, 2014 and beyond,” it said. (StarBiz)
Mah Sing: Makes Ng CEO. Property veteran Ng Chai Yong has been appointed CEO of Mah Sing Group. With close to 30 years of experience in the civil engineering, banking and property industries, Ng has served several roles including in SP Setia for 11 years where he was director and GM of Bukit Indah Johor SB as well as CEO of Setia Eco-Park SB. The new role at Mah Sing will have Ng provide strategic advice to the group MD and group CEO Tan Sri Leong Hoy Kum and board of directors, and preside over the organisation’s dayto- day operations. (StarBiz)
MARKET UPDATE
The FBM KLCI might follow the strong performance on Wall Street last night, with the leading US equity indices again closed at record highs. The bullish sentiment was kick-started by the release of global manufacturing data that brought no major surprises. The S&P 500 and the Dow Jones again closed at record levels after adding 0.7% and 0.8% to 1,973.32 and 16,956.04 respectively, led by gains in the healthcare, tech and consumer discretionary sectors. Meanwhile, the Nasdaq Composite rose 50.47 points or 1.1% to 4,458.65 (highest since Mar 2000). The economic data released so far indicated rebound in housing and manufacturing i.e. economy is growing albeit at slower rate. Among the key economic data due this week include the report on private-sector job creation or the ADP employment report today and the monthly US jobs report tomorrow, which is released earlier due to July 4 holiday. Separately, the US car sales in June were the highest annual rate in more than 8 years which was above consensus expectations.Across the Atlantic, the European markets closed mostly higher despite a report that showed slowing in euro-zone’s manufacturing sector in June (purchasing manufacturer’s index was 51.8, lower than a preliminary reading of 51.9). At the closing bell, the FTSE 100 stock index added 0.9% to 6,802.92, the DAX 30 increased 0.7% to 9,902.41 and the CAC 40 rose 0.9% to 4,461.12.
Back home, the FBM KLCI ended broadly lower after closing 3.59 points lower at 1,879.12. Losers outpaced gainers by 415 to 369, with 1.7bn shares changed hands valued at RM1.65bn. The regional markets closed mixed with the Nikkei 225 up 1.1%, the Shanghai Composite Index rose 0.1%, Kospi down 0.2% and the S&P/ASX200 lost 0.4%. Hong Kong’s Hang Seng was closed for a holiday. In Japan, the latest Tankan quarterly survey of business sentiment from the Bank of Japan painted a mixed picture. The headline reading of large manufacturers’ business confidence fell from 17 to 12, following April’s consumption tax increase. While disappointing, its impact was offset by the indication that companies are planning to increase their capital expenditure by 7.4% in the current fiscal year. Among the corporate news that might attract trading interest today include: 1) AirAsia, after the Group’s plan to build a low-cost carrier terminal in Japan; 2) Daya (Outperform, TP: RM0.43) following the redesignation of its CEO, Datuk Mazlin Md Junid to non-executive director; 3) Eco World, which was said to be the frontrunner for the 312ha development near the Second Bridge in Batu Kawan into a theme park with a resort and golf course.
Source: PublicInvest Research - 2 Jul 2014
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