Economy
UK: Bank lending lags G7, more help needed. British bank lending to the corporate sector lagged lending in other Group of Seven leading economies last year, despite government attempts to boost the availability of credit. Initiatives to encourage corporate lending such as the Funding For Lending Scheme (FLS) launched by the government and the BoE in 2012 have had limited impact on small business lending, said UHY Hacker Young Partner Laurence Sacker. (Reuters)UK: Central bank meetings to set stage for parting of ways. After the Federal Reserve maintained its path towards raising US interest rates next year, other major central banks will jostle for space on a crowded stage this week. The ECB, BoJ, BoE and the central banks of India and Australia all hold meetings. While imminent action is unlikely, the time when policy settings start pointing in different directions is nearing. (Reuters)
China: July official services PMI dips to six-month low. Growth in China's services sector slipped to a six-month low in July as new orders rose at their weakest rate in at least a year, taking some of the shine off an industry that has been a bright spot in the Chinese economy this year. The official PMI for the non-manufacturing sector slowed to 54.2 in July from June's 55, the National Bureau of Statistics said. (Reuters)
China: Central bank signals refrain on broad monetary easing. The PBOC warned that the country’s credit and money supply have increased rapidly and indicated that it will refrain from broader monetary easing to support growth. “The total debt level has been rising relatively quickly,” the PBOC said in its 2Q monetary policy report on Aug 1. (Bloomberg)
Markets
Boustead: Pricing for sea-fronting land in Pulau Indah fair. Boustead Holdings (BHB) has clarified that the RM310m it paid for the Port Klang Cruise Centre (PKCC) and 69.9 acres of land in Pulau Indah, Selangor was for a few reasons, including scarcity premium for sea-fronting and deep water parcels. BHB said the acquisition of the properties involved two components, namely the cruise terminal (including a jetty) and vacant lands. “The pricing was agreed on the basis that the acquisition of all the nine parcels of land is interdependent,” it said. (StarBiz)KNM: With foreign partner put in bids worth RM3.2bn for Rapid jobs. KNM Group and its foreign partner have put in aggressive bids for the process equipment jobs at Petroliam Nasional’s (Petronas) Refinery and Petrochemical Integrated Development (Rapid) project worth in excess of USD1bn (RM3.21bn), sources said. It is learnt that KNM’s share in the JV is 33% and that the foreign partner was also a company with technical expertise in the oil and gas field. They said any possible wins would boost investors’ confidence towards the local process equipment manufacturer as it works towards gaining investors interest in the company. (StarBiz)
Yinson: Upbeat on FPSO market growth. Yinson Holdings is optimistic the floating production, storage and offloading (FPSO) market will grow at an average rate of 10 to 12 new orders annually in the next five years. Group executive chairman and MD Lim Han Weng said there are six credible and reputable FPSO providers in the world for O&G-related services. “I anticipate the FPSO market to having strong growth potential. We can capitalise on it with our expertise and strong financial background,’’ he said. For the FYE Jan 31, Yinson recorded evenue of RM941.9m and a profit of RM66.4m, as compared with a RM865.2m revenue and RM33.9m profit for the previous financial year. Lim said petroleum exploration firms will likely look for credible and reputable players with good track record and balance sheet for the construction of their FPSO units. “The O&G industry is capital-intensive and no petroleum firms will take the risk by awarding FPSO contract to unknown players.” (Business Times)
REDtone: Disposes of indirect unit in China for RM14m. REDtone International's indirect subsidiary, REDtone Telecommunications China Ltd (REDtone China), has entered into a share sale agreement with Guotai Investment Holdings Ltd for the divestment of Shanghai Hongsheng Business Administration Co Ltd (SHHS) for RMB28m (RM14m) cash. Guotai will acquire the third party payment licence held by SHHS's wholly-owned Shanghai Qianyue Business Administration Co Ltd, REDtone said. SHHS is a wholly-owned subsidiary of REDtone China and is principally involved in the marketing and distribution of discounted call, mobile reload and other telco-related services. (SunBiz)
Media (Neutral): Adex seen picking up in 2H. Industry observers are optimistic that advertising expenditure (adex) will pick up further in 2H2014, as they expect advertisers to fully utilise their budgets before the year ends. Carat Media Services (M) SB CEO Bala Pomaleh says growth has been sliding month-on-month in 1H2014. “We are hoping for the 2H to be better as clients who have been conserving their budgets will start spending again,” he said. Bala added that the spate of recent airline tragedies is unlikely to affect adex in the long term. “The tragedies do have an impact on related industries, but this is likely on a shorter term as we expect things to normalise later.” (StarBiz)
MARKET UPDATE
Suddenly, the world has gotten worried again. Global markets capped off their worst week in two years, tumbling on concerns surrounding Argentina and Portugal, the former defaulting on its interest payments and the latter seeing one of its banks sink deeper into trouble. The Dow Jones Industrial slipped another 0.4% for the day while the S&P 500 declined 0.3%, bringing its total loss for the week to 2.7%, the worst since mid-2012. Economic data releases out of the US were mixed, with manufacturing activity expanding at its fastest in more than 3 years and the unemployment rate inched up a notch to 6.2% as more people entered the labor force, though the jobs data may not necessarily be a bad thing altogether as it gives the US Federal Reserve some leeway in holding back on its interest rate hikes.The toll was greater on European equities as most major markets sank between 1.0% and 2.1% last Friday. With markets having been on a tear in recent months, investors found good reasons to sell. Additionally, the US and European Union ramped up sanctions against Russia while manufacturing data fell short of estimates. Germany’s DAX slumped 2.1% while Spain’s IBEX 35 fell 1.8%. Italy and France’s benchmarks both declined 1.0% while UK’s FTSE 100 slipped 0.8%.
Asian markets traded in a sea of red last Friday with the exception of Philippine’s benchmark which gained 0.4%. With investors here also bolting toward the exit doors, conditions were made worse by poor earnings outlooks of industry heavyweights Samsung Electronics and Cheung Kong Holdings which cast some gloom over near-to-medium term prospects of the continent. Separately, the People’s Bank of China signaled that there would be no broad monetary easing to support growth. The Hang Seng Index and Shanghai Composite Index closed 0.9% and 0.7% lower respectively while the Straits Times Index fell 0.9%. The FBM KLCI fell 0.4%.
The water asset consolidation exercise took a step closer to completion when a Heads of Agreement was signed between the Selangor state and Federal governments late last week, which in-principle concludes the restructuring exercise and signals the beginning of the construction of the Langat 2 water treatment project. Or does it? With plans afoot to change the Menteri Besar in Selangor, will this agreement hold water (no pun intended)? Should it, Puncak Niaga (PNH) will pocket about RM1.56bn in cash (about RM3.78 per share) while Kumpulan Perangsang Selangor (KPS) takes RM990.2m (about RM1.98 per share) for their respective stakes in SSP 2 (+ Syabas, in the case of PNH) and SSP1. Only Gamuda is holding out for its SSP3 stake, deeming the current offer value-destructive, but may have little recourse if the fairly draconian Water Services Industry Act is invoked, which till today remains unclear whether it actually has been or not. Other beneficiaries of this long drawn-out exercise, should it finally be concluded, will be Selangor-based pipe makers like JAKS Resources and Engtex Group.
Source: PublicInvest Research - 4 Aug 2014
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