Economy
US: Rate hike still not likely until second half 2015. Atlanta Federal Reserve Bank President Dennis Lockhart said that despite recent strong US economic growth he still feels the Fed should not raise interest rates until likely the 2H of next year. He said strong 2Q GDP growth was partly a rebound from the dismal start of the year and may not be sustained. More evidence is needed, Lockhart said, before he is convinced the economy is ready to absorb higher rates without a risk to the recovery. (Reuters)EU: Italy recession as German orders fall shows euro strain. Italy unexpectedly returned to recession and German factory orders dropped the most since 2011 as slowing global growth and rising tensions with Russia over Ukraine threaten the euro area’s recovery. Italy’s economy shrank 0.2% in the 2Q after contracting 0.1% in the previous three months. German orders slid 3.2% in June from May. (Bloomberg)
China: Home glut set to worsen as developers avoid cutting prices. The biggest immediate risk facing China’s economy is about to get worse. A reluctance among some developers to sell units at prices lower than they could fetch just months ago threatens to cause a swelling in unsold properties. The worsening glut would extend a slide in construction that’s already put a drag on the world’s second-largest economy, and counter policy makers’ efforts to stimulate the real-estate industry with loosened rules. (Bloomberg)
Malaysia: Registers solid double-digit 1H growth. Malaysia’s trade staged a strong performance in the 1H of this year, backed by a double-digit growth in exports. According to MITI, total trade expanded 9.9% in the first six months of the year while trade surplus surged by 81.8%. Exports registered double-digit growth of 12.5%, compared to a drop of 4% in the 1H of year 2013. “Growth in exports was broad-based with all sectors and major markets recording increases,” it added. (Business Times)
Markets
Boustead: Plans to buy 80% stake in PFC Engineering. Boustead Holdings will buy an 80% stake in PFC Engineering SB for RM20m cash, bringing the group’s plans to expand its oil and gas (O&G) business a step closer to fruition. The firm said that it had inked a conditional share sale agreement with Datuk Abu Talib Mohamed, the brother of Tan Sri Abu Sahid Mohamed of the Maju Group, to acquire 8m shares in PFC Engineering, an integrated engineering and maintenance services provider for the O&G industry. (StarBiz)CBIP: Unit bags RM41m job. CB Industrial Product Holding (CBIP)’s wholly-owned unit, Modipalm Engineering SB, has entered into a contract agreement with PT Jas Mulia that is worth about RM41.1m. CBIP said the contract was for a continuous steriliser palm oil mill with a capacity of 60 tonnes of fresh fruit bunches per hour, complete with construction, machinery and accessories. CBIP said that the agreement was expected to contribute positively to its earnings for the FYE Dec 31, 2014 and 2015. (StarBiz)
Ivory Properties: Walks away from plan to redevelop Plaza Rakyat. Ivory Properties Group is walking away from a deal to redevelop the long-abandoned Plaza Rakyat in Kuala Lumpur after it failed to agree on the terms with the project’s receiver and manager. It said that its unit, Ivory Place SB, and Plaza Rakyat SB (PRSB) could not come to an agreement following their discussion to extend the conditions precedent period of the acquisition and rehabilitation agreement (ARA). (StarBiz)
Fitters: Sets aside RM90m for PVC-O plant. Fitters Diversified has allocated RM90m for capital expenditure (capex) to set up the first phase of its PVC-O (orientated PVC) manufacturing facility in Gebeng, Kuantan. The capex was for land purchase, construction of facility and installation of the initial three production lines, among others, Fitters said. MD Datuk Richard Wong said the company would focus on expediting the construction of the facility and complete it by the 4Q of 2014. Molecor (SEA) SB, Fitter’s 65%- owned subsidiary, will start with three production lines with a total capacity of 11,000 tonnes per year. (StarBiz)
Media Chinese: Still keen to list travel unit. Media Chinese International Ltd (MCIL), which expects advertising expenditure (adex) to rebound in the 2H of the current FY, is still keen to spin off its travel-related unit through an IPO in Hong Kong but will not commit to a listing timeline. "I don't want to give myself a timeline. It's actually lapsed, there is no pressure when to do it, but we'll do it…not too far away," its group CEO Francis Tiong said. Charming Holidays' IPO will be on the main board of the Hong Kong bourse, instead of the Growth Enterprise Market (GEM), considering the bigger size it has right now. (SunBiz)
MAS: To sell MRO unit in India to its partner, GMR. Malaysian Airline System's (MAS) unit, Malaysia Aerospace Engineering SB (MAE), is pulling out from its airframe maintenance, repair and overhaul (MRO) joint venture in India less than three years after it started operations. The Economic Times of India reported that MAE is selling its 50% stake to its joint venture partner, GMR Group. "The Board of Approvals, under the Union Ministry of Commerce, has given its conditional nod to a GMR Group proposal to buy out the 50% stake owned by its partner MAE in an aircraft MRO unit," it said. (SunBiz)
MARKET UPDATE
US equities ended little changed for the day as investors mulled the double failure of merger talks between 21st Century Fox – Time Warner and T-Mobile – Sprint, exacerbated by growing tensions between Russia and its “foes” with the former’s latest move being the restrictions of food imports from the US and other countries that have imposed sanctions on it. The Dow Jones Industrial Average was 0.1% higher for the day and the S&P 500 practically static with a 0.03 point gain.Europe, with more to lose from rising tensions with Russia, unsurprisingly saw its markets sink to three-month lows on account of the growing turmoil. Additionally, reports showed German factory orders unexpectedly declining and Italy falling into recession again with a 0.2% contraction in its second quarter gross domestic product. Respective benchmark indices slumped 0.7% and 2.7%. Spain, France and UK’s indices fell 1.0%, 0.6% and 0.7% as Russia continued reinforcing its troops along its borders with Ukraine. Asian markets slumped in tandem with the weaker overnight performance of its Western counterparts as well as troubles in the Ukrainian conflict. When will we ever have lasting world peace? If it’s not Iraq, it’s Afghanistan or the Middle East… and now Ukraine.
The Shanghai Composite Index and Hang Seng Index slipped 0.1% and 0.3% while the Straits Times Index and FBM KLCI fell 0.2% and 0.4% respectively. Indonesia’s Jakarta Composite Index fell a sharper 1.0% following the start of a Constitutional Court hearing after former general and recent presidential candidate Prabowo Subianto legally challenged the validity of President-elect Joko Widodo’s victory, alleging voter fraud.
Shares of High-5 Conglomerate will not be doing the proverbial “high five” today as its regularization plan has been rejected by the authorities, and now faces suspension and de-listing on August 14 and September 10 respectively. Going by the recent rejection (Bina Goodyear) just a few days ago which saw a subsequent 58% nose-dive in its share price, the same could likely occur in this instance. So, be wary! And what of the broader market? The momentum seems to be with penny-stocks at this juncture, going by recently-heightened activity in Malaysia Airlines, Sumatec Resources, Talam Transform and even Zelan. While some are setting hearts on fire currently, the point to note in momentum trades is that it’s for the moment. While the flavor’s there, well and good. Go for it! But when the mood’s gone, the momentum may be all we’ll hear (i.e. falling to the floor flat on our faces). So, be wary!
Source: PublicInvest Research - 7 Aug 2014
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