Economy
US: Jobless claims have dropped about as much as they can. Jobless claims in the US probably have nowhere to go but up. The number of Americans filing applications for unemployment insurance benefits over the past month has dropped to the lowest level since early 2006. Yet last month there were 5.4m more people in the labor force, which is for the most part the slice of the population eligible to file, than there were eight years ago. (Boomberg)US: Consumer credit rises on demand for car, student loans. Consumer borrowing rose in June as American households took out auto and student loans. The USD17.3bn increase in consumer credit followed a USD19.6bn May advance, the Federal Reserve reported. Non-revolving loans, including borrowing for cars and college tuition, climbed USD16.3bn. Stronger employment and gains in home values are giving households the confidence to borrow and make big-ticket purchases such as cars and appliances. (Boomberg)
EU: Draghi takes aim at Italy as recession scars euro-area recovery. Mario Draghi says Italy can only blame itself for its third recession since 2007. The day after data showed the euro-area’s third-biggest economy unexpectedly contracted last quarter, the ECB president singled out his country’s lack of structural reform and the disincentive for investment it engenders. That followed an opening statement that lamented the region’s “uneven” recovery. (Boomberg)
Japan: BOJ to stick to optimistic economic view, debate weak exports. The BoJ is set to continue its massive asset purchases and retain its rosy view on the outlook on Friday despite a series of weak data, underscoring its conviction that the world's third biggest economy can withstand the pain from a tax hike without further stimulus. Some BOJ policymakers may propose offering a bleaker view on exports and output than last month, given the recent gloomy data that dashed hopes exports will pick up in time to offset a slump in consumption after the sales tax hike in April. (Reuters)
Markets
CIMB (Outperform, TP: RM8.00), MBSB, RHBCap: Work roundthe- clock on merger. Malaysia Building Society (MBSB), CIMB Group Holdings and RHB Capital (RHBCap), which have entered into negotiations to create the largest banking group in the country under a 90-day exclusivity agreement, is working round-the-clock on the proposed merger. MBSB president and CEO Datuk Ahmad Zaini Othman said the discussions revolve around the various possibilities of moving forward, the strength of each entities and how the merged entity is going to look like. (SunBiz)Green Packet: Shareholders approve P1 investment agreement. Shareholders of Green Packet approved Packet One Networks (Malaysia) SB's (P1) investment agreement between Green Packet, Telekom Malaysia (TM) and Korea's SK Telecom at an EGM yesterday. The group expects the investment agreement, which was announced earlier on March 27, to be completed within the 3Q of this year. At completion, TM will initially invest up to RM560m, of which RM350m will be invested into P1 via the subscription of ordinary shares and RM210m will be invested into Green Packet via newly issued exchangeable bonds. The strategic partners are expected to invest a further RM1.65bn for P1's LTE roll-out. (SunBiz)
KNM: To get slice of Pengerang job, eyeing work worth RM1bn. Shares in KNM Group climbed after the company said it will get a slice of the USD1.33bn (RM4.26bn) contract for an oil refining and petrochemical engineering project at the Pengerang Integrated Complex in Johor. A source told that the process equipment fabrication specialist was eyeing for work worth at least RM1bn from the project. “KNM’s slice of the pie could be valued at between USD300m (RM963m) and USD360m,’’ the source said. (StarBiz)
MISC: Cuts chemical fleet. In a bid to win back investor confidence, MISC, which specialises in energy shipping services, is cutting down on its fleet of chemical tankers to reduce losses. The Petronas subsidiary is looking at holding only seven vessels and all on a charter basis by the end of next year. Early this year, it had a total of 21 vessels, of which 10 were chartered in. “MISC is not exiting the chemical tanker business completely but is looking at a smaller, more manageable and, hopefully, profitable fleet,” said an official close to the company. (StarBiz)
Petronas Dagangan: Posts lower Q2 profit. Petronas Dagangan posted a marginal drop in net profit to RM185.7m for the 2Q ended June 30, against RM197.1m a year earlier. The company attributed the decrease to higher operating expenses (opex) during the quarter and a gain in unrealised foreign exchange from aviation contracts due to the strengthening of the dollar. Petronas Dagangan added that it was on track to operationalise between 30 and 40 stations this year. (StarBiz)
Minetech Resources: Expects more revenue from quarry. Minetech Resources (MRB) expects its quarry products segment to contribute up to 50% to the company’s revenue by next year from 34.5% in 2013. Group ED Matt Chin Leong Choy said the target will be driven by new quarry developments in Perak which will likely start operations by the 3Q of this year. “We are raising RM20m from a right issues exercise to acquire two new quarries. By purchasing and owning quarries, we expect to improve profit from the sales of output from the sites.” (Business Times)
MARKET UPDATE
The FBM KLCI might continue to downtrend today, tracking the weak performance on Wall Street yesterday. Market sentiment was soured by concerns about the Ukraine crisis and uncertainty over its potential effect on the global economy. At the market close, the US stock market ended in the red, as investors moved out of riskier assets and into gold and US Treasuries. Other markets in Asia and Europe also ended mostly on a weak note. Performance-wise, the Dow Jones Industrial Average eased 75.07 points, or 0.5%, to 16,368.27 (lowest close since April 25), the S&P 500 lost 10.67 points, or 0.6%, to 1,909.57 and the Nasdaq Composite gave away 20.08 points, or 0.5%, at 4,334.97. Despite the geopolitical tensions, the economic news released was encouraging with the number of people who applied for unemployment benefits fell below 300,000 for the second time in three weeks. The flight-to-safety trades pushed up prices of Treasury and gold with the yield on a 10-year Treasury note fell to the lowest level in more than a year, at 2.42%, and gold hovered above USD1,300 for the second session in a row.In Europe, investors were shying away as worries mounted that the fragile eurozone economy could be dealt a further blow by Russia’s response to the imposition of EU and US sanctions over its role in the Ukraine crisis. On Thursday, Russia banned food imports from the US, members of the European Union and other countries in retaliation over sanctions. Also, the ECB held its key lending rate, the DAX 30 lost 1% to 9,038.97 and the CAC 40 shed 1.4% to 4,419.83.
Back home, our bellwether index FBM KLCI ended 2.6 points lower at the closing bell but gainers led losers by 459 to 388. Total volume changed hands was 3.19bn valued at RM2.3bn. Regional markets were generally weak with Hang Seng Index lost 0.8%, Shanghai Composite Index shed 1.3%, S&P/ASX 200) down 0.1% and Kospi lost 0.3%. Japan’s Nikkei 225 however, was up 0.5%.
Among the stocks that might have added interest today include: 1) TMC, after Singapore billionaire Peter Lim has acquired additional 26.6% from Tan Sri Vincent Tan for 48 sen per share, raising his stake to 59.2% and triggered a general offer for the rest of the shares; 2) MAS, after the speculation that it will be suspended today to pave way for Khazanah to privatise it; 3) Perwaja, following the report that it could resume production soon
Source: PublicInvest Research - 8 Aug 2014
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