- 19 Jan 2016
Author: PublicInvest | Publish date: Tue, 19 Jan 2016, 10:48 AM
Economy
Global: OPEC sees oil market rebalancing in 2016, but Iran to counter non-OPEC decline. OPEC forecast that oil supply from non-member countries will post a larger-than-expected decline this year due to the collapse in prices, boosting the need for crude from the producer group. Supply outside the OPEC would decline by 660,000 barrels per day (bpd) in 2016, led by the United States, OPEC said. "The analysis indicates that 2016 will be a supply-driven market. It will also be the year when the rebalancing process starts," OPEC said. (Reuters)
Global: Saudi oil exports climb to seven-month high as refineries return. Saudi Arabia, the world’s largest crude exporter, shipped the most oil in seven months in Nov in a sign that overseas refineries were getting prepared to put plants back on line after seasonal maintenance. Saudi shipments rose to 7.7m barrels a day, the highest since Apr, from 7.3m in Oct, according to data on the website of the Joint Organisations Data Initiative based in Riyadh. (Bloomberg)
EU: ECB unlikely to cut deposit rate in next six months-traders. The ECB is unlikely to cut its deposit rate further in the next six months, even though inflation expectations have nosedived, according to a slim majority of euro money market traders in a Reuters poll. Currently sitting at -0.3%, the negative deposit rate effectively means banks have to pay the ECB to park money overnight. Expectations for inflation have plunged as oil prices have fallen further and are not expected to rise anytime soon. (Reuters)
UK: BOE’s Vlieghe says he’s patient on timing of rate increase. BOE policy maker Gertjan Vlieghe said he’s “patient” on interest rates and wants to see evidence of stronger price pressures before tightening policy. “Inflation pressures remain muted across a wide range of indicators,” he said. “In order to be confident enough of the medium-term inflation outlook to raise bank rate, I would like to see evidence that growth is not slowing further, and that a broad range of indicators related to inflation are generally on an upward trajectory.” (Bloomberg)
UK: Still faces stretch of lowflation even after pound drop. The BOE may have to see a further depreciation of the pound before there’s a noticeable impact on inflation that will allow policy makers to raise interest rates. In a monthly survey by Bloomberg, 33 of 36 economists said the currency’s 6% drop against the dollar in the past two months has strengthened the outlook for consumer prices “a little.” One said it’s helped a lot, while the remaining two said there was no impact. Data on Tuesday will show inflation was just 0.2% in Dec, far below the central bank’s 2% goal. (Bloomberg)
China: Seen posting slowest economic growth in 25 years as policy risks grow. China is expected to report its weakest quarterly economic growth in nearly seven years on Tuesday, adding pressure on policymakers to take bolder steps to ward off fears of a sharper slowdown that are jolting global financial markets. 4Q GDP growth is expected to slow to 6.8% from a year earlier, down from 6.9% in the 3Q and the weakest since early 2009, according to analysts polled by Reuters. (Reuters)
China: To put reserve rule on offshore bank yuan funds. China is stepping up efforts to counter speculative bets against the nation’s currency, through imposing reserve requirements on yuan deposits held on the mainland at offshore participant banks. The move follows pledges by Chinese officials to maintain a stable exchange rate, and a squeeze in interbank funds in Hong Kong that saw borrowing costs in yuan in the city soar to a record last week. Premier Li Keqiang on Friday said that there was "no basis for a continued depreciation of the yuan exchange rate." The offshore yuan advanced after news of the latest measure. (Bloomberg)
Malaysia: Five year bond yield falls to lowest since 2013. Malaysian government bonds rose, driving the five-year yield to its lowest level since 2013, on speculation the nation's debt is luring investors amid a selloff in stocks. The yield on the notes has dropped 18 basis points in the past month, while the benchmark stock gauge lost 1.5%. The government will take measures to cut spending, including studying the privatization of projects, the finance ministry's top bureaucrat Mohd Irwan Serigar Abdullah said. (Bloomberg)
Markets
DRB-Hicom (Outperform, TP: RM1.55): Proton casts eye on Europe again with new engines. Proton Holdings is eyeing to re-enter the European market again after it completes testing an engine with UK company Ricardo. The national car company had held the first firing of its latest engine -- the 1.5 litre turbo gasoline direct injection in the UK. These engines will meet the vigorous euro 6C standards for emissions in Europe. Currently, it cannot export to Europe due to stringent emission rules. (StarBiz)
Boustead: To raise up to RM1.0bn through rights issue. Boustead Holdings (BHB) is proposing a 2-for-5 rights issue to raise gross proceeds of up to RM1.0bn, which will mainly be used for property development and repayment of bank borrowings. The group also proposed a 2-for-5 bonus issue after the completion of the proposed rights issue on an entitlement date to be announced later. It said the proposed rights issue involves the issuance of up to 413.7m rights shares on a renounceable basis. (StarBiz)
PLB: Buys Penang property developer for RM23.5m. PLB Engineering has acquired property developer Phoenix Residences SB (PRSB) for RM23.5m. The firm said that its unit PLB Land SB signed an agreement to acquire 100% equity interest in Penang-based PRSB. (StarBiz)
Hap Seng: To acquire plywood trader for RM14.2m. Hap Seng Consolidated proposed to acquire 2m shares, representing the entire equity base of Lei Shing Hong Wood Products Ltd (LSHWP), for USD3.2m (RM14.2m) to expand its fertilisers division. Hap Seng said it had entered into an equity transfer agreement with Lei Shing Hong Trading Ltd for the entire shareholdings of LSHWP. The target company is involved in general trading and trading of plywood. (Financial Daily)
Abric: Plans cash distribution of 43 sen. Cash rich Abric plans to distribute 43 sen a share totaling RM63.9m to its shareholders under a corporate exercise which will lead to its delisting from Bursa Malaysia Securities. Abric, which is a Practice Note 16 company, had proposed a capital reduction and repayment exercise and a special cash dividend. (StarBiz)
OWG: Plans RM50.2m placement to fund Komtar Tower's revitalisation. Only World Group Holdings (OWG) has proposed a private placement of up 10% of its total issued and paid-up share capital, which could raise about RM50.2m, based on an indicative issue price of RM2.26 sen apiece, to fund its Komtar Tower revitalisation project. The company said the exercise, comprising up to 22.2m shares, will be issued to independent third party investors to be identified later. (Financial Daily)
CAB Cakaran: To place 9.1% of its shares to Indonesia's Salim Group for RM31.2m. CAB Cakaran Corp has proposed to undertake a private placement of 15.1m new shares, representing a substantial 9.1% stake, to Indonesia's Salim Group for RM31.2m or RM2.07 per placement share. CAB said the proceeds raised from the placement will enable the company to reduce its bank borrowings from RM193.1m as at the latest audited Sept 30, 2015 to RM183.1m and will be used as general working capital, and will help reduce its gearing from 1.05x to 0.74x. (Financial Daily)
MARKET UPDATE
With the US market closed for the Martin Luther King Day holiday, all attention was on Europe as crude oil prices continued to weaken in the face of Iranian supply coming on-stream. The country’s oil ministry has given orders to increase production by 500,000 barrels per day even at the risk of further contributing to the price collapse owing to an oversupplied market at this juncture. Prices of Brent crude and the West Texas Intermediate slipped 0.6% and 1.6% overnight to settle below USD29 per barrel. Equity markets buckled further under the weight of worry. Losses on Italy’s benchmark FTSE MIB were particularly pronounced, down 2.7% for the day. Indices in Spain, France and Germany fell 1.0%, 0.5% and 0.3% while UK’s slipped 0.4%. Most Asian bourses were also lower, extending declines into a third week as the crude oil price slump shows no signs of abating. Conversely, the price of gold inched higher as investors sought out safe haven assets. Data released yesterday showed China’s property market improving, helping to drive the Shanghai Composite Index 0.4% higher. The country’s keenly-awaited 4Q15 GDP growth number will be announced later day. Australian and Japanese shares are on the brink of joining China in bear market territory as both countries’ respective benchmarks declined 0.7% and 1.1%. Elsewhere, the Straits Times Index and Hang Seng Index fell 1.5% and 1.4% while the FBM KLCI slipped 0.4%.
Abric Berhad has proposed to distribute 43sen per share and de-list from the Exchange, an exercise which would involve up to RM63.9m and undertaken via a capital reduction and repayment exercise and a special cash dividend. Meanwhile, Boustead Holding is planning to raise about RM1.05bn via a two-for-five rights issue exercise to lower its borrowings (c. RM507m), fund its property development activities (c. RM486m) and for working capital purposes. As a sweetener, the company also plans to give out two bonus shares for every five shares held after the proposed exercise. Only World Group Holdings and CAB Cakaran have both proposed private placements, the former to independent third party investors for about RM50.2m to fund its Komtar Tower revitalization project and the latter to Indonesia’s Salim Group for about RM31.2m. On other non-fund raising related developments, Media Prima is venturing into the home-shopping business while I-Berhad has started works on its Central Plaza Shopping Mall with the recent award of piling-related works to Pintaras Jaya.
Source: PublicInvest Research - 19 Jan 2016
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