Economy

Global: Falling oil cushions Asia economies as Fed threatens currencies. The slump in crude prices is hardly a silver bullet for Asian economies bracing for the fallout from rising US interest rates. But it’s a welcome cushion. One of the top beneficiaries is Indian Prime Minister Narendra Modi, who’s struggling to meet his deficit target. Cheaper oil will slash subsidies and keep inflation in check, leaving him with more cash to offset a revenue shortage. (Bloomberg)

US: Leading economic indicators increased 0.4% in Nov. The index of US leading economic indicators increased in Nov, buoyed by more home construction permits and higher stock prices. The Conference Board’s measure of the economic outlook for the next three to six months rose 0.4% after climbing 0.6% in Oct, the New York-based research group said. (Bloomberg)

US: Applications for jobless benefits fall more than forecast. Fewer Americans than forecast filed applications for unemployment benefits last week, a sign of persistent strength in the job market. Jobless claims fell by 11,000 to 271,000 in the week ended Dec 12, a report from the Labor Department showed Thursday. The median forecast in a Bloomberg survey called for 275,000. (Bloomberg)

EU: Euro zone backs EUR1bn aid for Greece after disputed bill shelved. Senior officials of the euro zone provisionally approved a EUR1bn aid tranche for Greece after Athens withdrew a disputed parallel economic program from parliament, an EU official said. He said Greece had agreed to shelve a bill with social measures to combat what the government calls the humanitarian crisis in the country until the lenders had a chance to review the measures and their funding. (Reuters)

China: Beige Book shows ‘disturbing’ deterioration on all fronts. China’s economic conditions deteriorated across the board in the 4Q, raising doubts over whether it’s successfully transitioning from manufacturing to services led growth. National sales revenue, volumes, output, prices, profits, hiring, borrowing, and capital expenditure were all weaker than the prior three months, according to the 4Q China Beige Book. (Bloomberg)

Markets

FGV (Underperform, TP: RM1.44): To buildwarehousing andlogisticsfacilityin Johor.Felda GlobalVenturesHoldings(FGV)will build a warehousing and logistics facility in Tanjung Langsat,Johor, to enhance the logistical capabilitiesforthe whole group.Thefacility will be built on a 4.0ha land in port bonded area, with utilitiesfor logistics use and directconnection to the port terminal.It isscheduled to be completed in March 2017, group presidentand CEODatuk Mohd Emir Mavani Abdullah said.(StarBiz)

Gadang: Wins RM185mPengerang contract.Gadang Holdings’unit has been awarded an RM185mcontract by Petronas atPengerang, Johor. The company said its unit, Gadang Engineering (M) SBreceived the award from PRPC Utilities and FacilitiesSB, asubsidiary under the Petronas group.“The contract is expected tocontribute positively to the earnings of Gadang group for the FYEMay 31, 2016 onwards,”itsaid.(StarBiz)

Kim Hin: Buys JohanCeramics’ property, assets for RM28m.KimHin Industryisacquiring propertyand assetsfromJohanCeramicsforRM28mcash to expand itsproduction capacityinSeremban and betterposition itselfforthe Peninsularmarket.KimHin will pay for RM20m through bank borrowingsand the balancefrominternally generated funds.The proposed acquisitions aresubject to approvals from thestate authority,shareholdersof JohanCeramics and KH Seremban as well as other relevant authorities,and are expected to be completed by the 1Qof 2016.(SunBiz)

Instacom: Fixes placement share price at 25 sen each. Telecommunication specialistInstacomGroup fixed the issue pricefor its private share placement at 25 sen each.Instacomhad lastmonth proposed to undertake the private placement ofup to 10% ofitsissued and paid-up share capitalto third-partyinvestors.Thecompany said then the exercise could involve up to 323.4m newshares.(Financial Daily)

Scientex: 1Q net profitdoubles to RM60.9m.Scientex saw its netprofit for the1Qended Oct 31, 2015 (1QFY16) doubleto RM60.9m,fromRM30.3min the previouscorresponding quarter,onstrongerdemand for consumer packaging and affordable properties. Revenuewas up 27.7% toRM550.6m, againstRM431.1m previously.(SunBiz)

REDtone:Posts2QnetprofitofRM398,000. REDtone Internationalhasposted a net profit of RM398,000 and revenue ofRM35.1mfor the 2Q ended Oct 31,2015.For the six months endedOct 31, 2015, it posted a net profit of RM936,000 and revenue of RM58.1m. The company said there are no comparative figuresavailable forthe period ended Oct31,2014 due to a change in itsFYE. (SunBiz)

Airline (Neutral): Newbudget carrier enters Malaysia. Malaysia will see the entry of a new low-cost passenger airline, Rayani Air SB,which willofferflightsto and fromklia2 in Sepang,LangkawiInternationalAirportand Kota Baru’sSultan IsmailPetra Airport.The new airline is due to receive its air service license (ASL) and airoperator’s certificate (AOC) from the Departmentof Civil Aviationtoday.(Financial Daily)

MARKET UPDATE

US markets tumbled as the reality of a US rate hike and its strengthening effects on the Dollar started to sink in. Commodities fell as their attractiveness waned in the face of other interest-bearing assets, while crude oil prices weakened further on renewed supply-glut concerns. Data released on the day showed unemployment benefit claims falling last week, reinforcing belief in the strength of the labor market as it’s now 41 weeks running (and the longest since the 1970s) that it has remained below 300,000. Another report showed the country’s current account deficit widening in the third quarter however, as the strong Dollar weighed on exports and profits of multinational companies. The Dow Jones Industrial Average and S&P 500 ended 1.4% and 1.5% lower respectively overnight. There were no such hang-ups in Europe however as exporters and financial companies led markets higher on investors’ belief (and relief) that the hike was a sign of the US Federal Reserve’s endorsement of strength in the world’s largest economy. The likes of Volkswagen AG and Daimler AG saw respective share prices gain in excess of 3% and driving Germany’s benchmark DAX Index 2.6%, this coming despite business confidence in the country slipping in December. Elsewhere around the continent, Italy and Spain’s benchmarks gained 1.5% and 1.7% while France and UK’s rose 1.1% and 0.7%. Never has a rate hike been “cheered” so much in recent history, as Asian markets also joined in the “reveling” earlier in the day with most closing markedly higher for the day. The Shanghai Composite Index and Hang Seng Index rose 1.8% and 0.8% while the Straits Times Index and FBM KLCI gained 0.7% and 1.4% respectively. Indonesia and Thailand’s benchmarks ended 1.6% and 0.6% higher while India and Japan’s gained 1.2% and 1.6%.

Scientex reported a doubling of its net profit for 1QFY16 to RM60.9m owing to stronger sales and margin improvements in its manufacturing business, though also partly aided by increased property-related income. Gadang Holdings has secured RM185m worth of works from Petronas for the RAPID project in Pengerang, Johor. Telekom Malaysia has signed two public-private partnership agreements with the government in relation to the High Speed Broadband Project Phase 2, and which will see it coming up with RM2.3bn of the total RM3.4bn capital outlay over the duration of the 10-year project.

Source: PublicInvest Research - 18 Dec 2015