Economy

Global: Mnuchin says global financial institutions need to tighten belts. Treasury Secretary Steven Mnuchin said international financial institutions such as the World Bank need to operate more efficiently as the US focuses on streamlining its own government operations. In fiscal 2018 budget proposals, the Trump administration called for cutting funding for the World Bank and other multilateral development lenders by USD650m over three years. (Bloomberg)

US: Fed raises rates, unveils balance sheet cuts in sign of confidence. The Federal Reserve raised interest rates on Wednesday for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing US economy and strengthening job market. In lifting its benchmark lending rate by a quarter percentage point to a target range of 1.00% to 1.25% and forecasting one more hike this year, the Fed seemed to largely brush off a recent run of mixed economic data. (Reuters)

US: Consumer prices, retail sales weaken in May. US consumer prices unexpectedly fell in May and retail sales recorded their biggest drop in 16 months, suggesting a softening in domestic demand that could limit the Federal Reserve's ability to continue raising interest rates this year. The Labor Department said its Consumer Price Index dipped 0.1% last month. The Commerce Department said retail sales fell 0.3% last month. (Reuters)

EU: ECB frets over bond purchases with year-end deadline in mind. ECB officials resumed their public debate over the future of their bond-buying plan as some policy makers criticized its impact. VP Vitor Constancio said that an announcement on the EUR2.3trn (USD2.6trn) program must come before the end of the year, when it is currently scheduled to finish, but the decision may not be taken until after the summer. (Bloomberg)

EU: Greece seeks credible debt deal in push for crisis drama finale. Euro-area finance ministers meeting in Luxembourg on Thursday will seek to reach a deal on ways to ease Greece’s debt load, which would close a key chapter in the nation’s bailout drama and end months of uncertainty. A resolution at the so-called Eurogroup meeting would unlock the next slice of financial aid the country needs to repay about EUR7bn (USD7.9bn) in maturing bonds in July. Crucially, the deal is expected to offer some much-needed clarity on Greece’s future debt obligations. (Bloomberg)

UK: Politics, inflation shocks mean rockier path for Carney. Mark Carney just can’t catch a break. After the economy slowed sharply in the 1Q, the BOE governor is now seeing inflation accelerating faster than anticipated, with the latest numbers at a four-year high. Coupled with that is a new minority government and plenty of uncertainty on Brexit. (Bloomberg)

Japan: BOJ slowing bond buys put meeting under scrutiny for taper talk. As it begins a two-day policy meeting on Thursday, market consensus is the BOJ will eventually remove its JPY80trn (USD727bn) annual bond buying target and cut its purchases of debt with more than 10 years to maturity. The only thing unclear is the timing. Governor Haruhiko Kuroda conceded last month the annual pace of bond purchases has slowed to about JPY60 trn. (Bloomberg)

Markets

Bumi Armada (Outperform, TP: RM0.90): Sets up JV to secure FPSO project in Ghana. Bumi Armada has inked a JV with two parties, Shapoorji Pallonji and Co Pvt Ltd (SPCL) and Cypress Energy Company Limited (CECL), to secure the award of a floating, production, storage and offloading (FPSO) project in Ghana. The JV company, which is known as Bumi Armada Shapoorji Pallonji Ghana Ltd (BASPG) was established on June 5 between Bumi Armada’s wholly-owned subsidiary, Bumi Armada Marine Holdings Ltd (BAMHL), SPCL’s wholly-owned subsidiary Shapoorji Pallonji Oil and Gas Pvt Ltd (SPOG), and CECL, Bumi Armada said. (The Edge)

Sunway: Eyes spinning off healthcare unit in five years. Sunway said it plans to list its healthcare unit within the next five years, as the group further builds and strengthens its medical brand. Sunway founder and chairman Tan Sri Jeffrey Cheah said the group need funds and a listing will be a way to marshal funds from the market. We also want to expand overseas as well, but we need a strong brand first," he said. (The Edge)

Pasukhas: To buy 93% stake in company to strengthen foothold in Indonesian power plant business. Pasukhas Group (PGB) has proposed to acquire a 92.5% stake in PT Tenaga Listrik Gorontala (PT TLG), a subsidiary of PT Bangun Daya Perkasa (PT BDP), with a view to firm up its foothold in the Indonesian power plant sector. PGB said PT TLG is principally involved in mining and power supply generation. It added that PT TLG is also running a coal fired power plant in Sulawesi Utara, Gurontalo City, Indonesia. (The Edge)

JAG: Sees 30% revenue growth. JAG expects revenue to grow by up to 30% this year from a year earlier on more electronic-waste (e waste) management contracts. Chairperson and ED Datin Stacey Tan said JAG had secured 40% more e-waste contracts. "We have secured 40% more contracts, and we are expecting 25% to 30% growth in revenue this year. We hope to register at least RM100m in revenue for FY17," Tan said. (The Edge)

Poh Huat: 2Q profit about triples on higher furniture exports. Poh Huat Resources Holdings' net profit in 2QFY17 grew 2.7x or 174% to RM10.6m from RM3.88m a year earlier, on higher shipping volume of furniture exported from its Vietnamese and Malaysian operations, which led to higher quarterly revenue. According to the group, shipment of furniture from its Malaysian factories increased substantially due to the coming on-stream of new products such as panel-based bedroom models, which were introduced in the previous quarters. (The Edge)

Berjaya Food: Incurs maiden quarterly loss in 4Q. Berjaya Food (BFood) fell into the red for the first time in its 4QFY17, with a net loss of RM3.37m or 90 sen a share, as it undertook an impairment exercise in the face of a slowing economy. It netted a profit of RM3.17m or RM1.05 sen a share in the same quarter a year ago. (The Edge)

IPO: Lotte to pay out 50% of profit as dividends. Lotte Chemical Titan Holdings, which has secured four cornerstone investors, will be paying out half of its profits as dividends, which works out to a dividend yield of around 3.3%, sources said. This is based on the RM1.31bn in net profit the company recorded in FY16. The IPO is looking to raise RM6bn, out of which slightly more than RM1bn will be taken up by the cornerstone investors. (StarBiz)

Market Update

As expected, the US Federal Reserve (FED) hiked its benchmark interest rate by another 0.25% at the end of its 2-day policy meeting, while also guiding for another hike this year as economic data continues to improve. The FED also laid out some plans on how it plans to shrink its USD4.5tln balance sheet. Markets ended the day mixed however with the tech-heavy Nasdaq Composite falling 0.4% and the broader-based S&P 500 slipping 0.1% though the Dow Jones Industrial Average inched 0.1% higher to another record-high on gains in Home Depot Inc. and Travelers Co. Crude oil prices stole the march on the FED, with West Texas Intermediate futures slumping as much as 3.5% to about USD45 per barrel following release of data showing US gasoline inventories increasing while stockpiles shrank less than anticipated. Fresh supplies from the US, Brazil and Canada are forecast to exceed demand growth in 2018, a signal that the global glut could continue despite efforts by OPEC and some non-OPEC producers to curb as much. European markets were mostly lower as economic data out of the US disappointed, clouding growth outlooks ahead of the FED’s decision later in the day. Retail sales and inflation numbers missed expectations, leading some to believe that the much-anticipated rate hike could be the last this year. Spain and Italy’s benchmarks were the major losers, down 1.0% and 0.6% respectively while UK and France’s both fell 0.4%. Germany’s DAX gained 0.3% to close short of an all-time high. Asian markets pared gains but still closed mostly higher after data out of China largely met expectations but failed to provide clues on the strength of the country’s economic recovery. Retail sales expanded 10.7% YoY in May and industrial production gained 6.5% YoY in the same period, though doing little to help the Shanghai Composite Index which fell 0.7% on the day. Elsewhere, benchmarks in Hong Kong, Malaysia and Indonesia rose 0.1%, 0.4% and 0.8% though Singapore’s slipped 0.1%.

Sunway Berhad has announced a 4-for-3 bonus issue, an exercise which will see 2.8bn new shares issued, while also issuing 631m free warrants on the basis of 3 warrants for every 10 existing share held. Separately, group Founder and Chairman Tan Sri Jeffrey Cheah was also quoted to have said plans are afoot to list the healthcare unit within the next 5 years, with the addition of 5 new hospitals costing about RM1bn in the ensuing period part of the process. Astro Malaysia reported a slight 3.1% YoY dip in its 1QFY18 net profit to RM195.8m on higher finance costs. A first interim dividend of 3sen per share was declared nonetheless.

Source: PublicInvest Research - 15 Jun 2017