Economy

US: Fed says economy growing in most of US as weak spots emerge. The still-strong US economy showed signs of slowing in recent weeks amid declining optimism, though most regions continued to show modest to moderate growth, a Federal Reserve survey showed. “Outlooks generally remained positive, but many districts reported that contacts had become less optimistic in response to increased financial market volatility, rising short-term interest rates, falling energy prices, and elevated trade and political uncertainty,” according to the report, released Wednesday in Washington. The central bank’s Beige Book economic report, based on anecdotal information collected by the 12 regional Fed banks from late-Nov through Jan 7, showed manufacturing and energy expanded at a slower pace in most districts, while non financial services cooled in a few districts. (Bloomberg)

US: Homebuilder sentiment gauge rises from a three-year low. Sentiment among US homebuilders rose for the first time in three months amid a decline in borrowing costs, a sign that housing may stabilize in the year ahead even as the industry remains in a broad slowdown. The National Association of Home Builders/Wells Fargo Housing Market Index increased to 58 in Jan from a three-year low of 56 in the prior month, according to a report Wednesday. The median estimate of economists called for the gauge to be unchanged. (Bloomberg)

US: Home sales plunged in Dec, price growth at 6-year low. Home sales in the US slumped in Dec, while prices inched up slightly, marking the smallest annual increase since the end of the last housing crash in 2012, according to data from brokerage Redfin. The median home price rose to USD289,800 in Dec, a gain of 1.2%, the slowest monthly pace

Markets

Hibiscus Petroleum (Outperform, TP: RM1.73): Discloses North Sabah Fields reserves, contingent resources. Hibiscus Petroleum said the gross proved plus probable reserves (2P reserves) and the gross contingent resources (2C resources) of oil in the North Sabah Fields were estimated at 55.3 MMstb and 85.7 MMstb respectively. Hibiscus Petroleum appointed RISC Advisory Pty Ltd to audit and assess the reserves and contingent resources within the North Sabah Fields' Barton, St Joseph, South Furious and SF 30 oil fields. (The Edge)

Barakah: Unit secures 5-year service contract from Petrofac. Barakah Offshore Petroleum unit has won a five-year contract to service Petrofac (Malaysia-PM304) Ltd’s oil and gas fields offshore peninsular Malaysia. The group said the contract, awarded to its wholly-owned subsidiary PBJV Group SB for the years 2018 to 2023, includes Pan Malaysian maintenance, construction and modification works for structures and facilities for the client’s oil and gas fields. (The Edge)

Kawan Food: Sees continued margin pressure due to depreciation. Kawan Food may face a margin squeeze this year, due mainly to a yearly depreciation of some RM20m on its newly commissioned Pulau Indah facility. The group is launching innovative products and ramping up sales to mitigate the slight dip expected in its profitability this year. "We moved in to our Pulau Indah facility in July last year, and we have shut down our two factories in Shah Alam by end-December. We are still trying to increase our output. The utilisation rate is not at an optimum yet. (The Edge)

Scomi Group: Still owes RM28m to Scomi Energy, probe to conclude in April. Scomi Group has still not paid RM28.44m of the RM64.33m it borrowed from its 65.64%-subsidiary Scomi Energy Services. This was after Scomi Group paid RM300,000 cash and transferred property valued at RM6. million. Scomi Energy also clarified that the interest rate on the advances is 7% per annum, while no late payment charges have been imposed on the advances. (The Edge)

Aturmaju Resources: Enters MoU with YESS to provide inventory tracking system. Aturmaju Resources has entered into a Memorandum of Understanding with Yes’s Comm. Enterprise SB (YESS) to collaborate in a new retail business model and to supply the latter’s five retail outlets with an inventory tracking system. Aturmaju indicated the formalising of an agreement could result in a deal providing RM20m in annual revenue for the company. (The Edge)

Silver Ridge: Bags two contracts from TM worth RM5.7m. Silver Ridge Holdings has bagged two contracts from Telekom Malaysia (TM) with a combined value of RM5.7m to provide maintenance and support services for Huawei. The group said its wholly-owned subsidiary Silver Ridge SB accepted the letters of award from TM. (The Edge)

Hengyuan: Approves full fund release of USD66.4m for H2GEN project. Hengyuan Refining Co has approved the full fund release amounting to USD66.4m (RM273m) for the H2GEN project, which will supply its refinery with 30 tonnes/day of hydrogen. The project will be executed within its refining complex in Port Dickson, Negeri Sembilan. (The Edge)

Market Update

The FBM KLCI might inch higher today after well-received earnings from the US financial sector and more economic stimulus measures in China kept most global stock indices on an upward path, while sterling stayed in focus following Tuesday’s crushing parliamentary defeat for UK Prime Minister Theresa May’s Brexit deal. Mrs May on Wednesday won a vote of no confidence— as had been widely predicted — by 325 votes to 306. The S&P 500 and the Stoxx Europe 600 equity indices both hit one-month highs, with the former taking its rise from a 20-month intraday low hit on December 26 to more than 11 percent. The continued rally for equities helped nudge up US and German government bond yields, while the dollar inched higher against a weighted basket of currencies. Shares in Bank of America and Goldman Sachs climbed sharply after fourth-quarter results from both beat estimates. Meanwhile, the People’s Bank of China injected a record USD84bn into the country’s banking system in a bid to boost liquidity and increase lending. While the move underscored a recent pledge to increase policy support, analysts at Capital Economics noted that the timing suggested that concerns over a cash crunch ahead of the Chinese New Year were likely to have been a factor. On Wall Street, the S&P 500 ended 0.2% higher at 2,616 after earlier reaching 2,625. The Dow Jones Industrial Average rose 0.6%, while the Nasdaq Composite edged up 0.1%. Across the Atlantic, the Europe-wide Stoxx 600 index rose 0.5%, with the Xetra Dax in Frankfurt gaining 0.4% and France’s CAC 40 closing 0.5% higher. But the FTSE 100 index slipped 0.5%.

Back home, the FBM KLCI index lost 6.34 points or 0.38% to 1,673.08 points on Wednesday. Trading volume decreased to 2.33bn worth RM1.88bn. Market breadth was positive with 438 gainers as compared to 358 losers. Hong Kong’s Hang Seng added 0.3%. The CSI 300 index of Shanghai and Shenzhen-listed stocks was flat while Japan's Nikkei 225 was off 0.55%.

Source: PublicInvest Research - 17 Jan 2019