Economy

US: The housing market, while still risky, won't be all bad for buyers in 2019. With spring on the way, many home buyers are starting their hunt for a new home. But with the housing market in transition, will they be able to find what they're looking for. Thus far this year, the 30-year-fixed has averaged 4.46%, down from 4.54% in 2018. The dip in interest rates, combined with modest gains in home prices, have helped turn some parts of real estate into a buyer's market but one clouded by at least some uncertainty. Going forward, it won't be the record number of sales as saw in 2017 but have seen mortgage rates come down considerably over the course of even the new year. However, it wasn't just interest rates that caused buyers to pull back in 2018. Many home buyers couldn't find a home that fit in their budget, and Richardson said that's not likely to change this year. (CNBC)

US: Trump's disruptive foreign policy will be tested in four major ways this month. Feb brings the most significant series of tests yet of whether Trump can transform his disruptive US foreign policy into concrete outcomes. The 4 to watch most closely are negotiating a trade deal with China, denuclearizing North Korea, rallying an international community to contain Iran, and democratizing Venezuela. US Trade Representative and Treasury Secretary will visit China early next week seeking progress toward a trade deal before a March 1 deadline, ending a 90-day truce agreed to by the two country's leaders at the G-20 in Buenos Aires. That would not only head off the increase of tariffs on USD200bn of Chinese goods from 10% to 25%, but it would also show markets that the world's two leading economies can find mutually beneficial ways to settle trade differences. (CNBC)

EU: Germany's foreign trade hit a fresh record in 2018. The volume of Germany’s foreign trade hit a record in 2018, the Federal Statistics Office said, underlining how exposed Europe’s largest economy is to a global trading system that is under threat from protectionism and the threat of a trade war. The annual figures showing that Germany had exported EUR1.3trn worth of goods and imported EUR1.1trn, exceeded the previous record set in 2017. The trade surplus for the year narrowed slightly. (Reuters)

EU: Russia holds key rate steady after Dec’s hike. Russia's central bank left its key rate unchanged in Feb, after raising it in Dec, saying that the balance of risks remains skewed towards pro-inflationary prospects. The Board of Directors decided to hold the key rate steady at 7.75%, the Bank of Russia said in a statement, in line with economists' expectations. The previous change in the rate was a quarter-point hike in Dec. A similar size raise was undertake in Sept, which was the first since 2014. Inflation expectations of households and businesses increased somewhat, adding that the effect of the VAT increase on inflation can be fully assessed no sooner than this April. There persists uncertainty over future external conditions and certain food price dynamics. The balance of risks remains skewed towards pro-inflationary risks, especially over a short-term horizon. (RTT)

EU: Greece is at risk of not getting fresh money as reforms stall. Greece risks not getting a fresh batch of funding in the coming months with a series of promised reforms yet to be competed. The country is no longer in an official bailout program. But in June it agreed to keep implementing certain reforms in exchange for some debt relief. This package included guarantees that Greece wouldn't have to pay any of its debt until 2032 which would be a 10-year extension on what it previously had. It was also agreed that Greece would receive profits that central banks made when buying Greek sovereign bonds. These are known as SMP-ANFA profits and would allow Greece to invest back into its economy. European technical experts have been monitoring what the Greek government has been implementing. (CNBC)

EU: Banks in Europe struggle to find talent with US rivals paying top dollar. European banks are finding it hard to recruit the right people due to new regulations and intense competition from some of their US peers. Pay in the banking sector is generally higher compared to other industries. A junior-level analyst in a trading role at a European bank can start at anything between USD50,000 to USD60,000 for a base salary. On top of this they would receive allowances and a bonus, which can sometimes be given in the form of company shares. This is where US banks differ as they tend to stick to cash bonuses, taking the overall compensation of a junior analyst to somewhere between USD80,000 to USD100,000. This gap starts to widen more as employees go up the ladder. (CNBC)

China: Bullish start to the year faces a big test after holiday. The bullish mood that was starting to build in China will be tested when markets reopen as concern over the US trade relationship resurfaces. For clues on how investors may react, look to Hong Kong, where Chinese equities just had their first back-to-back loss of the year and the offshore yuan fell against the dollar over the week. A drop in a US fund tracking A shares also indicates caution could spread onshore after the five-day break, while the greenback’s run of gains is likely to weigh on China’s currency. The CSI 300 Index rose 7.9% this year through Feb. 1, reversing its Dec losses as investors took comfort from Beijing’s measures to support the slowing economy and risk assets gaining favor around the world. But trade clouds could now persist into March. (Bloomberg)

Markets

TNB (Outperform, TP: RM16.86): Signs MoU with three companies. TNB’s wholly-owned subsidiary, TNB Energy Services, has via its unit, Maevi SB, signed MoU with three companies as strategic partners for energy management and smart home projects. Maevi will cooperate with real estate companies Protasco Development, Tan & Tan Development, as well as, software and engineering consultancy, Diversified Gateway (DGB). The MoU with Protasco is for the supply and installation of the Maevi smart homes service for housing development projects. In the case of Tan & Tan, the smart partnership is for the efficient management and asset supervision of IGB. (Bernama)

Utusan: Umno sells 31.61% in Utusan at a premium to chairman Abd Aziz? Datuk Abd Aziz Sheikh Fadzir has acquired 35m shares representing a 31.6% stake in the group. Utusan notified that Abd Aziz bought the stake at 19 sen per share for a total of RM6.65m via his private vehicle, Opulence Asia SB. The price was at a premium of 7.5 sen or 65.2% from the stock's last traded price of 11.5 sen apiece on Jan 31. It did not reveal from whom Abd Aziz bought the stake from. According to Bloomberg data, as at April 30 last year, Umno was the single, largest shareholder of the group with a 49.8% stake. This raises the speculation that Umno was the likely seller. (The Edge)

AT Systematization: Buys 9.1% stake in Trive Property. AT Systematization has acquired a 9.1% stake in Trive Property Group for RM2.92m as it seeks to expand into the solar energy business. The group said its wholly-owned subsidiary, AT Precision Tooling SB, purchased the stake, comprising 213.3m placement shares, at 13.7 sen per share. Trive announced that it had completed a private placement of 213.3m shares. (The Edge)

MYEG: MyCC warns MyEG for not paying financial penalty. The Malaysia Competition Commission (MyCC) has warned MyEG Services for not complying with the decision of the Competition Appeal Tribunal to pay a daily penalty of RM7,500, now totaling RM9.46m. MyCC said MyEG had continuously been in non compliance with the CAT’s decision dated Dec 28, 2018 which affirmed MyCC’s June 24, 2016 decision. The total financial penalty, to date, has accumulated to RM9.46m, it said. (StarBiz)

Berjaya Media: Sun Media loses two defamation suits. Berjaya Media announced that its unit, Sun Media Corp SB (Sun Media), which publishes theSun newspaper, has lost two defamation suits filed against the company and was ordered to pay damages totaling RM4.6m. It said the High Court had ruled in favour of the plaintiffs Asia Pacific Higher Learning SB (APHLSB) and Wan Mazlan Mohamed Woojdy in the lawsuits. (The Edge)

O&G (Overweight): RAPID to boost Asia's refining capacity growth in 2019. With the start-up of the Petronas' RAPID project in Pengerang around the corner, Asia’s refining capacity growth will experience a boost in 2019, says S&P Global Platts. The start-up of the 300,000 barrels refining capacity per day project will also increase Saudi crude inflows to the region and add to the supply of refined petroleum products. This will underscore the shift of global refining capacity growth to Asia where the bulk of the demand growth is concentrated. The refinery, located in the southern state of Johor, has fired up its crude distillation unit and is expected to be ready for commercial operations by the 4Q19. (Business Times)

Market Update

US markets wavered last Friday in the face of uncertainties surrounding US-China trade negotiations and worries over slowing global growth. While both the S&P 500 and Nasdaq Composite managed to eke out marginal gains of 0.1%, the Dow Jones Industrial Average slipped 0.3% however. According to a Wall Street Journal news report, both countries have yet to put together a draft of matters they agree or disagree. This also comes in the face of the European Commission sharply lowering their growth forecasts for the Eurozone the day before, rekindling fears that the global economy may be slowing down. European markets were mostly lower on similar concerns, with the added development of President Trump reportedly ready to sign an order this coming week banning Chinese telecommunication equipment from US wireless networks. Germany’s DAX was hardest hit amongst major markets, down 1.1% on the day. France’s CAC 40 and UK’s FTSE 100 fell 0.5% and 0.3% respectively meanwhile. It was no different in Asia, with most markets that were open on the day ending lower on simmering US-China tensions. The Hang Seng Index which opened last Friday after being closed for most of the week for the Lunar New Year holidays slipped 0.2%. Japan’s Nikkei 225 and Korea’s KOSPI slumped 2.0% and 1.2% while the FBM KLCI fell 0.4%. Markets in China and Taiwan were closed.

Utusan Melayu has seen a change in shareholding with a 31.61% stake crossing hands at 19sen per share, the buyer its Executive Chairman Datuk Abd Aziz Sheikh Fadzir and the seller reportedly UMNO. AT Systematization has acquired a 9.1% stake in Trive Property Group through a private placement for RM2.9m or 13.7sen per share in its plans to expand into the solar energy business. Berjaya Media announced that its unit, Sun Media, which publishes theSun newspaper, has lost two defamation suits filed against the company and has been ordered to pay damages totaling RM4.6mn.

Source: PublicInvest Research - 11 Feb 2019