Economy

US: Business debt exceeds households’ for first time since 1991. US business debt exceeded that of households for the first time since 1991, a potential warning sign for the economy as corporate investment softens. Nonfinancial companies boosted debt at a faster 5.7% annual pace in the 3Q to a total outstanding USD15.987trn, while household borrowing slowed to a 3.3% rise to reach USD15.986trn, Federal Reserve data showed Thursday. Federal government debt climbed 10.4%, the most since early 2018, to USD18.9trn. With the record-long expansion in its 11th year, Fed policy makers have indicated in recent months that they’re watching the corporate debt situation closely. Chairman Jerome Powell said in Oct that “leverage among corporations and other forms of business, private businesses, is historically high. (Bloomberg)

US: Fed aims a half-trillion dollar liquidity hose at year-end risks. The Federal Reserve Bank of New York is getting its house in order, ramping up measures to combat end-of-year funding risks and tapping permanent leaders to steer its interactions with markets. The branch on Thursday said it would conduct additional repurchase-agreement operations that could take the amount its support for funding markets over the crucial year-end period to more than half a trillion dollars. It also announced new senior leaders within that markets function, naming Daleep Singh as head of the group and appointing Lorie Logan to oversee the System Open Market Account. An announcement by the Fed Thursday means that the central bank is now planning to offer a total of USD490bn in liquidity via repo operations for the turn of the year, including the USD75bn that it has already pumped in through three earlier term actions. (Bloomberg)

US: Producer prices unchanged in Nov, core prices unexpectedly dip. With higher prices for goods offsetting lower prices for services, the Labor Department released a report on Thursday showing US producer prices came in unchanged in the month of Nov. The Labor Department said its producer price index for final demand was flat in Nov after climbing by 0.4% in Oct. Economists had expected prices to rise by 0.2%. The report said prices for final demand goods rose by 0.3% in Nov, primarily reflecting a 1.1% jump in food prices. Energy prices also increased by 0.3%. Excluding the increases in food and energy prices, core producer prices dipped by 0.2% in Nov after rising by 0.3% in Oct. Core prices had been expected to inch up by 0.2%. (RTT)

US: Weekly jobless claims jump to two-year high. First-time claims for US unemployment benefits jumped by much more than expected in the week ended Dec 7, according to a report released by the Labor Department on Thursday. The report said initial jobless claims surged up to 252,000, an increase of 49,000 from the previous week's unrevised level of 203,000. Economists had expected jobless claims to edge up to 213,000. With the much bigger than expected increase, jobless claims reached their highest level since hitting 257,000 in Sept of 2017. However, Michael Pearce, Senior US Economist at Capital Economics, said the spike in jobless claims "most likely reflects seasonal adjustment problems around the Thanksgiving holiday rather than a genuine sudden deterioration in labor market conditions." (RTT)

US, China: Trump approves US-China trade deal to halt Dec 15 tariffs. President Donald Trump signed off on a phase-one trade deal with China, averting the Dec 15 introduction of a new wave of US tariffs on about USD160bn of consumer goods from the Asian nation,  according to people familiar with the matter. The deal presented to Trump by trade advisers Thursday included a promise by the Chinese to buy more US agricultural goods, according to the people. Officials also discussed possible reductions of existing duties on Chinese products, they said. The terms have been agreed but the legal text has not yet been finalized, the people said. A White House spokesperson declined to comment. (Bloomberg)

EU: ECB keeps rates, forward guidance unchanged. The ECB left its key interest rates, asset purchases and forward guidance unchanged on Thursday, in the first policy session chaired by the new chief Christine Lagarde. The Governing Council decided to hold the refi rate unchanged at a record low 0%, the deposit rate at -0.50% and the marginal lending rate at 0.25%. The move was in line with economists' expectations. The previous change was a 10 basis points cut in the deposit rate in Sept. The bank also retained its forward guidance on both interest rates and asset purchases. "The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics," the bank said. (RTT)

China: Signals more effective fiscal policy to stabilize economy. The Chinese government said it would improve the effectiveness of fiscal policy in 2020, while monetary settings remain “prudent,” signaling a fine-tuning of support measures as the world’s second largest economy slows. The Communist Party’s annual economic planning meeting declared that the government would maintain economic growth next year within a “reasonable range,” according to a summary of decisions carried by state media. The government and central bank will ensure reasonably ample liquidity, and the report also called for a continued lowering of the overall level of import tariffs. “The meeting pointed out that the basic trend of China’s economic stability and long term improvement has not changed,” according to the statement. (Bloomberg)

Japan: BOJ's Amamiya says global uncertainties warrant attention. Uncertainties over the global outlook continue to warrant attention and the BOJ is cautious about future developments, Masayoshi Amamiya, BOJ deputy governor said Thursday. However, there are signs of a pick-up in the global economy, he said. The banker observed that there is high uncertainty over the outcome of the US China trade negotiations. Regarding Japanese economy, he said domestic demand will avoid a large decline although the momentum is set to decelerate temporarily in the short run due to global slowdown and sales tax hike. With regard to exports and production activity, some weakness has continued to be observed, Amamiya said. Taking into account the downside risks to economic activity and prices, the policy stance of being tilted toward monetary accommodation will be appropriate for the time being, the banker said. (RTT)

Singapore: Retail sales decline in Oct. Singapore retail sales declined at a faster rate in Oct, data from the Department of Statistics showed on Thursday. Retail sales declined 4.3% YoY in Oct, following a 2.1% fall in Sept. Economists had expected a 1.5% decrease. Motor vehicle sales decreased 22.7%, after a 12.3% drop in Sept. Excluding motor vehicles, retail sales declined 0.6%, following a 0.1% fall. Sales of furniture and household equipment, and those of optical goods and book fell by 10.6% 6.9%, respectively, in Oct. On a monthly basis, retail sales fell 2.2%, reversing a 2.0% rise in Sept. (RTT)

Markets

Hibiscus (Outperform, TP: RM1.55): Completes acquisition of two North Sea blocks. Hibiscus Petroleum has completed its acquisition of two North Sea blocks — one of which is the Crown discovery — in the UK, for a cash consideration of up to USD5m. The blocks are identified as 15/18d and 15/19b (License P2366). This follows the receipt of approval from the UK's Oil and Gas Authority for the reassignment of the blocks' licence to AHUK, and the appointment of AHUK as exploration operator. (The Edge)

TNB (Neutral, TP: RM14.12): Gets interim stay of RM4bn tax bill. Tenaga Nasional (TNB) has been granted an interim stay of notices of additional assessment by the IRB. TNB said notices were for the years of assessment 2015, 2016 and 2017. On Nov 28, TNB said it had been slapped with RM3.98bn additional tax assessment by the IRB. High Court has granted an interim stay of all further proceedings including the enforcement of the notices until the hearing of the leave application on April 2, 2020. (The Edge)

Pestech: Gets RM93.73m substation job in Philippines. Pestech International has received a notice of award for a contract worth RM93.73m in the Philippines for a 230kV outdoor substation. Pestech had received the notice from the National Grid Corp of the Philippines (NGCP) for the contract in relation to the Cebu-Bohol 230kV Interconnection Project. It said the offshore portion of the contract was worth USD13.89m (RM57.7m) while the onshore portion was worth PHP439.9m (RM36.03m). Under the project, Pestech will deliver a new 230kV outdoor substation at Bohol as well as 138kV extension works at the existing substation at Bohol. (The Edge)

Pos Malaysia: Awaits official details on postal tariff hike from govt. Pos Malaysia has yet to obtain official details on the new postal tariff rates and the implementation date from the government although the postal service provider has received a letter confirming the approval for the tariff hike. The source added that the change in pricing would not impact the postage rates for domestic non commercial users. (Bernama)

Brahim: PwC quits as auditor, no reason given. Brahim’s Holdings’s external auditor Messrs PricewaterhouseCoopers PLT (PwC) has resigned on a voluntary basis with immediate effect. No reason was given for the resignation. On April 16, PwC made an unqualified opinion on Brahim’s FY18 financial statements, highlighting a material uncertainty related to the group’s going concern. The auditor pointed to Note 2 in the group’s financial statements for FY18 which stated that Brahim’s had incurred a net loss after tax of RM116m and RM59.6m at the group and company level, while liabilities had exceeded current assets by RM56.6m and RM80.2m respectively. (The Edge)

EcoWorld, EWI: Post strong FY19 earnings. Eco World Development Group (EcoWorld) and its associate Eco World International (EWI) reported strong results for their respective 4QFY19. For FY19, EcoWorld saw a net profit of RM203.4m while EWI's net profit was RM190.3m. For EcoWorld, the better performance was due to higher percentage of completion and higher sales secured by ongoing projects of the group's subsidiaries. On EWI, the strong performance was due to higher recognition of revenue and profit by its JV projects in UK following completion and commencement of handover of open market sale units sold to customers. (The Edge)

Market Update

The FBM KLCI might open higher today after US stocks surged to new records Thursday propelled by reports the US and China had reached a trade deal to avoid new tariffs due on Sunday, and roll back existing levies, in exchange for purchases of American agricultural products. The Dow Jones Industrial Average closed 220.75 points, or 0.8% higher, at 28,132.05, just shy of a new all time high. The S&P 500 index gained 26.95 points, or 0.9%, to close at 3,168.58, and the Nasdaq Composite Index added 63.27 points, or 0.7%, to 8,717.32, both new records.

Meanwhile, the UK is holding a general election on Thursday which will play a crucial role in determining the course of its plans to exit from out of the European Union. Recent polling figures indicate Prime Minister Boris Johnson’s Conservative Party is most likely to win, but his lead has narrowed over the rival Labour Party, injecting some doubt into the outcome. Results are expected late Thursday New York time. In Europe, the Stoxx 600 Europe index closed 1.36 point higher, 0.3%, at 407.58.

Back home, the FBM KLCI saw marginal gains, rising 0.29% or 4.15 points to 1,567.34 points after the US Federal Reserve decided to maintain interest rates. The Shanghai Composite Index posted a decline of 0.30% or 8.72 points at 2,915.70 points. Meanwhile, Hong Kong’s Hang Seng Index closed marginally higher, registering a 1.31% or 348.71 points to 26,994.14 points. South Korea’s Kospi also posted gains of 1.51% or 31.73 points at 2,137.35 points and the Nikkei 225 in Japan rose 0.14% or 32.95 points to 23,424.81 points.

Source: PublicInvest Research - 13 Dec 2019