Monday, January 21st, 2019

 

IMF lowers growth forecast for Saudi Arabia, region

DAVOS, Jan 21 — The International Monetary Fund today lowered its 2019 economic growth forecast for Saudi Arabia and the region over low oil prices and crude output along with rising geopolitical tensions. In its World Economic Outlook update for…


IMF fears trade war and weak Europe could trigger sharp global slowdown

DAVOS, Jan 21 — The International Monetary Fund today cut its world economic growth forecasts for 2019 and 2020 due to weakness in Europe and some emerging markets, and said failure to resolve trade tensions could further destabilise a slowing…


Oil and consumer goods support FTSE 100 as May's Plan B awaited

LONDON, Jan 21 — British blue-chip shares rose today, buoyed by oil majors and multinational consumer goods stocks, as investors readied for Prime Minister Theresa May to present a modified plan to exit the European Union. London's FTSE 100 was…


Automotive sector remains clouded

PETALING JAYA: The outlook for the automotive sector for the rest of this year remains clouded amid the uncertainties over the impact of the revision of the National Automotive Policy under the Pakatan Harapan-led government.

“While nothing (on the policy) is revealed yet, there is a risk of a change in the tax structure, which could affect the whole industry. News on the delay of the approval on new model prices also raises regulatory risk,” RHB Research Institute Sdn Bhd said in a note last Friday.

RHB Research downgraded the sector to “neutral” from “overweight” after recently downgrading its call on UMW Holdings to “neutral” from “buy”. Its top picks are Bermaz Auto and DRB-Hicom.

It forecasts 2% growth for 2019 total industry volume (TIV) to 610,000 units on several interesting models introduced/planned this year to renew consumer interest.

However, it said if the US dollar continues to exhibit a weakening bias as it expects, sentiment on the sector should likely trend positively.

Meanwhile, Kenanga Research, which kept its “neutral” outlook on the sector, maintained its TIV target of 590,000 units for 2019, which is below the Malaysian Automotive Association’s (MAA) target of 600,000 units.

The research firm said this because it had factored in the possible delay in pricing approval for the new launches from authorities, absence of sales boosting factor, such as the tax-holiday, and tepid purchasing power given the weak consumer sentiment.

KAF Research, however, said it is maintaining its 600,000 TIV target for 2019 – representing a 0.2% growth from 2018, premised on a higher base seen last year following the strong sales during the tax holiday period.

It added that its target is in line with MAA’s 600,000 units forecast as the association expects slower sales amid a subdued economic growth and moderate consumer spending.

“We expect TIV to be mainly driven by Perodua, which commands 38% of industry car sales,” it added.

However, RHB Research said it believes that it will be challenging for Perodua to repeat its performance in 2018, as the demand for Myvi could ease during its second year.

“Demand on the recently launched Perodua Aruz, however, should provide some support to sales volume. We estimate Perodua sales at 222,000 units in 2019, implying -2.3% year-on-year,” it added.


Bintulu Port job termination – no major impact on Muhibbah seen

PETALING JAYA: Analysts view the impact from the termination of Muhibbah Engineering (M) Bhd’s contract by the Bintulu Port Authority as managable and they expect the Cambodian airport concession to hold the fort for the group.

MIDF Research displayed a conservative stance by down-grading its rating on the stock to “neutral” with an unchanged target price RM3.15.

According to the research house’s rough estimates, with work reaching a progress of 45-50%, the contract’s current unbilled value ranges between RM200 million and RM220 million, which is at about 9.7% of the group’s out-standing order book of RM2.1 billion.

“Assuming that fair com-pensation for Muhibbah is agreed upon, we need to caution that reparation could take a while to materialise. Based on current price, our target price implies 7.5% upside to investors and earnings yield of 6.7%. Moving forward, we believe any retracement in share price will unveil attractive position for entry,” it said.

The research house noted that based on the current circumstances, the risk is concentrated on near-term earnings projection and the impact will be muted for FY20 onward.

Muhibbah is currently in negotiations with Bintulu Port Authority in relation to the compensation.

Alliance DBS Research, on the other hand, maintained its “buy” call on the stock at a lower target price of RM3.55 (previously RM3.65) in view of a lower sustainable order book.

It said the termination was due to the government’s concerted efforts to reduce its borrowings to a manageable level and not from any non-performance of the contractor.

Alliance DBS estimates that Muhibbah’s 51% stake in the project is worth an estimated RM298 million or circa 16% of its outstanding construction order book, assuming that 20% of work done at Bintulu Port.

It has cut the group’s FY19-20 earnings forecasts by 5-6% to account for the loss of the Bintulu Port contract.

However, Alliance DBS noted that Muhibbah’s construction division has taken a supporting role in the group given the strong growth of its Cambodian airport concessions, which contribute 70% of the group’s bottom line.

Kenanga Research expects traffic growth at the Cambodian airports to remain robust at high teens and it remains one of its major earnings contributors.

“Muhibbah’s outstanding order book currently stands at RM1.8 billion (construction: RM1.3 billion, cranes: RM500 million) providing it with at least two years of visibility.

Following the termination, Kenanga expects some knee-jerk selling of its shares, but it could present a compelling entry level given minimal impact from the termination.

Muhibbah’s share price was down 19 sen or 6.35% to close at RM2.80 last Friday with 4.57 million shares changing hands.


China’s 2018 economic growth slowest in nearly 30 years

BEIJING: China’s economy grew at its slowest pace in almost three decades in 2018, losing more steam in the last quarter as it battles a massive debt pile and a US trade war, official data showed today.

The 6.6% growth comes in above the official target of around 6.5% and matches a forecast by analysts polled by AFP, but is down from the 6.8% chalked up in 2017, according to the National Bureau of Statistics (NBS).

And in a sign of the struggle Beijing faces, growth in the last three months of the year clocked in at 6.4%, matching a low seen during the global financial crisis 10 years ago, with economists widely expecting the slowdown to deepen.

“Everyone is widely concerned about the direction of the international situation where there are many variables and uncertain factors,” said NBS commissioner Ning Jizhe, noting trade protectionism was in vogue.

“For the world’s second-largest economy, where trade accounts for one-third of GDP (gross domestic product), this has an impact,” he said, adding “downward pressure” on the economy has increased.

The slowing growth prompted Premier Li Keqiang last week to vow the government would not let the economy “fall off a cliff”.

Relations with top trading partner the US deteriorated sharply last year after President Donald Trump hit roughly half of Chinese imports with new tariffs in an attempt to force trade concessions.

Escalating the trade war is on hold for now after President Xi Jinping and Trump agreed to a three-month ceasefire, with top negotiators set to meet in Washington at the end of this month as a March deadline for a deal looms large.

“China-US economic and trade frictions do indeed affect the economy, but the impact is generally controllable,” said Ning.

While analysts say the standoff has dented confidence – leaving the stock markets battered and the yuan weakened – they attribute most of the downturn to the government policies to tackle growing debt, financial risk and pollution.

China hit the brakes on major projects such as subway lines and motorways to keep a lid on debt last year, with infrastructure investment rising by just 3.8%, down from 19% the year before.

China’s exports to US and the world also fell in December, reinforcing the need for its legions of domestic consumers to fuel the economy.

Fourth quarter GDP growth slowed as expected, said Lu Ting, China economist at Nomura, in a note. “But the worst is yet to come,” he said.

Li last week touted China’s “massive market” and vowed to spur on consumption, but the data shows difficulty ahead.

Overall credit growth decelerated every month last year.

“The slowdown in credit growth is causing economic momentum to falter,” said Mark Williams, chief Asia economist at Capital Economics, in a note last week.

Slowing disposable income growth and tighter credit has hit consumer spending with car sales falling last year for the first time in more than 20 years.

Retail sales growth slowed to 9.0%, down from a 10.2% increase the previous year. In December, sales grew 8.2%.

Output at factories and workshops ticked up 6.2% for the year, down from 6.6% in 2017.

Chinese officials say they will not resort to large-scale stimulus like during the financial crisis to jolt growth, instead laying out policies like lower taxes and fees and less red tape to drive consumption.

“Growth will remain under pressure in the coming months and policymakers will aim to halt the slowdown in growth, rather than try to engineer a significant pick-up in growth,” said Louis Kuijs of Oxford Economics.

The official figures could be painting an overly rosy picture, analysts say.

Economists in China and abroad have long suspected data is massaged upward, often noting that full-year gross domestic product hits Beijing’s pre-set targets with suspicious regularity.

“China’s GDP number is not an accurate gauge of economic growth,” said Raymond Yeung, economist at ANZ bank.

The governor of northeastern Liaoning admitted in 2017 that the industrial province had falsified data for years.

Even Li said in 2007, when he was Liaoning’s top political official, that results were often “man-made” and he used his own calculations to guide provincial policymaking, according to a confidential memo released by WikiLeaks.

“The NBS is part of the government… that is why it is legitimate for the outside world to worry about potential adjustment of data on the economy,” said Kuijs.

The US-based Conference Board, a widely respected global business think tank, said its methodology indicates growth of 4.1% for 2018.


Port job termination – no major impact on Muhibbah

PETALING JAYA: Analysts view the impact from the termination of Muhibbah Engineering (M) Bhd’s contract by the Bintulu Port Authority as managable and they expect the Cambodian airport concession to hold the fort for the group.

MIDF Research displayed a conservative stance by down-grading its rating on the stock to “neutral” with an unchanged target price RM3.15.

According to the research house’s rough estimates, with work reaching a progress of 45-50%, the contract’s current unbilled value ranges between RM200 million and RM220 million, which is at about 9.7% of the group’s out-standing order book of RM2.1 billion.

“Assuming that fair com-pensation for Muhibbah is agreed upon, we need to caution that reparation could take a while to materialise. Based on current price, our target price implies 7.5% upside to investors and earnings yield of 6.7%. Moving forward, we believe any retracement in share price will unveil attractive position for entry,” it said.

The research house noted that based on the current circumstances, the risk is concentrated on near-term earnings projection and the impact will be muted for FY20 onward.

Muhibbah is currently in negotiations with Bintulu Port Authority in relation to the compensation.

Alliance DBS Research, on the other hand, maintained its “buy” call on the stock at a lower target price of RM3.55 (previously RM3.65) in view of a lower sustainable order book.

It said the termination was due to the government’s concerted efforts to reduce its borrowings to a manageable level and not from any non-performance of the contractor.

Alliance DBS estimates that Muhibbah’s 51% stake in the project is worth an estimated RM298 million or circa 16% of its outstanding construction order book, assuming that 20% of work done at Bintulu Port.

It has cut the group’s FY19-20 earnings forecasts by 5-6% to account for the loss of the Bintulu Port contract.

However, Alliance DBS noted that Muhibbah’s construction division has taken a supporting role in the group given the strong growth of its Cambodian airport concessions, which contribute 70% of the group’s bottom line.

Kenanga Research expects traffic growth at the Cambodian airports to remain robust at high teens and it remains one of its major earnings contributors.

“Muhibbah’s outstanding order book currently stands at RM1.8 billion (construction: RM1.3 billion, cranes: RM500 million) providing it with at least two years of visibility.

Following the termination, Kenanga expects some knee-jerk selling of its shares, but it could present a compelling entry level given minimal impact from the termination.

Muhibbah’s share price was down 19 sen or 6.35% to close at RM2.80 last Friday with 4.57 million shares changing hands.


Chatime Malaysia outlines aggressive expansion plans

KUALA LUMPUR, Jan 21 — After recording an impressive business growth within one year of a ‘comeback’, food and beverage provider Chatime Malaysia Sdn Bhd aims to be the world’s biggest Chatime operator by year-end. Group managing director…


Qatar to put US$500m in Lebanon bonds to support economy

DOHA, Jan 21 — Qatar will invest US$500 million (RM2 billion) in Lebanese government US dollar bonds to support Lebanon's struggling economy, the Qatari Ministry of Foreign Affairs said on Monday. Lebanon has one of the world's highest levels of…


European stocks dip at open

LONDON, Jan 21 — European stocks eased at the open today, with traders awaiting the UK government's Brexit "Plan B" after the country's parliament voted down Prime Minister Theresa May's original EU divorce deal. London's benchmark FTSE 100 index…