Economy
Global: Coordination important as world economy changes. Global coordination is important as the world economy undergoes changes, including the latest increase in US interest rates earlier this month, China's Vice Finance Minister Zhu Guangyao said ahead of a G20 summit of leaders in July. As the global economy stabilises, major countries need to normalise their interest rates, although this is happening at a very slow pace, Zhu said. "We need to closely monitor how the normalisation of interest rates in major economies will impact global capital markets," said Zhu. (Reuters)
US: 1Q economic growth revised up on jump in consumer spending. The US economy slowed less than feared in the 1Q due largely to a jump in consumer spending, providing a slightly more encouraging outlook for growth this year. GDP increased at a 1.4% annual rate instead of the 1.2% reported last month, the Commerce Department said. The reading was the worst since the 2Q of 2016 but above analysts' expectations, easing fears the economy had been hobbled at the start of this year. The government had pegged 1Q growth at a paltry 0.7% in its first estimate in April. (Reuters)
US: Fed to release monetary policy report on July 7, five days ahead of Yellen testimony. The Federal Reserve said it would release its semi-annual monetary policy report on July 7, five days before Fed Chair Janet Yellen testifies to Congress. Historically, the report on the US economy and central bank policy has been released along with testimony from the Fed chief. Yellen is scheduled to testify before the House Financial Services Committee at 10am (1400 GMT) on July 12, the panel said. (Reuters)
US: Trump seeks to project global power through energy exports. President Donald Trump promoted a "golden era" of the US energy business by seeking to assert power abroad through a boost in natural gas, coal and petroleum exports. In what he called a policy of "energy dominance," Trump re-branded efforts to export LNG to markets in Eastern Europe and Asia that had been set in motion during the previous presidential administration. The US also will offer to export coal to Ukraine, where energy consumers often have suffered from cuts in natural gas supply by Russia. (Reuters)
US: Trump to demand G20 take stronger action on steel overcapacity. US President Donald Trump will use the premise of a national security review of the US steel industry to demand action by the Group of 20 leaders to reduce excess capacity and other distortions in the global steel market, the top White House economic adviser said. Trump is attending a G20 leaders summit in Hamburg, Germany on July 7-8. National Economic Council director Gary Cohn said that it was unclear when the Commerce Department will submit its "Section 232" report on the steel industry and potential new import restrictions to the White House. (Reuters)
China: Land sale controls threaten developers’ profits, may trigger deals. Real estate developers say a slew of new regulations governing many land auctions in China is threatening the business model most of them use, and is likely to speed up the consolidation of the industry through more joint ventures and takeovers. The measures, which are widely seen in the industry as representing the most stringent tightening in controls ever, have been introduced by authorities running major cities as they seek to stop home prices from surging further out of control. (Reuters)
Japan: BOJ could cut ETF buying if inflation nears 2%: Harada. BOJ board member Yutaka Harada said the central bank could reduce or end purchases of exchange-traded funds (ETF), if inflation approaches its 2% target. He also said the BOJ's current ultra-loose monetary policy is already bold enough, signalling that no additional stimulus was forthcoming in the near future. "The BOJ is buying ETFs to stimulate the economy and achieve its 2% inflation target," Harada said. "If achievement of the target comes into sight, the BOJ could of course reduce or stop ETF purchases," he said. (Reuters)
India: Modi set to launch biggest tax reform amid protests. At midnight on Friday, India will introduce nationwide GST with Prime Minister Narendra Modi taking centre-stage in parliament for what will be the country's biggest tax reform in the 70 years since independence from British colonial rule. The GST will replace about 20 federal and state taxes such as factory-gate duties, service and local taxes while unifying USD2trn economy and 1.3bn people into a single market. (Reuters)
Markets
Sime Darby (Outperform, TP: RM9.72): Sells land to PNB for RM85.5m cash. Sime Darby is selling New Lunderston Estate, a freehold tract measuring 297.5 acres, in Selangor for RM85.5m cash. The conglomerate said its indirect wholly-owned subsidiary Sime Darby Builders SB has entered into a sale and purchase agreement (SPA) with PNB Development SB, a wholly-owned unit of Permodalan Nasional (PNB). (The Edge)
Kumpulan Jetson: Bags RM919m project from China firm. Kumpulan Jetson bagged a RM919.3m contract to build high-rise serviced apartments and a hotel along Jalan Conlay. The construction company announced on Thursday it had accepted the sub-contract for the projects from MCC Overseas (M) SB, which is a subsidiary of China Metallurgical Group Corporation. Jetson said the building works were valued at RM336.7m and prime cost and provision sum at RM582.7m. (StarBiz)
AEON: Sells Mahkota Cheras mall for RM87.8m. AEON Co (M) is disposing of a piece of freehold land together with the two-storey AEON Mahkota Cheras Shopping Centre built on the land for RM87.8m. AEON said the disposal is in line with its corporate strategy of focusing and developing its future retail business. The buyer of the property — used for operating a shopping centre with car parks and departmental store-cum-supermarket — is Foremost Wealth Management SB. The group said the net book value of the property for FYE16 was RM67.4m and the age of the building is seven years. (The Edge)
Tasco: Expects cold chain logistic operation to bring in extra revenue of RM100.0m. Tasco expects its foray into the cold chain logistics segment to boost its 2017 revenue by an additional RM100.0m, following shareholder approval for its acquisition of Gold Cold Transport (GCT) and Westport land. This will bring its revenue for the year to around RM700.0m, said Tasco’s executive chairman Lee Check Poh. GCT, which Tasco is buying for RM186.1m cash, is expected to begin registering contribution once the acquisition is completed in July. Meanwhile, the acquisition of 39.5 acres of land in Pulau Indah for RM113.8m will contribute to revenue by year-end, said Tasco’s MD Freddie Lee Jew Kiat. (The Edge)
Boon Koon: To diversify into property development. Boon Koon Group, which specialises in rebuilt commercial vehicles, intends to diversify into property development. To do that, Boon Koon will jointly develop a residential project with Platinum Eminent SB, a wholly owned subsidiary of Aera Property Group SB. Boon Koon announced that it had entered into a joint development agreement with Platinum Eminent. Under the agreement, Boon Koon’s wholly-owned subsidiary BKG Development SB will have to pay an upfront participation fee of RM20.0m, which in turn will entitle Boon Koon to 60% of the gross development profits of the project, which is estimated to be RM93.5m. (The Edge)
Berjaya Corp: Returns to the black in 4Q. Berjaya Corp (BCorp) posted a net profit of RM3.2m for (4QFY17), a stark contrast to a net loss of RM368.9m a year ago due to impairment in value of goodwill of RM473.2m plus and assets held for sale relating to Berjaya (China) Great Mall Co Ltd of RM131.8m. Quarterly revenue came in at RM2.2bn, which was 10% lower from the RM2.5bn it recorded a year ago. (The Edge)
Market Update
The FBM KLCI might struggle to open higher today as this week’s global government bond sell-off gathered pace, and the Dollar touched an eight-month low against a basket of rivals, as participants continued to weigh the prospect of central banks outside the US joining the Federal Reserve in removing monetary policy stimulus in coming months. The prospect of less accommodative policy weighed on equity markets on both sides of the Atlantic with technology stocks suffering fresh losses, even as US banks rose after passing the latest round of Federal Reserve “stress tests”. Energy stocks also gained ground on Wall Street as oil prices touched two-week highs — before coming off the boil — although the softer Dollar did little to bolster gold as the metal drifted back towards Monday’s six-week low. The focus remained largely on the bond and FX markets following this week’s flurry of central bank comments that were largely viewed by market participants as more hawkish than expected, despite efforts by policymakers to clarify their positions. On Wall Street, the Dow Jones Industrial Average fell 167.58 points, or 0.8%, to 21,287.03, its biggest percentage decline since May 17. The S&P 500 index declined 20.99 points, or 0.9%, to 2,419.70, also its worst selloff in more than a month. The Nasdaq Composite Index tumbled 90 points or 1.4% to 6,144.35. In Paris, the CAC 40 index ended 1.9% lower at 5,154.35. In Frankfurt, the export-heavy DAX 30 fell 1.8% to 12,416.19 and in London, the FTSE 100 finished modestly lower, down 0.5% at 7,350.32.
Back home, the FBM KLCI index was flat with the key index up marginally by 0.13 of a point or 0.01% to 1,771.36 points. Trading volume increased to 1.40bn worth RM1.56bn. Market breadth was positive with 502 gainers as compared to 314 losers. The regional equity markets were higher, with finance stocks broadly leading gains after all major U.S. financial institutions received approval from the Federal Reserve to ramp up dividend payouts and share buybacks. Australia’s S&P/ASX 200 advanced 1.1% while Japan’s Nikkei Stock Average was up 0.5%. Elsewhere, Hong Kong’s Hang Seng Index was up 0.8%, led by strength in banking giant HSBC and Standard Chartered. In China, the Shanghai Composite Index added 0.5%.
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