Breakfast briefing: Friday, August 28


Market wrap: Wall Street rallied more than 2% on Thursday as strong US economic data and hints that a September interest rate hike was unlikely fueled optimism that the worst of recent market turmoil was over. - Reuters

The DJIA rose 2.27% to end at 16,654.77 and the S&P 500 jumped 2.43% to 1,987.66. The Nasdaq added 2.45% to 4,812.71.

Forex summary

*The ringgit rose 0.56% to 4.2080 per US$

*It increased 0.91% to 4.7304 per euro

*Up 0.99% to 6.4873 to the pound sterling

*0.41% higher to 3.0090 per Singapore dollar

*Down 0.17% to 3.0232 per Aussie

*Up 0.61% to 3.4750 per 100 yen

Energy

Oil rocketed more than 10% higher on Thursday, posting its biggest one-day rally in over six years as recovering equity markets and news of diminished crude supplies set off a short-covering scramble by bearish traders. Front month Brent crude LCOc1 for October more than reversed a week's worth of losses, rising US$4.42 to settle at US$47.56 a barrel, marking a 10.25% rise. - Reuters

Top foreign news

US second-quarter GDP growth revised sharply higher: The US economy grew faster than initially thought in the second quarter on solid domestic demand, showing fairly strong momentum that could still allow the Federal Reserve to hike interest rates this year. Gross domestic product expanded at a 3.7% annual pace instead of the 2.3% rate reported last month, the Commerce Department said on Thursday in its second GDP estimate for the April-June period. - Reuters

Japan inflation stalls and spending slides: Japan's core consumer inflation was flat in the year to July and household spending unexpectedly fell, casting deeper doubt on the central bank's forecast that a solid economic recovery will help accelerate inflation to its 2% target. While the Bank of Japan has said it will look through the effect of slumping oil costs on inflation, the weak figures will keep it under pressure to expand its massive stimulus programme. - Reuters

Top local stories

Cautious approach: Malayan Banking Bhd (Maybank) adopting a cautious approach in its second half and has revised down its loans growth for this year to 8%-9% from 9%-10% previously. For the first half of this year, Maybank recorded a loans growth of 4.2% year-on-year from its Malaysian operations. During the quarter Maybank's earnings rose 3.4% to RM3.28bil from RM3.18bil in the previous year. Revenue grew 10.8% to RM9.88bil from RM8.91bil. - StarBiz

AirAsia X finds fictitious services: Long-haul budget airline AirAsia X Bhd has discovered payments for fictitious services that adds up to RM7mil. The firm said its internal and external auditors had recently discovered that certain payments had been made to a service provider between the period of 2010 to 2014 for services which were now established to be fictitious. - StarBiz

FGV to sell Canadian facility: Felda Global Ventures Holdings Bhd (FGV) has proposed to dispose of its oilseeds crushing and refining plant in Canada to Viterra Inc for C$190mil (RM608.2mil) cash. It intends to use about RM596.7mil of the proceeds to partially repay borrowings and for working capital. FGV’s total borrowings stood at RM4.56bil as at June 30. - StarBiz

Encorp hurt by softer property market: Encorp Bhd posted a net loss of RM10.60mil in the second quarter compared with earnings of RM1.5mil a year ago. Revenue fell 50.3% to RM59.18mil. The company said the weaker results were due to lower sales by the property division because of the softer property market and cost written off and recognition of foreseable losses of terminated construction projects. - StarBiz

DRB-Hicom posts loss amid auto sales slump: DRB-Hicom Bhd registered a net loss of RM19.7mil for the first quarter due to lower sales of motor vehicles by its automotive division. The vehicle maker expects a very challenging year. Revenue fell 20.7% to RM2.95bil, dragged down by its automotive and services divisions. Its loss per share stood at 1.02 sen compared with an earnings per share of 5.58 sen a year earlier. - StarBiz

QL Resources expanding shrimp farming: QL Resources Bhd will spend the bulk of its capital expenditure of RM150mil in capital expenditure to grow its shrimp farming business. It has also set aside RM15mil to purchase a 900-acre parcel of land in Kota Buruk in Sabah for future aquaculture expansion. - StarBiz

Bumi Armada slips into the red on charges: Bumi Armada Bhd posted a net loss of RM291.53mil in the second quarter ended June 30, from a net profit of RM98.38mil a year ago, due to a non-cash impairment charge of RM383.7mil. The company said excluding the charge, it would have recorded an adjusted net profit of RM84.8mil.  Revenue fell to RM459.08mil from RM590.08mil due to lower utilisation of vessels. - StarBiz

KPJ Healthcare earnings up on hospital income: KPJ Healthcare Bhd ’s net profit rose 6.7% to RM36mil in the second quarter, lifted by higher revenue and contribution from the hospitals. The healthcare provider said revenue increased 7.8% to RM714.3mil, while earnings per share (EPS) rose to 3.59 sen from 3.38 sen. - StarBiz

Moody’s: Outlook for banks remains stable: The outlook for Malaysia's banking sector remains stable as its exposure to foreign currency loans is minimal, said Moody’s Investors Service. Its vice-president senior credit officer, financial institutions group Eugene Tarzimanov said the banks’ current position were quite strong, compared with what they were during the Asian financial crisis. - Bernama

Weaker ringgit a windfall for VS Industry: For VS Industry Bhd , one of the top 50 electronics manufacturing service providers in the world, the weakening of the ringgit against the greenback is a windfall as it gains on exports. Managing director Datuk Gan Sem Yam said that 90% of the company products were exported to the United States, Australia, Japan and European countries with the transactions done in US dollars. - StarBiz

Franklin Templeton remains optimistic on Malaysia: Franklin Templeton remains optimistic over Malaysia, saying the country is an example of investors being overly negative, despite its economic resilience. “Malaysia is an example, where we believe investors have been overly negative, as it continues to be viewed through a prism of being a commodity exporter," says Templeton Global Macro chief investment officer Dr Michael Hasenstab. “Actually, the country has a well-balanced export basket, including electronics, which would be supported by the re-emergence of the US consumer." - StarBiz

Bank Negara, Thai counterpart set up local currencies framework:
Bank Negara and Bank of Thailand plan to set up a framework to promote the settlement of bilateral trade and direct investment in their local currencies. The two central banks have signed an MoU that would ultimately enable both countries enhance bilateral trade and investment flows. - StarBiz

8.39% of Destini shares traded off-market: Oil and gas services provider Destini Bhd saw 67.83 million of its shares, or an 8.39% stake, crossed off-market on Thursday for RM39.34 million. According to Bloomberg data, the shares were transacted in two blocks at 58 sen each. A source said the party involved in the transactions was the Ministry of Finance Inc. - digitaledge

Scan Associates withdraws Bursa suit: Scan Associates Bhd , which slipped into Guidance Note 3 (GN3) status in May this year, has withdrawn its lawsuit against Bursa Securities with costs of RM30,000 paid to the regulator and with no liberty to file afresh. In a filing with Bursa Malaysia, Scan Associates said it feels the withdrawal of the suit is in the best interest of the company. - digitaledge

TM seals cable deal with TIME: Telekom Malaysia Bhd (TM) inked a 20-year construction and maintenance agreement with TIME dotCom Bhd unit TT dotCom Sdn Bhd on Thursday for the development and construction of a new submarine cable system, “Sistem Kabel Rakyat 1 Malaysia”. The new submarine cable system is part of the government’s initiatives to increase the capacity of high-speed broadband, as outlined in Budgets 2014 and 2015. - digitaledge

Events calendar

UK's National Statistics releases Gross Domestic Product data for the second quarter (0830 GMT).

AGMs/EGMs

AMMB Holdings Bhd

Time: 10am

Venue: Berjaya Times Square Hotel Kuala Lumpur,  Jalan Imbi, Kuala Lumpur

Southern Acids (M) Bhd


Time: 11am

Venue: Setia City Convention Centre , Seksyen U13, Shah Alam


Breakfast Briefing