The Week Ahead: 11mp, China GDP and MRT2 project in focus

This article first appeared in The Edge Malaysia Weekly, on October 15, 2018 - October 21, 2018.
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Market players will be looking for signs of a sustained recovery in the local stock market after a turbulent week in global markets, even as the 11th Malaysia Plan (11MP) and China’s third-quarter gross domestic product data — due to be released this Friday — will be in focus.

Prime Minister Tun Dr Mahathir Mohamad is expected to table the mid-term review of the 11MP in parliament on Thursday.

After shedding 65.66 points or 3.7% last Wednesday and Thursday to 1708.49 — the FBM KLCI’s lowest close in three months — the benchmark index recovered from its seven-day losing streak, gaining 22.25 points to end at 1,730.74 points on Friday. Week on week, the index lost 2.6%.

Investors will be keeping an eye out for developments relating to MMC-Gamuda KVMRT (T) Sdn Bhd after the government’s controversial decision last week to terminate the underground portion of the MRT2 contract awarded to the joint venture company, equally owned by Gamuda Bhd and MMC Corp Bhd.

The move by the new administration, aimed at lowering costs, prompted the companies to launch a social media campaign to draw attention to the 20,000 workers they said would lose their jobs.

Dr Mahathir subsequently said that the government would review the contract. Minister of Economic Affairs Datuk Seri Mohd Azmin Ali, Finance Minister Lim Guan Eng, Works Minister Baru Bian and Transport Minister Anthony Loke form the four-man team set up by the Cabinet to revisit the contract.

“We will re-examine the project to reduce its costs. We will look into it, but the need [for the project] is still there,” Mohd Azmin said last Thursday.

Gamuda’s share price, which sank to a record low of RM2.07 last Wednesday, closed at RM2.35 on Friday, down 26.8% from a week earlier. MMC’s shares, too, fell to a record low of RM1.12 last Wednesday, before regaining ground to close at RM1.15 on Friday. The stock shed 12.6% w-o-w.

Meanwhile, follow-up news can be expected on the outcome of the Oct 13 by-election in Port Dickson, in which prime-minister-in-waiting Datuk Seri Anwar Ibrahim is contesting. Anwar needs to win to secure a seat in parliament.

China’s third-quarter GDP will be closely watched for signs of how the world’s second largest economy is doing amid its trade war with the US. A Bloomberg survey sees China’s economy growing at a slightly slower pace of 6.6% year on year in 3Q, compared with 6.7% in 2Q.

A further escalation of the US-China trade war is expected to hurt growth in both countries. The International Monetary Fund said last week it expects China’s growth pace to slow to 6.6% this year from 6.9% last year, and then to 6.2% in 2019. It expects US growth to peak at 2.9% this year from 2.3% last year, but then soften to 2.5% in 2019.

Other data out in China this week include the September Consumer Price Index and Producer Price Index (Oct 16) , as well as industrial production, retail sales and unemployment rate (Oct 12).

South Korea is the only Asian central bank due to make a monetary policy decision, on Thursday. The Bank of Korea, which last November raised its benchmark rate to 1.5% from a record low of 1.25% — the first increase in more than six years — is largely expected to leave it unchanged.

Indonesia and Japan are expected to release September trade data on Monday and Thursday respectively.

Markets will be closed in Thailand (Oct 15), Hong Kong (Oct 17) and India (Oct 19). Thailand is celebrating the King’s memorial day while Hong Kong has the Chung Yeung festival and India, the Hindu festival Dussehra.

In the US, among key data out this week are advance retail sales and business inventories (both on Oct 15), September industrial production (Oct 16), initial jobless claims (Oct 18) and existing home sales for September (Oct 19).

Apart from that, the Federal Open Market Committee’s September meeting minutes will be out on Oct 18, 2am local time. It will also be a busy week for US earnings’ reports.

In Europe, the European Union Leaders’ Summit (Oct 18-19) has been billed as the last chance to negotiate an orderly Brexit. According to news reports, officials from London and Brussels say the draft of a Brexit deal must be completed by the summit dinner on Oct 17, or at the very latest, by mid-November.

At home, DiGi.Com Bhd will release its third-quarter financial results on Wednesday. Companies that will hold annual general meetings include REDtone International Bhd (Tuesday), Berjaya Land Bhd (Wednesday), YTL Hospitality REIT, Ancom Logistics Bhd, Vizione Holdings Bhd and Nylex Malaysia Bhd (Thursday.)

Those with extraordinary general meetings include DRB-Hicom Bhd (Monday) and JAKS Resources Bhd (Thursday).

DRB-Hicom Bhd is seeking shareholders’ approval to sell Alam Flora Sdn Bhd to a subsidiary of Malakoff Corp Bhd for RM944.61 million in cash. Malakoff’s shareholders had earlier this month approved the acquisition.

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