Economy

US: Biden, McCarthy divided over debt ceiling but still talking. President Joe Biden and top lawmakers failed to break a deadlock on Tuesday in face-to-face talks over raising the USD 31.4trn US debt limit but vowed to meet again with just three weeks before the country may be forced into an unprecedented default. After about an hour of talks in the Oval Office, Biden, a Democrat, and House of Representatives Speaker Kevin McCarthy, a Republican, showed no signs of softening their positions as a default looms as early as 1 June. But talks among aides may continue as soon as Tuesday night on the federal budget. (Reuters)

US: Corporate bankruptcies at highest level since 2010. US companies are feeling the heat of decades-high interest rates and sticky inflation, with several filing for bankruptcy protection as the era of easy money draws to a close. The tally of U.S. companies that have gone bankrupt so far in 2023 is higher than the first four months of any year since 2010. There were 54 corporate bankruptcy petitions in April, down from 70 in March, S&P Global said. Still, the YTD count more than doubled to 236 from a year ago. (Reuters)

US: Small business sentiment slumps to more than 10-year low; sales drop. US small business confidence fell to more than a 10-year low in April on worries about the near-term economic outlook and persistent worker shortages, but there were few signs that businesses were having difficulties accessing credit. The Small Business Optimism Index dropped 1.1 points to 89.0 last month, the lowest level since Jan 2013. It was the 16th straight month that the index remained below the 49-year average of 98. Higher interest rates tied to the Federal Reserve's battle to tame inflation combined with tighter credit conditions following recent financial market stress are stoking fears of a recession this year. (Reuters)

EU: French trade gap narrows to EUR 8.02bn. France's foreign trade deficit decreased at the end of the first quarter as imports fell faster than exports. The trade deficit dropped to EUR 8.02bn in March from EUR 9.3bn in Feb. In the corresponding month of 2022, the deficit totaled EUR 13.6bn. Exports decreased 1.2% from the previous month, and the fall in imports was 3.1%. On a yearly basis, exports were 7.2% higher in March. At the same time, imports registered a comparatively slower increase of 3.7%. During the first quarter, total exports and imports fell by 1.6% and 7.4%, respectively. (RTT)

UK: Halifax house prices log unexpected fall in April. UK house prices unexpectedly declined in April as higher interest rates to tame stubbornly high inflation weighed on affordability and demand. House prices decreased 0.3% on a monthly basis in April, in contrast to the 0.8% increase in March. This was the first fall in four months. Prices were forecast to rise 0.2%. On a yearly basis, house prices gained only 0.1%. This followed a 1.6% rise in March. A typical UK property cost GBP 286,896 compared to GBP 287,891 in March. Recent house price movements reflected the short-term volatility seen in borrowing costs, Halifax Mortgages Director Kim Kinnaird said. (RTT)

China: Shrinking imports, slower exports growth darken economic outlook. China's imports contracted sharply in April, while exports rose at a slower pace, reinforcing signs of feeble domestic demand despite the lifting of COVID curbs and heaping pressure on an economy already struggling in the face of cooling global growth. China's economy grew faster than expected in the first quarter thanks to robust services consumption, but factory output has lagged and the latest trade numbers point to a long road to regaining the pre-pandemic momentum at home. Inbound shipments to the world's second-largest economy fell 7.9% year on year in April, extending the 1.4% decline seen a month earlier, while exports grew 8.5%, easing from the 14.8% surge in March. Economists poll had predicted no growth in imports and an 8.0% increase in exports. (Reuters)

China: Soy imports hit by stricter customs checks. China’s April imports of soybeans fell 10% from a year earlier, customs data showed on Tuesday, after stricter customs checks delayed cargoes. The world’s top soybean buyer brought in 7.3m tonnes of the oilseed last month, significantly less than the 9.0m tonnes expected by traders. Analysts and traders attributed the drop to new customs procedures that delayed the discharging of soybean cargoes for up to two weeks. The strengthened inspection at customs continued during the whole month of April and that resulted in lower imports than expected. Soybeans are crushed to make protein-rich soybean meal, a major ingredient in animal feed, as well as oil for cooking. (Reuters)

South Korea: Has USD 0.27bn Current Account Surplus In March. South Korea posted a current account surplus of USD 0.27bn in March. That beat expectations for a deficit of USD 0.80bn following the USD 0.52bn shortfall in Feb. The goods account saw a USD 1.13bn deficit, while the services account posted a USD 1.90bn deficit owing to a deficit in the travel account. The primary income account recorded a USD 3.65bn surplus due to an increase in the income on equity, and the secondary income account had a USD 0.35bn deficit. For the first quarter of 2023, the current account deficit was USD 4.46bn. (RTT)

Australia: To log first budget surplus in 15 years. Australia's budget is projected to return to surplus in 2022-23 for the first time in 15 years amid high commodity prices and a record low unemployment, and then to post smaller deficits and lower debt across the forward years, Treasurer Jim Chalmers said in his budget statement. The surplus for the fiscal year ending June 2023 is projected at AUD4.2bn. For 2023-24, the underlying cash deficit is expected to be AUD13.9bn. Gross debt is seen at 35.8% of GDP in 2023-24. The government forecast gross debt to peak at a lower level and five years sooner than forecast in the October Budget. (RTT)

Indonesia: Consumers more optimistic in April. Indonesia's consumer confidence improved in April to the highest level in ten months, supported mainly by households' improved assessment of the current economic conditions, survey data from the Bank of Indonesia. The consumer confidence index rose to 126.1 in April from 123.3 in the previous month. The current income index, which increased to 116.6 from 113.1, was primarily responsible for the overall upward trend. The job availability index and current income index made the most contributions among the components. The consumer expectation index also remained strong in April, rising to 135.5 from 133.5 in March, mostly driven by the expectation index for employment availability. (RTT)

Markets

Reservoir Link (Neutral, TP: RM0.39): Unit inks MOU with Nasdaq-listed VCIG to explore opportunities in clean energy industry. Reservoir Link Energy is keen on exploring potential collaboration in the clean energy industry with Nasdaq-listed company VCI Global Ltd (VCIG). The oil and gas services player said its 51%-owned subsidiary Founder Energy SB (FESB) has entered into a MOU with VCIG on the matter. “The parties are keen to explore and venture into new market opportunities in the clean energy industry by using their expertise and resources to procure, manage and develop clean energy projects, with their focus in the region of Southeast Asia. (The Edge)

TT Vision: Secures RM14m contract. TT Vision Holdings has secured purchase orders worth USD3.2m (RM14.0m) for its solar cell inspection and sorting equipment. The contract, to be fulfilled within eight to nine months, was awarded by a "global leader in solar innovation," the company said, without naming the customer. (The Edge)

Khee San: Reveals regularisation plan, seeks for scheme of arrangement with creditors. Khee San has announced its regularisation plan, which includes share capital reduction, issuance of renounceable rights shares with free warrants and a scheme of arrangement with its creditors. The share capital reduction entails the cancellation of RM100.97m of its issued share capital to set off its accumulated losses. Besides the share capital reduction to offset its accumulated losses, Khee San has also proposed a scheme of arrangement with creditors in respect of the amounts owing to the scheme creditors, aggregating RM138.5m as at March 31, 2022. (The Edge)

Citaglobal: Secures RM261m contract for KVDT 2. Citaglobal has secured a RM261m contract for the Klang Valley Electrified Double Track Phase 2 (KVDT 2) project. in a statement, the group said it received the letter of award from main contractor Dhaya Maju Infrastructure (Asia) SB (DMIA) for the supply, delivery, construction, successful completion and maintenance of bridges, culverts, drainage and fencing works that form part of the KVDT 2 project. (StarBiz)

AAX: Gets further three-month extension to submit regularisation plan. AirAsia X has been granted a further threemonth extension of time until July 28 from Bursa Securities to submit its regularisation plan. It was previously granted an extension of time until April 28 this year, to submit the regularisation plan to the regulatory authorities. (The Edge)

Matrix Concepts: Inks strategic partnership with McDonald’s. Matrix Concepts Holdings has inked a strategic cooperation agreement with McDonald's Malaysia, which has chosen Bandar Sri Sendayan (BSS) as the location for its newest outlet. McDonald's is set to open a new restaurant in Sendayan Merchant Square, complete with both dine-in and drive-through facilities. (StarBiz)

Velesto: Wins RM570m contracts from PETRONAS Carigali. Velesto Energy has received three notices of assignments relating to the provision of jack-up drilling rigs for PETRONAS Carigali SB totalling USD128m (RM570m). The jobs entail the provision of services of three jack-up rigs, namely Naga 3, Naga 4 and Naga 6.. (StarBiz)

MARKET UPDATE

The FBM KLCI might retreat today after US stocks slipped on Tuesday but traders were mostly on the sidelines ahead of the release of crucial inflation data. Wall Street’s benchmark S&P 500 ended the day down 0.5% while the tech-heavy Nasdaq Composite fell 0.6%. The moves come ahead of the release of US consumer price data on Wednesday morning, which is expected to show headline CPI rose at an annual rate of 5 % in April, unchanged from the previous month, according to consensus. In Europe, the regionwide Stoxx 600 fell 0.3% as investors expressed concern about the outlook for real estate companies following a year of aggressive interest rate rises. London’s FTSE 100 fell 0.2% as traders awaited the Bank of England’s next policy meeting on Thursday when the central bank is expected to raise interest rates by 0.25 percentage points to 4.5%, their highest level since 2008.

Back home, Bursa Malaysia closed slightly lower due to profit-taking particularly for banking and plantation stocks. At the closing, the FBM KLCI had eased by 1.11 points to 1,432.63, from Monday’s close at 1,433.74. In the region, Hong Kong’s benchmark Hang Seng index fell 2.1%, while China’s CSI 300 was down 0.9%. Japan’s Topix stood out from the rest of the region, rising 1.3%.

Source: PublicInvest Research - 10 May 2023