Economy

US: Credibility, 'gradual' approach at stake as Fed weighs rate rise. The US Federal Reserve, facing this week its biggest policy decision yet under Chair Janet Yellen, puts its credibility on the line regardless of whether it waits or raises interest rates for the first time in nearly a decade. The central bank, for its part, has left the door open to a modest rate rise on Thursday, following a two-day meeting. Recent comments by Fed officials suggest it will try to comfort investors with pledges that whatever it decides it will keep nurturing the economic recovery. (Reuters)

US: Inflation expectations lowest in years, Fed survey shows. Consumer expectations for inflation three years ahead fell last month to the lowest level in records going back to June 2013, according to a Federal Reserve Bank of New York survey. The median respondent to the New York Fed’s Aug Survey of Consumer Expectations predicted annual consumer price inflation three years hence would be 2.9%, down from 3% the month before. Median expected inflation a year ahead fell to 2.8% from 3%, marking the second-lowest response in the history of the survey. (Bloomberg)

EU: Industrial production increases most since Feb. Euro-area industrial production rose more than economists estimated in July as output jumped in three of the region’s four largest economies. Production in the 19-nation currency bloc increased 0.6% from June, when it dropped a revised 0.3%. On the year, output was up 1.9%. The data add to evidence that the region’s economic outlook is improving, even as ECB President Mario Draghi cautions that a China-led slowdown in emerging markets poses downside risk. Economic confidence is at a 4-year high, unemployment unexpectedly declined in July and growth in the first half was stronger than initially reported. (Bloomberg)

EU: Italy may seek up to EUR10.5bn in EU flexibility. Italy may ask the EU for flexibility in budget targets that would free up as much as EUR10.5bn (USD12bn) to help fund tax cuts pledged by Prime Minister Matteo Renzi, his economic adviser said. Filippo Taddei said in an interview that the government may seek the additional flexibility under EU rules on structural reforms and investment. He said Renzi and Finance Minister Pier Carlo Padoan are “on the same wavelength” on how to finance EUR35bn of tax cuts from 2016 to 2018, dismissing press reports of discord over the issue. (Bloomberg)

EU: ECB to extend QE beyond Sept 2016 say traders. The ECB will expand its asset purchase program and extend it beyond Sept next year amid lower inflation expectations, a Reuters poll of euro money market traders found on Monday. Just six months into the ECB's asset purchase program that was set to end a year from now, traders polled by Reuters said the ECB would add more stimulus to boost the economy and raise inflation. Most traders also said the central bank would - probably before year-end - announce a new end-date for the quantitative easing program. (Reuters)

China: Grabs unused funds to spend on new projects as growth slows. Chinese authorities have seized up to CNY 1trn (USD157bn) from local governments who failed to use their budget allocations, sources said, as Beijing looks for ways to spend its way out of an economic slowdown. Two sources close to the government said budget funds repossessed from local governments would be used to pay for other investments. (Reuters)

Japan: BOJ, meeting before the Fed, seen holding fire despite global risks. The Bank of Japan is expected to warn of heightening global risks at its monetary meeting on Tuesday, but will hold off on expanding stimulus to preserve its limited policy options in case a looming US rate hike decision sparks a fresh wave of market volatility. A run of poor data, including weak exports, feeble wage growth and soft household spending, has ramped up pressure on the BOJ to deploy additional monetary steps to reflate the economy out of a second-quarter contraction. (Reuters)

India: Inflation eases, adding rate-cut pressure on Rajan. India’s two main inflation gauges showed a continued easing, adding pressure on central bank Governor Raghuram Rajan to cut interest rates for a fourth time this year. Consumer price inflation eased to 3.7% in Aug, below the central bank’s target of 6% by Jan for a 12th straight month. Wholesale prices fell 5.0% in Aug from a year earlier after slipping 4.1% in July. (Bloomberg)

Markets

AAX (Neutral, TP: RM0.21): In talks with Airbus to delay aircraft delivery. AirAsia X is in talks with Airbus Group SE to delay more planes due for delivery in the next two years as the long-haul arm of South-East Asia's biggest low-fare carrier takes steps to improve its financial standing. AirAsia X would like to rework the schedule for the other four planes due this year and the nine it was supposed to take in 2016 and 2017, he said. (StarBiz)

FGV (Neutral, TP: RM1.16): Shares hit limit up on govt measures. Felda Global Ventures Holdings (FGV) shares, along with the shares of other government-linked companies (GLCs), were in focus yesterday following measures unveiled by the Government to strengthen the stock market. FGV shares hit limit up after rising 38 sen to RM1.65 briefly in the last 30 minutes of trading. The counter closed 37 sen or 29.13% higher with 65.5m shares traded. This prompted an unusual market activity query from Bursa Securities shortly after market close. (StarBiz)

Puncak Niaga: Agrees to extension. Puncak Niaga Holdings has agreed to a further extension until Oct 15 for the fulfillment of the conditions precedent stated in the conditional sale and purchase agreement (SPA) with Pengurusan Air Selangor SB (Air Selangor). This mark the eighth extension since Puncak Niaga signed the SPA with Air Selangor last Nov. (StarBiz)

Harvest Court: To diversify into property sector. Harvest Court Industries, which manufactures timber-related products, plans to diversify into property development while focusing more on timber services to return to profitability by the end of its financial year 2017. Managing director Datuk Eddie Chai Woon Chet said the company had identified two prime areas in Selayang, Selangor, and Malacca for development. (StarBiz)

Halex: Unit ventures into Cambodia’s gaming ops. Agricultural chemical manufacturer and distributor Halex Holdings is venturing into the Cambodian gaming business. Halex said its subsidiary Halex International SB has entered into a MoU with the major shareholder of VW Win Holdings Plc, Goh Teik Keng, for a proposed acquisition of at least 51% stake in the latter. (StarBiz)

MAA: Indonesia revokes licence. MAA Group’s Indonesian operating licence has been revoked by the Indonesia Financial Services Authority, Otoritas Jasa Keuangan (OJK), effective Sept 3 OJK has regulatory and supervisory duties over financial services activities including insurance activities in Indonesia. The PN17-status company said its sub-subsidiary PT MAA General Insurance (PTMAAG) received a letter dated Sept 10, 2015 from OJK stating that the operating licence has been revoked with effect from Sept 3, 2015. (StarBiz)

BIMB: 2Q earnings flat at RM129m on higher costs. BIMB Holdings’ net profit was relatively flat at RM129.9m for the 2QFY15, compared with RM129.7m a year ago, as higher costs offset income growth. BIMB said that during the quarter in review, the earnings per share (EPS) of the financial services provider stood at 8.42 sen, compared with 8.68 sen previously. The group’s revenue, however, saw a growth of 10.9% to RM814.7m in the second quarter this year, compared with RM734.6m in the previous corresponding period. (StarBiz)

MARKET UPDATE

US markets ended lower overnight as investor caution rose a notch ahead of the Federal Reserve's 2-day policy meeting starting tomorrow. With little economic data releases to fall back on, market movement was largely determined by stock-specific developments, ie. Yahoo! Inc. and Alibaba Group Holding Ltd falling 3.1% each in reaction to a report suggesting the latter may lose another 50% of its value as volume growth declines, while energy and raw-materials shares fell as commodity prices eased further. For the day, both the Dow Jones Industrial Average and S&P 500 slipped 0.4%. Most European markets also closed lower as investors refrained from taking fresh bets on the market and on which way the Fed would move. Talk about market paralysis! Never has one event been more closely-watched in recent memory than this! Losers amongst the major markets were led by Italy’s 0.9% decline. France, UK and Spain’s indices fell 0.7%, 0.5% and 0.4% respectively though Germany’s DAX inched 0.1% higher. China’s economic data releases over the weekend raised growth-related concerns again, driving the Shanghai Composite Index 2.7% lower yesterday. Fixed-asset investment rose at the slowest pace in 15 years while industrial production growth trailed estimates, though retail sales numbers were encouraging. Amongst other decliners were the Nikkei 225 and Straits Times Index which fell 1.6% and 0.6% respectively. Markets elsewhere were a little more refreshed however, none more so than the FBM KLCI which raced 2.3% ahead to close at 1,639.63points, possibly in reaction to the government’s announcement that RM20bn could be put to work in the market through its investment arm, ValueCap. India’s BSE Sensex recoded a 1.0% gain, Indonesia’s Jakarta Composite Index rose 0.7% while the Hang Seng Index inched 0.3% higher.

Mudajaya Group announced the securing of an RM489m contract to build the workers’ village and temporary construction facilities for the utilities, interconnecting and offsite facilities for the RAPID project in Pengerang, a job which is very much welcomed given the dearth in recent times. SKP Resources announced that it had clinched another manufacturing contract from Dyson Ltd. Please refer to the accompanying reports today for further details on both these announcements. Poh Huat Resources recorded a healthy 82.9% gain in its 9MFY15 net profit to RM23.3m on increased contributions from its Vietnamese operations as US-led demand rose strongly. The group also recorded an RM3.4m forex gain during the quarter from the strengthening of the USD against the Ringgit and the Dong.

Source: PublicInvest Research - 15 Sep 2015