Economy

US: Mortgage application tick up, purchase applications at 3- month low – MBA. US applications for home mortgages increased on a pickup in homeowners seeking to refinance their loans, but requests for loans to purchase a house fell to a three-month low amid an acute shortage of housing stock that is driving up prices. The Mortgage Bankers Association (MBA) said its seasonally adjusted Purchase Index increased 1.2% from a week earlier, reflecting a 4% rise in applications for refinancing. Refinancing activity has ticked higher in recent weeks as mortgage interest rates have pulled back from their recent highs. The purchase index decreased 4% from a week earlier to the lowest level since February, which may signal further headwinds for home sales in the months ahead. (Reuters) 

EU: Inflation at 2-year high. Eurozone inflation accelerated, as initially estimated to a two-year high in April, driven by higher energy prices, final data from Eurostat showed. Inflation rose to 1.6% in April from 1.3% in March. The annual rate came in line with the flash estimate published on April 30. This was the highest rate since April 2019, when inflation was 1.7%. On a monthly basis, the harmonized index of consumer prices advanced 0.6% in April, as estimated. Meanwhile, core inflation that excludes energy, food, alcohol and tobacco, eased to 0.7% from 0.9% in the previous month. (RTT)

EU: January to April new car registrations up 24.4%. European new passenger car registrations rose sharply in the first four months of the year and there was a surge of over 200% in April alone due to the low base comparison of last year as sales were hurt by the coronavirus pandemic. New car registrations rose 24.4% YoY in the January to April period to 3.4m units, data from the European Automobile Manufacturers Association (ACEA) showed. March and April sales provided substantial boost to the total for the four months, ACEA said. (RTT)

EU: German business less optimistic on 2021 GDP growth than government. Germany’s DIHK Chambers of Industry and Commerce said it slightly raised its growth forecast for Germany to 3% this year after its recent survey pointed to improved business morale over the past three months. The DIHK’s updated growth forecast compares with its previous estimate of 2.8% projected in February and is based on the latest findings of the association’s survey among more than 27k companies from various sectors of the economy. The DIHK forecast is less optimistic than the government’s projection of 3.5% GDP growth this year. The German economy shrank by 4.8% last year due to the pandemic. (Reuters)

UK: Inflation exceeds expectations in April. UK consumer price inflation exceeded expectations in April on higher energy prices, the Office for National Statistics said. Consumer prices advanced 1.5% YoY in April, more than double the March's 0.7% increase. A similar higher rate was last seen in March 2020. Prices were forecast to gain 1.4% in April. At the May monetary policy committee meeting, policymakers of the Bank of England said that although inflation is below the 2% target, it will rise temporarily above the target towards the end of 2021, owing mainly to developments in energy prices. The BoE had forecast inflation to rise to 2.5% in 2021 and to return to 2% in 2022. (RTT)

UK: House price inflation highest since 2007 – ONS. UK house price inflation accelerated to its highest level in 14 years in March, data from the Office for National Statistics showed. The house price index rose 10.2% YoY following a 9.2% increase in February. The house price annual inflation rate was the highest since August 2007, the ONS said. The annual rate has climbed steadily since July last year, when it was 1.8%. London remained the region with the lowest annual growth, of 3.7%, for the fourth consecutive month. (RTT)

Japan: Industrial production rises less than estimated. Japan's industrial production rose less than estimated in March, final data from the Ministry of Economy, Trade and Industry showed. Industrial production increased a seasonally adjusted 1.7% MoM in March. In the initial estimate, industrial production rose 2.2%. Shipment grew 0.4% monthly in March. According to the initial estimate, shipment rose 0.8%. Inventories gained 0.4% in March versus 0.1% growth in the initial estimate. Inventory ratio grew 0.2% in March. In the initial estimate, inventory ratio declined 0.8%. (RTT)

Markets

Bumi Armada (Outperform, TP: RM0.49): JV inks deal for FSRU project in Mumbai. Bumi Armada's 49%-owned JV company entered into a licence agreement with the Board of Trustees for the Port of Mumbai (MBPT) to set-up, operate and maintain a floating storage and regasification unit (FSRU) in Mumbai harbour for a period of 30 years. (Bursa Malaysia)

Comments: Under the License Agreement, both parties will have approx. 9 months to fulfil certain conditions comprising of financing, obtaining permits for construction works, and signing of the agreement between the FSRU owner, charterer and JV Company for providing the FSRU for the License Period. Upon the fulfilment, the License Agreement will become effective and the License Period shall commence. Construction works for FSRU is expected to take about another 1.5 – 2 years hence earnings will only contribute from late FY23 onwards. While this could be positive on BAB’s future earnings, we are curious on how BAB is going to finance this job due to its stretched balance sheet with 2.4x net gearing. Pending more development on this and its 1QFY21 results next week, we maintain our earnings forecast at this juncture.

Eduspec: Inks MoU with Get Success to develop E-Sports Academy in Malaysia . Eduspec Holdings (EHB) has entered into a MoU with Get Success SB to jointly work out a commercial and business model for the creation of E-Sports Academy in Malaysia. The new E-Sports Academy would follow the model of EA Sports Academy overseas with relevant certification from recognised educational institutions and organisations. (Bernama)

UCrest: Inks agreement with Chinese contract manufacturers to produce Sputnik V vaccines . UCrest has inked an agreement with two contract manufacturers in China and secured the capacity to produce Sputnik V vaccines. The agreement is a follow-up to a MoU inked between UCrest and the Russian Direct Investment Fund (RDIF) in April, wherein it was agreed that UCrest will identify and manage contract manufacturers for the production of the vaccines. (The Edge)

TRC Synergy: Bids for infrastructure projects worth over RM2bn . TRC Synergy is actively tendering for more than RM2bn worth of infrastructure projects and building construction works throughout Malaysia. Group managing director Tan Sri Sufri Mohd Zin said the company's current construction orderbook of RM1.5bn would sustain it until 2023. (Bernama)

Techbond: Halts Shah Alam plants' ops for a week as seven workers found Covid-19 positive. Techbond Group is temporarily closing its factories in Kota Kemuning, Shah Alam, for a week from May 20 until May 26, after seven of its factory workers tested positive for Covid-19. It had voluntarily conducted Covid-19 screening on all its employees and discovered positive cases among them in the Shah Alam factories. (The Edge)

Automotive (Neutral): Malaysia's April vehicle sales down 9.34% from March as chip shortage impacts some brands. Malaysia's vehicle sales fell 9.34% to 57,912 units in April, from 63,878 units in March, as the shortage of computer chips impacted the sales of some makes. Monthly sales were also dragged by the enforcement of CMCO in Selangor, Kuala Lumpur, Johor, Penang, Kelantan and Sarawak. (The Edge) 

Market Update

The FBM KLCI might open weaker today after stock and bond prices slid in the US on Wednesday, as the latest minutes from the Federal Reserve reinforced fears of a potential pullback of crisis era support measures should the economic recovery continue. Wall Street’s S&P 500 index moderated losses late in the trading day but still closed 0.3% lower in New York, solidifying its third consecutive day of falls. Meanwhile, the Dow fell 164.62 points, or 0.5%, to 33896.04 and the Nasdaq Composite lost 3.90 points, or less than 0.1%, to 13299.74. The benchmark 10-year US Treasury yield, which moves inversely to its price, rose sharply following the release of minutes from the Federal Open Market Committee’s April meeting to 1.68 percentage points. The drops followed a weak session in Europe, where the region-wide Stoxx 600 closed down 1.5%, which was one of the benchmark’s biggest daily tumbles this year.

Back home, the FBM KLCI closed 10.8 points or 0.68% lower at 1,580.52, snapping three consecutive days of gains, as most component stocks succumbed to selling pressure amid rising Covid-19 cases. MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.5% while Japan's Nikkei lost 1.3%. Singapore's STI closed down 1.15% and the Jakarta Composite Index lost 1.27%.

Source: PublicInvest Research - 20 May 2021