Economy

US: Business borrowings jump 19% in April – ELFA survey. US companies borrowed USD9.8bn for capital investments in April, up 19% from a year earlier, benefiting from an economic recovery triggered by mass Covid-19 vaccinations and easing restrictions, the Equipment Leasing and Finance Association (ELFA) said. Borrowing in April rose 5% from the previous month, as companies across several sectors lined up for loans, leases and lines of credit. “An increasing number of businesses are opening up, as more Americans are receiving a vaccination, traveling and otherwise trying to return to some semblance of normalcy,” ELFA said. “What we see so far in terms of capital equipment investment is indeed encouraging as we head into the summer months.” (Reuters)

US: Consumer confidence holds steady in May. A report released by the Conference Board showed consumer confidence in the US held steady in May. The Conference Board said its consumer confidence index edged down to 117.2 in May after climbing to a revised 117.5 in April. Economists had expected the consumer confidence index to pull back to 119.5 from the 121.7 originally reported for the previous month. "After rebounding sharply in recent months, US consumer confidence was essentially unchanged in May," said Economic Indicators at The Conference Board. It added, "Overall, consumers remain optimistic, and confidence should remain resilient in the short term, as vaccination rates climb, Covid-19 cases decline further, and the economy fully reopens." Reflecting consumers' improved appraisal of current conditions, the present situation index jumped to 144.3 in May from 131.9 in April. (RTT)

EU: Germany 1Q GDP falls more than initially estimated. The German economy contracted slightly more than initially estimated in 1Q due to the coronavirus pandemic, revised data from Destatis revealed. GDP fell 1.8% sequentially in 1Q, in contrast to the 0.5% expansion seen in 4Q. The sequential fall was revised from -1.7%. On an unadjusted basis, the annual decline in GDP deepened to 3.4% from 2.3% in 4Q. The rate was revised from 3.3%. The calendar adjusted GDP was down 3.1% YoY, following a 3.3% decline a quarter ago. According to flash estimate, GDP was down 3%. Compared to the 4Q19, the quarter before the start of the Corona crisis, economic output was 5.0% lower, Destatis reported. In 1Q, private consumption declined 5.4% from the previous quarter. In contrast, government consumer spending rose slightly by 0.2%. (RTT)

EU: German Ifo business confidence at 2-year high. Germany's business sentiment strengthened to a two-year high in May as the lifting of restrictions related to the Covid-19 boosted expectations among managers, survey data from the ifo Institute revealed. However, data released earlier in the day showed that the largest euro area economy contracted slightly more than initially estimated in 1Q. The business confidence index rose to 99.2 in May from 96.6 in the previous month. This was the highest value since May 2019. The reading was also above economists' forecast of 98.2. GDP fell 1.8% sequentially in 1Q, in contrast to the 0.5% expansion seen in the fourth quarter, Destatis reported. The sequential decline was revised from -1.7% estimated. (RTT)

UK: Budget posts second biggest April deficit on record. The UK budget registered its second biggest shortfall on record for April, the Office for National Statistics reported. The public sector net borrowing, excluding public sector banks, increased to GBP31.7bn in April. This was the second highest April borrowing since monthly records began in 1993, and was GBP15.6bn less than in April 2020. In the financial year ending March 2021, public sector net borrowing was GBP300.3bn, revised down by GBP2.8bn from last month's first provisional estimate but remained the highest borrowing since financial year records began in FYE March 1946. (RTT)

UK: Retail sales and orders rise in May – CBI. UK retail sales and orders increased in May but the comparison was distorted by the low level of activity during the first national lockdown twelve months ago, the latest Distributive Trades Survey from the Confederation of British Industry showed. The retail sales balance came in at +18%, down from +20%, while the order book balance advanced sharply to 22% from -1% in April. With the easing of lockdown, retailers were planning to invest in their businesses once again, with investment intentions for the coming 12 months rising to +35%, the biggest since February 1994. (RTT)

Japan: Services prices creep up as freight costs pinch firms. Japan’s corporate service prices rose for the second straight month in April due to a rebound in advertising and freight fees, data showed, a sign the economy was gradually emerging from the Covid-19 pandemic’s initial hit. But the gain was driven mostly by fuel costs and the base effect of the previous year’s sharp drop, suggesting higher commodities and transportation prices could pinch corporate bottom lines. The services producer price index, or the price companies charge each other for services, increased 1.0% in April from a year earlier, Bank of Japan data showed, accelerating from a 0.7% gain in March. (Reuters)

Singapore: Industrial production growth slows in April. Singapore's industrial production increased at a softer pace in April, data from the Economic Development Board showed. Industrial output rose 2.1% YoY in April, after a 7.6% growth in March. Production was forecast to increase 3.4%. Excluding biomedical manufacturing, industrial production grew 11.1% in April, after a 14.9% increase in the preceding month. On a monthly basis, industrial production rose 1.0% in April, after a 1.7% decline in the previous month. Economists had expected a 0.5% rise. Precision engineering output accelerated 20.4% annually in April. (RTT)

Markets

Serba Dinamik (Outperform, TP: RM2.37): External auditors flag statutory audit matters, to set up independent review. Serba Dinamik is commencing a special independent review after its board of directors was informed by its external auditors on some matters pertaining to statutory audit. (Bursa Malaysia)

Comments: It is understood that Serba’s external auditor had started its audit process in Oct 2020 and only raised some risk factors that require the Group to provide additional information, as well as additional procedure, in April 2021. Due to the movement restrictions as well as time constraint, Serba faced some difficulty in providing the information on time. Management indicates that it has provided all the required information this month. The appointment of an independent third party auditor is to help provide an independent view to the existing auditor. Given Serba’s global footprint and exposure in various business segments, the independent review is likely necessary. There could be some selling pressure in the short run until this matter is resolved, though we think long term prospects are intact. Management affirms that business is running as usual.

DPS Resources: Buy 2.85ha land in Melaka for RM6.1m. DPS Resources is acquiring a piece of freehold land measuring 2.85 hectare in Melaka from Bao Long Marketing SB for RM6.1m. The acquisition is in line with the company's strategy to build up its landbank and expand its property development business in the state. (BTimes)

Bursa Malaysia: Disposes of CME Group shares for RM45m on Nasdaq. Bursa Malaysia has disposed of 50,000 shares of CME Group Inc (previously known as Chicago Mercantile Exchange Holdings Inc) Class A common stock for USD18.86m (RM44.94m). The proceeds of the sale will be used to fund its initiatives to ensure continuous development to the ecosystem and infrastructure of the exchange. (The Edge)

Pharmaniaga: Ready to pump up production of Covid-19 vaccine. Pharmaniaga is ready to ramp up production from 2m to 4m doses a month to help the government expedite the vaccination programme and achieve herd immunity. (SunBiz)

PA Resources: Secures First Solar contract extension. PA Resources announced that its supply agreement with First Solar has been extended for two years at an approximate value of RM800m. The agreement shall commence from May 2021 and shall remain effective for two years. (Bernama)

DNeX: Maintains positive earnings, focusing on integration between new business additions and existing operations. Dagang NeXchange (DNeX) posted RM45.1m in revenue and RM2.2m in net for the 5Q ended March 31, 2021. The remaining revenue was contributed from the energy segment. (BTimes)

Tuju Setia: Reports 1Q21 net profit of RM3.5m. Tuju Setia reported net profit of RM3.49m on a revenue of RM59.29 million in its 1Q21. Tuju Setia’s revenue was derived from billings from seven on-going construction projects. End of 1Q21, the group increased its balance order book to RM1.26bn. (SunBiz)

Market Update

The FBM KLCI might open with a positive bias today after US stock markets edged higher on Wednesday as investors digested opaque messages from policymakers about the path of crisis-era stimulus. The S&P 500 rose 7.86 points, or 0.2%, to 4,195.99 as the broad market index posted modest gains after declining Tuesday. The Nasdaq Composite climbed 80.82 points, or 0.6%, to 13,738.00. The Dow jumped 10.59 points, or less than 0.1%, to 34,323.05. Wednesday marks the 125th anniversary of the launch of the Dow Jones Industrial Average. Investors have worried that higher inflation would cause Fed officials to dial back the monetary policy that pulled markets back from the Covid-19 selloff last year. While officials in recent days have indicated they may begin discussing scaling back measures, they have stressed that there are no imminent plans to change policy. Meanwhile, Europe’s pan-continental Stoxx 600 index closed the day flat. In the region, major benchmarks closed after a mixed performance. The Shanghai Composite Index added 0.3% while South Korea’s Kospi declined 0.1%. New Zealand’s central bank signaled that it might raise a key interest rate in the second half of next year, which could make it one of the first developed markets to reverse Covid-era rate cuts.

Source: PublicInvest Research - 27 May 2021