Economy

US: Inflation expectations rise to new highs in NY, fed survey. US consumers’ expectations for inflation over the medium term rose to an eight-year high in May, according to a Federal Reserve Bank of New York survey. The median survey respondent anticipated an inflation rate of 3.6% in three years, up from 3.1% in April. The reading marked the highest level since Aug 2013, while short-term expectations, over one year, reached a record. Fed officials may discuss the data points at this week’s Federal Open Market Committee meeting, in which they will debate the US central bank’s next steps for monetary policy. They follow measures of inflation expectations closely because they believe them to be key determinants of actual inflation. (Bloomberg)

EU: Industrial production growth accelerates in April. Eurozone industrial production growth accelerated in April, data from Eurostat showed. Industrial production grew 0.8% on a monthly basis in April, faster than the 0.4% increase seen in March. This was the second consecutive rise in production and matched economists' expectations. Production of durable consumer goods advanced 3.4% and that of energy grew 3.2%. Capital goods production grew 1.4% and intermediate goods by 0.8%. Meanwhile, the production of non durable consumer goods fell 0.3%. On a yearly basis, industrial production surged 39.3% versus 11.5% rise in March. Production was forecast to climb 37.4%. (RTT)

EU: Rate hawks urge start of hikes in East EU to tame inflation. In the debate over how dangerous the surge in global inflation may become, two hawkish central banks in the European Union’s eastern wing are preparing to take action. Policy makers in Hungary and the Czech Republic are urging for a liftoff in borrowing costs next week to prevent the jump in commodity prices, supply-chain bottlenecks and  other global factors from transforming into inflationary pressures such as demand for higher wages in their own economies. The pace of increases may differ between the two countries, which have scrapped social-distancing restrictions to reopen shops and restaurants after overcoming some of the world’s deadliest coronavirus outbreaks. (Bloomberg)

EU: ECB sees early tensions emerge over ending crisis stimulus. European Central Bank tensions over how and when to discuss ending its emergency bond-buying program are starting to bubble over into the public domain. Little more than an hour after President Christine Lagarde said that it is “far too early” to debate when to end the stimulus, Austrian central-bank Governor Robert Holzmann said the program will end in March. The central bank is entering a tricky phase of the crisis, with the economy starting what looks like a strong recovery as infections drop but companies and households still reliant on support. The ECB has pledged to keep financing conditions favourable as long as needed, and most policy makers have avoided talking about an exit. (Bloomberg)

India: Wholesale prices accelerate in May. India's wholesale prices rose in May, data from the Ministry of Commerce & Industry showed. The wholesale price index increased 12.94% YoY in May, following a 10.49% rise in April. Economists had expected a 13.07% rise. The primary articles price index grew 9.61% annually in May, after a 10.16% increase in the previous month. Food prices rose to 8.11% in May, following a 7.58% growth in the previous month. Fuel and power prices accelerated 37.61% in May, following a 20.94% rise in the prior month. Prices of manufactured products grew 10.83% in May, following a 9.01% gain in the previous month. The final wholesale prices rose 7.89% in March. On a monthly basis, wholesale prices rose 0.76% in May. (RTT)

India: May retail inflation accelerates to 6.3%, highest in six months. India inflation surged to 6.3% in May, breaching the Reserve Bank of India’s upper end of the 2% - 6% target range. Both headline and core measures increased in a broad-based manner. Healthcare cost rose, reflecting higher spending on account of pandemic. Rising crude prices and logistics costs have also led to higher prices, outweighing weaker demand pressures. Higher than expected outturn in inflation is likely to keep the RBI cautious. Nonetheless, the price pressures are triggered by supply-side disruption, which are likely to subside as restrictions are eased gradually. As such, this print is not expected to trigger a change in RBI’s monetary policy stance. (Reuters)

Japan: Industrial production rises more than estimated. Japan's industrial production increased more than estimated in April, the Ministry of Economy, Trade and Industry said. Industrial production rose a seasonally adjusted 2.9% MoM in April. In the initial estimate, output increased 2.5%. Shipment grew 3.1% monthly in April. According to the initial estimate, shipment rose 2.6%. Inventories increased fell 0.1% in April, as estimated. Inventory ration declined 2.4% in April. On a yearly basis, industrial production accelerated 15.8% in April. In the initial estimate, output rose 15.4%. (RTT)

Markets

Kawan Food (Outperform, TP: RM3.00): Manufacturing unit temporarily stops production due to Covid-19. Kawan Food has temporarily closed operations due to the spread of Covid-19. It has been ordered to suspend operations by the Ministry of Health (MoH) from June 14 to June 21. (The Edge)

Comments: While the 1 week closure of the Pulau Indah plant is expected to cause a delay in shipments, we believe that it will not have a huge impact on Kawan’s earnings as we understand that the group can ramp up the utilisation in Nantong, China to cover for Pulau Indah’s temporary closure. Note that the utilisation rate in Nantong is at c.30-35% previously. We estimate that for every one week’s closure, Kawan’s earnings would fall by c.2%. Our Outperform call and TP of RM3.00 is maintained.

Serba Dinamik (Neutral, TP: RM1.39): Appoints EY as independent auditor, three directors to board. Serba Dinamik has appointed Ernst & Young Advisory Services SB as the independent reviewer to assess the audit issues involving about RM3.5bn of transactions highlighted by external auditor KPMG PLT. The Group has appointed Datuk Mohamed Ilyas Pakeer Mohamed, Masleena Zaid and Johan Mohamed Ishak as independent directors effective from last Friday. (BTimes)

Hextar (Outperform, TP: RM1.30): Executes RM89m financing facility to venture into specialty cleaning chemicals business. Hextar Global has executed an RM89m Islamic financing facility from OCBC Al-Amin Bank to finance its purchase of Alpha Aim (M) SB and Chempro Technology (M) SB, which provides specialty chemical products for the cleaning, hygiene and food industry, as well as the rubber glove industry in Southeast Asia. (The Edge)

Powerwell: Wins RM8.8m supply contract in Bangladesh. Powerwell Holdings has secured a USD2.135m (RM8.8m) supply contract from a solar power company in Bangladesh. The purchase order by Intraco Solar Power Ltd was for the supply of low voltage switchboards and medium voltage switchgear panels using 33 kilovolt (KV) gas insulated switchgear. (StarBiz)

Permaju, MTouche: Permaju acquires 20% stake in MTouche via rights share subscription. Permaju Industries has emerged as a substantial shareholder of MTouche Technology after acquiring 185.05m rights shares, together with 92.52m free warrants in the mobile telecommunications group. (The Edge)

Green Ocean: Proposes another fundraising to fix shortfall of funds in glove venture. Green Ocean Corp has proposed to raise an additional RM12.95m from a private placement to fund the capital expenditure for its new glove business. (The Edge)

IPO: Pekat oversubscribed by 76 times. Pekat Group’s 32.2m new shares for the Malaysian public under its initial public offering (IPO) was oversubscribed by 76 times. The solar photovoltaic (PV) and earthing and lightning protection specialist received a total of 34,963 applications for 2.5bn shares. (SunBiz)

Market Update

The FBM KLCI might open higher today after stocks on Wall Street staged a late rally on Monday, erasing earlier losses ahead of a two-day US central bank meeting that will be closely watched for clues on the future path of monetary policy. Wall Street’s S&P 500 index finished 0.2% higher in New York, having been on course for a 0.2% loss less than hour before the final bell. It marks another high for the index following a 0.2% gain on Friday. The technology focused Nasdaq Composite index climbed 0.7%. The Fed is widely expected to maintain its $120bn of monthly bond purchases when it meets on Tuesday and Wednesday. These asset purchases, which have been followed by rate-setters in Europe and the UK, have lowered the yields on government bonds, reduced corporate borrowing costs and boosted the appeal of riskier assets such as equities. But after a rapid recovery of the US economy fuelled by coronavirus vaccines and President Joe Biden’s massive stimulus programmes, some analysts see the Fed’s policymakers bringing forward their predictions of the first post-pandemic interest rate rise. Across the Atlantic, the pan-regional Stoxx Europe 600 gained 0.2% to another high, with energy the top-performing sector following a further rise in oil prices. Elsewhere in the region, the UK’s travel and leisure companies lagged the wider market, with a full reopening of the economy being delayed by four weeks. The FTSE 350 travel and leisure sector was 1.4% lower compared with a rise of 0.2% for the broader FTSE 350 index.

Back home, the FBM KLCI finished 0.46% or 7.3 points higher at 1,582.46 in line with gains in regional markets. Regional markets also closed mostly higher with Hong Kong's Hang Seng up 0.36%, Japan's Nikkei 225 up 0.74%, and South Korea's Kospi up 0.09%. However, the Shanghai Composite finished down 0.58% at 3,589.75, and Singapore’s Straits Times Index fell 0.21% to 29,161.8.

Source: PublicInvest Research - 15 Jun 2021