Economy

US: Fed will not raise rates on inflation fears alone, Powell says. Fed Chair Jerome Powell reaffirmed the US central bank's intent to encourage a "broad and inclusive" recovery of the job market, and not to raise interest rates too quickly based only on the fear of coming inflation. Recent price increases have pushed the consumer price index to a 13-year high, prompting Republicans on the committee to offer charts detailing spikes in consumer items like bacon and used cars to suggest price increases are getting out of hand. In setting upcoming monetary policy, the Fed chief pledged that the central bank would keep its eyes focused on a broad set of labour market statistics, including how different racial and other groups are faring. (Reuters)

US: Existing home sales in May drop for fourth straight month as affordability squeezes buyers. Sales of existing homes in May dropped for the fourth straight month due to a very low supply of homes on the market. Existing home sales fell 0.9% last month from April to a seasonally adjusted annualized rate of 5.8m units, according to the National Association of Realtors. The 5.8m rate is modestly above pre-pandemic levels. Sales were 44.6% higher than a year earlier, but that comparison is skewed massively given that the housing market basically shut down for about two months at the start of the pandemic. The market then rebounded dramatically last summer and remained strong for all of last year. (CNBC)

EU: Eurozone consumer confidence highest since 2018. Eurozone consumer confidence strengthened for a fifth month in a row in June to its highest level since early 2018, preliminary data from the EC showed. The flash consumer confidence index rose to -3.3 from -5.1 in May. Economists had forecast a score of -3.0. The latest reading was the highest since Jan 2018, when it was -3.0. The confidence index for EU also improved for a fifth straight month, climbing 1.5 points to -4.5. That was the highest reading since Oct 2018, when it was at the same level. (RTT)

EU: Dutch economy to grow 3.2% in 2021 in sharp recovery. Economic growth in the Netherlands is expected to recover much faster from its coronavirus slump than previously expected, according to government policy adviser CPB. The euro zone’s fifth largest economy is set to grow 3.2% this year, the CPB said, following last year’s contraction of 3.7%. In March the CPB predicted 2021 growth of only 2.2%. It kept its 2022 outlook roughly unchanged at 3.3%. (Reuters)

EU: Denmark consumer confidence weakens in June. Denmark consumer confidence weakened in June, survey data from Statistics Denmark showed. The consumer confidence index fell to 2.3 in June from 2.8 in May. The average for the past six months was -1.7. The index measuring consumers' view regarding the future personal financial situation decreased to 12.4 in June from 14.4 in the preceding month. The measure reflecting the past personal financial situation fell to 6.3 in June from 7.8 in the prior month. Households' assessment regarding the general economic situation of the country over the next year expanded to 10.4 in June from 8.5 in May. (RTT)

EU: Germany raises net borrowing next year to EUR99.7bn. German Finance Minister Olaf Scholz is targeting EUR99.7bn (USD114bn) in additional borrowing next year to bolster the country’s recovery from the coronavirus pandemic. The projected new debt represents a 22% increase from the EUR81.5bn foreseen in an earlier federal budget plan. The borrowing would take the total for this year and next to more than EUR340bn. (Bloomberg)

UK: Budget Deficit Narrows In May. The UK budget deficit narrowed in May from the last year, data from the Office for National Statistics showed. Public sector net borrowing decreased to GBP24.33bn in May from GBP43.76bn in the previous year. The deficit was also below the economists' forecast of GBP26.1bn. Nonetheless, this was the second highest May borrowing since records began in 1993. In the financial year-to-May, PSNB was estimated at GBP53.4bn, the second-highest financial year-to-May borrowing since monthly records began in 1993 and was GBP37.7bn less than in the same period last year. (RTT)

Australia: Manufacturing PMI slows in June – Markit. The manufacturing sector in Australia continued to expand in June, albeit at a slower pace, the latest survey from Markit Economics with a manufacturing PMI score of 58.4. That's down from 60.4 in May, although it remains well above the boom-or-bust line of 50 that separates expansion from contraction. The survey also showed that the services PMI fell to 56.0 from 58.0 in June and the composite index slipped to 56.1 from 58.0 a month earlier. (RTT)

South Korea: Producer Prices Jump 6.4% On Year In May. Producer prices in South Korea were up 6.4% on year in May, the Bank of Korea said - accelerating from the upwardly revised 6.0% increase in April (originally 5.6%). On a monthly basis, producer prices rose 0.4%, slowing from the upwardly revised 1.0% gain in the previous month (originally 0.6%). Individually, prices for agricultural products sank 1.2% on month, while manufactured products were up 1.0%, utilities were down 1.0% and services rose 0.1%. (RTT)

Thailand : Likely to hold rates, cut GDP outlook - decision guide. The Bank of Thailand is expected to keep its benchmark interest rate unchanged at a record low to accommodate a fragile economic recovery, while cutting its growth forecast to factor in the country’s biggest wave of Covid cases yet. All 25 economists surveyed by Bloomberg expect the central bank to keep the policy rate at 0.5% for a ninth straight meeting Wednesday. The Monetary Policy Committee will also release its new economic forecasts for this year and next. (Bloomberg)

Markets

Serba Dinamik (Neutral, TP: RM1.39): Takes legal action against KPMG. Serba Dinamik Holdings has filed a civil claim for substantial damages against its external auditor KPMG, alleging professional negligence, breach of contract and breach of statutory duty. (SunBiz)

Yinson: Partners Chile-based Verano for solar projects in Latin America. Yinson Holdings has agreed to collaborate with Chile-based renewable energy developer Verano Capital Holdings SpA to undertake renewable energy projects in Chile, Colombia and Peru. The collaboration has initially targeted to progress a pipeline of over 800 MW of solar projects. (The Edge)

TCS Group: Bags RM555m mix-use development contract in Setapak. TCS Group (TCS) secured an RM555m contract from Jayyid Land SB (JLSB) for J Satine mix-use development project in Setapak. This contract is the fourth project the company secured in 2021. (BTimes)

Willowglen: Awarded maintenance job at Singapore's East West Cable Tunnel. Willowglen MSC has won a contract for the maintenance of Singapore's East-West Cable Tunnel Scada System, including system enhancements. The contract worth RM10.99m was awarded by SP PowerAssets Ltd. (The Edge)

White Horse: Disposes of land in Vietnam for RM113m. White Horse is disposing of a piece of leasehold land with buildings in Vung Tau, Vietnam for RM113.45m. The group is selling the land measuring 278,511 sqm to Vietnam's Viglacera Tien Son Joint Corp. The disposal is expected to improve its bottom line in the long run as the ceased operation in Vietnam would reduce its loss position. (The Edge)

MAA Group, Turiya: MAA proposed to take over Turiya at 18sen. MAA Group is acquiring a 57.78% stake in Turiya from Ithmaar Bank BSC for RM23.8m in a bid to extend a mandatory takeover offer on the machinery and chemicals manufacturer. MAA proposed to acquire 132.15m Turiya shares at 18 sen per share. It also intends to maintain Turiya's listing status on Bursa Malaysia. (The Edge)

Mulpha: To sell entire 37.81% stake in New Zealand's Education Perfect. Mulpha International has entered a transaction to dispose of its entire equity interest in New Zealand’s Education Perfect Group Limited. The disposal represents the entire 37.81% for NZD455m or approximately RM1.31bn. (The Edge)

Priceworth: Resumes log harvesting, plywood export. Priceworth International log production volume for May this year was 3,748.28 cubic meters compared to 3,992.03 cubic meters recorded in April. The slight decrease in May 2021 compared to April 2021 was mainly due to log harvested and in transit to the downstream processing mills. (BTimes)

Daibochi: 3Q earnings slide due to higher raw material prices. Daibochi fell 5.35% to RM10.26m in the 3Q ended April 30, 2021, from RM10.84m a year ago due to higher raw material prices. Daibochi quarterly revenue also fell 1.22% to RM150.12m despite sales remaining stable in the domestic market. The contribution from the domestic markets made up RM86m or 57.3%. (BTimes)

Market Update

The FBM KLCI might open higher today after Wall Street stocks gained on Tuesday, with the Nasdaq Composite hitting a fresh high, as US Federal Reserve chair Jay Powell signalled a patient approach to eventually scaling back the central bank’s monetary policy support. The blue-chip S&P 500 index closed 0.5% higher after Powell testified before the House’s select subcommittee on the coronavirus crisis. The tech-heavy Nasdaq rose 0.8% on the day. Powell’s congressional appearance came after Fed officials last week brought forward their projections for the first post pandemic interest rate rise by a year to 2023 — a shift that sent US stocks tumbling and government bonds rallying amid fears that tighter monetary policy could derail the economic recovery. Powell took a dovish tone from the onset, stating in his opening statement that the Fed would “do everything we can to support the economy for as long as it takes to complete the recovery”. In Europe, the region-wide Stoxx Europe 600 index gained 0.3%, with energy stocks topping the benchmark’s leaderboard.

Back home, the FBM KLCI ended 0.11% higher, tracking regional markets on the back of the overnight rally on Wall Street. The benchmark index closed 1.78 points higher at 1574.02, after rising to a high of 1,577.57. The Nikkei share average jumped 3.12% to 28,884.13 in its biggest percentage gain since June last year. South Korea’s Kospi closed up 23.09 points or 0.71% at 3,263.88 and the Shanghai Composite Index rose 28.23 points or 0.8% higher to 3557.41.

Source: PublicInvest Research - 23 Jun 2021