Economy

EU: Euro zone business activity soared in June as lockdowns lifted. Euro zone businesses expanded activity at the fastest rate in 15 years in June as the easing of more coronavirus restrictions brought life back to the bloc’s dominant service industry, a survey showed. But that surge in growth has come at a cost as inflationary pressures mounted due to labour shortages and disruptions to supply chains caused by the pandemic. IHS Markit’s final composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, jumped to 59.5 last month from May’s 57.1, its highest level since June 2006. That was ahead of the 59.2 “flash” estimate and well above the 50 mark separating growth from contraction. (Reuters)

UK: Business is soaring for UK services firms, and so are prices – PMI. The post-lockdown bounce-back for British services firms eased only slightly in June but price pressures jumped by the most on record, adding to signs of a further rise in inflation ahead, a survey showed. The IHS Markit/CIPS Purchasing Managers’ Index for the sector edged down to 62.4 from 62.9 in May but was slightly higher than a preliminary June reading of 61.7. Job creation was the fastest for seven years but even so staff shortages contributed to the highest level of backlogs since the survey began in 1996. That in turn helped to push up prices by the most on record for inputs and prices charged. (Reuters)

UK: New car sales rise in June compared to difficult 2020. British new car registrations rose by an annual 28% in June compared to the same month last year, when some dealerships were closed for much of the month due to COVID-19 restrictions. A total of 186,128 new cars were registered, according to the Society of Motor Manufacturers and Traders (SMMT), which said the level remained down on the 10- year average for June. (Reuters)

China: Service sector expands at slower pace in June. China's service sector expanded at a much slower pace in June as the recent uptick in COVID-19 cases and reduced travel dampened overall new business, survey results published by IHS Markit showed. The Caixin services Purchasing Managers' Index fell notably to 50.3 in June from 55.1 in May. Nonetheless, the index has remained above the neutral 50 mark for the fourteenth successive month. The slower upturn in business activity coincided with a softer increase in overall new work. New work from abroad meanwhile increased only marginally. Employment across the service sector fell for the first time in four months. (RTT)

Singapore: Retail sales surge in May. Singapore retail sales increased sharply in May, data from the Department of Statistics showed. Retail sales accelerated 79.7% YoY in May, following a 54.0% rise in April. Motor vehicle sales surged 421.8% annually in May, following a 261.3% growth in the previous month. Excluding motor vehicles, retail sales gained 61.6% in May, following a 39.2% rise in the preceding month. Sales of watches and jewellery grew 2090.0% yearly in May and those of wearing apparel and footwear surged 447.1%. Sales recreation goods increased 219.0%. Sales of petrol service stations, and optical goods and books grew by 114.3% and 296.5%, respectively. (RTT)

Singapore: Private sector activity near stagnation. Singapore private sector activity barely grew in June, survey data from IHS Markit showed. The IHS Markit Purchasing Managers' Index fell to 50.1 in June from 54.4 in May. Any reading above 50.0 indicates expansion in the sector. Output and new orders increased at a softer pace in June. Stocks of purchases declined at a faster rate. The number of workforce fell at a faster pace in June and backlogs of work increased for the seventh month in a row. Suppliers' delivery time lengthened to the greatest since Dec last year. Input prices rose to a thirteen-month high in June and output costs increased at a record rate. (RTT)

Japan: Service sector contracts at slower pace in June. Japan's service sector continued to contract in June as the activity was disrupted by the latest wave of COVID-19 infections, but the pace of decline in services activity slowed from May, survey data from IHS Markit showed. The au Jibun Bank services Purchasing Managers' Index rose to 48.0 in June from 46.5 in May. A score below 50 indicates contraction. New business inflows fell for the seventeenth month in a row in June. Foreign demand for services declined at a softer pace in June. Meanwhile, employment levels increased for the fifth straight month at the end of the second quarter due to capacity expansion. (RTT)

Australia: RBA expected to pare back emergency stimulus amid lockdown. Australia’s central bank is likely to gently rein in some of its emergency stimulus to reflect the economy’s powerful recovery, even with the nation’s largest city in lockdown due to an outbreak of the delta variant of Covid-19. The Reserve Bank is expected to decide against rolling over its three-year yield target to the Nov 2024 bond from the current April 2024, an extension that would imply interest rates won’t go up until 2025. The central bank will also maintain its quantitative easing program but likely in a revised form, with most economists expecting it to come up with a more flexible approach than the first two tranches of AUD100bn (USD75bn) each. (Bloomberg)

Markets

Axiata (Neutral, TP: RM3.85): In advanced talks for stake in CVC-backed Link Net. Axiata Group is in advanced talks to buy a stake in Indonesian internet provider PT Link Net. Discussions are progressing among Axiata and the potential sellers, private equity firm CVC Capital Partners and PT First Media, an arm of the billionaire Riady family's Lippo Group conglomerate. Axiata is weighing options on the potential deal structure including buying the stake via its Jakarta-listed unit PT XL Axiata. (BTimes)

Solarvest: Wins RM42.9m solar plant EPCC contract from MK Land. MK Land Holdings has awarded Solarvest Holdings its first solar installation project under the large-scale solar 4 (LSS4) scheme to develop an LSS photovoltaic plant in Kerian, Perak, worth RM42.9m. Under the contract, Solarvest will undertake the full turnkey EPCC works for the 10.95 MW LSS solar photovoltaic (PV) system. The project win is the first of the many EPCC projects that the company has in the pipeline. (BTimes)

Chin Hin Group Property: Plans construction diversification. Chin Hin Group Property is planning to acquire a 65% equity interest in construction firm Kayangan Kemas SB for RM37.95m. It has also proposed to diversify its business into construction, to complement its property development business. It plans to pay for the acquisition via cash (RM29.15m) and the issuance of 11m new shares at an issue price of 80 sen apiece to Kayangan Kemas' shareholders Chan Kin Keong and Khor Chee Yong. (The Edge)

JF Technology: Bags six new IP patents from Malaysia, US, and the Philippines. JF Technology has been granted another six new patents from the intellectual property authorities of Malaysia, the US, and the Philippines. Two of the six new patents are for the invention of a high-frequency integrated circuit (IC) test contacting solution, primarily for 5G applications. The other four are for the invention of IC for automotive applications. The company emphasises the importance of intellectual properties (IP). (BTimes)

Green Packet: To sell G3 Global stake to CEO. Green Packet has proposed to dispose of its stake in G3 Global to its managing director and CEO Puan Chan Cheong for between RM61.26m and RM91.89m in cash. It plans to sell up to 612.57m shares or a 24.81% stake in G3 Global (after exercising warrants into shares) to CC Puan at between 10sen and 15sen per share. The group said as at July 2, it held 307.32m shares or a 14.2% stake in G3 Global. (The Edge)

Straits Inter, Petronas Dagangan: To supply marine fuel for vessels at Malaysian ports. Straits Inter Logistics (SIL) will collaborate with Petronas Dagangan (PDB) to provide marine fuel to vessels at Malaysian ports through its 70%-owned Tumpuan Megah Development SB (TMD). Through SIL's wide established network and large vessels fleet, PDB will be able to supply marine fuel oil to all its customers, mainly container liners within the ports of Malaysia. With this tie-up, PDB's customers will enjoy highly reliable, efficient and safe cargo delivery services through SIL's comprehensive infrastructure and tight operating procedures. (BTimes)

MARKET UPDATE

The FBM KLCI might open with a positive bias today after European stocks closed higher for the third consecutive session on Monday as business activity in the region expanded at its fastest pace in more than a decade. During a day of lower trading volumes because of an Independence Day public holiday in the US, which closed Wall Street, the region-wide Stoxx Europe 600 index climbed 0.3%. Strong services purchasing managers’ indices readings in Spain and Italy in particular lifted the overall reading for the eurozone services sector to 58.3 in June, its highest level since July 2007. Madrid’s Ibex 35 index rose 0.4%, while Milan’s FTSE MIB ended the session up 0.6%. London’s FTSE 100 index, which has a heavy weighting to energy groups, also closed up 0.6% as the price of oil rose further.

Back home, the FBM KLCI ended the day on a flat note as investors remained on the sidelines on lack of catalysts. The index closed 0.99 point or 0.06% lower at 1,532.36, after moving between 1,525.4 and 1,535.88. In the region, markets were rattled after Beijing broadened its crackdown on tech platforms to include Boss Zhipin, an online recruitment company, and Chinese truckhailing apps Yunmanman and Huochebang. The moves rippled through markets in the region, taking the Hang Seng Tech index down 2.3%, underperforming the wider Hang Seng benchmark, which slid 0.6%. Elsewhere, Japan’s Nikkei 225 fell 0.64% while South Korea's KOSPI gained 0.35% and the Shanghai Composite Index closed up 0.44%.

Source: PublicInvest Research - 6 Jul 2021