Economy

US: Service sector growth slows from record pace in June. After reporting record US service sector growth in the previous month, the Institute for Supply Management released a report showing the pace of growth in the sector slowed more than expected in the month of June. The ISM said its services PMI slid to 60.1 in June from 64.0 in May, although a reading above 50 still indicates growth in the sector. Economists had expected the index to edge down to 63.5. (RTT)

EU: Retail sales recover in May. Eurozone retail sales expanded in May after falling in the previous month, Eurostat reported. Retail turnover grew 4.6% MoM in May, reversing a 3.9% fall in April. This was also faster than the economists' forecast of 4.4%. Sales of food, drinks and tobacco dropped 0.2%, while non-food product sales were up 8.8%. Sales of automotive fuel in specialized stores grew 8.1%. On a yearly basis, retail sales growth moderated to 9% from 23.3% in April. Economists had forecast sales to rise 8.2%. (RTT)

EU: German industrial orders fall unexpectedly in May. Orders for German-made goods posted their sharpest slump in May since the first lockdown in 2020, data showed, hurt by weaker demand from countries outside the euro zone and fewer contracts for machinery and intermediate goods. The data published by the Federal Statistics Office showed orders for industrial goods fell by 3.7% on the month in seasonally adjusted terms, marking the first drop in new business this year. This confounded a Reuters forecast of a 1% rise and came after an upwardly revised increase of 1.2% in April. (Reuters)

UK: Homebuilding drives construction growth to 24-year high. Britain’s construction industry expanded at the fastest pace in 24 years, driven by a surge in homebuilding that’s starting to push up inflation. IHS Markit said its key index of purchasing managers jumped to 66.3 in June. Economists had forecast a modest slowdown. The strength of demand strained the ability of supply chains to keep up and fueled the biggest increase in purchasing costs since the survey began in 1997.. (Bloomberg)

Australia: Central bank tapers QE but affirms low rates outlook. Australia's central bank took its first step towards tempering its massive stimulus as employment proves far stronger than previously expected, although actual rate hikes remain a distant prospect. The Reserve Bank of Australia (RBA) held the cash rate at a record low 0.1% in a widely expected move and reiterated the need for the setting to remain unchanged until 2024 to help spark wage and inflation pressures.. (Reuters)

Japan: May household spending growth slows from previous month. Japan's household spending rose at a double-digit rate in May as consumers bought cars and mobile phones, though the pace of growth slowed from the prior month as a new wave of COVID-19 infections weighed on consumer confidence.. (Reuters)

Taiwan: Jobless rate rises in May. Taiwan's unemployment rate increased in May, data from the Directorate General of Budget, Accounting and Statistics showed. The unemployment rate rose to a seasonally adjusted 4.15% in May from 3.71% in April. On an unadjusted basis, the jobless rate grew to 4.11 in May from 3.64% in the prior month. The number of unemployed persons decreased to 489,000 in May from 435,000 in the previous month. (RTT)

Markets

Top Glove (Neutral, TP: RM4.40): Halts operations in Klang due to EMCO, awaits clarification from MKN. Top Glove Corp is temporarily halting the operations of its medical glove factories in Klang following the imposition of the enhanced MCO in the district. It is awaiting clarification from the National Security Council (MKN) on the matter but did not give further details. The company looks forward to safely resuming operations at the appropriate time and continuing to produce its medical gloves for frontliners and healthcare workers globally. (The Edge)

Hartalega (Outperform, TP: RM9.75): Joins Top Glove in halting ops due to EMCO. Hartalega Holdings has initiated a full shutdown of all its glove manufacturing facilities in Bestari Jaya and Sepang, due to the enforcement of the enhanced MCO in Selangor. This will have a significant impact on both the local and international healthcare value chain in terms of disruption to availability of supply, as Hartalega is a key manufacturer of nitrile gloves for hospitals globally. It did not specify the timeline of the temporary closure of its manufacturing facilities. (The Edge)

Serba Dinamik (Neutral, TP: RM0.44): To appoint new auditor by month end. Serba Dinamik Holdings is expecting to appoint new auditor by the end of the month, as its former external auditor KPMG PLT resigned last month after the oil & gas engineering firm filed a lawsuit against the latter. It has submitted a request of proposal for provision of external audit to international audit firms on June 27. It had also requested a meeting with the Companies Commission of Malaysia for the appointment of external auditor. (The Edge)

Hubline: Bags a RM29.15m contract from CAAM. Hubline has bagged a RM29.15m contract from the Civil Aviation Authority of Malaysia (CAAM) to provide inspection and calibration services. It is contracted to perform aviation works, flight and calibration inspections on air navigation equipment, specifically instrument landing system, doppler very high frequency omni range, distant measuring equipment and non-directional beacon locator. It will be in charge of aircraft preparation, which will include preparing the aircraft for flight inspection and calibration and crew preparation. (BTimes)

CB Industrial Product: Telok Panglima Garang plant gets clearance to reopen from MoH but shuts again due to EMCO. CB Industrial Product Holding (CBIP) had resumed manufacturing operations at its Telok Panglima Garang plant after it received an approval letter from the Ministry of Health on July 2 but closed again after the enhanced MCO was imposed. The company will continue to implement, and practise strict standard operating procedures recommended by the authorities to ensure the safety and health of all employees. (The Edge)

Aeon Credit: 1Q net profit jumps over sixfold to RM163.1m, revenue at RM410.9m. Aeon Credit Service (M) (Aeon Credit) net profit rises more than sixfold to RM163.1m in the 1Q ended May 31, 2021, from RM26.3m posted in the same period a year ago. The financial services company said this was mainly contributed by lower impairment losses of RM23.253m recorded in the current quarter and lower other operating expenses of RM14m. Its 1Q revenue rose 5.4% to RM410.9m on the back of higher transaction and financing volume. (BTimes)

MARKET UPDATE

The FBM KLCI might open lower today after the S&P 500 and Dow Jones Industrial Average fell Tuesday, retreating from last week’s record highs. The S&P slipped 8.80 points, or 0.2%, to 4343.54, halting its recent winning streak. On Friday, the broad-based index closed at a record for the seventh consecutive trading session, its longest record-setting streak since 1997. The Dow slid 208.98, or 0.6%, to 34577.37. The technology-heavy Nasdaq Composite inched up 24.32, or 0.2%, to close at 14663.64, a new record. US markets were closed Monday for the Independence Day holiday. New data released Tuesday showed that growth in the US services sector eased in June compared with the previous month, as demand slowed and firms struggled to find candidates to fill open positions. The Institute for Supply Management’s purchasing managers index for the services sector fell to 60.1 last month from the 64.0 record high registered in May. While that still reflects a high pace of growth, it fell short of economists’ forecasts that the PMI would come in at 63.3. Across the Atlantic, the Stoxx Europe 600 fell 0.5%.

Back home, the FBM KLCI finished near the flatline for the second day running as investor sentiment continued to be affected by a high number of new Covid-19 cases. The benchmark index closed 0.73 point or 0.05% lower at 1,531.63. Asian markets were mixed. Japan’s Nikkei 225 edged up 0.2%, while Hong Kong’s Hang Seng Index slipped 0.3%. In mainland China, the Shanghai Composite Index weakened 0.1%.

Source: PublicInvest Research - 7 Jul 2021