Economy

US: Goods trade deficit widens on imports; inventories increase. The US trade deficit in goods increased in June as imports continued to rise amid strong economic activity, suggesting trade likely remained a drag on growth in the 2Q. The US economy has rebounded more quickly from the pandemic compared to its global rivals, thanks to massive fiscal stimulus, low interest rates and vaccinations against COVID-19. The goods trade deficit increased 3.5% to USD91.2bn last month, the Commerce Department said. Imports of goods advanced 1.5% to USD236.7bn. (Reuters)

US: Fed holds rate, bond-buying program unchanged. The Federal Open Market Committee, which concluded its two-day monetary policy meeting, left the target range for its federal funds rate unchanged at 0 to 0.25% and said it will continue with its USD120bn - a-month bond-buying program. The move by the central bank is in line with expectations. The bank, which said the economy is strengthening despite concerns over the spread of the coronavirus, stressed that progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy. (RTT)

US: Mortgage applications rise in latest week as rates decline. The number of applications for US home mortgages increased last week, driven by an uptick in refinancing activity and a decline in purchase activity as mortgage rates fell. The Mortgage Bankers Association (MBA) said its seasonally adjusted market index rose 5.7% in the week ended July 23 from a week earlier. That reflected a 9.3% increase in applications to refinance existing loans, while purchase applications declined 1.6%. The average contract interest rate for traditional 30-year mortgages decreased to 3.01%. (Reuters)

US: Auto sales pace to weaken further in July - J.D. Power, LMC Automotive. Growth in US new vehicle retail sales is expected to slow down further in July because of a limited supply of automobiles caused by a global semiconductor shortage, consultants J.D. Power and LMC Automotive said. Retail sales are expected to reach 1.2m units in the month, a 3.7% increase from the same period last year when adjusted for selling days, but a slump in expectations when compared to the preceding months. The consultants had forecast sales growth of 110% for April. (Reuters)

EU: German consumer morale steady heading into Aug - GfK. German consumer sentiment held steady heading into Aug as shoppers grew more ready to spend, but took a less upbeat view on the economic outlook than a month earlier on worries about rising numbers of COVID-19 cases, a survey showed. The consumer sentiment index, based on a survey of around 2,000 Germans, was unchanged at -0.3 points. The reading compared with a forecast for 1.0. After more than two months of steady decline, COVID-19 cases have been rising since early July. (Reuters)

UK: Nationwide house price inflation weakens more than expected. UK house price inflation slowed more-than-expected in July from a 17-year high as the tapering of stamp duty relief in England took the heat out of the market, data published by the Nationwide Building Society showed. House prices grew 10.5% YoY in July, slower than the 13.4% increase posted in June. This was also weaker than the economists' forecast of 12.1%. On a monthly basis, house prices fell unexpectedly by 0.5%, reversing a 0.7% rise in June. Economists had forecast prices to climb 0.6%. This was the first fall in four months. (RTT)

Japan: Leading index falls as estimated. Japan's leading index decreased in May, as initially estimated, final data from the Cabinet Office showed. The leading index, which measures the future economic activity, fell to 102.6 in May from 103.8 in April, as estimated. The coincident index decreased to 92.1 in May from 95.3 in the previous month. In the initial estimate, the reading was 92.7. The lagging index declined to 93.2 in May from 94.1 in the prior month. This was in line with initial estimated. (RTT)

Autralia: Inflation accelerates in 2Q. Australia's consumer price inflation accelerated in the 2Q largely due to the low base effects, data from the Australian Bureau of Statistics showed. Annual inflation increased to 3.8% in the June quarter from 1.1% in the March quarter. The rate came in line with economists' expectations and was the fastest rate in almost 13 years. The acceleration in annual inflation was largely driven by the 'base effects' following the introduction of free child care and a record fall in fuel prices in the June 2020 quarter. (RTT)

Markets

IJM Corp (Neutral, TP: RM2.03): Proposes to reward shareholders with 15 sen special dividend from IJM Plantation stake sale. IJM Corp plans to distribute a potential special cash dividend of 15 sen per share to its shareholders after completion of its entire 56.2% stake sale in IJM Plantations for RM1.53bn. IJM said it also plan to utilise the proceeds to undertake share buy-back activities for capital management purposes. In total, RM800m was allocated for capital management activities. (The Edge)

Mercury Industries: Bags RM450m construction job in Johor Baru. Mercury Industries has secured a RM450m contract to build three blocks of serviced apartment and SOHO units in Johor Baru. The project was awarded by Solusi Kelana SB. Work of the project was scheduled to start on Sept 1 and would take 32 months to complete. (StarBiz)

Rhone Ma: Appointed exclusive distributor of Canada-based Citest’s Covid 19 test kit in Malaysia. Rhone Ma has been appointed as the exclusive distributor of Canada-based Citest Diagnostics Inc’s Covid-19 antigen rapid test kit in Malaysia. The test kit to be distributed has obtained the “recommended to be used” status from the Medical Device Authority of the Ministry of Health, Rhone Ma said. (The Edge)

BioAlpha: Inks MoA with Crawford Laboratory to provide Covid-19 screening services in Sudan. Bioalpha (BHB), signed a memorandum of agreement (MoA) with Crawford Laboratory Ltd of the Republic of South Sudan to provide Covid19 screening services at two locations in South Sudan for a twoyear period. Under the MoA, BHB will deliver Covid-19 screening equipment and products, including rapid test kit (RTK) and polymerase chain reaction (PCR) test kits to South Sudan. (NST)

Overseas: Plans 30% placement, one-for-one rights issue to fund expansion. Oversea Enterprise has proposed a private placement, followed by a rights issue, to raise funds for the expansion of its restaurant and manufacturing businesses. The plan is to issue a minimum of 261.92m shares under the private placement, to raise between RM20.04m and RM30.32m, followed by a one-for-one rights issue, together with one free detachable warrants for every three rights shares subscribed. (The Edge)

Glomac: Returns to the black in 4Q. Glomac posted a net profit of RM4.77m in 4QFY21, reversing its net loss of RM8.60m, incurred in the same period a year ago. It said the profitability was boosted by a reduction in interest expense, various ongoing cost rationalisation measures and a lower fair value loss on investment properties. Its revenue jumped 97.6% YoY to RM115.43m, largely driven by the pick-up in construction activities post-MCO, leading to higher progress billings from its ongoing projects. (NST)

LC Titan: 2QFY21 net profit retreats from record quarter in 1Q. Lotte Chemical Titan’s (LC Titan) net profit retreated 13.11% QoQ to RM382.29m for 2QFY21, as higher feedstock prices started to catch up with the rise in selling prices of its petrochemical products. The rise brought the gross profit margin lower to 20% from 23%, it said. (The Edge)

MARKET UPDATE

The FBM KLCI might edge higher today as US stock and government bond prices rallied on Wednesday after the Federal Reserve acknowledged improvements in the US economy at its latest meeting while opting to keep its current policy stance unchanged. The yield on the 10-year US Treasury bond, which moves inversely to the price of the benchmark government debt instrument and is sensitive to signals about the future of the Fed’s USD120bn-a-month of pandemic-era bond purchases, eased following the meeting to trade 0.01% points lower for the day at 1.23%. The yield has tumbled from close to 1.8% in March as traders bet on the Fed sustaining its purchases despite the US economy’s strong rebound from a historic contraction in the second quarter of 2020. The blue-chip S&P 500 share index had lost early morning gains and was trading slightly lower before the meeting. It rallied back, closing flat for the day. The technologyheavy Nasdaq Composite index rose 0.7% after a rout in Chinese stocks, following a crackdown by Beijing on education and technology companies. Europe’s Stoxx 600 share index gained 0.7%, touching a fresh high.

Back home, political headwinds and persistent rise in the number of Covid-19 infections continue to bog down the stock market. The FBM KLCI closed almost flat amidst cautious sentiments as it ended 0.79 points or 0.05% lower at 1,515.39, after trading at between 1,509.81 and 1,516.35. Regional markets were mixed with China’s Shanghai Composite Index ended 0.58% lower at 3,361.59, after falling as much as 2% and Japan’s Nikkei 225 index also finished 1.39% lower at 27,581.66. Meanwhile, South Korea’s Kospi index closed 0.13% higher at 3,236.86; Hong Kong’s Hang Seng ended 1.54% higher at 25,473.88.

Source: PublicInvest Research - 29 Jul 2021