Economy

US: Fiscal stimulus, vaccinations lift economy above prepandemic level. The US economy grew solidly in the 2Q, pulling the level of GDP above its pre-pandemic peak, as massive government aid and vaccinations against COVID-19 fueled spending on goods and services. The pace of GDP growth reported by the Commerce Department, however, slower than economists had expected. That was because businesses ran down inventories further to meet the robust demand. Supply constraints are making it harder for business to replenish stocks. GDP increased at a 6.5% annualized rate last quarter, the government said in its advance estimate of 2Q GDP. The economy grew at a 6.3% rate in the 1Q, revised down from the previously reported 6.4% pace. (Reuters)

US: Pending home sales decline in June as prices climb. Contracts to purchase previously owned US homes declined in June in step with a spike in home prices after rebounding strongly in the prior month. The Pending Home Sales Index, based on contracts signed last month, fell 1.9% to 112.8. Economists polled had forecast pending home sales would increase 0.3%. Pending home sales for May were revised to show an increase of 8.3% instead of the 8.0% gain previously reported. Pending home contracts are seen as a forward-looking indicator of the health of the housing market because they become sales one to two months later. House prices have soared in the past year, with the median price for both new and existing homes now topping USD360,000. (Reuters)

US: Weekly jobless claims pull back less than expected. After reporting an unexpected increase in first-time claims for US unemployment benefits in the previous week, the Labor Department released a report showing a modest pullback in initial jobless claims in the week ended July 24th. The report said initial jobless claims dipped to 400,000, a decrease of 24,000 from the previous week's revised level of 424,000. Economists had expected jobless claims to drop to 380,000 from the 419,000 originally reported for the previous week. Meanwhile, the Labor Department said the less volatile four-week moving average crept up to 394,500, an increase of 8,000 from the previous week's revised average of 386,500. (RTT)

EU: Economic confidence hits record high. Eurozone economic confidence hit a record high in July driven by rising sentiment in the industrial and service sectors, survey results from the European Commission showed. The economic confidence index rose to 119.0 from 117.9 in June. This was the highest since records began in 1985 and also well above economists' forecast of 118.5. However, compared to the previous months, the latest improvement was much weaker, suggesting that the indicator is approaching its peak. The improvement in the overall economic confidence was largely driven by industrial and services confidence. (RTT)

EU: German inflation hits 13-yr high, union demands "strong wage increases". Germany’s annual consumer price inflation accelerated by more than expected to hit a 13-year high in July, leading services sector trade union Verdi to immediately demand “strong wage increases”. Consumer prices rose by 3.1% in July compared with 2.1% in June. A poll had pointed to a reading of 2.9%. July’s reading was the highest since Aug 2008, when the harmonised inflation rate hit 3.3%, an official at the Statistics Office said. The rise pushed the inflation rate further above the European Central Bank’s 2% target and fuelled a debate about whether the increase in the cost of living will persist. (Reuters)

EU: German unemployment falls in sign of continuing recovery. German unemployment fell in July as companies hired more staff in light of a recovery in Europe’s largest economy, official figures showed. The Labour Office said the number of people out of work fell by 91,000 in seasonally adjusted terms to 2.598m. A poll had forecast a fall of 28,000. The seasonally adjusted jobless rate fell to 5.7%. Unemployment and underemployment have continued to fall sharply since the start of the summer break. Companies are increasingly looking to hire new staff. The release of the jobless figures followed the publication of a survey showing German business morale fell unexpectedly in July on continuing supply chain worries and amid rising coronavirus infections. (Reuters)

UK: Mortgage lending booms but consumers stay wary about debt. British mortgage lending showed a record surge in June as home-buyers rushed to qualify for a tax break before it was scaled back, but other data added to signs that a rise in COVID-19 cases in recent weeks slowed the broader economic recovery from lockdown. Mortgage borrowing leapt by a net GBP17.9bn (USD25.0bn) from May, the biggest monthly increase in Bank of England records which date back to 1993. (Reuters)

South Korea: Industrial output rises 2.2% in June. Industrial production in South Korea was up a seasonally adjusted 2.2% on month in June, Statistics Korea said. That beat expectations for an increase of 1% following the downwardly revised 1% contraction in May (originally -0.7%). On a yearly basis, industrial production jumped 11.9% again exceeding expectations for 9.3% following the downwardly revised 14.9% gain in the previous month (originally 15.6%). For the 2Q of 2021, industrial production fell 1% on quarter and gained 13% on year. (RTT)

Australia: Export prices spike 13.2% on quarter in 2Q. Export prices in Australia were up 13.2% on quarter in the 2Q of 2021, the Australian Bureau of Statistics said, accelerating from 11.2% in the previous three months. On a yearly basis, export prices surged 26.0%. (RTT)

Markets

CTOS Digital: Acquires 4.63% in RAM for RM10m. CTOS Digital made its first post-listing acquisition by buying a 4.63% stake in credit rating agency RAM Holdings from CIMB Bank for RM10.05m, to extend product offering to its existing customers. CTOS had entered into a share purchase agreement with CIMB Bank. The acquisition of a strategic minority stake in RAM will allow both companies to leverage each company’s expertise in credit assessment, data and analytics to further extend their product offering and value proposition to their existing customer base. (The Edge)

MAG: Proposes one warrant for four shares to raise RM84.9m. MAG Holdings has proposed a bonus issue on the basis of one warrant for every four shares held which will enable it to raise RM84.90m when the warrants are converted. This would involve the issuance of up to 471.67 million warrants. The proceeds would be used for working capital. (StarBiz)

Nextgreen Global: Plans private placement to raise up RM21.09m for tissue paper mill JV. Nextgreen Global has proposed to undertake a private placement of 5.32% of its total issued shares to raise up to RM21.09m for its tissue paper mill JV. Nextgreen announced that it had entered into a JV agreement with Dengkil Paper Mill to set up a tissue paper mill in Pahang. The estimated cost for the venture was RM25.5m. (The Edge)

T7 Global: Bayan gas MOPU hits construction milestone in China. T7 Global’s Bayan mobile offshore gas production unit (MOPU) has reached its second construction milestone, with the keel laying at a shipyard in Qingdao, China. It is set to be installed offshore Sarawak for Petronas Carigali SB's Bayan Gas Redevelopment Project Phase 2 to boost gas production in the Bayan field upon completion in 2022. (The Edge)

LYC Healthcare: Suspends its confinement centre in Bukit Jalil after 7 Covid-19 cases found. LYC Healthcare has temporarily suspended its confinement centre in Bukit Jalil, Kuala Lumpur for 14 days from July 29, following the discovery of seven Covid-19 infections there. The temporary stoppage is not expected to have a significant impact on its revenue and earnings for FY22, and that its other confinement centres at other locations are unaffected and operating as normal. (The Edge)

Frontken: 2Q earnings climb to RM24.74m on strong semiconductor demand. Frontken’s s net profit rose 21.69% YoY to RM24.74m in 2QFY21, due to an increase in contributions from its Taiwan, Malaysia and Singapore subsidiaries. Revenue was up 23.97% YoY to RM108.63m from RM87.62mil as volume in the semiconductor space picked up on higher demand and strong orders from a customer of its Taiwan subsidiary. (StarBiz)

Genetec: Returns to black in 1Q on higher sales volume and improved operational efficiency. Genetec has returned to the black with a net profit of RM8.18m in 1QFY21, from a net loss of RM2.09m a year ago, underpinned by higher sales volume and improved operational efficiency.The group has achieved a strong order book primarily from the Electric Vehicle (EV) sector, which has significantly contributed positively to its current quarter performance. (The Edge)

MARKET UPDATE

The FBM KLCI might open flat today due to political headwinds and persistent rise in the number of Covid-19 infections expected to continue to bog down the stock market. Overnight, stocks on Wall Street rose on Thursday despite weaker than expected US growth data that cemented expectations that the Federal Reserve would maintain its pandemic-era stimulus that has supported financial markets for a year and a half. The moves followed data showing US gross domestic product grew at an annualised rate of 6.5% in the second quarter, missing the 8.5% rise expected by economists polled by Reuters. The S&P 500, the blue-chip US share index, closed 0.4% higher after hitting a high on Monday. The tech-heavy Nasdaq Composite index climbed 0.1%, rebounding slightly after notching its worst day in two and a half months earlier in the week. The region-wide Stoxx Europe 600 benchmark closed up 0.5% to a new record, while London’s FTSE 100 gained 0.9% and Frankfurt’s Xetra Dax ended the session 0.5% higher.

Back home, the FBM KLCI erased earlier gains and sank into the red on concerns about the latest political developments in the country. The benchmark index closed 2.46 points or 0.16% lower at 1,512.93 after moving between 1,511.51 and 1,520.04 throughout the day. Most regional bourses closed higher after the US Federal Reserve (Fed) signalled that it was in no rush to taper monetary policy support. Japan’s Nikkei 225 finished 0.73% higher at 27,782.42, while South Korea’s KOSPI rose 0.18% to 3,242.65. In China, shares rebounded after Beijing calmed investor nerves over mounting regulatory risks. The Shanghai Composite index closed 1.49% higher at 3,411.72, while Hong Kong’s Hang Seng Index added 3.3% to 26,315.32.

Source: PublicInvest Research - 30 Jul 2021