Economy

US: Jobs report bolsters case for Fed to taper asset purchases. US employment data showing strong job gains, a sharp drop in the unemployment rate and a rise in wages last month is likely to push the Fed closer to paring its massive support for the economy. It certainly helps meet Fed Governor Christopher Waller’s bar for doing so. Earlier this week the newest addition to the US central bank’s policymaker panel said he felt the Fed could start tapering its USD120bn in monthly asset purchases by Oct if 800,000 to 1 million jobs were added in both July and Aug. The US Labor Department reported that nonfarm payrolls rose by 943,000 jobs last month, beating the forecast of economists in a Reuters poll. Job gains for June and May also were revised higher. The unemployment rate also fell sharply to 5.4% while wages rose at a solid pace. (Reuters)

US: Fed’s Sanguine inflation view tested in new data, Eco week ahead. US consumer prices probably rose in July at the slowest pace in five months, marking a deceleration that stops short of full relief from cost increases weighing on sentiment and driving political debate. The government’s index is seen climbing 0.5%, according to the median projection in a Bloomberg survey of economists ahead of data this week. Stripping out volatile food and energy components, the core measure of prices is forecast to rise 0.4% after a 0.9% advance in June that matched the largest month-over-month gain since 1982. The pace of increase already exceeded expectations for four straight months through June. (Bloomberg)

EU: ECB’s Weidmann warns inflation may pick up faster than expected. ECB Governing Council member Jens Weidmann warned that inflation in the euro area could pick up faster than expected, and urged not to drag out the institution’s pandemic bond-buying program. Weidmann, who is also the president of Germany’s Bundesbank, will “urge to also keep a close eye on the risk of an inflation rate that is too high and not just look at the risk of an inflation rate that is too low,” he told German newspaper Welt am Sonntag in an interview published. “Higher inflation rates cannot be ruled out.” The ECB expects inflation to average 1.9% in 2021, mainly reflecting temporary factors, before falling to 1.5% and 1.4% in 2022 and 2023. While underlying price pressures should strengthen as the economy recovers. (Bloomberg)

UK: House price inflation slows for second month – Halifax. UK house price inflation slowed for a second month in a row in July, survey data from the Lloyds Bank subsidiary Halifax showed. The house price index rose 7.6% YoY following an 8.7% increase in June. The latest increase was the smallest since March. "This easing was somewhat expected given the strength of price inflation seen last summer, as the market began its recovery from the first lockdown, and with activity supported by the start of the stamp duty holiday," Halifax Managing Director Russell Galley said. Average house price was GBP 261,221, a little below May's peak but still more than GBP 18,500 higher than a year ago, Galley added. Compared to the previous month, house prices climbed 0.4 percent in July, partially reversing a 0.6 percent fall in June. (RTT)

China: Export slowdown in July may signal more bumps ahead. China’s export growth unexpectedly slowed in July following outbreaks of COVID-19 cases, while imports also lost momentum, pointing to a slowdown in the country’s industrial sector in the second half even as easing global lockdowns boost commerce. The world’s biggest exporter has staged an impressive economic rebound from a coronavirus-induced slump in the first few months of last year after quickly containing the pandemic, and its rapid vaccination rollout has helped drive confidence. But new infections in July, mainly caused by the highly transmissible Delta strain have spread to tens of Chinese cities. (Reuters)

China: July forex reserves rise to USD3.236trn. China’s foreign exchange reserves rose more than expected in July, official data showed, likely due to changes in the value of currencies and global assets that it holds. The country’s foreign exchange reserves - the world’s largest - rose by USD21.88bn to USD3.236trn last month, compared with USD3.217trn tipped by a Reuters poll of analysts and USD3.214trn in June. Foreign inflows into Chinese stocks and bonds have been strong as China led other major economies in its recovery from the coronavirus pandemic, lifting reserves back to levels last seen in 2016. But widening regulatory crackdowns in recent months has revived worries about the risks of investing in China. (Reuters)

India: Central Bank keeps key rates unchanged. India's central bank left its key interest rates unchanged on and vowed to continue its accommodative stance as long as necessary. The Monetary Policy Committee of the Reserve Bank of India unanimously voted to hold the benchmark policy rate at 4.00%. The reverse repo rate was retained at 3.35%. The Marginal Standing Facility rate and the Bank Rate were also left unchanged at 4.25% at the meeting. The MPC also decided on a 5 to 1 majority to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target, going forward. (RTT)

Japan: Leading index highest since Feb 2014. Japan's leading index increased to the highest since Feb 2014, preliminary data from the Cabinet Office showed on Friday. The leading index, which measures the future economic activity, rose to 104.1 in June from 102.6 in May. this was the highest since February 2014, when the reading was 104.5. The coincident index increased to 94.0 in June from 92.1 in the previous month. In April, the index was 95.3. The lagging index grew to 96.5 in June from 93.2 in the prior month. In April, the index was 94.1. (RTT)

Markets

CTOS: Increases stake in Thailand’s BOL to 22.65%. CTOS has increased its stake in Business Online Public Company Limited (BOL) to expand its foothold in Thailand’s business decision-making solutions market. The acquisition represents a 2.65% stake in BOL for a purchase consideration of THB208.7m (c.RM26.8m). The acquisition will be fully funded by proceeds from a recent IPO. The 2.65% shareholding adds on to CTOS’ earlier acquisition of a 20% stake in BOL in Oct 2020. (Bernama)

Tiong Nam: To acquire land from Senai Airport. Tiong Nam Logistics has signed two sale and purchase agreements with Senai Airport City SB to acquire two plots of vacant land for RM136.4m. Tiong Nam said the land spanning some 20.23 hectares is located within the Free Commercial Zone in Senai Airport City in Johor Bahru, Johor. "The land will be used for the construction of a warehouse with a built-up area of about 1.09m sqft. The total warehouse construction cost is estimated at RM200m. (The Star)

MyEG: To bring DeFi services into Malaysia. MyEG Services will be introducing decentralised finance (DeFi) products in Malaysia to provide cryptocurrency services to users of digital asset exchanges which are licensed as recognised market operators locally and abroad. The service will enable holders of cryptocurrency to enter into smart contracts for the purposes of borrowing cryptocurrency or lending against their cryptocurrency assets. (The Edge)

MMHE: Arbitral tribunal orders to pay RM28m to KPOC. MMHE has been ordered to pay RM28.03m to Kebabangan Petroleum Operating Company SB (KPOC) over their dispute regarding an oil rig project off north Sabah in 2014. MMHE said the arbitral tribunal had issued the final award following the arbitration proceedings initiated against MMHE by KPOC. “The final award will not have any impact on the operation of MMHE. The total financial impact arising from the final award would be RM28.09m,” it said. (StarBiz)

SLP Resources: 2Q earnings dragged by workforce restriction, declares 1.5 sen dividend. SLP Resources’ net profit for 2QFY21 fell 22.35% QoQ to RM4.68m, dragged by lower production due to the 60% workforce restriction. It declared a dividend of 1.5 sen per share for 2QFY21. On prospects, it said the 60% workforce restriction and increasing supply chain interruptions may cause short-term headwinds, going forward. (The Edge)

MSC: 2Q21 profit triples, says on target for Pulau Indah plant commissioning by early 2022. Malaysia Smelting Corp’s (MSC) net profit more than tripled in 2QFY21 to RM2.93m, supported by higher tin prices and production. “The outlook for tin demand is promising from its continued use in semiconductors, electronics, home appliances, photovoltaics and etc,” MSC said. “Our progress at the new Pulau Indah smelter is still on track for full commissioning by early-2022, as we gradually ramp up production”. (The Edge)

MARKET UPDATE

The FBM KLCI might open flat today as the blue-chip S&P 500 closed 0.2% higher last Friday, extending the all-time high the benchmark index set on Thursday, while the technology-focused Nasdaq, more sensitive to rising interest rates, dropped 0.4%. Europe’s benchmark Stoxx 600 index ended flat while the UK’s FTSE 100 closed slightly higher as investors were encouraged by more hawkish comments from the Bank of England on Thursday. Data released showed the US created more jobs than expected, raising investors’ expectations that the Federal Reserve would ease its crisis-era stimulus package as the economy recovers. As optimism rose, investors re-evaluated the path of US interest rates, pushing the yield, which moves inversely to price, on the 10-year Treasury note 0.08 percentage points higher to 1.30%.

Back home, the FBM KLCI edged lower against the backdrop of retreating regional markets amid a surge in Covid-19 cases and its impact across the region. The benchmark index settled 5.98 points or 0.4% lower at 1,489.8. China shares closed lower on worries over a continuing surge of new coronavirus cases and tightening government regulations. The Shanghai Composite index closed 0.24% lower at 3,458.23, while Hong Kong’s Hang Seng Index declined 0.09% to 26,179.4. Elsewhere, South Korea’s KOSPI fell 0.18% to 3,270.36, while Japan’s Nikkei 225 finished 0.33% higher at 27,820.04.

Source: PublicInvest Research - 9 Aug 2021