Economy

Global: Supply chains are being battered by fresh Covid surges . Asia’s renewed surge in Covid-19 infections is compounding supply chain blockages across the world’s biggest source of manufactured goods. After weathering earlier pandemic waves better than other regions, the fast-spreading delta variant has thrown into turmoil factories and ports in countries that were once among the most successful containing the virus. The snarls in Asia where the United Nations estimates around 42% of global exports are sourced. As earlier snags have shown, problems that start in Asian ports can ripple slowly. (Bloomberg)

US: New York manufacturing index plunges much more than expected in August. New York manufacturing activity saw significantly slower growth in the month of August, according to a report released by the Federal Reserve Bank of New York. The New York Fed said its general business conditions index plunged to 18.3 in August from 43.0 in July. While a positive reading still indicates growth, economists had expected the index to show a much more modest drop to 30.0. Looking ahead, the firms remained optimistic that conditions would improve over the next six months, with substantial increases in employment and prices expected. (RTT)

EU: Italy, Spain economies set to expand at fastest rate since 1970s . Italy and Spain are set to record the fastest pace of economic expansion this year in more than four decades, a strong rebound that will help the countries overcome last year’s deep recession. Spain’s GDP will expand 6.2% in 2021, while Italy will record a rate of 5.6%, according to a Bloomberg survey of economists published. That’s a 0.3 and 0.6 percentage point increase, respectively, compared with a survey published in July. (Bloomberg)

China: Recovery weakens as Delta outbreak adds new risks . China’s economic activity slowed more than expected in July, with fresh virus outbreaks adding new risks to a recovery already hit by floods and faltering global demand. All the main data missed forecasts: retail sales expanded 8.5% in July from a year earlier, lower than the 10.9% predicted by economists; industrial output increased 6.4% versus the median estimate of 7.9%; fixed-asset investment grew 10.3% in the first seven months of the year, compared with a forecast of 11.3%. (Bloomberg)

Japan: Industrial production rises more than estimated . Japan's industrial production increased more than initially estimated in June, data from the Ministry of Economy, Trade and Industry said. Industrial production rose a seasonally adjusted 6.5% monthly in June. In the initial estimate, output grew 6.2%. Shipments gained 4.8% on month in June. According to the initial estimate, shipment rose 4.3%. Inventories rose% 2.1% in June versus a 2.3% growth in the initial estimate. The inventory ratio declined 0.3% monthly in June, as estimated. (RTT)

Thailand: 2Q GDP beats forecasts, but outlook cut as Covid-19 hampers recovery . Thailand's economy unexpectedly grew in the 2Q from the first helped by exports and government spending even though fresh coronavirus outbreaks battered consumption and tourism. The government again cut its 2021 economic growth forecast to 0.7-1.2% from 1.5-2.5% as the outbreak and lockdown measures crimped domestic activity amid Thailand's slow vaccination rollout. The economy slumped 6.1% last year. (Reuters)

Singapore: Property market booms again as home sales rebound . Singapore’s residential market rebounded the most in six months signalling the sector’s resilience as buyers anticipate pandemic restrictions easing. Purchases of new private units rose 82% MoM to 1,589 in July, Urban Redevelopment Authority data showed. It’s the highest increase since Jan, when 1,633 homes were sold, and comes after sales dropped for three consecutive months through June due to tightened virus curbs. (Bloomberg)

Indonesia: Proposes USD188bn 2022 budget with shrinking fiscal deficit . Indonesia's president proposed a USD188bn budget for 2022 with a narrowing fiscal deficit and higher growth targets, but some analysts warned uncertainties over the Covid-19 pandemic could push the budget plans off the rails. In his budget speech, President Joko Widodo told parliament the theme of next year's budget would be to accelerate the economic recovery from the pandemic and strengthen structural reforms, with controlling Covid-19 still a main focus. (Reuters)

Markets

QL Resources (Neutral, TP: RM5.85): Indonesian units being sued by minority shareholder for management negligence. QL Resources Bhd’s Indonesian subsidiaries are being sued by a minority shareholder for alleged negligence in management. (The Edge)

Comments: The lawsuit has been initiated by a minority shareholder of QL's subsidiaries in Indonesia that are involved in oil palm plantation. QL has obtained legal advice from its Indonesian counsels and is of the view that the lawsuit is not justified and has no legal merits. Hence, it is denying and refuting the basis of the lawsuit and plaintiff's allegations as well as claims for damages amounting to c.IDR752bn (~RM221m). We are not expecting QL to incur any material compensation apart from the legal costs. However, should QL loses the lawsuit, we opine that QL’s cash balance as of 31st March 2021 of c.RM487m is sufficient to handle the damages. We reiterate our Neutral call on QL with a TP of RM5.85.

FGV (Neutral, TP: RM1.56): Inks deal to explore investment in integrated dairy farm biz. FGV Holdings has inked a collaboration to explore investment in an integrated dairy farm business in Chuping, Perlis. FVG has entered into a MoU with FELCRA, and Qatar-based Baladna Food Industries Co WLL to carry out a comprehensive feasibility and technical study on an opportunity to potentially co-invest in an integrated dairy farm business in Chuping. (The Edge)

DNeX: To inject RM200m capital in SilTerra. Dagang Nexchange (DNeX) and its Chinese partner will inject RM200m of new capital in SilTerra Malaysia SB. The capital would be used to buy equipment and upgrade machinery to meet the current technological needs. DNeX had on July 26 completed the acquisition of a 60% stake in SilTerra from Khazanah. (BTimes)

EDEN: Inks RM46m power purchase deal with Sabah Electricity. EDEN Inc's unit, Stratavest SB (STV), signed a power purchase agreement with Sabah Electricity SB for RM46m. The agreement involves issuing the share capital of STV comprising 46m ordinary shares. STV's principal activity is as a developer and operator of power plants as an independent power producer. (BTimes)

Mobilia: Proposes 3-for-4 bonus issue and free warrants. Mobilia Holdings has proposed a bonus issue of 3 new shares for every 4 held. The group also announced free bonus warrants on the basis of one warrant for every four shares held. The entitlement dates for the two issues will be determined later. The full exercise of warrants could raise up to RM49m. (The Edge)

Revenue Group: To buy 25% stake in digitalisation service provider for RM12m. Revenue Group through its wholly-owned subsidiary Revenue Harvest SB (RHSB) is acquiring a 25% stake in VSure Tech SB, which is in the business of digitalising insurance platforms, for RM12m. (The Edge)

Mercury Industries: Inks deal to develop RM152m GDV project in Melaka. Mercury Industries has signed a deal to develop houses on a freehold land in Melaka. The 17,237sqm land in Pekan Tanjong Kling is proposed for a mixed development, including one block of service apartments with 648 units comprising four apartment towers. (The Edge)

Market Update

The FBM KLCI might open higher today as the benchmark S&P 500 — the closely followed barometer of the USD51trn US stock market — rose 0.3% on Monday, its fifth consecutive gain. The small advance lifted the index 100% from its March 2020 closing low, when investors were dumping stocks as the gravity of the pandemic sent many scrambling for cash. But intervention from policymakers at the Federal Reserve and trillions of dollars worth of stimulus signed into law by the White House have helped revive the country’s economic fortunes, as well as the US stock market. Earnings figures from corporate America have broadly eclipsed Wall Street expectations, with data late-last month showing the country’s economic output returned to pre-pandemic levels in the second quarter. The gains have been broad-based since the March lows, even as investors have rotated between different sectors they believe will benefit most from the recovery. Tech has been among the biggest beneficiaries. Meanwhile, the Nasdaq Composite slipped 0.2% on Monday. It had already doubled from its pandemic lows in February. All big European bourses fell, with London’s FTSE 100 down 0.9%, Frankfurt’s Xetra Dax off 0.3% and the CAC 40 in Paris 0.8% weaker.

Back home, the FBM KLCI slipped 2.21 points or 0.15% to close at 1,502.9, following news that Prime Minister Tan Sri Muhyiddin Yassin and his entire Cabinet have resigned, which drew his turbulent 17-month premiership to an abrupt end. Global shares slid on Monday after a raft of Chinese economic indicators showed a surprisingly sharp slowdown in the engine of global growth, just as much of the world races to stem the spread of the Delta variant of Covid-19 with vaccinations. In the region, Japan's Nikkei 225 dived 1.62%, while Seoul's Kospi tumbled 1.16%. In China, Hong Kong’s Hang Seng Index fell 0.8% while the Shanghai Stock Exchange Composite Index closed marginally up 0.03%.

Source: PublicInvest Research - 17 Aug 2021