Economy

US: Fed minutes indicate tapering of asset purchases expected this year. Most Federal Reserve officials at the central bank's July monetary policy meeting believe it will be appropriate to begin tapering asset purchases this year, according to the minutes of the meeting released. The expectation of tapering the Fed's asset purchases this year comes as most participants saw the "substantial further progress" criterion as satisfied with respect to the price stability goal and as close to being satisfied with respect to maximum employment. (RTT)

US: Housing starts fall sharply in July. US homebuilding fell more than expected in July, the latest indication that surging construction costs and home prices continued to constrain the housing market early in the 3Q. Housing starts dropped 7.0% to a seasonally adjusted annual rate of 1.534m units last month, the Commerce Department said. Data for June was revised up to a rate of 1.650m units from the previously reported 1.643m units. (Reuters)

US: Employment growth through March revised modestly lower. The US economy likely created 166,000 fewer jobs in the 12 months through March than previously estimated, the Labor Department’s Bureau of Labor Statistics said. The reading is a preliminary estimate of the BLS’ annual “benchmark” revision to the closely watched payrolls data. The leisure and hospitality sector, which was hardest hit by the COVID-19 pandemic, accounted for the bulk of the revision, with employment growth revised down by 597,000 or 4.6%. Leisure and hospitality employment is 1.7m below its peak in Feb 2020. (Reuters)

EU: Inflation confirmed above ECB target in July. Eurozone inflation accelerated to 2.2% in July, its highest rate in nearly three years and above the European Central Bank's target of 2.0%, final data released by the EU statistics office showed, confirming its earlier estimate. Eurostat said consumer prices in the 19-nation bloc rose 2.2% in July on the year, after a 1.9% rise in June. It was the highest rate since Oct 2018. MoM inflation in the bloc fell 0.1%, in line with the mean forecast of economists. The ECB is forecasting a further increase of annual inflation towards the end of the year, but it sees the acceleration as caused largely by temporary factors which would not require changes in policy. (RTT)

EU: Construction output falls for third month. Eurozone's construction output declined for the third straight month in June, data from Eurostat showed. The construction output fell 1.7% MoM in June, after a 0.4% decrease in May. Production in building construction decreased 1.9% monthly in June, while output in civil engineering grew 0.2%. On a YoY basis, the construction output gained 2.8% in June, after a 12.2% growth in the prior month. (RTT)

UK: Inflation slows sharply to 2.0%. UK consumer price inflation slowed sharply in July to the Bank of England's target, preliminary data from the Office for National Statistics showed. The consumer price index rose 2.0% YoY following a 2.5% increase in June. Economists had forecast a 2.3% inflation. Headline inflation slowed for the first time in five months. Core inflation, which excludes prices of energy, food, alcoholic beverages and tobacco, slowed to 1.8% from 2.3% in the previous month. (RTT)

China: July exports to North Korea up for second month. China’s exports to North Korea rose for the second straight month in July but were only still a fraction of their pre-COVID levels, data from the General Administration of Customs showed. Chinese shipments to North Korea rose to USD16.8m in July from USD12.3m in June, Chinese customs data showed. Shipments totalled USD207.7m in July 2019, before the coronavirus pandemic disrupted trade. (Reuters)

Japan: June core machine orders dip 1.5%. The total value of core machine orders in Japan fell a seasonally adjusted 1.5% on month in June, the Cabinet Office said, standing at JPY852.4bn. That beat expectations for a decline of 2.8% on month following the 7.8% jump in May. On a yearly basis, core machine orders climbed 18.6%, again exceeding expectations for an increase of 15.8% following the 12.2% gain in the previous month. For the 2Q of 2021, core machine orders were up 4.6% on quarter and 12.6% on year at JPY2,521.0bn. (RTT)

Japan: Factory mood hits 3-1/2-year high. Confidence among Japanese manufacturers hit a more than three-and-half-year high in Aug and service-sector sentiment turned positive, the Reuters Tankan poll showed, suggesting the economy was shaking off the drag from the COVID-19 slump. The monthly poll, which tracks the Bank of Japan’s (BOJ) closely watched tankan quarterly survey, found that manufacturers’ mood would slip a little while staying buoyant in three months and service-sector sentiment would recover further. (RTT)

Indonesia: Trade surplus decreases in July. Indonesia's trade surplus decreased in July, figures from Statistics Indonesia showed. The trade surplus increased to USD2.588bn in July from USD3.225m a year ago. Economists had expected a surplus of USD2.27bn. In June, the trade surplus was USD1.324bn. Exports grew 29.32% YoY in July. Economists had expected a rise of 30.2%. Imports rose 44.44% annually in July. (RTT)

Markets

AirAsia (Underperform, TP: RM0.19): Teleport to buy Delivereat for USD9.8m. AirAsia’s digital logistics venture Teleport has signed an agreement to acquire 100% equity interest in local online food delivery platform Delivereat for USD9.8m (RM42m) to strengthen its delivery service in the country. (The Edge)

Comment: We are positive on the acquisition as it strengthens AirAsia Digital’s plan to cover the end-to-end logistic chain. The deal which values Teleport at USD300m shows strong industry endorsement of the business model. Nonetheless, the pandemic will continue to weigh on its overall operation near to medium term. We maintain our Underperform call.

Tasco: Certified as authorised economic operator. Tasco has been certified as an authorised economic operator by the Royal Malaysian Customs Department. With the certification, the company is able to offer a number of benefits to its selected customers. These include priority customs clearance both at origin and destination, lower rate of physical inspections of imported or exported goods, faster release of shipments, deferred payment of duties, as well as enhanced security and improved risk mitigation. (The Edge)

Kelington: Clinches RM45m UHP works contract in Singapore. Kelington Group has secured a contract worth approximately RM45m to undertake specialty gas systems distribution (UHP) works for GlobalFoundaries Inc’s new semiconductor fabrication plant in Singapore. (The Edge)

Tomei: Proposes ACE Market listing for its precious metals biz via SPV. Tomei Consolidated has proposed to list four wholly-owned subsidiaries under a special purpose vehicle YX Precious Metals on the ACE Market of Bursa Malaysia. The four companies are involved in the precious metals business, in particular the wholesale, design and manufacturing, assaying services and refining services. (The Edge)

Komarkcorp: Seeks to raise up to RM82m via rights issue. Komarkcorp plans to raise up to RM81.78m — 128% of its market value of RM64m — through a rights issue. This exercise entails the issuance of up to 817.82m rights shares and up to 272.61m free detachable warrants, on the basis of three rights shares and one warrant for every three shares held. (The Edge)

Widad Group: Gets RM53.2m job to build school in Bangi. Widad Group’s unit has secured a RM53.20m contract from the Public Works Department (PWD) to build a school in Bukit Mahkota, Bangi by Its unit Widad Builders SB. (StarBiz)

Grand Hoover: Unit appointed main contractor for RM69.88m project in Terengganu. Grand Hoover’s whollyowned subsidiary, Pembinaan Att SB, has been appointed by R.M.E. SB as the main contractor for an RM69.88m construction project in Terengganu. (The Edge)

Destini: Bags oil and gas assets service contract. Destini has secured a contract to provide tubular handling and conductor installation equipment and services from Repsol Oil and Gas Malaysia. (The Edge)

MARKET UPDATE

The FBM KLCI might open lower today as US stocks slid on Wednesday after policymakers at the Federal Reserve signalled they had accelerated discussions on when to wind down its USD120bn-a-month asset purchase programme. Minutes from the most recent meeting of the Federal Open Market Committee, which sets US interest rates, revealed that a majority of central bank officials believed the withdrawal of the stimulus programme could start later this year. The S&P 500 fell 1.1%, its worst day since mid-July, while the tech-heavy Nasdaq Composite declined 0.9%. Uncertainty ahead of the minutes’ publication had encouraged a cautious day of trading on the other side of the Atlantic. The FTSE 100 in London ended the day 0.2% lower, while the CAC 40 in Paris closed down 0.7%. The pan-European Stoxx 600 index closed up 0.1%, as shares in Germany advanced marginally. Data from the US, Europe and China this week has indicated the pace of the economic recovery is slowing, leaving US and European benchmark equity indices close to record highs but lacking a catalyst for further gains.

Back home, the FBM KLCI ended the day on a flat note as investors remained on the sidelines, amid concerns over domestic political developments, while new Covid19 cases in the country hit another fresh record high. At 5pm, the benchmark index ended 1.65 points or 0.11% higher at 1,525.24. Elsewhere in the region, stocks edged up from a three-week low on Wednesday, but gains were capped by ongoing fears about the Delta variant of the coronavirus, which also caused New Zealand’s central bank to delay a previously expected rate hike. Hong Kong’s Hang Seng Index climbed up 0.47% and the Shanghai Stock Exchange Composite Index closed up 1.11%; Japan's Nikkei 225 rose 0.59%, while South Korea's Kospi advanced 0.5%.

Source: PublicInvest Research - 19 Aug 2021