Economy

US: Fed says it could begin ‘gradual tapering process’ by mid Nov. Fed officials could begin reducing the extraordinary help they’ve been providing to the economy by as soon as mid-Nov, according to minutes from the central bank’s Sept meeting released. The meeting summary indicated members feel the Fed has come close to reaching its economic goals and soon could begin normalizing policy by reducing the pace of its monthly asset purchases. In a process known as tapering, the Fed would reduce the USD120bn a month in bond buys slowly. (CNBC)

US: Consumer prices increase solidly in Sept. US consumer prices increased solidly in Sept and are poised to rise further in the months ahead amid a surge in the costs of energy products, which would cast doubts on the Federal Reserve’s view that high inflation is transitory. The consumer price index rose 0.4% last month after climbing 0.3% in Aug, the Labor Department said. In the 12 months through Sept, the CPI increased 5.4% after advancing 5.3% YoY in  Aug. Excluding the volatile food and energy components, the CPI climbed 0.2% after edging up 0.1% in Aug, the smallest gain in six months. The so-called core CPI rose 4.0% on a YoY basis after increasing 4.0% in Aug. (Reuters)

EU: German economic institutes cut 2021 growth forecast to 2.4% - sources. Germany’s economic institutes will cut their joint forecast for 2021 growth of Europe’s largest economy to 2.4% from the 3.7% they previously projected as supply bottlenecks slow recovery, two people familiar with the decision told Reuters. The institutes, which are expected to release their joint growth forecast, will also raise their forecast for growth next year to 4.8% from 3.9%, and will project 1.9% economic growth for 2023. The German government, which so far has been forecasting growth of 3.5% for this year and 3.6% for next, is expected to update its own estimates this month as well. (Reuters)

EU: Rising German inflation calls for 'noticeable wage gains', union chief says. Rising inflation in Germany calls for “clearly noticeable real wage increases”, the chairman of services sector trade union Verdi said in comments released. German inflation accelerated in Sept to 4.1%, its highest since Dec 1993, driven up by energy and food costs. Economists are looking for signs that higher inflation expectations will lead to higher wage increases which could kick off a wage-price spiral, driving inflation higher still and eroding households’ purchasing power further. (Reuters)

UK: Economy expands in Aug. Underpinned by services and production output, the UK economy expanded in Aug after contracting for the first time in six months in July, the Office for National Statistics (ONS) reported. GDP grew 0.4% on month, but slightly slower than the economists' forecast of +0.5%. The ONS said GDP growth for July has been revised from 0.1% growth to a 0.1% fall, mainly because of downwardly revised data for the manufacture of motor vehicles, oil and gas, and improvements to how health output is measured. GDP remained 0.8% below its pre-pandemic level in Aug. (RTT)

China: Sept export growth unexpectedly picks up, imports slow. China’s export growth was faster than expected in Sept, as solid global demand offset some of the pressure on factories from power shortages and a resurgence of domestic COVID-19 cases. China’s exports in Sept rose 28.1% from a year earlier, up from a 25.6% gain in Aug. Analysts polled by Reuters had forecast growth would ease to 21%. (Retuers)

China: Sept new bank loans rise to CNY1.66trn, below forecast. Chinese banks extended CNY1.66trn (USD257.66bn) in new yuan loans in Sept, up from Aug but falling short of analyst expectations. Analysts polled by Reuters had predicted new yuan loans would rise to CNY1.85trn in Sept from CNY1.22trn the previous month and against CNY1.9trn a year earlier. Broad M2 money supply grew 8.3% from a year earlier, central bank data showed, above estimates of 8.1% forecast in the Reuters poll. M2 grew 8.2% in Aug from a year earlier. (Reuters)

India: Fuel demand rose 5.2% YoY in Sept. India’s fuel demand rose 5.2% in Sept compared with the same month last year to 15.92mt, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed. Sales of gasoline, or petrol, were 6% higher from a year earlier at 2.60mt, while diesel sales rose 0.5% YoY to 5.51mt, the data showed. (Reuters)

Markets

WCT (Neutral, TP: RM0.58): Secures development rights over Sabah land. WCT Holdings has secured the sole development rights over 411 acres of land at Lok Kawi in Sabah. (The Edge)

Comments: The agreement provides the Group options to acquire the development rights over the 11 parcels of land. The period opened for the Group as a developer to exercise the Options is 15 years. Nonetheless, the Group is to undertake at least two Parcels of land within six months for Parcel 1 and within 54 months for Parcel 2, to exercise the Options. We are positive over this development as it would enable WCT to enhance its landbank with a strategic development land in Sabah, without incurring a substantial upfront land cost given the Options are to be exercised over the Option Period. The Group will only need to pay 10% upon execution of the agreement while the balance 90% to be paid by way of settlement in cash or payment in kind within 7 years. Financial benefit will not be so immediate as the Project is envisaged to be a long-term investment and development. Given the lack of details (size of the required two parcels and its estimated GDV), it is difficult to gauge the potential earnings contribution at this juncture.

Maxis (Neutral, TP: RM4.64): Proposes MyKRIS Asia acquisition for up to RM157.5m, its largest to date. Maxis has proposed to acquire managed network and security services company MyKRIS Asia SB for up to RM157.5m, which would be the telecommunications company's largest acquisition to date. The acquisition includes adding a pool of experts comprising 70 qualified engineers and support team, which is expected to enhance Maxis' capabilities. (The Edge)

Malakoff (Outperform, TP: RM1.02), Gas Malaysia collaborate on O&M services for cogeneration plants . Malakoff Corp and Gas Malaysia have teamed up to share their expertise and resouces in the undertaking of operations and maintenance services for cogeneration plants in Malaysia. In a joint statement, the two utility companies, which are members of the MMC Group, said they will form a joint venture company called Malakoff-Gas Malaysia Cogen O&M SB. (StarBiz)

SCIB: Bags RM13.28m school project near Sibu . Sarawak Consolidated Industries has secured a RM13.28m job from Sarawak Public Works Department to redeveloped two schools near Sibu, Sarawak. The project is expected to contribute positively to financial performance over the coming quarters. (StarBiz)

UMW: Auto sales surge 133% to 22,193 units in Sept 2021 . UMW Holdings posted a 133.3% jump in automotive sales to 22,193 units in Sept 2021 compared with 9,512 units sold in Aug 2021 as the operations gradually normalised following easing of the FMCO restrictions from Aug 16. Both UMW Toyota Motor (UMWT) and UMW’s associate company, Perodua continue to ramp-up production to hasten delivery of the outstanding orders. (StarBiz)

KTB: Proposes placement of 16.63% issued shares to DOH Properties . Konsortium Transnasional (KTB) has proposed placement of 67m new ordinary shares, representing 16.63% of its existing issued shares, to Doh Properties SB at an issue price of 10 sen per unit. (The Edge)

Market Update

The FBM KLCI might open higher today after Wall Street stock and bond prices climbed on Wednesday despite data confirming a surge in inflation and the Federal Reserve publishing further details on its plans to begin easing asset purchases. Headline US consumer prices rose 5.4% year on year in September, marking the fifth consecutive month of annual increases of 5% or more. The figure was slightly ahead of most economists’ forecasts, but had little immediate effect on US stocks after investors had spent much of the past few weeks positioning themselves for a likely increase. Persistent inflation has increased confidence that the US central bank will begin tapering its pandemic-era stimulus measures as early as next month. Minutes from the latest meeting of the Federal Open Market Committee provided further support on Wednesday, showing that there was a growing consensus among top officials to begin tapering “soon”. The prospect has hit stock markets in recent weeks, but the blue-chip S&P 500 rose 0.3% on Wednesday. The index has dropped about 4% from the record high it hit in early September. The tech-heavy Nasdaq Composite index rose 0.7%. In Europe, the region-wide Stoxx 600 also closed up 0.7%.

Back home, Bursa Malaysia on Wednesday broke through the 1,600 psychological level, accumulating gains of 5% during its seven-day rally. At 5pm, the FBM KLCI increased 1% or 16.47 points to 1,600.38 from 1,583.91 at Tuesday’s close. In the region, major benchmarks were mixed. The Shanghai Composite Index added 0.4% while Japan’s Nikkei 225 slid 0.3%. Markets in Hong Kong were closed due to a typhoon..

Source: PublicInvest Research - 14 Oct 2021