Economy

US: Yellen expects high inflation through mid-2022 before easing. Treasury Secretary Janet Yellen said she expects price increases to remain high through the first half of 2022, but rejected criticism that the US risks losing control of inflation. Inflation is expected to ease in the second half as issues ranging from supply bottlenecks, a tight US labor market and other factors arising from the pandemic improve, Yellen said on CNN’s “State of the Union” on Sunday. The current situation reflects “temporary” pain, she said. “I don’t think we’re about to lose control of inflation,” Yellen said, pushing back on criticism by former Treasury Secretary Lawrence Summers this month. “Americans haven’t seen inflation like we have experienced recently in a long time. But as we get back to normal, expect that to end.” Federal Reserve Chair Jerome Powell sounded a note of heightened concern over persistently high inflation as he made clear that the central bank will begin tapering its bond purchases shortly but remain patient on raising interest rates. (Bloomberg)

US: Business borrowing for equipment rises 6% in Sept – ELFA . US companies increased their borrowings for capital investments in Sept by 6% compared with a year earlier, the Equipment Leasing and Finance Association (ELFA) said. The companies signed up for USD9.2bn in new loans, leases and lines of credit last month, up from USD8.7bn a year earlier. Borrowings rose 8% from Aug. “Supply chain disruptions and inflation concerns continue, with the Fed poised to gradually ease its asset purchases in the near term,” ELFA CEOr Ralph Petta said in a statement. “For now, liquidity is abundant and businesses are acquiring the productive equipment necessary to respond to customer demand in a variety of market sectors,” he said. (Reuters)

EU: German business confidence weakens for fourth straight month . German business confidence weakened for the fourth consecutive month in Oct to hit a six-month low as supply bottlenecks weighed heavily on expectations, survey results from the ifo Institute showed. The business confidence index fell more-than-expected to 97.7 in Oct from revised 98.9 in Sept. The expected level was 97.9. This was the lowest since last April. The current situation indicator came in at 100.1, down from 100.4 a month ago and below the economists' forecast of 99.4. The expectations index dropped to 95.4 from 97.4 in the previous month. The reading was forecast to fall to 96.4. Supply problems are giving businesses headaches, Clemens Fuest, ifo President said. Sand in the wheels of the German economy is hampering recovery. (RTT)

China: New Delta hit, production rebound still key. Another outbreak of the delta variant adds to a slew of negative shocks that have hit China’s weakening economy. The good news is it may have a milder impact on growth than the flareup over the summer -- and it pales in comparison with damage from supply-side challenges. But the threat to consumption from repeated Covid-19 flareups reinforces our view that production will have to drive any turnaround in the economy. The outbreak originated in Inner Mongolia and has affected areas in five provinces and municipalities, including Beijing, which together account for 8.3% of GDP. Officials have warned the outbreak is likely to worsen in the coming days. This flareup is likely to have a milder impact on consumption than the outbreak in July-Aug, which began in Nanjing. The reason -- containment steps are more targeted, people are more relaxed. (Bloomberg)

Japan: BOJ to hold, lift next year’s growth outlook. The Bank of Japan is expected to keep policy on hold at its board meeting this week. It may cut its GDP growth outlook for fiscal 2021 to reflect the impact of virus-containment restrictions that were extended to the end of September. But it’s likely to lift its growth forecast for next fiscal year. Japan’s economy is recovering, aided by higher vaccination coverage. Activity in the fourth quarter should benefit from the end of the state of emergency on Sept. 30. Mobility was higher in mid October than at the start of the month, according to high-frequency data. The BOJ may revise down its inflation outlook to account for special factors, such as a change in the base year for the CPI series. But it will be important to see how the BOJ assesses the inflation outlook -- as that would give a better read on its policy stance. (Bloomberg)

Taiwan: Industrial production growth slows in Sept . Taiwan's industrial production increased at a softer pace in Sept, data from the Ministry of Economic Affairs showed. Industrial output grew 12.24% YoY in Sept, after a 13.43% increase Aug. The annual growth in manufacturing output eased to 12.78% from 14.3% in the previous month. Electricity, gas and water supply output rose 7.36%. Meanwhile, mining and quarrying declined 4.11% and water supply output decreased 0.84%. On a MoM basis, industrial production increased 2.23% in Sept, after a 1.19% fall in the prior month. (RTT)

South Korea: GDP gains 0.3% on quarter in 3Q . South Korea's GDP expanded a seasonally adjusted 0.3% on quarter in the 3Q of 2021, the Bank of Korea said. That was shy of expectations for an increase of 0.6% and down from 0.8% in the previous three months. On an annualized basis, GDP grew 4.0% - again missing forecasts for 4.2% and slowing from 6.0% in the three months prior. Real gross domestic income also was up 0.3% on quarter and it gained 2.4% on year. (RTT)

Markets

YTL Power: Wins pilot project to import electricity from Malaysia to Singapore. YTL Power International has secured a two-year trial project to import 100 MW of electricity from Malaysia into Singapore via existing interconnectors. The appointment follows a request for proposal in March by Singapore's Energy Market Authority (EMA). (BTimes)

Petronas Gas: Soliciting bids for proposed LNG storage tank in Pengerang, Johor. Petronas Gas has announced a non binding expression of interest (EOI) for a proposed liquefied natural gas (LNG) storage tank in Pengerang, Johor to be used for LNG storage and reloading activities. (The Edge)

Yinson: To establish Islamic MTN programme of up to RM1bn. Yinson Holdings has made a lodgement with the Securities Commission Malaysia (SC) for the establishment of the Sukuk Wakalah Programme of up to RM1bn based on the syariah principle of Wakalah Bi Al-Istithmar. (The Edge)

Supermax: Warns of 'material effect’ on its financials if sales diversion less than successful after US detention order. Supermax warned that there will be "material effect" on its financial performance should the glove maker’s efforts to divert sales to other markets be less than successful after the US Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) against the company on forced labour allegations. (The Edge)

Xin Hwa: Sees surging storage demand. With the impending commencement of its new e-fulfillment centre in Shah Alam, Xin Hwa Holdings aims to ride on the boom on warehousing space and recovery from the logistics sectors. (StarBiz)

Hup Seng: Says crackers are safe. Hup Seng Industries has reaffirmed that the special cream crackers manufactured by the company is fit for human consumption. The production and marketing of the cream crackers were also in compliance with local regulations, quality and food safety standards. (BTimes)

Annum: Inks RM62.3m Sarawak water supply grid project. Annum signed a collaboration agreement with Greentech IOT Technology (GITSB) for the Sarawak water supply grid program for RM62.25m. The project is a pipeline from Salim water treatment plant, Sibu Water Board (SWB) to Kanowit Sibu Division. (BTimes)

Genetec: 2Q net profit soars sixfold to RM16.3m, 12-for-one bonus issue proposed. Genetec Technology net profit for 2QFY22 jumped more than sixfold YoY to RM16.31m from RM2.64m due mainly to higher sales volume and improved operational efficiency. Genetec proposed to undertake a bonus issue of 661.56m new shares on the basis of 12 bonus shares for every one share held. (The Edge)

Cepatwawasan: 3Q net profit more than doubles to RM11.62m on higher palm oil prices. Cepatwawasan Group net profit for the 3Q ended 30 Sept 2021 more than doubled to RM11.62m from RM5.35m YoY, underpinned by higher palm oil prices. Its quarterly revenue also rose 64.61% to RM103.88m, from RM63.11m YoY. (The Edge)

Market Update

The FBM KLCI might open higher today after US oil prices rose above USD85 a barrel on Monday for the first time in seven years, as traders bet that crude supplies would not keep pace with fast rising global demand and analysts said a wider energy crunch was spreading to petroleum markets. US stocks meanwhile advanced to highs after a slight pullback at the end of last week. The blue chip S&P 500 index rose 0.5%, closing at a record high for the second time in the past three sessions. The advance was led by consumer-focused stocks and companies that stand to benefit from elevated commodity prices. The tech-heavy Nasdaq Composite climbed 0.9%, though it remained about 1% below the record close it hit in September. Electric carmaker Tesla was among the biggest risers, climbing 13% and becoming the first carmaker to hit a $1tn market capitalisation after rental company Hertz said it had ordered 100,000 of its vehicles. European equities were little changed on Monday. The region-wide Stoxx 600 index closed 0.1% higher, while London’s FTSE 100 index was up 0.3%.

Back home, the FBM KLCI closed slightly lower on Monday as investors are awaiting the Budget 2022 announcement on Friday. The benchmark index closed 0.14 point lower at 1,587.94 despite reaching an intraday high of 1,593.37 and dipping to a low of 1,586.77. In the region, Hong Kong’s Hang Seng closed roughly flat as improvements in healthcare and industrial stocks were tempered by a drop in real estate shares after Beijing said at the weekend it would expand trials for a property tax. Elsewhere in the region, Singapore’s Straits Times Index declined 0.11% and Japan’s Nikkei 225 declined 0.71%.

Source: PublicInvest Research - 26 Oct 2021