Economy

US: Labor productivity slumps much more than expected in 3Q. A report released by the Labor showed a steep drop in US labor productivity in the 3Q. The labor productivity tumbled by 5.0% in the 3Q after surging by an upwardly revised 2.4% in the 2Q. Economists had expected labor productivity to decrease by 1.5% compared to the 2.1%t jump that had been reported for the previous quarter. Meanwhile, the report showed unit labor costs spiked by 8.3% in the 3Q after climbing by a downwardly revised 1.1% in the 2Q. Labor costs were expected to shoot up by 5.2% compared to the 1.3% increase that had been reported for the previous quarter. (RTT)

US: Trade deficit widens much more than expected in Sept. Reflecting a sharp pullback in the value of exports, the Commerce Department released a report showing the US trade deficit widened much more than expected in the month of Sept. The trade deficit widened to USD80.9bn in Sept from a revised USD72.8bn in Aug. Economists had expected the deficit to widen to USD74.1bn from the USD73.3bn originally reported for the previous month. The wider than expected trade deficit came as the value of exports tumbled by 3.0% to USD207.6bn, while the value of imports rose by 0.6% to USD288.5bn. (RTT)

US: Weekly jobless claims fall to new 19-month low. The number of Americans filing new claims for unemployment benefits fell to a fresh 19-month low last week, suggesting the economy was regaining momentum amid a significant improvement in public health, though supply constraints remain. Initial claims for state unemployment benefits fell 14,000 to a seasonally adjusted 269,000 for the week ended Oct. That was the lowest level since the middle of March in 2020, when mandatory business closures were being enforced to slow the first wave of COVID-19 infections. Claims have now declined for five straight weeks. (Reuters)

EU: ECB's aware of inflation fears, sees potential threat to independence. The ECB is aware of people’s fears about high inflation but is very unlikely to raise interest rates next year, and it is concerned that excessive criticism of its policies may endanger its independence. Eurozone inflation exceeded 4% last month, twice the ECB’s target, and is set to go higher, irking some in Germany, the euro zone’s biggest economy and a long-time critic of the ECB’s ultra easy monetary policy. (Reuters)

EU: Germany factory orders recover on foreign demand. Germany factory orders recovered in Sept underpinned by robust foreign demand, figures from Destatis. New orders grew 1.3% MoM in Sept, reversing an 8.8% decrease in Aug. However, this was slower than the 2% expansion expected by economists. Domestic orders were down 5.9% in Sept. By contrast, foreign orders rose 6.3%. New orders from the euro area decreased 7.3% and that from other countries moved up 14.9%. Producers of intermediate goods reported a 2.0% fall in new orders. On the other hand, the producers of capital goods recorded an increase of 3.9%. Regarding consumer goods, orders were down 1.7%. (RTT)

UK: BOE policymakers split on rate, hints at hike. BOE policymakers decided to maintain the record low interest rate and quantitative easing in a split vote and signaled a rate hike over the coming months as inflation remains stubbornly above the target. Seven members of the Monetary Policy Committee voted to leave the key interest rate unchanged at 0.10%, while Dave Ramsden and Michael Saunders sought a 15 basis point rate hike. The economic outlook warranted a tightening in the monetary policy stance at this meeting. Markets expected a 15 basis point rate hike at the meeting after Governor Andrew Bailey recently commented that the bank will have to act on inflation. (RTT)

UK: New car sales slump to lowest Oct level since 1991. British new car registrations fell to their lowest Oct level since 1991 after a 25% YoY drop as a lack of semi-conductor chips continued to hit the sector, according to industry figures. Full-year sales are expected to stand at 1.66m vehicles, only 1.9% higher than 2020, when COVID-19 lockdowns and restrictions were in place. A total of 106,265 vehicles were registered last month. The worldwide chip shortage has forced many brands to cut production and increased the waiting times for some buyers as carmakers grapple with the fallout from the pandemic. (Reuters)

Japan: Services sector swings to expansion in Oct. The services sector in Japan moved into expansion territory in Oct with a services PMI scire of 50.7. That's up from 47.6 in Sept and it moves above the boom-or-bust line of 50 that separates expansion from contraction. Japanese services companies reported an increase in business activity for the first time since the start of last year in Oct. Activity returned to expansion territory for the first time since Jan 2020, as COVID-19 restrictions were eased amid a reduction in infections. (RTT)

India: Service sector logs strongest growth in 10-1/2 years. India's service sector grew at the strongest rate in ten-and-a-half years in Oct amid robust output and new business. The services Purchasing Managers' Index rose more-than-expected to 58.4 in Oct from 55.2 in Sept. Economists had forecast the index to rise to 55.7. A reading above 50.0 indicates expansion in the sector. (RTT)

Markets

DRB-Hicom (Outperform, TP: RM2.00): Proton’s 2021 sales exceed 2020’s YTD volume, despite lower industry TIV. DRBHicom’s 50.1% subsidiary Proton Holdings announced that it has now exceeded its (YTD) sales volume by selling 86,379 units for the first 10 months of 2021 compared to 84,999 units for the same period. The market share for Proton is estimated to be 20.5% for Oct while its YTD market share figure stood at 22.7%. (The Edge)

Damansara Holdings: JCorp extends closing date of takeover offer for Damansara Holdings to Nov 22. Damansara Holdings ongoing unconditional mandatory take-over offer by Johor Corp’s (JCorp) subsidiary JLand SB has been extended from Nov 8 to Nov 22 as JCorp’s current stake of 74.44% of the total issued shares of Damansara Holdings is insufficient for the statecontrolled investment arm to withdraw the listing status of the facilities management company. (The Edge)

Symphony Life: Plans private placement to raise up to RM38.18m for property projects, working capital. Symphony Life is proposing a private placement to raise up to RM38.18m to fund its property development projects and working capital based on an illustrative issue price of 47.69 sen. According to the company’s filing, RM13m is earmarked for property development projects, RM24.03m for working capital while the remaining RM1.15m is for the estimated expenses for the proposed private placement. (The Edge)

Sarawak Consolidated: Bursa warns SCIB of trading suspension again if it fails to submit FY21 annual report by Nov 8. Sarawak Consolidated Industries Bhd has been given an ultimatum by regulator Bursa Malaysia to submit its annual report by Nov 8 or it will face suspension on Tuesday, Nov 9. SCIB had been given five trading days from Oct 31 to issue its annual report, which the group has failed to do since the last correspondence between Bursa to SCIB on Oct 26. (The Edge)

ARB: Sets up R&D unit to commercialise research, patented technology. ARB announced the setting up of a wholly-owned subsidiary ARB Lab SB (ALSB), the company's research and development (R&D) unit to focus on information technology (IT) and Internet of Things (IoT) to strengthen the innovation ecosystem in Malaysia. (Business Times)

Pentamaster: Acquires Batu Kawan land for RM28.28m. Pentamaster Corp has announced that its sub-subsidiary Pentamaster Equipment Manufacturing SB has entered into an agreement to acquire a tract of leasehold land from Penang Development Corp for RM28.28m. It said that the leasehold land measures about 11.8037 acres in Batu Kawan Industrial Park in Penang. (StarBiz)

F&N: 4Q profit down by almost a third amid sharp rise in commodity prices, Covid-19 restrictions. Fraser & Neave Holdings net profit dropped 31.7% to RM58.69m from RM85.99m a year ago following a sharp rise in commodity prices and the accounting of restructuring expenses, while revenue fell. Its revenue declined 6% to RM896.26m for its 4QFY21 from RM953.7m in 4QFY20 amid the Covid-19 lockdowns in both Malaysia and Thailand, where it operates. (The Edge)

MARKET UPDATE

The overall local market breadth is expected to be positive with technology-related stocks likely to trade higher following a solid performance posted by the US Nasdaq, which rose 0.8% overnight. Meanwhile, the S&P 500 rose for a sixth day in a row as investors took solace in the Federal Reserve’s patient stance on raising interest rates. The central bank said it will begin to slow its bond-buying program later this month, signaling that the economy can now handle an unwinding of pandemic stimulus. However, the Dow slipped 0.1%, dragged by banking sector as Treasury yields fell. The US Federal Reserve’s announcement also has a spillover effect on the European markets with the UK FTSE and German DAX rising 0.4% each and French CAC finished 0.5% higher. Asian markets were mostly higher yesterday with Shanghai Composite jumping 0.8% and Hong Kong’s Hang Seng up 0.4%. Markets in Singapore and Malaysia were closed for public holiday.

Back home, the FBM KLCI closed 0.4% lower on Wednesday to 1,531.33. In terms of market news, Dialog Group has secured an EPCC contract worth RM248m in Pengerang, Johor. The contract was awarded by a subsidiary company of PETRONAS Refinery and Petrochemical Corporation. Meanwhile, Bursa Malaysia has warned Sarawak Consolidated Industries the trading of its shares will be suspended from next Tuesday if it is unable to submit its annual report for FY21 by next Monday.

Source: PublicInvest Research - 5 Nov 2021