Economy

US: Fast-taper signal presages agile Fed on 2022 rates. Jerome Powell’s pivot toward a quicker withdrawal of stimulus paves the way for a more agile Federal Reserve in 2022, one that’s willing to raise interest rates faster than expected if inflation lingers or hold back if the pandemic worsens. Investors can expect stepped-up Fed communication of an evolving outlook for employment and inflation that stresses flexibility amid uncertainty over the pandemic and new virus strains. The ultra-gradual normalization that marked the Fed’s retreat from stimulus after the 2008-2009 financial crisis is not a template for this Fed, which is facing something policy makers haven’t had to confront in decades: booming growth and soaring prices. (Bloomberg)

EU: Investor confidence at 8-month low. Eurozone investor confidence eased to the lowest since last April as tighter lockdown measures weighed on current assessment. The investor confidence index fell to 13.5 in Dec from 18.3 in the previous month. This was the lowest score since April 2021 and below the expected level of 15.9. The lockdown measures taken above all in Germany and Austria put a considerable damper on current economic activity. The current situation index came in at 13.3 in Dec, the lowest since May 2021, and down from 23.5 a month ago. Meanwhile, the expectations indicator rose to 13.8 from 13.3 in the prior month. (RTT)

EU: Germany factory orders decline more than expected. Factory orders decreased 6.9% MoM in Oct, reversing a 1.8% rise in Sept. Economists had forecast a moderate fall of 0.5%. Nonetheless, excluding major orders, factory orders dropped only 1.8% from the previous month. Domestic orders went up 3.4%, while foreign orders declined 13.1% in Oct. New orders from the euro area fell 3.2%. The fall in new orders from other countries amounted to 18.1% in Oct. Demand for intermediate goods was down 2.7% and that of capital goods declined sharply by 10.7%. For consumer goods, orders went up by 4.3%. The second sharp decline in incoming orders within the last three months has put a further damper on the economic outlook. It is becoming increasingly apparent that the order boom in manufacturing has come to an end, at least for the time being. (RTT)

EU: Germany construction sector continues to shrink. Germany's construction sector continued to contract in Nov but the pace of decline slowed. The construction Purchasing Managers' Index rose marginally to 47.9 in Nov from 47.7 in Oct. Although the reading was below the 50.0 no-change threshold, the score was the highest since Aug 2020. Activity was down across the board, according to sub-sector data. Civil engineering remained the worst performing area despite seeing its rate of contraction ease to the weakest since July. Commercial activity showed a renewed decline following a brief uptick in Oct, while housing activity posted a further marginal decrease. New orders dropped at a faster pace in Nov as some panelists indicated that higher prices made it more difficult to secure new work. (RTT)

EU: Italy retail sales growth slows in Oct. Italy's retail sales growth eased in Oct. The retail sales value increased 0.1% MoM in Oct, after a 1.0% growth in Sept. Economists had expected the sales to remain unchanged. On a yearly basis, retail sales value rose a 5.3% in Sept, after a 2.2% growth in the previous month. Economists had forecast a growth of 6.9%. Food sales declined 0.1% monthly in Oct, while non-food product sales grew 0.3%. In volume terms, retail sales rose 0.2% on month in Oct, after a 0.7% gain in Sept. The annual growth rose to 2.8% from 3.9% a month ago. (RTT)

UK: Car sales rise for first time in 5 months. UK car registrations increased for the first time in five months in Nov. New car registrations grew 1.7% from last year in Nov. Sales totaled 115,706 units. The lobby cautioned that this data must be viewed in the context of a weak 2020, when lockdowns impacted registrations, including Nov. Data showed that sales of battery electric vehicles surged 110% annually. Meanwhile, sales of diesel and petrol vehicles plunged 62.7% and 10.4%, respectively. Compared to the pre-pandemic average, the market remained down significantly, with -31.3% fewer vehicles registered in Sept as semiconductor shortages constrained supply. Year-to-date, 1,53m new cars have been registered, of which 17.5% have been BEVs or PHEVs, meaning one in six new cars is capable of being plugged in. (RTT)

UK: Construction recovers as supply chain pressures ease. Growth in Britain's construction industry hit a four-month high in Nov, as supply-chain difficulties appeared to have passed their peak and a rise in commercial property work offset a slowdown in house-building. The monthly purchasing managers' data also showed an easing in inflation pressures to their lowest since April - although they are still high in outright terms. The emergence of the Omicron variant of COVID-19, and the signs of an easing in inflation may encourage the BOE to wait rather than raise interest rates this month, as had been widely expected. (Reuter)

China: Frees up USD188bn for banks in second reserve ratio cut this year. China's central bank said it would cut the amount of cash that banks must hold in reserve, its second such move this year, releasing CNY1.2trn (USD188 bn) in long-term liquidity to bolster slowing economic growth. The PBOC would cut the reserve requirement ratio (RRR) for banks by 50bps, effective from Dec. 15. The world's second-largest economy, which staged an impressive rebound from last year's pandemic slump, has lost momentum in recent months as it grapples with a slowing manufacturing sector, debt problems in the property market and persistent COVID-19 outbreaks. (Reuter)

Markets

Mah Sing: Gets FDA approval to market gloves in the US . Mah Sing Group has been granted approval to market nitrile examination gloves in the US by the US Food and Drug Administration (FDA). With the 501(K) clearance, the recent issuance of a medical device licence from Health Canada and pending the completion of the European Union Medical Devices Regulation certificate, Mah Sing will be able to export medical grade gloves to a wider range of markets, including major markets such as the US, Canada and Europe. (SunBiz)

Kelington: Secures RM85m gas distribution contract. Kelington Group had received an estimated RM85m contract from a customer who is a global leader in engineering and project management of high-technology facilities to undertake the specialty gas system distribution works for a world leader in innovative memory solutions’ fabrication facilities in Singapore. Kelington did not specify the names of the customer and the world leader in innovative memory solutions. (The Edge)

Bintai Kinden: To raise RM35m via private placement to repay borrowings. Bintai Kinden Corp has proposed to undertake a private placement of up to 20% of its existing issued shares to raise RM35m mainly to repay borrowings. The proposed private placement will involve the issuance of up to 111m shares, to be placed out to independent third party investors to be identified later at an issue price to be determined later. The placement shares will be issued based on a discount of not more than 10% to the 5-day VWAP. (The Edge)

T7 Global: Secures contracts worth RM300m. T7 Global has secured three letters of appointment and award worth a combined value of about RM300m under its energy division for the operations and maintenance (O&M) segment and the specialist products segment. The letters of appointment and award were from Petroliam Nasional and Carigali Hess Operating Company SB. The awards are expected to contribute positively towards T7 Global’s earnings and net assets for the next five years. (SunBiz)

Jade Marvel: Inks JV to venture into frozen seafood processing and sales. Jade Marvel Group has inked a JV and shareholders agreement with YHL Foods SB and YHL Jadem Frozen SB to provide services linked to frozen seafood processing and cold storage facilities as well as sales. This represents a strategic opportunity for the group to expand its businesses into frozen seafood business and provide an additional revenue stream. (The Edge)

Kerjaya Prospek Property: Buys land in Penang for RM28m. Kerjaya Prospek Property has acquired 1.97 hectares of freehold land in Seberang Perai Selatan, Penang from Aspen Vision City SB for RM27.57m. The proposed acquisition will be funded by cash via internally generated funds and/or bank borrowings. The proposed acquisition will enable KPPROP to focus on its core business of property development and to expand and strengthen its landbank size. (The Edge)

G3 Global: To continue pursuing AI park venture. G3 Global remains committed to the development of the 315-acre artificial intelligence (AI)-powered park near Kuala Lumpur with SenseTime Group Ltd (STGL) and China Harbour Engineering Company Ltd (CHEC). The AI park will transform intelligent city living through digital technologies converging at incredible speed and has already changed the way people live, work and play. (BTimes)

Market Update

The FBM KLCI might open higher today after Wall Street equities rose on Monday, led higher by travel stocks, as fears that the Omicron coronavirus variant would lead to fresh lockdowns eased. The broad-based S&P 500 index rose 1.2% on Monday, after closing down 0.8% on Friday. Travel-related stocks rallied strongly, with shares in Norwegian Cruise Line, United Airlines, Royal Caribbean Cruises and Carnival all rising by more than 8%. The technology-focused Nasdaq Composite index closed 0.9% higher on Monday. The narrower gain continued a trend seen over the past fortnight, in which the Nasdaq has trailed the S&P 500. Investors have retreated from faster-growing tech shares as policymakers at the US central bank have signalled their comfort with more aggressively tightening policy than previously thought. Tech sector shares are particularly sensitive to changes in interest rates, given valuations in the industry are dependent on profits far off in the future. Europe’s Stoxx 600 share index closed up 1.3%. London’s FTSE 100, which has heavy weightings of commodities producers and miners, rose about 1.5%. UK-listed travel stocks also closed higher, with shares of British Airways-owner IAG up 8.1%.

Back home, fears over Omicron’s possible impact on global economic recovery dragged Bursa Malaysia’s key market barometer to its lowest in 13 months on Monday. The benchmark FBM KLCI fell 18.29 points or 1.22% to 1,483.45 compared with 1,501.74 at Thursday’s close. In regional stock markets, Hong Kong’s Hang Seng index dropped 1.8%, with significant price falls for large Chinese tech companies including Alibaba and Tencent. Tokyo’s Topix closed 0.5% lower.

Source: PublicInvest Research - 7 Dec 2021