Economy

China: Manufacturing profits squeezed by commodity prices. China’s industrial firms are doing much better this year than in 2020, but the improvement in profits is patchy, with miners and raw material providers benefiting from higher commodity prices at the expense of manufacturers. In the first 11 months of the year, industrial profits climbed 38% from a year earlier, the National Bureau of Statistics said. On a monthly basis, though, profit growth decelerated to 9% in Nov from a year earlier. That was the slowest pace of increase since May as some manufacturers saw their margins squeezed by higher input costs. (Bloomberg)

China: Central Bank vows greater support for real economy. China’s central bank pledged greater support for the real economy and will make monetary policy more forward-looking and targeted. There will be more “proactive” use of monetary policy tools, the People’s Bank of China said. It added that there will be “good use” of the monetary policy tools’ quantitative and structural functions, referring to the adjustment of liquidity in the market and policies targeted at certain groups. The central bank also reiterated its aim to promote the property sector’s “healthy” growth and protect home buyers’ rights, as well as work to better meet housing demand. The PBOC has so far taken a restrained approach to monetary stimulus but expectations are growing that it will do more in the new year, especially if property market problems and slowing private consumption continue. (Bloomberg)

Japan: Retail sales rise for third month as shoppers catch up. Japan’s retail sales increased for a third straight month, as easing virus concerns fueled spending by consumers before the emergence of the omicron variant. Sales advanced 1.2% in Nov from the previous month, as shoppers spent more on clothing and motor vehicles, the industry ministry reported. Economists had expected a 1.3% overall gain. While Japan’s consumption hasn’t jumped to the extent that it has in places like the US, spending has increased since a fall in virus cases in Sept allowed state of emergency restrictions to be lifted at the end of that month. The increase shows the importance of keeping the spread of omicron under control if consumption is to drive the economy’s recovery. The consensus forecast for Japan is to grow at an annualized pace of 6.1% in the final three months of 2021. (Bloomberg)

India: Indicators show economy was growing steadily pre Omicron. India’s economy was expanding at a steady pace in November, a month that saw the omicron variant of coronavirus induce fresh concerns about risks to the recovery. All eight high frequency indicators tracked by Bloomberg News were steady last month, keeping the needle on a dial measuring the so-called ‘Animal Spirits’ unchanged at 5. But the pace of activity based on indicators from demand for services to factory output, faces threats from rising cases of the omicron variant, first detected in South Africa toward the end of last month. While the Reserve Bank of India this month kept its full-year growth forecast steady at 9.5%, Governor Shaktikanta Das sounded caution, saying “it is too premature to gauge” the effects of the new strain at this stage. (Bloomberg)

South Korea: Consumer confidence index slips to 103.9 - BoK. Consumer sentiment in South Korea ebbed in December, the Bank of Korea said with a consumer confidence index score of 103.9 - down from 107.6 in November. Consumer sentiment regarding current living standards was one point lower than in November, at 91, and the outlook was one point lower at 96. Consumer sentiment for future household income was one point lower than in November at 100, while the outlook was five points lower at 110. Consumer sentiment concerning current domestic economic conditions was two points lower than in November at 79, while the outlook was eight points lower at 88. The expected inflation rate for the upcoming year was 2.6%. (RTT)

Markets

AAGB (Neutral, TP: RM0.86): RM975m cash call undersubscribed by 14.87%. AirAsia Group Bhd’s (AAGB) RM974.5m cash call received valid acceptances for 1.11bn or 85.13% of the total available redeemable convertible unsecured Islamic debt securities (RCUIDS) at a nominal value of 75sen apiece. AAGB had received a total of 1.11bn in valid acceptances and excess applications for its RCUIDS. There were 193.2m RCUIDS or 14.87% of the total available RCUIDS that were not subscribed by its entitled shareholders. (The Edge)

Comments : The undersubscription rate may suggest shareholders lack of confidence in the travel and leisure industries' recoveries. While the undersubscription is not expected to derail the fund raising exercise as it is underwritten, this may pose share overhang issues and limit any potential upside over the medium term. We maintain our Neutral call, with longer term intrinsic value lying in its non-aviation businesses.

Lambo: Quoted securities holding exceeds 5% of consolidated net assets. Lambo Group’s aggregate value of quoted securities acquired by its wholly-owned subsidiary Oriented Media Holdings has exceeded 5% of the group’s consolidated net assets. Oriented Media — which is involved in the investment in marketable securities — paid a total of RM9.78m for the acquisition of shares in the 12 months ended Dec 24. (The Edge)

Hap Seng Consolidated: Buys Wisma KFC. HAP Seng Consolidated has emerged as the new owner of Wisma KFC in Jalan Sultan Ismail, Kuala Lumpur, after purchasing the asset from Singapore-based property developer and manager Royal Group for RM190m. The sale comes three years after Royal Group purchased the building from the Employees Provident Fund (EPF) for RM116.5m. (The Edge)

Sunway Construction: Secures letters of intent for RM385m solar PV jobs. Sunway Construction Group (SunCon) has secured two letters of intent for jobs worth RM385m in total for the design, engineering, procurement, construction, testing and commissioning of solar photovoltaic (PV) energy generating facilities. It has received a letter of intent from Gopeng for the construction work of a solar PV energy generating facility (LSS4 Project 1) in Kampar, Perak for RM200m. (The Edge)

Pestech International: Secures RM743.95mil APM contract at KLIA. Pestech International has secured a contract for works in relation to design, supply, installation, testing and commissioning of automated people mover (APM) and associated works at KL International Airport (KLIA) from Malaysia Airports (Sepang) (MASSB) worth RM742.95m. (StarBiz)

Censof: Awarded RM5.14m contract by SOCSO. Tech solutions provider Censof Holdings has bagged a RM5.14m contract to maintain and upgrade server application and data storage for an accounting system from the Social Security Organisation. (The Edge)

Market Update

US stock indexes rose as markets reopened after the Christmas holiday and investors assessed the spread of the omicron Covid- 19 variant. The S&P 500 gained nearly 1.4% to close at 4,791.19, marking its 69th record close of the year. The Dow Jones Industrial Average added 351.82 points or roughly 1%, at 36,302.38. The Nasdaq Composite ticked up about 1.4% to 15,871.26. Market strategists remained positive on the overall equity outlook amid a surge in Covid cases. New studies suggest the Omicron strain has a lower risk of hospitalization than other Covid variants. European markets were slightly higher in a holiday-thinned trading session with many markets still closed due to the Christmas festivities. The German’s DAX and France’s CAC rose 0.5% and 0.8% respectively. In Asia, shares were mixed with several major markets in the region closed for holidays. Shanghai Composite was marginally lower, down 0.1% while Singapore’s Straits Times Index fell 0.13%.

Back home, the FBM KLCI jumped 17.46 points or 1.15%, mainly driven by interest in glove stocks. In terms of corporate news, Sunway Construction Group has secured letters of intent for the construction of two solar photovoltaic energy generating facilities, one worth RM200m in Kampar, Perak, and the other worth RM185m in Klang, Selangor. Coastal Contracts said a consortium led by its joint venture company Coastoil Dynamic SA de CV has secured a gas conditioning plant construction project in Mexico worth RM4.5bn.

Source: PublicInvest Research - 28 Dec 2021