Economy

US: Jobless claims surge to three-month high on Omicron impact . Applications for US state unemployment insurance surged last week to a three-month high, suggesting that the Omicron variant is having a bigger impact on the labour market. Initial unemployment claims increased by 55,000 to 286,000 in the week ended Jan 15, Labor Department data showed. The increase in applications may point to employers laying off staff during the most recent surge in Covid-19 cases. (Bloomberg)

EU: ECB minutes show caution about 'higher for longer' inflation . ECB policymakers retained the view that the current spike in inflation is being driven by temporary factors that are likely to ease in the course of this year, but some expressed concern that inflation could remain elevated, the minutes of the latest policy session showed. (RTT)

China: Chinese banks cut borrowing costs as PBOC signals easing . Chinese lenders lowered borrowing costs for a second straight month after the central bank cut policy loan rates and pledged more easing to stabilise the economy. The one-year loan prime rate (LPR) was cut by 10bps to 3.7%, in line with forecasts in a Bloomberg survey of economists. The five-year rate, a reference for long-term loans including mortgages, was lowered by 5bps to 4.6%, a smaller reduction than predicted. (Bloomberg)

Japan: Dec exports, imports hit record high by value as supply bottlenecks eased . Japan's exports and imports in Dec hit record highs in terms of their value in yen as supply bottlenecks eased at the end of 2021 amid rising prices. However, a persistent semiconductor shortage remained a headache for Japanese firms such as automaker Toyota, which slashed its near-term output target this week, in addition to uncertainties around the Omicron variant of Covid-19. (Reuters)

Indonesia: Central bank surprises with hefty RRR hikes, eyes Fed . Indonesia's central bank announced a surprise 300 basis point hike in the reserve requirement ratio (RRR) for banks over the next eight months, in one of its first concrete signs of monetary tightening. At its first policy meeting of the year, Bank Indonesia (BI) kept its benchmark seven-day reverse repurchase rate steady at 3.50%, as expected. It also left two other main policy rates unchanged. (Reuters)

Hong Kong: Inflation at 5-month high. Hong Kong's consumer price inflation was the highest in five months in Dec, data released by the Census and Statistics Department showed. Consumer prices increased 2.4% YoY in Dec, following a 1.8% rise in Nov. Netting out the effects of all government's one-off relief measures, the underlying inflation rose to 1.4% from 1.2% in Nov. The increase in underlying inflation was driven by the enlarged increases in prices for meals out and takeaway food, and electricity. (RTT)

Taiwan: Export orders rise more than expected. Taiwan's export orders rose more than expected in Dec, data from the Ministry of Economic Affairs showed. Export orders increased 12.1% YoY in Dec. Economists had expected an 8.0% growth. Orders for mineral products surged 98.7% annually in Dec and those of basic metals and articles thereof gained 24.9%. (RTT)

Markets

AAX (Outperform, TP: RM0.13): Withdraws application to challenge court judgement to pay BOC Aviation USD23m. AirAsia X Bhd (AAX) along with AAX Leasing Two Ltd had on Jan 20 withdrew their application to challenge the registration of a UK court judgement by its lessor BOC Aviation Ltd for the airlines to pay USD23.37m (RM96.84m). (The Edge)

Comments: The withdrawal is in line with the debt restructuring scheme which was approved earlier on 12 Nov 2021. BOC Aviation was one of the creditors of AAX that had supported AAX’s RM33.65bn debt restructuring exercise. There will be no additional outlays involved. We maintain our Outperform call on AAX as we are confident over its cargo driven focus, though full value is likely to be realised with shareholders going through the entire corporate exercise.

I-Berhad (Neutral, TP: RM0.26): i-City partners with Huawei to reinvent next smart city. Urban development i-City in Shah Alam announced a partnership with Huawei Enterprise Malaysia to reinvent the next generation of smart city at Malaysia's first technology city developed by I-Berhad. (BTimes)

Comments: Technology-based offerings are no longer a luxury but a necessity given the evolution of society, and as developers provide differentiating factors to their projects. Though details are scant in terms of specific areas of collaboration, we are positive on this development. We maintain our Neutral call with an unchanged 26sen target price however, as we continue to monitor the Group's earnings prospects. The Group has not launched any developments since 2018 given the tough operating environment.

Destini: Secures contracts from Mindef worth RM89m. Destini has secured two contracts worth a total of RM89m from the Ministry of Defence (Mindef) to provide its services to the military. The group said the first contract is an extension of an existing contract and involves the provision of maintenance, repair and overhaul (MRO) services and the supply of safety and survival related equipment for the Royal Malaysian Air Force. (The Edge)

Supermax: Confirms contracts termination by Canadian govt. Supermax Corp confirmed that two of its existing contracts for the supply of nitrile gloves in Canada have been terminated. Supermax said its Canadian subsidiary, Supermax Healthcare Canada Inc had agreed to terminate by mutual consent with the Federal Government of Canada the two existing contracts for the supply of nitrile gloves. (StarBiz)

Censof: Completes acquisition of 51% stake in Cognitive Consulting. Censof Holdings has completed the acquisition of a 51% stake in Cognitive Consulting SB (CCSB). Censof entered into a share purchase agreement to acquire the equity interest in CCSB for RM3.7m with a profit guarantee scheme on Dec 20, 2021. (StarBiz)

NWP Holdings: Rejects EGM request, deems it invalid. NWP Holdings has said an EGM requisitioned by several shareholders of the timber manufacturer will not be held as its board of directors deems it invalid. (StarBiz)

Market Update

The FBM KLCI might end the week lower after stocks on Wall Street slid on Thursday with the tech-heavy Nasdaq Composite taking its losses from its record high to near 13% as the prospect of higher interest rates has driven investors out of equities. The Nasdaq index ended the day down 1.3%. It has now fallen 12.7% from a record struck in November. The index earlier this week fell into a technical correction. This occurs when it falls more than 10% from a high. The blue-chip S&P 500 stock index fell 1.1% on Thursday, and now sits 7% below a high set this month. European stock markets wavered on Thursday, with the regional Stoxx 600 index ultimately closing 0.5% higher.

Back home, Bursa Malaysia’s benchmark index ended slightly lower by 0.17% on Thursday on continuous selling in heavyweights led by Malayan Banking Bhd (Maybank), Public Bank Bhd and Petronas Chemicals Group Bhd. At 5pm, the benchmark FBM KLCI shed 2.58 points to 1,527.75 from 1,530.33 at Wednesday’s close after opening 0.89 of-a-point easier at 1,529.44. Hong Kong listed Chinese stocks jumped after an interest-rate cut by China’s central bank lifted shares of property developers and tech giants. The Hang Seng Index rose 3.4%, while mainland China’s Shanghai Composite Index edged down 0.1%. Elsewhere in the region, the Nikkei 225 rose 1.1%.

Source: PublicInvest Research - 21 Jan 2022