Economy

US: Fed's loudest hawk ramps up odds for monster rate hike after hot inflation data. Federal funds rate futures have boosted the chances of a half percentage-point tightening by the Fed at next month’s meeting after hawkish comments from St. Louis Fed President James Bullard and following hotter-than-expected US consumer prices data for Jan. In late afternoon trading, rate futures showed a 62% chance that the Fed will raise interest rates by 50 basis points in March following Bullard’s remarks, from a 30% chance earlier. Bullard, a voter on the FOMC this year, told Bloomberg he has become “dramatically” more hawkish in light of the hottest inflation reading in nearly 40 years. He now wants a full percentage point of interest rate hikes over the next three US central bank policy meetings. (Reuters)

US: Fed to stress test banks against commercial real estate, corporate debt troubles in 2022. The US Fed announced on that its 2022 round of large bank stress tests will include a severe decline in commercial real estate prices and turmoil in corporate bond markets. The hypothetical recession the Fed will use as the basis of its tests also envisions unemployment spiking to 10% over two years. Commercial real estate prices will fall 40% over that time frame, while corporate debt and other assets will collapse in value. (Reuters)

US: Posts USD119bn budget surplus in Jan; first in over 2 years. The US government posted a USD119bn budget surplus in Jan, the first in more than two years, amid strong growth in tax receipts and a sharp drop in pandemic-related outlays, the Treasury Department said. The Jan surplus compared to a Jan 2021 deficit of USD163bn, a record for the month as direct payments to individuals from COVID-19 aid legislation enacted in December 2020 were distributed. The surplus last month was the first since the USD83bn reported in Sept 2019 and the largest since the USD160bn in Apr 2019. April and Sept are traditionally months with high tax collections. (Reuters)

EU: GDP growth to gain strength after soft patch. After a moderate slowdown triggered by the exponential spread of the Omicron variant and the persistent logistic and supply bottlenecks, the euro area economic recovery is set to regain momentum in the 2Q and remain strong over the forecast horizon, the European Commission said. According to the Winter Interim Forecast, the currency bloc entered the 2022 on a weaker note. At 4.0%, the projected GDP growth rate for 2022 was slower than the 4.3% estimated previously and 5.3% in 2021. In 2023, growth is expected to moderate further to 2.7% in a movement towards 'normalcy'.. (RTT)

China: Record credit shows stimulus starting to flow. January’s record high and stronger-than-expected aggregate social financing was driven by more than a seasonal tendency for banks to unleash lending at the start of the year. Policy support is kicking in. A pickup in YoY credit growth reflected stimulus from the central bank and fiscal front-loading to counter downward pressure on growth. This is all part of a concerted push to counter the economy’s slowdown. Monthly new aggregate social financing totalled CNY6.17trn, up sharply from CNY2.37trn in Dec. That exceeded our above consensus estimate of CNY5.68trn (the consensus was for CNY5.40trn). (Bloomberg)

Japan: BOJ acts to put lid on bond yields and affirm dovish stance. The BOJ finally acted to keep a lid on bond yields and reaffirm its commitment to its stimulus framework after a tense week of upward market pressure. With most bond traders in Tokyo already well on their way home to start a long weekend, the central bank offered to buy an unlimited amount of bonds at a fixed rate, pushing back against weeks of trader speculation about policy normalization. The central bank will buy 10-year bonds at 0.25% on Feb 14, according to a statement on its website that sparked a weakening of the yen. This is the first such operation since July 2018 as yields creep closer to the limit of tolerated levels under the BOJ’s yield curve control framework. (Bloomberg)

India: Central Bank leaves rate unchanged. India's central bank left its key interest rate unchanged at a record low and maintained its 'accommodative' stance as policymakers assessed that the on going recovery needs continued policy support. The Monetary Policy Committee of the Reserve Bank of India, led by Governor Shaktikanta Das, unanimously decided to retain the policy repo rate at 4.00%. (RTT)

Indonesia: Leaves rates unchanged. Indonesia's central bank held its key interest rate steady again to control inflation and underpin the economic recovery. The Board of Governors decided to maintain the seven-day reverse repo rate at 3.50%, the Bank Indonesia said. The previous change in the rate was a quarter-point reduction in Feb 2020. (RTT)

Markets

Capital A (Neutral, TP: RM0.79): AirAsia to announce further company reorganisation. AirAsia Aviation, the holding company of the airline group, is set to announce key organisational changes. In a media advisory, the airline group entity will also be announcing the establishment of an independent board of directors, including a new non-executive chairman. The announcement will be made by Capital A chief executive officer Tan Sri Tony Fernandes. (The Edge)

I-Bhd (Neutral, TP: RM0.26): RM10m to expand i-City with Metaverse experience. i-City Malaysia plans to spend RM10m for the expansion of its theme park with Metaverse experience. The expansion would be carried out in collaboration with China Mobile International (CMIM) to entwine i-City's City of Digital Lights with an immersive 3D Metaverse experience. The new experience will be unveiled beginning with the 2023 new year countdown, while the Metaverse experience is expected to draw 10m visits to the theme park in 2023. (BTimes)

Aemulus: In talks with China partner to inject capital into JV. ACE Market-listed automated test equipment manufacturer Aemulus Holdings is looking to inject capital into Tangming Shengshi Technology (Jiashan) Co (TMSS), which is involved in the development and sales of semiconductor equipment and the provision of design consultancy services. Aemulus has entered into a memorandum of understanding (MoU) with Tangren to discuss the details in relation to the capital injection into TMSS. (The Edge)

Asia Media: Files legal suit against founder over account discrepancies. Asia Media Group has filed a legal suit against its former chief executive officer and founder Wong Shee Kai over account discrepancies. The company discovered discrepancies in the accounts relating to the company's funds used to acquire property, plant and equipment based on findings made by BDO Governance Advisory. (The Edge)

Serba Dinamik: High Court strikes out Serba Dinamik’s bid to stop Bursa Malaysia from compelling company to release fact-finding update. The High Court had dismissed Serba Dinamik Holdings's application for an injunction on Bursa Malaysia Securities to prohibit the regulatory authority from forcing the company to release the factual findings update (FFU) by Ernst & Young Consulting (E&Y Consulting). (The Edge)

Censof: Bags RM7.25m contract from SME Corp. Censof Holdings has secured a contract worth RM7.25m from SME Corp Malaysia. The contract was to build an application system for small and medium enterprises credit rating and accreditation platform phase 1 for SME Corp. The duration of the project is for a period of 45 months commencing from 15 Feb 2022 to 14 Nov 2025. (StarBiz)

Berjaya Food: 2Q net profit surges more than three-fold, revenue up 57%. Berjaya Food's (BFood) net profit rose more than three-fold YoY to RM38.9m for the 2Q ended 31 Dec 2021 from RM11.1m previously. This was attributed to improved performance from the Kenny Rogers Roasters (KRR) operations in Malaysia. (BTimes)

Market Update

The FBM KLCI might open lower today as Wall Street stocks and government bond prices fell on Thursday after data showed the rate of US inflation hit a 40-year high in January. The latest hot consumer price index print prompted traders to bet on more aggressive action from the Federal Reserve, with six quarter-point interest rate increases priced into the market for 2022. With higher rates, and therefore higher borrowing costs, on the horizon, US stocks stumbled. The broad-based S&P 500 index closed down 1.8%, pulled lower by the real estate and tech sectors, while the technology-heavy Nasdaq fell 2.1%. US consumer prices rose at an annual pace of 7.5% last month, higher than the 7.3% forecast by analysts and marking the fastest pace since 1982.

Across the Atlantic, the yield on Germany’s 10-year Bund, which last month traded in positive territory for the first time since 2019, added 0.07 percentage points to rise to 0.28 per cent. In European equity markets, the Stoxx 600 index dipped 0.2%, after closing 1.7% higher in the previous session. London’s FTSE 100 added 0.4%.

Back home, Bursa Malaysia closed at its intraday high for the second consecutive day on Thursday with the benchmark composite index rising 1.2%, lifted by banking, technology and plantation counters, amid positive regional market sentiment. At the closing bell, the FBM KLCI jumped by 18.59 points to 1,570.1 from 1,551.51 at Wednesday's close. its intraday low of 1,550.42, moved in an uptrend mode throughout the session.

In the region, Japan’s Nikkei 225 added 0.4% and the Shanghai Composite ticked up 0.2%. In Hong Kong, China Evergrande shares rose 5.4% after reports that the embattled property company plans to restore construction and sales activity, while refraining from a fire sale of its assets.

Source: PublicInvest Research - 11 Feb 2022