Economy

US: Consumer sentiment hit more than 10-year low; inflation fears mount. US consumer sentiment fell to its lowest level in more than a decade in early Feb amid expectations that inflation would continue to increase in the near term, but that was unlikely to derail spending against the backdrop of excess savings and a strengthening labour market recovery. The decline in sentiment reported by the University of Michigan was entirely among households with incomes of USD100,000 or more, which could reflect falling stock market prices. (Reuters)

US: Fed rush to catch up on inflation raises US recession risks. The Fed faces a growing risk of making a policy mistake, tipping the economy into a recession, as it confronts decades-high inflation that’s proving more persistent and broad-based than policy makers expected. After holding interest rates near zero since the start of the pandemic, Fed Chair Jerome Powell and his colleagues are poised to embark on a credit-tightening campaign next month, with some economists forecasting an outsized half percentage-point increase to start the cycle. (Bloomberg)

EU: Germany inflation slows as estimated. Germany's consumer price inflation slowed in Jan, as initially estimated, final data from Destatis showed. The consumer price index rose 4.9% YoY in Jan, after a 5.3% increase in the previous month, as estimated. Food inflation eased to 5.0% in Jan from 6.0% in the previous month, as estimated. Energy price growth accelerated to 20.5% from 18.3% in Dec as initially estimated. Services costs rose 2.9% annually in Jan versus a 3.0% growth in the initial estimate. On a MoM basis, the EU measure of inflation increased 0.9% in January. This was in line with initial estimate. (RTT)

UK: Economy rebounds in 2021. The UK economy expanded at the fastest pace since 1941 despite the Omicron variant acting as a drag on growth towards the end of the year, data from the Office for National Statistics showed. GDP grew by an estimated 7.5% in 2021, in contrast to the sharp 9.4% contraction in 2020. This was the biggest growth since 1941. In Dec, GDP shrank 0.2%, reversing the revised 0.7% growth in Nov. Services were the main contributor to GDP's 0.2% fall in December as output fell 0.5%. Meanwhile, production output increased 0.3% with growth in three out of the four sub-sectors. Manufacturing gained 0.2%. At the same time, construction output climbed 2.0% in Dec, following an increase of 1.9% in Nov. (RTT)

China: Central bank to keep liquidly ample, steps up finance support for key sectors. China's central bank said it would keep liquidity reasonably ample and step up financing support for key sectors and weak links of the economy. The People's Bank of China (PBOC) will meet the reasonable financing demands of the real economy while not resorting to flood-like stimulus, it said in its fourth-quarter implementation report. The world's second-largest economy has shown signs of slowing after a rapid rebound from the Covid-19 slump, with concerns about the financial health of property developers and the rapid spread of the Omicron variant clouding the outlook. "We will improve the money supply mechanism, maintain reasonable and sufficient liquidity, guide financial institutions to vigorously expand loan lending and enhance the stability of total credit growth," the central bank said. (Reuters)

Taiwan: Exports growth slows more than estimated. Taiwan's export growth eased more than expected in Jan, figures from the Ministry of Finance revealed. Exports grew 16.7% YoY in Jan, after a 23.4% rise in December. Economists had forecast shipments to rise 17.2%. Exports of parts of electronic product, information, communication and audio-video products, base metals and articles of base metal, plastics & rubber and articles thereof, and machinery increased in Jan. Imports rose 24.9% annually in Jan, after a 28.1% increase in the previous month. Economists had expected a 25.0% increase. The trade surplus totalled USD4.91bn in Jan. (RTT)

India: Industrial output growth eases in Dec. India's industrial production growth eased in Dec, largely reflecting the contraction in manufacturing, data from the statistics ministry showed. Industrial output grew only 0.4% in Dec from the last year, following Nov's 1.3% expansion. Economists had forecast the annual rate to slow to 1.3% from 1.4% estimated initially for Nov. Mining output rose 2.6% and electricity output advanced 2.8%. Meanwhile, manufacturing output was down 0.1%. During April to December, industrial production rose 15.2% compared to the 13.3% decline in the same period last year. (RTT)

Markets

Capital A (Neutral, TP: RM0.79): Aviation arm taps former telco executive Jamaludin Ibrahim as independent non executive chairman. Capital A Bhd (formerly known as AirAsia Group) has tapped former telecommunications executive Tan Sri Jamaludin Ibrahim to join its aviation arm’s board as its new independent non-executive chairman. The name change of Capital A’s airline group from AirAsia Aviation Ltd (AAAL) to AAAGL and a corporate consolidation of its aviation-related businesses were also announced by Capital A. (The Edge)

Comments: We are positive on the corporate reorganisation as it provides dedicated focus on its aviation businesses to ensure recovery and sustainable growth however remain wary over the Group’s PN17 status and challenges it may face in pulling itself out of the situation. While we see value in its non-airline business, we suggest investors wait for more clarity on the Group’s turnaround plans. We maintain our Neutral call.

Vizione: Bags RM130m sub-contract works, forms JV to expand RE exposure. Vizione Holdings has bagged sub contract works worth RM130m from Permata Rebana SB to build a medical lab at Bandar Enstek, Seremban, Negeri Sembilan. Permata Rebana, a building and civil engineering contractor, is the main contractor for the project, which was awarded to it by the Ministry of Health. (The Edge)

Mulpha International: Secures AUD67.2m loan facility for an Australian project. Mulpha International Bhd (MIB) has accepted an AUD67.2m (RM201.5m) loan facility from the National Australia Bank Ltd for a property development project in New South Wales, Australia. The loan facility is to fund the development of a seven-storey strata office and healthcare building owned by the JMJ Trust. (The Edge)

Tropicana: To develop 308-acre entertainment hub in Genting Highlands. Tropicana Corp has entered into an agreement with PowerChina International Group Ltd to develop a 308-acre integrated entertainment hub dubbed Tropicana Paradise in Genting Highlands. The project is part of the 596- acre mega master planned development in Genting Highlands called Tropicana WindCity. (The Edge)

Icon Offshore: Bags USD9.6m jack-up drilling rig order from ConocoPhillips Sarawak. Icon Offshore has secured a USD9.6m (RM40.22m) order from ConocoPhillips Sarawak to supply a jack-up drilling rig. The award is to drill three plus one wells which is expected to commence in the second quarter of 2022. (The Edge)

Cahya Mata: Unit raises cement prices amid rising production cost. Cahya Mata Sarawak (CMS) said its wholly owned subsidiary, CMS Cement Industries SB, will raise its price of cement by an average of 10% subject to product types and location. (The Edge)

Mestron: Inks share sale deal with Winstar Aluminium to acquire 10% stake at RM6m. Mestron signed a share sale and purchase agreement (SSPA) with Chua Nyok Chong (CNC) and Chua Boon Hong (CBH) to acquire 806,000 ordinary shares or 10% of the share capital of Winstar Aluminium Manufacturing SB for RM6m. (BTimes)

Market Update

The FBM KLCI might trend lower today as equities on Wall Street fell on Friday after the US warned that a Russian invasion of Ukraine could come within days and the UK’s Foreign Office urged its citizens to leave the country. The S&P 500 share index slipped 1.9%, having traded flat in early dealings. The broad US equity barometer is down more than 7% for the year, having hit an all time high at the turn of 2022. The technology-focused Nasdaq Composite fell 2.8%, having closed down 2.1% a day earlier. Tensions over a potential Russian invasion of Ukraine escalated on Friday. Jake Sullivan, US national security adviser, said that an attack on Ukraine could be launched before the end of the Winter Olympics in Beijing on February 20. The broader stock market decline added to losses on Thursday following data that showed US inflation rising at its fastest pace in 40 years, leading investors to price in rapid interest rate rises by the Federal Reserve. European stock markets, with heavier weightings of commodities producers as well as bank stocks, are seen to better weather rate rises. The Stoxx is down by about 3.7% in 2022, dropping 0.6% on Friday. The UK’s FTSE 100 has advanced almost 4% since January 1.

Back home, Bursa Malaysia extended its rally with the key index ending the week at its intraday high for the third consecutive day, driven by positive sentiment and improved buying interest in banking, plantation and telecommunication heavyweights. At 5pm, the FBM KLCI advanced by 0.56% or 8.79 points to 1,578.89 from 1,570.1 at Thursday's close. The barometer index, which opened 5.8 points lower at 1,564.3, hit an intraday low of 1,562.91 in the morning session before gathering momentum in the afternoon session to close higher.

In the region, mainland China’s CSI 300 share index fell 0.8% on Friday. South Korea’s Kospi 200 also closed 0.8% lower.

Source: PublicInvest Research - 14 Feb 2022