Economy

US: Inflation outlook falls for first time since Oct 2020 . US consumers don’t expect red-hot inflation levels to last in the long term. That’s the takeaway from the Jan consumer survey from Federal Reserve Bank of New York, which showed that the median one-year-ahead inflation expectations fell for the first time since Oct 2020, to 5.8%. The outlook over three years dropped even more sharply, and the decline was broad-based across age, education and income. In a separate analysis of data from the survey and from the University of Michigan’s sentiment index, New York Fed economists concluded that consumers seem to recognize the unusual nature of the current bout of high inflation. “This result suggests that while consumers are highly attuned to current inflation news in updating their short-term inflation expectations, they are taking less signal than before the pandemic from the recent sharp movements in realized inflation when revising their three-year ahead expectations,” the economists said in a blog post. (Bloomberg)

China: To further open services sector. As liberalisation of trade in services and openness in the services sector are often at the core of high-level international economic and trade rules, China is expected to further open up the sector to the rest of the world to achieve its goal of basically establishing a new system for higher level opening up of the economy during the 14th Five-Year Plan period (2021-25), industry experts said. The nation's openness commitments in the services sector under the Regional Comprehensive Economic Partnership agreement, which has taken effect in 11 of its members, will usher in a new era of liberalisation in China's services industry to uplift quality development of its services industry and bolster the nation's overall expansion in high level opening-up, they said. (StarBiz)

China: PBOC’s rate decision sparks debate with economy under strain . The People’s Bank of China is leaving economists divided over whether it needs to cut interest rates for a second month to boost a faltering economy. Another drop in the rate after last month’s 10 basis-point cut would be an aggressive step for the PBOC, signalling heightened concern about the growth outlook in a year when the Communist Party wants a stable backdrop to a crucial leadership meeting in the fourth quarter. A rate cut would also widen the policy divergence with major central banks like the Federal Reserve, which is now expected to hike interest rates at a faster pace than before. A majority of economists argue that the PBOC can afford to wait and see whether earlier easing measures are taking effect, with January’s strong expansion in credit seen as a positive signal. (Bloomberg)

Japan: BOJ defends key bond yield target as global rates pressure builds . The Bank of Japan (BOJ) successfully defended its key bond yield target, holding the line on its ultra-loose monetary policy, with the 10-year government bond yield falling after the central bank pledged market support to stop rates going higher. The BOJ said last week it would buy an unlimited amount of 10-year Japanese government bonds (JGBs) at 0.25% to prevent rising global yields from pushing up domestic borrowing costs too much. The benchmark 10-year cash JGB yield, which hit a six-year high this month, lost one basis point to 0.215%. It fell to as low of 0.200% earlier in the day. The BOJ said it made no purchases of the debt, as there were no offers for sale. (Reuters)

Indonesia: Retail sales growth accelerates in Jan . Indonesia's retail sales growth accelerated further in Jan driven by automotive fuels and clothing, data from Bank Indonesia showed. Retail sales were up 16.0% on a yearly basis, faster than the 13.8% rise in Dec and 10.8% increase in Nov. On a monthly basis, retail sales were down 2.4% after a 7.6% growth in Dec. Retailers expect mild inflationary pressure in March and June in response to price corrections caused by adequate supply of goods and services, coupled with the smooth and orderly distribution of goods. (RTT)

India: Inflation rises in Jan . India's consumer price inflation increased in Jan, data from the National Statistical Office showed. The consumer price index gained 6.01% YoY in Jan, bigger than the 5.66% rise in Dec. In the same period last year, consumer price inflation was 4.06%. Likewise, food price inflation advanced to 5.43% from 4.05% in the previous month. On a monthly basis, consumer prices dropped 0.3% in Jan, while food prices fell more markedly by 1.32%. Data showed that clothing and footwear prices climbed 8.84% annually and housing increased 3.52%. Cost of fuel and light gained 9.32%. The central bank expects inflation to average 5.3% in the fiscal year 2022 and at 4.5% in FY 2023. (RTT)

Markets

AAX (Outperform, TP: RM1.30): AirAsia X secures space utilisation for one-third of A330-300 fleet. AirAsia X Bhd (AAX) has secured full belly space utilisation for one third of its wide body A330-300 fleet for an initial period of one year. (StarBiz)

Comments: This is a welcome boost and will provide better certainty on utilisation and visibility of earnings. We maintain our Outperform call on AAX , with its cargo-driven strategy gaining traction. We continue to highlight however that full value is only likely to be realised with shareholders going through the Group's entire turnaround plan and corporate exercise.

Telekom Malaysia (Outperform, TP: RM6.70): Acceptance of spectrum assignment offered by the MCMC . TM’s subsidiary, Webe Digital, has accepted offer from the Malaysian Communications and Multimedia Commission (MCMC) for spectrum assignment (Bursa).

Comment: Webe has agreed to an upfront fee of RM7.06m and an annual fee of RM5.98m for 20MHz in the 2600MHz band. The spectrum assignment is for a 5-year period effective 1 July 2022. The acceptance of this spectrum offer would allow TM’s to continue its drive towards improving nationwide connectivity and achieving better internet experience. The pricing is lower that the offer accepted by Maxis, Axiata and Digi mainly because of the difference in technology i.e Frequency Division Duplex (FDD) versus Time Division Duplex (TDD). Webe’s 20MHz is TDD, which is less superior in terms of coverage and performance. It is also cheaper than FDD as there is no need for a diplexer to isolate transmission and reception. All in all, we do not expect any material financial impact arising from this new pricing.

Optimax: Proposes one-for-one bonus issue. Optimax Holdings has proposed a bonus issue of up to 405m shares on the basis of one bonus share for every existing share held. The entitlement date will be announced later, after all approvals for the bonus issue have been obtained. The maximum number of 405m of bonus issue shares was based on its existing 270m issued shares, 67.5m warrants, as well as its employee’s share option scheme (ESOS) which shall not exceed the aggregate 20% of the total number of issued shares of the company of 67.5m ESOS options. (The Edge)

Suria Capital: Inks MoU to develop renewable energy industrial complex. Suria Capital has signed a MOU with Vandelay Ventures SB to develop the Sabah Maju Jaya Renewable Energy Industrial Complex at Sapangar Bay in Kota Kinabalu. The development is set to bring in investments of about RM700m. (The Edge)

Muhibbah Engineering: Bags RM50.3m contract from Siemens Energy. Muhibbah Engineering has clinched a combined order of RM50.3m from Siemens Energy (Sweden) and Siemens Energy (Houston). Muhibbah had accepted the purchase order for the contract under the waste heat recovery unit (WHRU). (BTimes)

HB Global: Undertakes private placement exercise to raise RM23.1m. HB Global Ltd will be undertaking a private placement of up to 154m new ordinary shares in the company, representing about 20% of the existing issued shares. (BTimes)

Market Update

The FBM KLCI might open lower today after US and European stocks fell in volatile trading on Monday as investors were spooked by fears of an imminent Russian attack on Ukraine. The FTSE All World index slid 1% as global equities lurched lower. The declines were most significant in Europe, where the benchmark Stoxx 600 index fell 1.8% as the geopolitical crisis intensified. Germany’s Xetra Dax fell 2% while the CAC 40 in Paris shed 2.3%. The pain was also felt in the US, with the benchmark S&P 500 closing 0.4% lower. Monday’s market moves came after Jake Sullivan, US national security adviser, said on Sunday that an attack by Russia against Ukraine could begin “any day now”, including “this coming week before the end of the Olympics”. Stocks whipsawed on various news reports related to the crisis. European equities had bounced off their lows after Sergei Lavrov, Russia’s foreign minister, told President Vladimir Putin in a televised meeting on Monday that diplomatic engagement with the west should continue.

Back home, Bursa Malaysia ended mixed on Monday on continuous buying support in financial services, plantation and oil and gas stocks amid a weaker regional market performance. At market close, the FBM KLCI advanced 4.95 points to 1,583.84 from 1,578.89 at Friday's close. The barometer index, which opened 1.9 points lower at 1,576.99, moved between 1,575.1 and 1,585.08 throughout the session.

In the region, Hong Kong’s benchmark Hang Seng fell 1.4%, while Japan’s Topix and South Korea’s Kospi both closed 1.6% lower.

Source: PublicInvest Research - 15 Feb 2022