Economy

US: Record US trade deficit, slowing wholesale inventory gains seen curbing economic growth. The US trade deficit widened to a record high in Jan as businesses imported more goods to rebuild inventories, potentially setting up trade to remain a drag on economic growth in the first quarter. (Reuters)

US: Wholesale inventories increase in line with estimates in Jan. After reporting a spike in US wholesale inventories in the previous month, the Commerce Department released a report showing a continued increase in wholesale inventories in the month of Jan. The report showed wholesale inventories climbed by 0.8% in Jan after surging by an upwardly revised 2.6% in Dec. Economists had expected wholesale inventories to advance by 0.8% compared to the 2.2% jump originally reported for the previous month. (RTT)

EU: Eurozone GDP growth slows as estimated in Q4. The eurozone economy expanded at a slower pace in the fourth quarter, as initially estimated, due to the fall in household spending, revised data from Eurostat showed. GDP grew 0.3% sequentially, following third quarter's 2.3% expansion. The rate came in line with the preliminary estimate published on Feb 15. The expenditure-side breakdown showed that household spending decreased 0.6%, in contrast to the 4.5% increase a quarter ago. Meanwhile, the growth in government spending rose to 0.5% from 0.3%. Further, gross fixed capital formation rebounded 3.5% after falling 0.9% in the third quarter. Exports and imports climbed 2.9% and 4.6%, respectively. (RTT)

EU: German industrial output growth improves in Jan. Germany's industrial production growth accelerated at the start of the year ahead of the war in Ukraine, official data revealed. Industrial output advanced 2.7% MoM, faster than the revised 1.1% increase seen in Dec, Destatis reported. Production was forecast to climb at a slower pace of 0.5%. On a yearly basis, industrial output grew 1.8%, in contrast to the 2.7% decline posted in the previous month. Compared with Feb 2020, the month before restrictions were imposed due to the corona pandemic in Germany, production was 3.0% lower in Jan. Excluding energy and construction, industrial production was up by 1.3% on month in Jan. (RTT)

EU: Italy retail sales fall in Jan. Italy's retail sales declined in Jan, after rising in the previous month, data from the statistical office Istat showed. The retail sales value decreased 0.5% MoM in Jan, after a 0.8% growth in Dec. Economists had expected a rise of 1.1%. Food sales fell 0.1% monthly in Jan, while non-food product sales declined 0.8%. On a yearly basis, the retail sales value rose 8.4% in Jan, after a 9.8% growth in the previous month. The pace of growth slowed for a second straight month. In volume terms, retail sales decreased 0.7% monthly in Jan, after a 0.4% gain in the prior month. (RTT)

Japan: Leading index falls in Jan. Japan's leading index declined, as expected, in Jan, preliminary data from the Cabinet Office showed. The leading index, which measures the future economic activity, fell to 103.7 in Jan from 104.7 in Dec. This was in line with economists' expectation. A lower reading was last seen in Nov. The coincident index that measures the current economic situation, decreased to 94.3 in Jan from 94.8 in the previous month. The lagging index fell to 93.1 in Jan from 94.7 a month ago. (RTT)

Japan: Overall bank lending rises 0.4% on year in Feb. The value of overall bank lending in Japan was up 0.4% on year in Feb, the Bank of Japan said - coming in at JPY580.048bn. That follows the downwardly revised 0.5% increase in Jan (originally 0.6%). Excluding trusts, bank lending was up 0.3% on year to JPY503.822bn, down from 0.5% in the previous month. Lending from trusts gained 0.5% on year to JPY76.225bn, easing from 0.6% a month earlier. (RTT)

Australia: NAB business conditions, confidence improve in Feb. Australia business conditions and sentiment improved in Feb as the Omicron virus wave eased and the late 2021 momentum was regained, survey results from NAB showed. After a fall in Jan, the business conditions index rose 7 points to +9 in Feb. The rebound came on the back of a strong rise in the employment index, reflecting fewer health-related employment disruptions and strong labour demand - as well as improvements in trading and profitability. (RTT)

Markets

DRB-Hicom (Outperform, TP: RM1.95): Tribunal rules in favour of Proton and Lotus in claim by Goldstar of China. It was reported that an arbitration tribunal has decided in favour of its subsidiary Proton Holdings Bhd (PHB) and Lotus Group International Ltd (LGIL) in relation to the CNY860.61m (RM570 m) civil complaint filed by Goldstar Heavy Industries Co Ltd. Goldstar’s claim pertained to an equity joint venture contract entered into by Proton, LGIL and Goldstar in April 2015 to form a joint venture company — Goldstar Lotus Automobile Co Ltd. DRB Hicom said the Hong Kong International Arbitration Centre tribunal has declared that the contract was validly terminated on Feb 22, 2018. (The Edge)

Comments: While we are positive on this development, we have not been expecting any material impact from the Arbitration Proceedings, therefore our forecasts remain unchanged. We maintain our Outperform call on DRB-Hicom, underpinned by its business-related improvements.

Top Glove (Neutral, TP: RM1.90): Shelves HK listing as Ukraine war roils markets. Malaysia's Top Glove Corp has postponed a plan to raise USD347m in a Hong Kong listing due to elevated market uncertainty after Russia's invasion of Ukraine. (The Edge)

Serba Dinamik: High Court dismisses Serba Dinamik's bid to restrain EY Consulting from releasing special independent review findings. The High Court had dismissed an originating summons by Serba Dinamik Holdings for an injunction to be imposed on Ernst & Young Consulting (EY Consulting) to restrain it from sharing any findings or opinions of its special independent review (SIR) with Bursa Malaysia or other parties. (The Edge)

PPB: To provide standby revolving loan of up to RM300m to FFM. PPB Group is providing up to RM300m standby revolving shareholder's loan to its 80%-owned flour unit, FFM, to meet its short-term working capital requirements. The tenure of the proposed loan is for a period of up to six months and repayable on demand. (The Edge)

EPMB: Inks partnership with China-based Sharkgulf Technologies, CIS Pride Silver Rock Fund for two-wheeled EV production. EP Manufacturing (EPMB) is now closer to realising its diversification into the next-generation electric vehicle (EV) business, by capitalising on the green agenda of the Chinese government and global funds. (BTimes)

Dutch Lady: Awards RM100m manufacturing plant contract to Seremban Engineering. Dutch Lady Milk Industries has appointed Seremban Engineering as the main contractor of its new manufacturing plant in Tech Park at Bandar Enstek, Negeri Sembilan. (StarBiz)

UWC: 2Q net profit down 8% amid higher depreciation expenses and staff costs. UWC posted a 7.94% drop in net profit for the 2QFY22 to RM25.08m from RM27.24m a year prior, due to higher depreciation expenses and staff costs. This was a result of substantial capital investments in 2QFY22 as well as an increase in headcount in line with its corporate expansion plan. (The Edge)

Market Update

The FBM KLCI might open flat today as oil prices rose and US stocks retreated further in another choppy day on Wall Street after US President Joe Biden announced a ban on imports of Russian oil and gas. Brent crude settled 3.9% higher at USD127.98 on Tuesday after Biden stepped up economic sanctions on Moscow over the invasion of Ukraine, a move matched by the UK. Wall Street stocks hit fresh closing lows after the announcement — ending the day at the lowest level since 2021 — after recording on Monday their biggest single-day decline since October 2020. The blue-chip S&P 500 index, which closed almost 3% lower on Monday, ended down 0.7% on the day at its lowest level since June 2021. The technology-heavy Nasdaq Composite fell 0.3%, its worst close since March 2021. Neither index hit the intraday lows plumbed on February 24. Across the Atlantic, the regional Stoxx Europe 600 share gauge slipped 0.5%. European natural gas prices earlier rose as much as 33% to EUR285 a megawatt hour, according to Refinitiv data, after Moscow warned that it could cut off supplies to the region in response to western sanctions.

Back home, Bursa Malaysia closed lower for the third consecutive trading day on Tuesday on continued selling pressure, with all indices in the negative territory, tracking developments in the Russia-Ukraine crisis. At closing bell, the FBM KLCI fell 1.63% or 25.69 points to 1,546.87 from 1,572.56 at Monday's close. In the region, stock markets slumped, following Monday’s moves on Wall Street. Japan’s Nikkei 225 fell 1.7%, while Hong Kong’s Hang Seng Index dropped 1.4% to its lowest level since 2016.

Source: PublicInvest Research - 9 Mar 2022