Economy

US: Auto sales slump as less affluent buyers walk away. US new vehicle sales could fall to the lowest 1Q volume in the past decade as chip shortages and the Ukraine crisis squeeze inventories and rising prices push less affluent buyers out of the market, research firm Cox Automotive said. US car and light truck sales are expected to fall more than 24% to about 1.22m units in March and decline more than 16% in the 1Q. (Reuters)

US: Goods trade deficit narrows in Feb. The US trade deficit in goods narrowed in Feb as exports rebounded, which could provided a lift to economic growth in the 1Q. The deficit fell 0.9% to USD106.6bn, the Commerce Department said. Exports increased 1.2%, offsetting a 0.3% gain in imports. Trade has subtracted from GDP growth for six straight quarters. (Reuters)

EU: German exporters expectations deteriorate on war in Ukraine. Confidence among German exporters declined dramatically due to the war in Ukraine, survey results from the ifo Institute. The ifo Export Expectations index slipped to minus 2.3 points from +17.0 points in Feb. This was the lowest score since June 2020. The institute said the only other time the index suffered a steeper decline was at the beginning of the coronavirus crisis in April 2020. (RTT)

EU: Dutch export growth slows; imports rise faster. Dutch exports growth eased, while imports remained strong in Jan, figures from the statistical office CBS showed. Merchandise exports rose 2.7% YoY in Jan, after a 7.8% growth in Dec. Exports grew for a third month in a row. In Jan, in particular, more petroleum products, chemical products and transport equipment were exported, the agency said. Citing its export radar, CBS said conditions for exports in March are almost as favorable as in Jan. (RTT)

UK: Public inflation expectations hit new record high. The British public’s expectations for inflation over the next five to 10 years hit a record high this month, according to a survey that is likely to be noted with concern by the BoE. US bank Citi and polling firm YouGov said their gauge of expectations for inflation in five to 10 years’ time rose to 4.4% in March from 4.1% in Feb. With inflation hitting its highest levels since the early 1990s - 6.2% in the latest data - the BoE is worried that expectations for rapidly rising prices will become embedded in the economy, causing a selfperpetuating wage-price spiral. The BoE raised interest rates earlier this month for the third meeting in a row but it softened its message about the outlook for further increases in borrowing costs. (Reuters)

UK: Would be in recession were it not for post-covid bounce. Britain would be in recession this year due to the global inflation shock were it not for the rebound in growth from the pandemic, according to the government’s official independent forecaster. At UK Chancellor of the Exchequer Rishi Sunak’s Spring Statement last week, the Office for Budget Responsibility downgraded GDP growth this year to 3.8% from 6% as the sharp rise in energy and commodity prices squeezes household spending. A downgrade on that scale “in any ordinary year” would have left the economy in recession, David Miles, head of macroeconomic forecasting at the OBR, told UK lawmakers. (Bloomberg)

China: Economy faces new blow from Shanghai lockdown. Shanghai’s sweeping, two-phase lockdown will likely deal a heavy blow to businesses reliant on consumer spending, though economists say the city’s industrial sector can largely withstand the disruption, mitigating threats to the global supply chain. The staggered eight-day lockdown in Shanghai -- a city of 25m people -- and lingering effects from the measure may shave up to 0.4 percentage point from China’s economic growth in the 1Q and 2Q, compared to a year ago, according to estimates by Liu Peiqian, China economist at NatWest Group Plc. The restrictions targeting half of the city at a time will bar the city’s residents from leaving home, an attempt to curb China’s worst Covid outbreak since Wuhan in early 2020. (Bloomberg)

Japan: BoJ to purchase unlimited 10-year JGBs at 0.25%. The BoJ offered to buy unlimited amount of 10-year Japanese Government Bonds after yields rose to the upper end of the target range. The central bank said it will buy unlimited amount of 10-year JGBs at 0.25% for three consecutive days starting March 29. Earlier, the central bank had conducted unlimited JGB purchases at 0.25% on Feb 14. Despite the intervention, the yields on the government bonds continued to rise against the hawkish stance of the US Federal Reserve. The yield on 10-year JGBs rose to 0.24% and the JPY declined to a six-year low against the USD. The currency depreciated to 123.66 against the greenback. (RTT)

Hong Kong: Export growth eases in Feb. Hong Kong's merchandise exports and imports rose at softer paces in Feb and the trade deficit widened, data from the Census and Statistics Department showed. Exports rose 0.9% YoY in Feb, after an 18.4% increase in Jan. Imports gained 6.2% annually in Feb, after a 9.6% increase in the previous month. The trade deficit rose to HKD32.108bn in Feb from HKD14.699bn in the same month last year. In Jan, the surplus was HKD6.648bn. (RTT)

Markets

Hextar Global ( Neutral, TP: RM1.71 ): To acquire Indonesiabased Agro Sentosa for RM10.2m. Hextar Global has entered into a share sale agreement with with a related party, Hextar International Group SB to to acquire 99.91% equity interest in Indonesia-based PT Agro Sentosa Raya (PTASR) for RM10.2m cash. PTASR has been involved in the chemical business in Indonesia for over 15 years. (StarBiz)

Comment: We are neutral on this development, though the acquisition will help improve earnings by ~1.5% and broaden its reach in Indonesia. We continue to like HGB’s long term prospects, with growth underpinned by its leadership position in the domestic agrochemical market space and supplemented by its acquisition-driven contributions. We maintain our Neutral call however given limited upside to our unchanged target price of RM1.71

Uzma (Outperform, TP: RM0.62): Partners with Petronas to commercialise non-metallic pipeline technology. Uzma has signed a commercialisation agreement with Petroliam Nasional (Petronas) for the installation of non-metallic pipeline technology — a solution that shifts pipelines from metal-based to nonmetallic materials to minimise corrosion. On March 28, the agreement was signed through its wholly-owned subsidiary Uzma Engineering SB with Petronas’ technology commercialisation arm, Petronas Technology Ventures SB. (The Edge)

Sapura Energy (Trading Sell, TP: RM0.03): Appoints restructuring specialist Borrelli to its board effective March 25. Cash-strapped oil and gas service provider Sapura Energy has appointed restructuring specialist Cosimo Borrelli as its nonindependent and non-executive director effective March 25. The Australian specialist is currently the leader of the Asia-Pacific and the Caribbean restructuring practice of Kroll. (The Edge)

LSH Capital: Enters into multiple deals as part of expansion into property, construction biz. Lim Seong Hai Capital (LSH Capital) has announced a series of corporate proposals that will pave the way for its proposed expansion into the property and construction segments. It will have an enlarged secured construction orderbook amounting to RM1.1bn in aggregate, with an overall outstanding orderbook of RM782m, upon completion of the deals. It will also carry out a property development project with a gross development value of RM1.59bn which is expected to provide earnings visibility until 2026. (The Edge)

MCE: Wins contracts to supply parts for Perodua new car models. MCE Holdings’s wholly-owned subsidiary, Multi-Code Electronics Industries (M), has secured contracts to supply various mechanical parts for Perodua new car models. The supply of these parts is expected to commence in the first quarter of the financial year ending July 31, 2024 for a duration of six years. (StarBiz)

G Capital: Commenced operation of 3.0MWp solar PV for Muda Paper. G Capital's 70% owned subsidiary, Solarcity Malaysia SB, had on March 26, completed the installation and commenced the operation of a 3.0-megawatt peak (MWp) solar photovoltaic (PV) electric power generation system for Muda Paper Converting SB. (BTimes)

MARKET UPDATE

Overnight, Wall Street’s S&P 500 share index climbed for a third consecutive session, rising 0.7% while the tech-dominated Nasdaq Composite climbed 1.3%. Electric carmaker Tesla was the biggest driver of the gains, jumping more than 7% after it said it was considering a stock split. Europe’s Stoxx 600 share index added 0.3%. Meanwhile, oil prices dropped on Monday as optimism about peace talks between Ukraine and Russia eased concerns about supply levels while new coronavirus lockdowns in China raised the prospect of falling energy demand. Brent crude, the global benchmark, settled 6.8% lower at $112.48 a barrel, while US marker West Texas Intermediate dropped 7% to USD105.96. Oil markets have swung violently over the past week, with intraday moves of at least 5% each day as traders grappled with the latest developments from Russia and China, as well as Saudi Arabia where an oil storage facility was bombed on Friday.

Back home, Bursa Malaysia ended broadly lower after a lacklustre trading session as investors seemed reluctant to make significant moves due to the absence of buying catalyst. At the closing bell, the benchmark FBM KLCI fell 5.35 points to 1,597.95 from 1,603.3 at Friday’s close. The key index opened 2.84 points higher at 1,606.14, to record its intraday high, and hit a low of 1,595.37 about 30 minutes before the session ended. Asian bourses were mixed, with Japan’s Topix closing 0.4% lower, Hong Kong’s Hang Seng adding 1.3% and South Korea’s Kospi ended flat.

Source: PublicInvest Research - 29 Mar 2022