PublicInvest Research

PublicInvest Research Headlines - 24 May 2022

PublicInvest
Publish date: Tue, 24 May 2022, 09:58 AM
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An official blog in I3investor to publish research reports provided by PublicInvest Research team.

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Economy

US: Fed’s George says inflation will guide moves after rates hit 2%. Federal Reserve Bank of Kansas City President Esther George said she expects the central bank to raise interest rates to 2% by Aug, with the further course of tightening being guided by how surging inflation cools off. “Fed policymakers have emphasized a commitment to act expeditiously to restore price stability, and I expect that further rate increases could put the federal funds rate in the neighbourhood of 2% by Aug,” George said in prepared remarks to the bank’s agriculture symposium. “Evidence that inflation is clearly decelerating will inform judgments about further tightening.” The Fed raised interest rates by 50 basis points earlier this month, to a target range of 0.75% to 1%, and Chair Jerome Powell has signalled it was on track to make similar-sized moves at its meetings in June and July. (Bloomberg)

US: Business borrowing for equipment rises 7% in April - ELFA. US companies borrowed 7% more in April to finance their investments in equipment compared to a year earlier, the Equipment Leasing and Finance Association (ELFA) said, as firms ramp up production to meet demand. The companies signed up for USD10.5bn in new loans, leases and lines of credit, compared with USD9.3bn a year earlier. “Soaring energy prices and inflation are headwinds confronting the industry as we move into the summer months,” said Ralph Petta, ELFA’s CEO, in a statement. ELFA, which reports economic activity for the nearly USD1trn equipment finance sector, said credit approvals totalled 77.4%, down from 78.3% in March. (Reuters)

EU: Euro zone government bond yields edge higher as risk appetite returns. Euro zone government bond yields edged higher as increased risk appetite kept investors away from safe-haven bonds, while money market expectations about the pace of monetary tightening in the bloc were unchanged. European equities and US stock futures rose, shrugging off the gloomy Asian mood where investors worried inflation, rising interest rates, and China’s zero-tolerance policy towards COVID-19 would hamper the global economic outlook. Analysts are trying to assess ECB’s next moves while money markets price in 105 basis points (bps) worth of rate hikes by year-end, including a 70% chance of 50 bps in July. (Reuters)

EU: German business morale rises in May on buoyant services sector. German business morale rose unexpectedly in May thanks to a pick-up in the services sector in Europe's largest economy that helped offset the impact of high inflation, supply chain problems and the war in Ukraine, a survey showed. The Ifo institute said its business climax index rose to 93.0 in May following a reading of 91.9 in April, revised up slightly from 91.8. A Reuters poll of analysts had pointed to a May reading of 91.4. Ifo said in its statement there were "currently no observable signs of a recession". (Reuters)

UK: CEO pay rebounds, gap widens with workers – report. British chief executives’ pay is on track to exceed their employees’ median earnings by more than before the COVID-19 pandemic as profits and executive bonuses rebound, a report from Britain’s High Pay Centre showed. The ratio of executive pay to median earnings had fallen sharply during the COVID-19 pandemic, due to lower profit-related bonuses, which make up a high proportion of CEO pay. Looking at Britain’s 350 largest listed companies, the ratio of median CEO pay to median employee pay fell to 44:1 in the 2020/21 financial year from 53:1 in 2019/2020. For FTSE-100 companies, the ratio fell to 67:1 from 73:1. (Reuters)

Hong Kong: Inflation eases unexpectedly in April. Hong Kong's consumer price inflation eased unexpectedly in April to reach its lowest level in three months, data released by the Census and Statistics Department showed. Consumer prices climbed 1.3% YoY in April, slower than March's 1.7% increase. Economists had forecast inflation to accelerate to 1.9%. Netting out the effects of all government's one-off relief measures, the underlying inflation also eased to 1.6% in April from 1.7% in the previous month. The latest downward trend in inflation was mainly due to the slower increases in the prices of basic food, particularly fresh vegetables. Prices for basic food grew 5.2% annually in April and those of clothing and footwear rose 3.6%. (RTT)

Taiwan: Industrial production surges in April. Taiwan's industrial production increased at a faster pace in April, data from the Ministry of Economic Affairs showed. Industrial output increased 7.33% YoY in April, following a 2.40% rise in March. Manufacturing output rose 7.50% in April, following a 2.21% increase in the previous month. Electricity, gas and water supply output grew 5.79% and 1.33%. Meanwhile, mining and quarrying production fell 11.27%. On a MoM basis, industrial production grew 4.08% in April, after 6.27% drop in the prior month. (RTT)

Taiwan: Jobless rate declines in April. Taiwan's unemployment rate fell slightly in April, the Directorate General of Budget Accounting & Statistics showed. The unemployment rate declined a seasonally adjusted 3.68% in April from 3.70% in March. In the same period last year, the jobless rate was 3.69%. On an unadjusted basis, the jobless rate decreased to 3.62% in April from 3.66% a month ago. The number of unemployed persons fell by 6,000 to 429,000 in April from 435,000 the previous month. The total employment decreased by 25,000 persons from the previous month to 11.415m in April. (RTT)

Singapore: Inflation steady at 5.4%. Singapore consumer price inflation remained stable in April and core inflation increased, data published by the Monetary Authority of Singapore and the Ministry of Trade and Industry showed. Consumer prices increased 5.4% YoY in April, same as seen in March. Economists had expected the inflation rate to rise to 5.5%. The latest increase was due to the rise in core inflation that was offset by a moderation in private transport costs. MAS core inflation rose to 3.3% in April from 2.9% in the previous month. Economists had forecast a rise of 3.4%. The acceleration was largely driven by higher inflation for food, retail and other goods, and electricity and gas. (RTT)

Markets

TM (Outperform, TP: RM6.40): Poised to offer comprehensive data centre capacity for govt digital transformation. Telekom Malaysia Group’s (TM) enterprise and public sector business arm TM One is poised to offer comprehensive data centre capacity and data sovereignty for the government’s digital transformation. With the government’s Cloud Framework Agreement (CFA) formalised, the appointed cloud service providers (CSPs) and managed service providers (MSPs) must now demonstrate their strategic offerings to potential clients. In a statement on May 23, the group said that in anticipating the extended capabilities needed to implement the government’s strategic shift to cloud, TM One continues to expand its data centre portfolio. (The Edge)

Petron: Receives notice of arbitration of RM50m for additional MIF2 project costs. Petron M Refining & Marketing has received a notice of arbitration from MTC Engineering SB seeking RM50.5m for alleged outstanding additional costs from a project. The claims by MTC Engineering arose from the execution of Pipeline End Manifold (PLEM) Fabrication and Marine Equipment Installation for Marine Import Facilities 2 (MIF2) Project at Petron Port Dickson Refinery, Negeri Sembilan. The relief sought by MTC Engineering comprised payment of RM50.5m with 5% annual interest from date of award until final settlement, as well as costs and other reliefs. (The Edge)

EUPE: Plans high-rise residential development on KL land it is buying for RM125m. EUPE Corp is buying a 4.812-acre parcel of land located along Jalan Damansara and Jalan Belfield within the residential development of Kampung Attap, off Jalan Istana here (Belfield land) for RM125m cash, as part of plans to develop it into a high-rise residential development. The proposed acquisition is in line with the group’s business expansion objective and growth strategy in accumulating new suitable land to be included in the group’s landbank and to scale up its property development portfolio to generate additional streams of income for the group moving forward. (The Edge)

Destini: Secures MRO contract worth RM531.39m. Destini has secured a contract for the maintenance, repair and overhaul (MRO) of 35 train sets operated by Keretapi Tanah Melayu (KTMB) worth RM531.39m. In a statement on May 23, the group said its unit received the award of the four-and-a-half-year Level 4 MRO contract from the Ministry of Transport. Level 4 MRO for electric train sets is an important exercise that is required to be done based on a train's operational time or kilometre in service. The electric train sets are required to undergo Level 4 MRO to ensure their safety and reliability during service. (The Edge)

SCIB: Bags RM38m road infrastructure job in Sarawak. Sarawak Consolidated Industries (SCIB) has bagged a RM38m job from Masama SB to undertake a road infrastructure project connecting Baleh Bridge, RH Belaja, Ng Benin, SK Ng Pelagus and Pelagus Resort in Kapit, Sarawak. In a filing with Bursa Malaysia on May 23, the group has accepted a letter of award and acceptance for the engineering, procurement, construction and commissioning contract. The contract will commence from May 2022 to March 2023. (The Edge)

Market Update

The FBM KLCI might open higher today after US stocks rallied on Monday while government bond prices fell, as investors returned to riskier assets after growth fears and high inflation left the S&P 500 nursing its seventh consecutive week of losses. The broad S&P gauge closed 1.9% higher, with gains in every sector. The tech heavy Nasdaq Composite added 1.6%. Global equities have dropped this year as inflation — driven by economies reopening from coronavirus shutdowns and Russia’s invasion of Ukraine disrupting fuel and food prices — hit multi-decade highs in many countries and central banks moved to raise interest rates in response. However, some investors have begun to question whether markets have now priced in enough bad news to create buying opportunities. Monday’s advance followed a late turnround on Wall Street on Friday when the S&P briefly entered bear market territory — defined as a 20% drop from a recent peak — before rebounding to close 0.01% higher. In European stock markets, the Stoxx 600 share index added 1.3%, while London’s FTSE 100 rose 1.7%. UK-listed mining shares rallied after Chinese policymakers pledged new steps to support the nation’s pandemic-blighted economy.

Back home, Bursa Malaysia erased earlier gains to close in the negative territory on Monday, driven by continued profit taking in selected plantation counters, amid mixed sentiment in the regional market. At 5pm, the FBM KLCI declined 6.59 points or 0.43% to 1,542.53, from Friday’s close of 1,549.12, after hovering between 1,540.09 and 1,556.43 throughout the day. Elsewhere, Hong Kong’s Hang Seng share index closed 1.2% lower after the city of Beijing reported rising coronavirus cases, increasing fears of further social restrictions under China’s zero-Covid policy. The Hang Seng has lost about a tenth of its value since early March. Mainland China’s CSI 300 dropped 0.6% on Monday, while the Nikkei 225 in Tokyo added 1%.

Source: PublicInvest Research - 24 May 2022

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