Economy

US: Fed’s Waller backs half-point rate hikes at ‘several’ meetings. Federal Reserve Governor Christopher Waller said he wants to keep raising interest rates in half-percentage point steps until inflation is easing back toward the US central bank’s goal. “I support tightening policy by another 50 basis points for several meetings,” he said in Frankfurt. “In particular, I am not taking 50 basis-point hikes off the table until I see inflation coming down closer to our 2% target,” he told an event hosted by the Institute for Monetary and Financial Stability. US central bankers raised rates by a half point this month to cool the hottest inflation in 40 years and have signalled they’ll hike by the same amount again at their meetings in June and July. They’ll also start shrinking their massive balance sheet at a monthly pace of USD47.5bn, stepping up to USD95 billion in Sept, in a process also called quantitative tightening. Officials are counting on a combination of higher rates and QT to rebalance supply and demand that was pushed out of line during the pandemic. Waller said that various economic models suggest that the overall reduction in the balance sheet would be equivalent to around “a couple of 25-basis-point rate hikes,” while cautioning such estimates were very uncertain. Data released showed the Fed’s preferred gauge of price pressures, the personal consumption expenditures price index, rose by 6.3% last month from April 2021 -- more than three times the Fed’s 2% target. The data also showed US consumer spending holding up as households dip into savings. (Bloomberg)

EU: Eurozone economic confidence rises slightly in May. Eurozone economic confidence rose slightly in May but remained below its pre-Ukraine war level, survey results from the European Commission showed. The economic sentiment index rose slightly to 105.0 in May from 104.9 in the previous month. The score was forecast to remain unchanged at 104.9. Amongst the largest EU economies, the ESI rose markedly in Spain and, to a lesser extent, in France and Italy. Meanwhile, it remained virtually unchanged in Germany. At 14.0, the services sentiment index rose to a three month high in May, from 13.6 in April. Nonetheless, the reading was below economists' forecast of 14.3. The consumer confidence index came in at -21.1 in May, in line with flash estimate, but up from - 22.0 in April. Meanwhile, the industrial sentiment index dropped to 6.3 in May from 7.7 in the prior month. The score was forecast to fall to 7.5. Confidence among retailers dropped slightly in May, with the index easing to -4.0 from -3.9 in April. By contrast, the Employment Expectations Indicator increased mildly by 0.3 points to 112.9 in May. The European Commission's Economic Uncertainty Indicator declined for the second month in a row, by - 2.7 points to 22.6 in May. (RTT)

EU: German inflation beat, firms case for bigger ECB rate hike. German inflation rose to its highest level in nearly half a century in May on the back of soaring energy and food prices, strengthening the case for a big, half a percentage point ECB interest rate hike in July. Prices have risen sharply across Europe over the past year, first on supply chain problems after the pandemic, then on Russia’s war in Ukraine, suggesting that a new era of rapid price growth has swept away a decade of ultra-low inflation. German consumer prices, harmonised to make them comparable with inflation data across the European Union, increased to 8.7% from 7.8% a month earlier, well ahead of expectations for 8%, data from the Federal Statistics Office showed. Inflation was last time this high in the winter of 1973/1974, when the first oil crisis led to a new and difficult-to-tame inflationary cycle. Although the ECB responded to soaring prices relatively late compared to its global peers, the bank made clear last week that interest rates must go up to stop high inflation from getting entrenched. (Reuters)

UK: Inflation expectations stick at high levels - Citi/YouGov. The British public’s expectations for inflation have held stable this month but at high levels that are likely to keep the Bank of England on alert about price growth risks, according to a survey published. US bank Citi and polling firm YouGov said their gauge of expectations for inflation in five to 10 years’ time held at 4.2% in May, unchanged from April. Public inflation expectations for the coming 12 months edged up to 6.1%, matching March’s record high, from 6.0% in April. The figures were likely to mean the BoE remains concerned about medium-term inflation expectations. (Reuters)

China: PMIs to show lockdowns still curbing activity. China’s purchasing managers’ indexes for May are likely to show service and manufacturing activity continuing to shrink amid Covid lockdowns. Progress in containing the virus and resumed production at some Shanghai plants should allow for a small improvement compared with the prior month, but we see the PMIs still stuck deep in contractionary territory. We expect the official manufacturing PMI to edge up to 48.0 from 47.4 in April. The below- 50 reading indicates the sector continued to contract. The Caixin manufacturing PMI, which focuses more on smaller private firms and exporters, is likely to rise to 47.0 from 46.0 in April. We see the official non-manufacturing PMI at 43.0, up from 41.9 the prior month. The gain reflects progress in containing the virus in Shanghai. The official PMIs are due May 31 at 9:30 a.m., local time. The Caixin report is due at 9:45 a.m. on June 1. (Bloomberg)

Thailand: April factory output rises 0.56% YoY, below forecast. Thailand's factory output in April rose at a smaller pace than expected as higher costs continued to affect production, despite improved economic activity, the industry ministry said. The manufacturing production index (MPI) rose 0.56% in April YoY, below a forecast rise of 1.6% in a Reuters poll and against March's 0.44% increase. Factory output, however, should continue to be underpinned by increased domestic activity following an easing of COVID-19 curbs, while a weak baht further boost manufacturing exports, ministry official Thongchai Chawalitpichaet told a briefing. In April, production of cars, oil, and rubber products rose while output of hard disk drives dropped due to a shortage of materials over China's pandemic lockdown measures, the ministry said. In Jan-April, the MPI index rose 1.37% from a year earlier. Industrial goods account for about 80% of total exports. (Reuters)

Markets

OCB: In JV to develop Klang land. OCB is partnering with WorldKlang Group Property Development (WKGPD) to undertake a property development in Klang, with a gross development value of RM247.6m. ESSB and WKGPD have inked a development agreement to collaborate for the implementation of the proposed development. (The Edge)

Pasukhas: Bags RM31.16m construction contract in Kedah. Pasukhas Group has accepted a letter of award from Exyte Malaysia (EMSB) for construction works involving a general warehouse in Kulim, Kedah worth RM31.16m. (The Edge)

Hengyuan: 1Q profit swells 191% amid higher refined oil price, stronger demand. Hengyuan Refining Co’s net profit surged 191% to RM47.46m for the 1QFY22, from RM16.31m last year, as its quarterly revenue jumped more than two-fold. Lower net foreign exchange loss and lower manufacturing expenses also contributed to the improved quarterly net profit. (The Edge)

Litrak: 4Q net profit tumbles 47% on-year. Lingkaran Trans Kota Holdings’s (Litrak) net profit tumbled 20.86% to RM162.85m for the 4QFY22, from RM205.78m a year ago, despite chalking up higher revenue. The highway concession holder blamed the lower profitability to higher amortisation of highway development expenditure (HDE) and higher loss in Sprint group of RM10m due to higher amortisation of HDE, as well as higher income tax expense resulting from the impact of prosperity tax. (The Edge)

UOA Development: 1Q net profit drops 30% on lower sales. UOA Development’s net profit fell 29.66% to RM25.38m for the first quarter ended March 31, 2022, from RM36.09m a year earlier, on lower sales from its existing projects. The lower sales also resulted in revenue dropping 61.06% to RM54.58m from RM140.17m. (The Edge)

Time Dotcom: Posts RM90.64m net profit in 1Q despite forex impact. Telecommunications provider, TIME dotCom‘s net profit eased to RM90.64m in the first quarter ended March 31, 2022, as compared with RM91.62m in the same quarter last year. The reduced net profit was due to the impact of foreign exchange (forex) movements, higher depreciation charged for property, plant and equipment and right-of-use assets, as well as higher staff-related costs. (Business Times)

Press Metal Aluminium: Net profit rose 104.66% to RM421.02m in 1Q due to higher aluminium prices. Press Metal Aluminium Holdings's net profit rose 104.66% to RM421.02m in the 1QFY22 from RM205.72m a year earlier. The company's revenue increased 86.6% to RM3.92b in 1QFY22 compared to RM2.10bn last year, on the back of expanded production volume and higher average aluminium prices. (Business Times)

MyEG: Quarterly performance improves. My EG Services’s (MyEG) first-quarter net profit for the financial year 2022 has risen about 11% to RM84.63m from RM76.29m in the same quarter a year ago. (StarBiz)

Market Update

US markets were closed overnight for the Memorial Day holiday though futures contracts are showing signs of extending gains from the end of last week. Over in Europe, markets were mostly higher as investors took comfort in China’s relaxation of its strict COVID- 19 lockdown restrictions though also keeping a wary eye on inflation numbers around the region. On the latter, Spanish inflation jumped to 8.5% while German numbers spiked to 8.7%, both outstripping economists’ expectations. Germany’s DAX and France’s CAC 40 gained 0.8% and 0.7% as UK’s FTSE 100 rose 0.2%. Asian markets were also mostly higher on news of China’s COVID-19 relaxations over the weekend in Beijing and Shanghai. Data due out later this week (China’s official Purchasing Managers’ Index reading) is being looked on for clues on the impact of the recent lockdowns on the country. US jobs data is due on Friday. On the day, the Hang Seng Index and Nikkei 225 jumped 2.1% and 2.2% higher respectively while the Shanghai Composite Index gained 0.6%.

Source: PublicInvest Research - 31 May 2022