Economy

US: Teetering on brink of recession as GDP contracts in second quarter. The US economy unexpectedly contracted in the second quarter, with consumer spending growing at its slowest pace in two years and business spending declining, raising the risk that the economy was on the cusp of a recession. While the second straight quarterly decline in GDP reported by the Commerce Department largely reflected a more moderate pace of inventory accumulation by businesses due to on-going shortages of motor vehicles, the economic profile was weak, with exports as the only bright spot. This could deter the Fed from continuing to aggressively increase interest rates as it battles high inflation. The US central bank raised its policy rate by another three-quarter of a percentage point, bringing the total rate hikes since March to 225 basis points. (Reuters)

US: Weekly jobless claims edge down from eight-month high. After reporting modest increases in first-time claims for US unemployment benefits over the three previous weeks, the Labour Department released a report showing a slight pullback in initial jobless claims in the week ended July 23rd. The report showed initial jobless claims edged down to 256,000, a decrease of 5,000 from the previous week's revised level of 261,000. Economists had expected jobless claims to inch up to 253,000 from the 251,000 originally reported for the previous week. The upwardly revised figure for the previous week reflects the highest level of jobless claims since they hit 265,000 in the week ended Nov 13, 2021. (RTT)

EU: Eurozone economic confidence at 17-month low. Eurozone economic confidence reached its lowest level in nearly one-and-a half years in July, survey results from the European Commission showed. The economic confidence index slid more-than-expected to 99.0 in July from 103.5 in the previous month. The reading was forecast to ease to 102.0. This was the lowest score since Feb 2021. The decline in July reflects substantial losses in industry, services and consumer confidence. The industrial sentiment index declined to 3.5 from 7.0 a month ago. The expected reading was 6.0. There were significant deteriorations in managers' assessment of the current level of overall order books and their production expectations. At -27.0, consumer confidence matched the flash estimate and came in below June's -23.8. (RTT)

EU: German inflation rises unexpectedly as gas crunch tightens. German inflation edged up unexpectedly in July, driven by an energy supply crisis as a further reduction in gas flows from Russia prompted concerns about even higher energy bills. Consumer prices, harmonised to make them comparable with inflation data from other European Union countries (HICP), increased by 8.5% on the year, the federal statistics office said, citing preliminary data. “The increase in HICP inflation is a warning sign for the ECB,” ING economist Carsten Brzeski. The ECB uses this figure to measure consumer price inflation. A first reading of July inflation for the wider euro zone is due on Friday. Consumer price growth in the 19 countries sharing the euro was a record-high 8.6% YoY in June, driven by rising energy and food prices. (Reuters)

EU: Ireland retail sales fall for second month. Ireland's retail sales volume decreased for the second successive month in June, data from the Central Statistics Office showed. Retail sales dropped 1.3% MoM in June, the same pace of fall as seen in May. This was the second consecutive fall. The largest monthly volume decreases were in electrical goods, hardware, paints & glass and clothing & footwear. Nonetheless, the volume of retail sales in June was 2.4% higher than pre-COVID-19 levels in Feb 2020. On a yearly basis, the decline in sales volume more than doubled to 6.6% in June from 3.0% a month ago. At the same time, the sales value was down 0.3% on month and -0.9% annually in June. (RTT)

Hong Kong: Lifts benchmark interest rate. Hong Kong's central bank raised its benchmark base rate on, following the decision of the US Federal Reserve to lift the rate by 75 basis points. The Hong Kong Monetary Authority adjusted the Base Rate by 75 basis points to 2.75% with immediate effect according to a pre-set formula. The latest hike came on the top of 75 basis point increase in rates last month. The Hong Kong's Base Rate is currently set at either 50 basis points above the lower end of the prevailing target range for the US federal funds rate or the average of the five-day moving averages of the overnight and one-month Hong Kong Interbank Offered Rates, whichever is the higher. (RTT)

Japan: Unemployment rate steady at 2.6% in June. The jobless rate in Japan came in at a seasonally adjusted 2.6% in June, the Ministry of Internal Affairs and Communications said. That missed expectations for 2.5%, although it was unchanged from the May reading. The jobs-to-applicant ratio improved to 1.27 - beating forecasts for 1.25 and up from 1.24 in the previous month. The participation rate was 63.0% - also beating forecasts for 62.9% and up from 62.7 a month earlier. (RTT)

South Korea: Industrial output jumps 1.9% in June. Industrial production in South Korea was up a seasonally adjusted 1.9% on month in June, Statistics Korea said. That exceeded expectations for a decline of 0.4% following the upwardly revised 0.2% increase in May (originally 0.1%). On a yearly basis, industrial production rose 1.4% - shy of expectations for an increase of 2.0% following the upwardly revised 7.4% gain in the previous month (originally 7.3%). The Index of all industry production in June increased by 0.6% on month and 2.1% on year. The Manufacturing Production Index jumped 1.8% on month and 1.4% on year. The Manufacturing Shipment Index fell 3.1% on month and 4.5% on year. (RTT)

Markets

Bintai Kinden: JV secures subcontracts worth RM4.43m. Bintai Kinden Corp's joint-venture (JV) company has secured a series of additional subcontracts from Petro Flanges & Fittings (PFF) to supply high-grade carbon steel/stainless steel piping, valves and piping accessories, with a value of approximately RM4.43m, to companies in the oil and gas (O&G) industry. (The Edge)

Samchem: 2Q earnings down 5%. Samchem Holdings’s net profit for the 2QFY22 decreased by 5.4% to RM18.21m, down from RM19.24m a year ago, due to narrower margin as a result of challenging business environment. Its earnings per share fell to 3.35sen in 2QFY22 versus 3.54sen a year earlier. (The Edge)

Unisem: 2Q net profit surges 277% to RM205.9m, declares two sen dividend. Unisem (M)'s net profit for the second quarter ended June 30, 2022 surged 276.7% to RM205.86m from RM54.64m a year earlier, on the back of higher average selling prices coupled with the appreciation of US dollar/ringgit exchange rates. Unisem said revenue for the quarter rose 15.4% to RM464.06m from RM402.23m a year prior. (The Edge)

Vitrox: Posts higher 2Q profit on stronger US dollar. Vitrox Corp said its second quarter net profit rose slightly to RM51.35m, from RM50.64m a year ago, thanks to the stronger US dollar. Earnings per share for the quarter ended June 30, 2022 increased to 5.44sen from 5.37sen. Quarterly revenue decreased 3.46% to RM189.4m from RM196.19m last year amid lower sales demand from the group’s machine vision system division offsetting continued high demand from the automated board inspection (ABI) sector. (The Edge)

Frontken: Declares 1.6sen dividend as 2Q net profit jumps 30.2% to RM32.2m. Frontken Corporation’s net profit for the 2QFY22 rose by 30.17% to RM32.2m, compared with RM24.74m a year earlier, on the back of improved revenue and better profit margins. Consequently, earnings per share increased to 2.05sen from 1.57sen. The group said its quarterly revenue rose by 18.02% to RM128.2m from RM108.63m. (The Edge)

Nestle Malaysia: Net profit, revenue jump in 2Q on stronger domestic and export sales. Nestle (Malaysia) remains on a growth trajectory, delivering solid sales and profit for its second quarter ended June 30 2022. Its net profit rose 26.1% to RM169.65m in the second quarter from RM134.53m a year ago, on the back of an 18.8% increase in revenue to RM1.64bn from RM1.38bn previously. (Business Times)

Pavilion REIT: Earnings up on retail sector recovery in 2Q. Pavilion Real Estate Investment Trust's (REIT) earnings is tracking better conditions in the retail industry as economic conditions improve and movement restrictions continue to ease. The REIT announced a net profit of RM54.98mil in the second quarter ended June 30, 2022, more than double its earnings in the same quarter last year. (StarBiz)

Lotte Chemical Titan: Incurs net loss of RM145.92m in 2Q. Lotte Chemical Titan Holding (LCT) has posted a net loss of RM145.92m for the second quarter ended June 30, 2022, as compared to a net profit of RM382.29m recorded in the same period last year. (StarBiz)

Market Update

The FBM KLCI might open higher today as US government debt rallied on Thursday after data showing the American economy shrank in the second quarter prompted traders to trim expectations for Federal Reserve rate increases. The yield on the two-year Treasury note, which is sensitive to monetary policy expectations, dipped 0.12 percentage points to 2.88% as the debt jumped in price. The 10-year Treasury yield, which moves with growth and inflation expectations, reached its lowest level since April following the report, and was trading down 0.11 percentage points to 2.68% at the end of the day. The fall in yields came after a report from the commerce department showed the world’s biggest economy contracted at a 0.9% annualised rate in the second quarter of this year, worse than expectations for a 0.5% rise. Gross domestic product declined at a 1.6% rate in the first three months of the year. Two straight months of contraction meets the technical definition of a recession, although a separate body, the National Bureau of Economic Research, will not weigh in until much later to determine if the economic cycle officially turned at the start of this year. European indexes were broadly higher. The pan-continental Stoxx Europe 600 rose 1.1%.

Back home, Bursa Malaysia ended at an intraday high on Thursday, thanks to the positive local market sentiment and foreign support, in tandem with the uptrend in the regional markets. At 5pm, the FBM KLCI rose 20.49 points, or 1.39%, to 1,491.2 from Wednesday’s close of 1,470.71. In the region, stock markets were mixed. Japan’s Nikkei 225 rose 0.4%, while in China the Shanghai Composite Index edged up 0.2%. The Hang Seng Index in Hong Kong weakened 0.2%.

Source: PublicInvest Research - 29 Jul 2022