Economy

US: Housing starts decline as mortgage rates weigh on demand . New US home construction declined in Sept and permit applications for single-family dwellings fell, adding to evidence that the highest mortgage rates in two decades are sapping demand and discouraging new builds. Residential starts decreased 8.1% last month to a 1.4m annualised rate, according to government data released. Single-family homebuilding dropped to an annualised 892,000 rate, the slowest since May 2020. Construction of multi family dwellings also declined. Applications to build, a proxy for future construction, rose to an annualised 1.6m units, led by multi family properties. Permits for construction of one-family homes fell 3.1% to a more-than-two-year low of 872,000 in Sept. (Bloomberg)

US: Fitch Ratings forecasts mild US recession in 2023 . Fitch Ratings released a report saying the US will likely enter a mild recession, much like the recession of the 1990s, next spring. Fitch said while it expects a strong labour market to cushion the blow of a recession during the second quarter of 2023, ongoing interest rate hikes and soaring inflation will hurt consumer demand and eventually slow down job growth, according to United Press International (UPI) which cited the report. Fitch predicts consumer spending to grow by 2.5% this year, before slowing to 0% in 2023. “Fitch expects the US economy to enter genuine recession territory — albeit relatively mild by historical standards — in the second quarter of 2023. The projected recession is quite similar to that of 1990-1991, which followed similarly rapid US Federal Reserve tightening in 1989-1990. (Bernama)

US: Fed says firms gloomier on outlook, but inflation pressures easing . US economic activity expanded modestly in recent weeks, although it was flat in some regions and declined in a couple of others, the Fed said in a report that showed firms growing more pessimistic about the outlook. Moreover, the US central bank's latest collection of anecdotes from contacts across its 12 districts, known as the "Beige Book," noted inflation pressures had eased somewhat and were expected to continue doing so, a key "soft data" indication that the Fed's aggressive interest rate hikes may have started to turn the tide against the highest inflation in 40 years. (Reuters)

EU: Eurozone construction output contracts in Aug . Eurozone construction output decreased in Aug after rebounding in the previous month, data from Eurostat showed. Construction output dropped 0.6% MoM in Aug, reversing a 0.3% rise in July. Civil engineering output logged a negative growth of 1.4%, and production in the building sector contracted 0.4%. On a yearly basis, growth in construction output accelerated slightly to 2.3% in Aug from 2.1% in the prior month. The rate for July was revised up from 1.5%. Construction output in the EU27 declined 0.4% monthly in Aug, while it grew 2.8% from a year ago. (RTT)

UK: Inflation returns to double digits as food prices soar . Soaring food prices drove UK inflation back into double digits in Sept, intensifying pressure on the government and central bank to act. The Consumer Price Index rose 10.1% last month from 9.9% in the month before, the Office for National Statistics (ONS) said. That matched a 40-year high reached in July and exceeded economists expectations for 10%. The figures leave inflation well above the BOE’s 2% target, adding to pressure on policymakers to lift the key rate significantly next month. The danger is that prices accelerate again early next year after the government loosens its support for household energy bills. Soaring prices have delivered the sharpest squeeze on consumer spending power in decades, leading to a plunge in poll ratings for Prime Minister Liz Truss' government. (Bloomberg)

South Korea: Central bank flags weaker exports, volatility in current account . South Korea’s central bank expects exports to weaken at a faster pace going forward and the current account to remain highly volatile for some time, it said in a report published. “Exports are expected to weaken at a fast pace going forward, as major economies’ growth shrinks altogether for the first time since the global financial crisis, excluding the pandemic, and as the global IT cycle slows more steeply than expected with fading pandemic effects,” the Bank of Korea (BOK) said. (Reuters)

Markets

Genting Malaysia (Outperform, TP: RM3.66): Subsidiary's Macau gaming concession proposal unconditionally accepted. The Macau Special Administrative Region is said to have unconditionally accepted Genting Malaysia Bhd's indirect subsidiary GMM SA's bid for the award of a new 10-year gaming concession involving casino operations there. (The Edge)

Comments: This brings the group one step closer to securing the concession in Macau. Although we view this positively as it should help the group to widen its geographical presence and diversify its casino operations, we believe the venture could also be a drain to its cashflow in the near term. During the gestation period, Genting Malaysia’s earnings may be adversely affected. Also, competition in the gaming industry is expected to be more intense given the presence of many established and prominent operators in Macau. At this juncture, no change to our earnings forecasts.

HL Bank: PNB plans to vote against Hong Leong Bank's proposal to issue, allot shares. Permodalan Nasional Bhd (PNB) has said it plans to vote against Hong Leong Bank Bhd’s (HLBANK) proposal to issue and allot shares, citing insufficient disclosure on the matter as the reason. (The Edge)

Heitech Padu: Secures contract extensions from JPJ. Technology services provider Heitech Padu has secured two contract extensions from the Road Transport Department (JPJ), amounting to an additional contract value of RM23.7m. (The Edge)

Rohas Tecnic: Unit seeks arbitration over dispute with power company in Bangladesh. Rohas Tecnic said its unit is seeking to refer a dispute with the Power Grid Company of Bangladesh Ltd, relating to the supply of a transmission line in that country, to arbitration. (The Edge)

Reneuco: Acquires Adat Sanjung for RM90m. Reneuco has proposed to acquire Adat Sanjung SB for RM90m from OHP Ventures SB. The purchase consideration would be satisfied via a combination of a cash payment of RM20m and the allotment and issuance of 318.2m new ordinary shares in Reneuco at an issue price of RM0.22 per consideration share. (StarBiz)

MNHB: Wins RM22.5m substation engineering contract in Johor. MN Holdings Bhd (MNHB) has secured a substation engineering contract worth RM22.5m in Nusajaya Technology Park, Johor. Inclusive of the latest contract, MNHB has increased its order book to approximately RM292m. (StarBiz)

EPMB: In reply to Bursa’s query, EPMB clarifies that MOA with Saean Group is not legally binding. EP Manufacturing Bhd (EPMB) has clarified to Bursa Malaysia that its four-wheel electric vehicle (EV) manufacturing memorandum of agreement (MOA) with a US-based company is not a legally binding agreement. (The Edge)

Vizione: Posts wider net loss in 3Q due to high building material costs, labour shortages. High building material costs and labour shortages caused Vizione Holdings to post a wider net loss in its 3QFY22. The net loss increased to RM7.9m, from RM5.2m in 3QFY21. (The Edge)

Market Update

The FBM KLCI might open weaker after US stocks dipped on Wednesday as investors weighed mixed corporate earnings and signs of persistent inflationary pressures. The benchmark S&P 500 gauge closed 0.7% lower, reversing course after two days of solid gains. The technology-heavy Nasdaq Composite ceded 0.9%. In Europe, the regional Stoxx 600 closed 0.5% lower. Consumer goods groups Procter & Gamble and Nestlé became the latest companies to highlight the effect of inflation as they reported third quarter earnings on Wednesday. Both groups reported falling sales volumes in the three months to September, and Nestlé chief executive Mark Schneider said the Swiss group would lift prices further to pay for higher energy and labour costs. Ohio-based P&G took an additional hit from the strength of the dollar. Investors are paying close attention to corporate guidance on pricing levels and the effect of higher costs. Central banks led by the US Federal Reserve have been aggressively tightening monetary policy this year in an effort to rein in price rises, but the speed and scale of the changes have raised fears that economies will be pushed into recession.

Back home, Bursa Malaysia continued its upbeat momentum for the fourth consecutive trading day, with the key index gaining 1.05%, lifted by buying of banking stocks. At the closing bell, the benchmark FBM KLCI had surged 14.74 points to finish at an intraday high of 1,415.10, from Tuesday's close at 1,400.36. The regional markets finished mixed with the Nikkei 225 gained 0.37%, while the Hang Seng led the Shanghai Composite lower. They fell 2.38% and 1.19% respectively.

Source: PublicInvest Research - 20 Oct 2022