Economy

Global: Jobs growth will deteriorate significantly this quarter. Global employment growth will deteriorate significantly this quarter, hit by the economic turmoil caused by the Ukraine war and by the impact of tighter monetary policy on consumption. There are already signs that a recovery in global hours worked that was seen in early 2022 went into reverse in the 2Q and 3Q. Overall, there were 40m fewer full-time jobs between July-Sept than in the 4QFY19, which is used as the benchmark level before the COVID pandemic. (Reuters)

US: Fed set to deliver another big rate hike, debate Dec downshift. US central bankers are expected to keep their inflation fight in high gear this week, even as they intensify a debate over when to downshift to smaller interest rate hikes so as to avoid sending the world’s biggest economy into a tailspin. With the Fed’s preferred measure of inflation running at more than three times its 2% target, the outcome of the central bank’s policy meeting on Tues and Wed is not in doubt: it will raise rates by three quarters of a percentage point for the fourth straight time, bringing the target overnight lending rate to a 3.75%-4.00% range. (Reuters)

EU: Inflation hits record amid slowing GDP growth. Germany's consumer price inflation accelerated faster than expected in Oct to set a new record, as the biggest euro area economy heads into a recession, adding more pressure on the ECB policymakers who have signaled more interest rate hikes ahead. The CPI rose 10.4% following a 10.0% increase in Sept. Economists had forecast a modest increase to 10.1%. Headline inflation accelerated for a third month in a row. The CPI climbed 0.9% monthly in Oct, which was much slower than Sept's 1.9%, but faster than the 0.6% economists had expected. (RTT)

EU: SNB’s balance sheet shrinks nearly 8% in Sept. The SNB balance sheet shrank by nearly 8% in Sept, as plunging valuations on its stock and bond investments and the high value of the Swiss franc reduced the value of its foreign investments. The 55.4bn CHF (USD55.4bn) decline in the value of the central bank’s foreign currency investments was the main reason for its balance sheet declining to 889.5bn CHF from 964.6bn CHF a month earlier. The value of SNB’s portfolio, which includes stocks in companies such as Starbucks and Apple as well as bonds, is adjusted every quarter to reflect their market value and every month to take into account exchange rate moves. (Reuters)

UK: Consumers cut back borrowing after jump in interest rates. UK consumers and businesses cut back on borrowing after a jump in interest rates, adding to headwinds for the economy. New mortgage approvals fell 10%, the sharpest pace since Feb 2021, and credit card borrowing along with loans taken out by businesses also declined, according to Bank of England figures. The data indicate that the central bank’s interest-rate increases to quell inflation are starting to rein in activity in the economy. New mortgage approvals fell to 66,789 last month from 74,422 in Aug. The effective rate on new home loans rose 29 bps to 2.84%, the biggest monthly increase since Dec 2021, when the BOE started a rate-increase cycle. Credit card borrowing fell to GBP78m in Sept from about GBP700m in Aug as a cost-of-living squeeze left consumers paying more to buy less. (Bloomberg)

China: Economy weakens and signs point to more strain ahead. China’s factory and services activity contracted in Oct, with signs that things could worsen in the coming months as the government sticks to Covid controls that have disrupted activity across the world’s second-largest economy. Both the official manufacturing purchasing managers index and the non manufacturing gauge, which measures construction and services activity, fell in the month to 49.2 and 48.7, respectively, missing economists’ expectations. Even though recent data showed economic growth strengthened to 3.9% in the 3Q, there have been signals of weakness again as Covid outbreaks worsen, creating more disruptions for businesses and residents. (Bloomberg)

Australia: Manufacturing PMI eases. The manufacturing sector in Australia continued to expand in Oct, albeit at a slower pace, with a manufacturing PMI score of 52.7. That's down from 53.5 in Sept, although it remains above the boom-or-bust line of 50 that separates expansion from contraction. Production at Australia's manufacturing firms rose for a ninth consecutive month in Oct, driven by an expansion in new orders as underlying demand rose. Improvements in factory performance were also reported to have supported the solid expansion in output. (RTT)

Australia: RBA set for another close call. The RBA faces a tough task in deciding whether to persist with smaller interest-rate increases or U-turning back to outsized hikes to try to gain control of hotter-than-expected inflation. Consensus is for the Reserve Bank to deliver a second straight quarter percentage-point rise today. But there are still some high-profile dissenters and doubters. It was a “pipe dream” that Western countries could soon end their reliance on China for rare earths and critical minerals. That won’t stop Australia and the US from working together to boost investment in these critical minerals in an attempt to break China’s monopoly on international supply chains. (Bloomberg)

Markets

EcoWorld (Neutral, TP: RM0.75): Issues maiden RM550m sukuk for working capital, capex under its sukuk wakalah programme of RM1.2bn. The funds will partly be used for working capital, capital expenditure and Shariah-compliant investments. The sukuk, which has a tenure of 5 years, will also be used for general corporate purposes of the group and/or of any joint ventures, as well as to refinance any existing borrowings. (The Edge)

Malayan Cement: Expects remainder of year to be challenging due to inflation, higher cost due to high inflation and increased logistical cost caused by geopolitical instability. However, the company is encouraged by the revival of major infrastructure projects, which bodes well for the industry. Malaysia is a relatively young nation with a high urbanisation rate, factors which will drive demand for housing and infrastructure development. (The Edge)

Pharmaniaga: Inks MOU to commercialise products in China. Pharmaniaga has inked a MoU with JDMas Commerce SB to commercialise Pharmaniaga’s OTC and subsequently pharmaceutical products in China through JD.com, with the support of JDMas. JDMas will be partnering with Pharmaniaga to register, import, distribute and market Pharmaniaga’s OTC and other healthcare products in China. (The Edge)

Supermax: Earmarks RM3.9bn for expansion, eyes first US glove in 2023. Supermax Corp, which has earmarked around RM3.9bn for the rubber glove maker's expansion, about RM1.3bn has been set aside for the group’s expansion plans in Malaysia and a further USD550m (RM2.6bn) allocated for phase 1 and phase 2 of its manufacturing project in the US within Texas' Brazoria county. The group will monitor closely the prevailing and expected market conditions before deciding on the next steps for its planned expansion in Malaysia. (The Edge)

Revenue Group: Appointed as payment processing partner for Taobao Malaysia. Revenue Group has been appointed as the front-end and back-end payment processing partner for the instalment payment plan (IPP) that Taobao Malaysia has just officially launched for its app. Currently, Revenue has secured 3 major banks in Malaysia as the first few participating banks of IPP partners for Taobao, led by CIMB Bank and CIMB Islamic Bank. (BTimes)

Econpile: Bags sub-structure job for private hospital in Kelantan. Econpile Holdings has bagged a RM24.1m contract to undertake substructure works for a private hospital in Kota Bharu, Kelantan. The hospital comprises a 12-storey hospital block and 11- storey carpark block. The project would be completed within 12 months. (The Edge)

Alam Maritim: Classified as PN17 company after auditor expressed disclaimer of opinion in accounts. Alam Maritim Resources Bhd said it is deemed a PN17 issuer after its external auditor expressed a disclaimer of opinion in the group's audited accounts announced on Oct 31. The group is taking the necessary steps to address the PN17 status, and has worked on its proposed debt restructuring with creditor banks. (The Edge)

Market Update

Overnight, US stocks notched a gain in October after two consecutive months of declines, bucking weaker earnings growth, persistent inflation and expectations of more sharp rate rises by the Federal Reserve. Wall Street’s benchmark S&P 500 climbed 8% during the month, its first monthly increase since July. On Monday the stock index fell 0.7%. The tech-heavy Nasdaq Composite index rose 3.9% in October, after closing down 1% in Monday’s trading. Market participants are also keeping an eye on policy meetings at the Bank of England and the Fed this week. The US central bank is forecast to implement its fourth straight 0.75 percentage point rate rise on Wednesday and to signal further increases in an effort to curb rapid price growth even as concerns mount that the country could enter a recession next year. In Europe, the regional Stoxx Europe 600 added 0.4%. London’s FTSE 100 gained 0.7%, erasing an earlier loss.

Back home, Bursa Malaysia finished broadly higher after two consecutive days of losses, tracking regional market peers amid the improved performance of global equities. At the closing bell, the FBM KLCI rose 13.07 points to 1,460.38 from Friday's close of 1,447.31. In the regional markets, Japan’s Topix gained 1.6% and South Korea’s Kospi added 1.1%. Hong Kong’s Hang Seng index fell 1.2%, while China’s CSI 300 lost 0.9%.

Source: PublicInvest Research - 1 Nov 2022