Economy

US : Hiring and wages extend strong gains, keeping pressure on Fed. US employers added more jobs than forecast and wages surged by the most in nearly a year, pointing to enduring inflation pressures that boost chances of higher interest rates from the Federal Reserve. Nonfarm payrolls increased 263,000 in Nov after an upwardly revised 284,000 gain in Oct. The unemployment rate held at 3.7% as participation eased. Average hourly earnings rose twice as much as forecast after an upward revision to the prior month. The median estimates in a Bloomberg survey of economists called for a 200,000 advance in payrolls and for the unemployment rate to hold at 3.7%. US stocks opened lower and Treasury yields surged as investors anticipated a more aggressive stance from the Fed. The net read is that the labour market is still far too tight and cooling only very gradually. It suggests that the economy is resilient and can handle more rate hikes and restrictive policy for longer. Job gains were concentrated in a few categories, led by growth in leisure and hospitality, healthcare and government. (Bloomberg)

EU: Eurozone producer price inflation slows in Oct. Eurozone producer price inflation slowed for the second consecutive month in Oct reflecting a notable reduction in energy price growth. Producer prices registered an annual increase of 30.8% after a 41.9% rise in Sept. Although inflation eased for a second month and remained below economists' forecast of 31.5%, overall factory gate prices remained elevated. Excluding energy, producer price inflation came in at 14%, slower than the 14.5% in Sept. The annual producer price inflation was driven by the 65.8% rise in energy prices. Energy prices had increased 108.0% in Sept. Prices of intermediate goods grew 17.4% and that of capital goods by 7.5 %. Durable consumer goods and non-durable consumer goods prices increased 9.8% and 16.0%, respectively. (RTT)

EU: German exports fall further raising risk of recession. Germany's exports declined for the second month in a row, as the global demand continued to be damped by high inflation and supply chain disruptions, and the biggest euro area economy is near recession. Yet, the trade surplus increased notably due to the sharp decrease in imports. Shipments logged a monthly drop of 0.6 percent, following Sept's 0.7% decrease. The pace of decline was double than the expected 0.3% fall. At the same time, the monthly decrease in imports deepened to 3.7% from 2.2%. This was also bigger than economists' forecast for a 0.4% fall. As a result, the trade balance closed Oct with a surplus of EUR6.9bn, which was higher than the EUR2.8bn in Sept. In the same month last year, the surplus was EUR12.2bn. Exports to the Eurozone countries dropped 2.9% and imports from the currency bloc decreased 5.2%. (RTT)

China: Economists call for easing of Covid curbs to boost growth. Chinese economists including former central bank adviser Huang Yiping and fellow Peking University professor Yao Yang called for a relaxing of the country’s Covid rules to boost economic growth. The resumption of economic activities should be the country’s top priority in the near term. Activities at public venues should resume because economic growth is fundamental to solving the nation’s problems, including to able to withstand external pressures from country’s such as the US and to help with domestic economic restructuring, according to the report. The signatories to the report joined a chorus of government-linked economists who have recently called for more efforts to boost the world’s second largest economy, which has been battered by the Covid restrictions. (Bloomberg)

India: Modi’s investment to lead growth pickup in 2023. India’s recovery looks set to strengthen in 2023. Fiscal policy will be a major driver as the government pours resources into growth boosting investment. A multi-year push to build up manufacturing capacity should pay dividends. A boost from exports aided by new free-trade deals also looks likely. The main risk is a steeper-than expected global downturn. Growth numbers will be distorted by the economy’s gyrations over the past few years of Covid-related shocks. Structural factors will underpin the recovery. These include increased capital spending, domestic manufacturing support, additional free-trade agreements, and improved housing affordability. As the government shifts priorities from income support to investment, the fiscal position will tighten. But we expect the net impact on growth to be positive -- capex yields more bang for the buck, and it is likely to draw in the private sector, amplifying the impact. (Bloomberg)

Australia: Set to raise rates as tightening cycle approaches end. Australia is set to raise interest rates as it closes in on the end of its tightening cycle, while nearby New Zealand just delivered a record hike and is poised to move higher, underscoring different central bank outlooks at year’s end. That contrasts with New Zealand, which has boosted rates by 4pps and sees more to come, and the Federal Reserve which has hiked by 3.75 pts since March and is also expected to go further. Both are willing to risk recession -- New Zealand forecasts one -- as they try to crush inflation. Australia is not seeing the same wage pressures that New Zealand and the US are experiencing. New Zealand’s labor cost index has remained above 3% since the beginning of this year while the Australian measure only broke out of the 2% range last quarter. The RBA’s forecasts show inflation peaking at 8% this quarter and then beginning to slow over the ensuing two years before finally returning to the 2-3% target in 2025. (Bloomberg)

Markets

Malakoff (Outperform, TP: RM1.02): To build & operate solar energy system at Senai Airport . Malakoff Corp Bhd has partnered with Senai Airport Terminal Services SB (Senai Airport) to develop and operate a solar energy system at Senai Airport in Johor. The company's subsidiary, Malakoff Radiance SB inked a solar power purchase agreement (SPPA) with Senai Airport for the project. Malakoff Radiance will install a solar photovoltaic (PV) facility under the build, own and operate (BOO) model at Senai Airport for 15 years. (New Straits Times)

Reservoir Link (Neutral, TP: RM: 0.31): Wins five solar contracts worth RM12.1m . Reservoir Link Energy’s 51% owned subsidiary Founder Energy SB, has won five solar contracts worth RM12.1m between Oct and Nov 2022. In a statement, the energy related services provider said with these contracts, its order book for solar renewable segment rose to RM51.5m. The contracts primarily involve the development of solar energy related facilities where the scope of services is based on Reservoir Link’s relevant expertise in the solar renewable segment. The projects are targeted to be completed between end-2022 and mid-2023. (StarBiz)

LYC Healthcare: Inks agreement with CuraLife to distribute diabetic supplement in Malaysia, Singapore . LYC Healthcare (LYC), via its wholly-owned subsidiary, LYC Nutrihealth SB (LYCN), signed an exclusive distribution agreement with CuraLife Spain S.L.U (CuraLife) to distribute a diabetic supplement product known as Curalin in Malaysia and Singapore. Manufactured in the EU and the US, Curalin is a herbal dietary supplement with proven efficacy in promoting a healthy glycemic response and energy levels. It reduces the craving for sugar and other carbohydrates and promotes healthy weight loss.. (New Straits Times)

Harn Len: Shareholders approve bonus shares . Harn Len Corp’s shareholders have approved its eight-for-five bonus issue of 399.24m shares at the extraordinary general meeting (EGM). “The proposed bonus issue of shares serves to reward existing shareholders for their loyalty and continued support to Harn Len group. “The board had taken into consideration that the proposed bonus issue of shares will enable shareholders to increase the number of Shares held with no cash outlay required, while retaining their percentage of equity interest held,” Harn Len said. (StarBiz)

KNM: Calls off RM1bn Borsig sale . KNM Group’s proposed sale of its entire stake in Borsig GmbH for EUR220.8m (RM1.03bn) to Vorsprung Industries GmbH, formerly GPR Siebzigste Verwaltungsgesellschaft mbH, has collapsed leaving the debt-laden group to consider other options including a possible listing of the unit instead. KNM stated the last extension sale date of Nov 30, 2022 for Borsig, a process equipment manufacturer based in Germany, passed without the closing of the transaction mainly due to financing issues. (StarBiz)

UMedic: 1Q earnings and revenue surge . UMediC Group's (UMC) net profit surged to RM2m in the 1Q ended Oct 31, 2022 from the previous quarter's RM0.6m. The medical device company's revenue of RM11.3m was 52.7 higher QoQ growth, than the previous quarter's RM7.4m. In a statement, the company said these were driven by the robust demand for medical devices and consumables. (New Straits Times)

Market Update

US indices ended last Friday mixed, though most pared earlier losses to finish largely unchanged. This comes after official jobs numbers showed a larger-than-expected gain in hiring as well as wage growth, with investors brushing off recent (weaker) economic numbers. The market is now looking toward the US Federal Reserve’s mid-month meeting where expectations are for the pace of rate hikes to be slowed. On the day, the Dow Jones Industrial Average inched 0.1% higher. The S&P 500 and Nasdaq Composite slipped 0.1% and 0.2% meanwhile. European markets were mostly lower as investors here looked toward the US jobs data and more clarity China’s easing of its zero-Covid policy. Oil and gas stocks were the major losers on the continent after the European Union tentatively agreed to a USD60 price cap on Russian seaborne oil, though this move will still require approval from the 27-member EU governments in writing. France’s CAC 40 fell 0.2% while UK’s FTSE 100 slipped 0.01%. Germany’s DAX gained 0.3% higher however. Asian markets were mostly lower earlier in the day despite news of China signalling a slight easing of its stringent Covid-19 restrictions. Japan’s Nikkei 225 slumped 1.6%. The Hang Seng and Shanghai Composite indices were both 0.3% lower meanwhile. Closer to home, the Straits Times Index fell 1.0% as the FBM KLCI slipped 0.7%.

Source: PublicInvest Research - 5 Dec 2022