Economy

US: Fed minutes signal further interest rate hikes. The US Federal Reserve released the minutes of its Dec monetary policy meeting, reinforcing expectations the central bank is likely to continuing raising interest rates. The minutes reiterated that officials continue to anticipate that ongoing rate increases would be appropriate to achieve the Fed's dual objectives of maximum employment and price stability. The Fed noted that the pace of future rate hikes would take into account the cumulative tightening of monetary policy, the lags with which policy affects economic activity and inflation, and economic and financial developments. At the meeting, the Fed decided to raise interest rates by 50bps, which marked a slowdown in the pace of rate hikes following four consecutive 75bps increases. The central bank raised the target range for the federal funds rate to 4.25 to 4.50%, the highest level in 15 years. (RTT)

EU: Private sector downturn softens in Dec. Euro area private sector activity shrank at the end of 2022, at the least marked pace since July, on the back of a slower fall in order books and a rebound in business confidence amid slowing inflation, results of the closely watched purchasing managers' survey. The composite output index rose to 49.3 in Dec from 47.8 in Nov. This was the highest reading since last July and above the flash estimate of 48.8. However, a score below 50.0 indicates contraction. Manufacturing was again the principal drag on overall output. Services activity also continued to fall. The services PMI, climbed more-than-estimated to 49.8 in Dec from 48.5 in Nov. The flash score was 49.1. Final PMIs suggest the euro-zone economy held up better than anticipated in 4Q, but are still consistent with a mild recession. (RTT)

UK: Mortgage approvals weakest since mid-2020. UK mortgage approvals reached the lowest level since the middle of 2020 as rising interest rates acted as a drag on housing demand. Mortgages approved for house purchases decreased more-than-expected to 46,100 from 57,900 in Oct. This was the lowest level since June 2020, when approvals totaled 40,500. The expected level was 55,000. The 'effective' interest rate, that is the actual interest rate paid on newly drawn mortgages rose 26bps to 3.35% in Nov. Consumers borrowed an additional GBP1.5bn in Nov, which was above the GBP0.7bn borrowed in Oct. Credit was much bigger than economists' forecast of GBP0.9bn. (RTT)

Japan: Manufacturing PMI slips to 48.9 in Dec. The manufacturing sector in Japan continued to contract in Dec, and at a slightly faster rate with a manufacturing PMI score of 48.9. That's down from 49.0 in Nov. The greatest influence on decline in the headline PMI number came from its largest component, new orders. Firms registered a reduction in order book volumes that was strong overall and faster than rates recorded over much of the past 2.5 years. Weak underlying demand conditions, on both a domestic and global scale, reportedly drove the latest contraction. Similarly, new export orders fell for the 10th month in a row. It is, however, worth noting that the rates of decline signalled by each index were slightly softer than those recorded in Nov. In line with the picture for demand, production levels at Japanese good producers decreased in Dec. The reduction, though slower than Nov's 27-month record, was solid overall. (RTT)

India: Services growth strongest in 6 months on strong demand. India's service sector activity expanded at the fastest pace in 6 months amid robust inflow of new orders and favourable market conditions. The services PMI climbed to 58.5 in Dec from 56.4 in Nov. New orders received by the Indian service providers rose for the 7th straight month in Dec. The latest pace of growth was the fastest since June, which was linked to demand strength and successful marketing initiatives. Among sales categories, finance and insurance outperformed all other sectors. In terms of prices, input price inflation has accelerated since Nov, driven by higher energy, food, and transportation costs. As a result, selling prices also increased at a faster pace at the end of the year. (RTT)

Hong Kong: Retail sales slump 4.2%, worst fall in 8 months. Hong Kong's retail sales declined for the first time in 3 months continue damping consumption ahead, while a relaxation in Covid restrictions and an improvement in the labour market are expected to lent support. The value of retail sales dropped 4.2% annually in Nov, after a 4.0% growth in Oct. This was the worst decline since March, when sales fell 13.8%. Tightened financial conditions will continue to weigh on local consumption demand, while the further relaxation of social distancing measures and continued improvement in labour market conditions will provide support. (RTT)

Thailand: Manufacturing gains strength on robust output growth. Thailand's manufacturing activity gained strength at the end of the year driven by sustained improvement in output. The manufacturing PMI posted 52.5 in Dec up from 51.1 in Nov. Activity expanded at the fastest pace in 3 months. Production continued to expand in Dec and at the second fastest pace on record as manufacturers lifted their activity to complete previous orders. However, new orders contracted due to the deterioration in economic conditions and high inflation. Workforce levels declined as firms attempted to rein in labour costs. (RTT)

Markets

Coastal Contracts: Mexican JV signs expanded deal with Pemex . Coastal Contracts, via the JV company with its Mexican partner Grupo Empresarial Alfair S.A.P.I. De C.V., recently signed an addendum to the contract with Mexican state-owned petroleum company Petroleos Mexicanos (Pemex). Under the addendum, Pemex has agreed to increase the unit price for the gas sweetening services of the contract to compensate Coastoil Dynamic S.A. De C.V., the joint venture company, for the expansion of plant capacity from 150m standard cu ft per day (mmscfd) to 180 mmscfd since Nov 2021, Coastal Contracts said. "Consequently, the maximum contract value has increased to MXN1.6bn (equivalent to RM371.8m) from MXN1.3bn (equivalent to RM258.7m) representing an increase of MXN0.3bn and RM113.1m respectively," it said. (Bernama)

Cypark: Jakel is now our single largest shareholder, says Cypark, confirming The Edge report. Jakel Group has emerged as Cypark Resources single largest shareholder with a 27.33% stake after the renewable energy company completed the placement of 176.65m new shares under its private placement exercise, with all the shares taken up by Jakel’s investment arm Jakel Capital SB for RM67.1m or 38 sen per share. (The Edge)

Crest Builder: Gets construction job worth RM251m. Crest Builder Holdings has been awarded a contract by Sime Darby Property (Bukit Raja) SB worth RM250.2m, to build three condominium blocks with a car park podium in Putra Heights. The company said the contract period is 36 months from Feb 2. (The Edge)

Destini: Govt takes over THHE-Destini's offshore patrol vessel project, provides RM153m rescue loan . The Ministry of Finance has taken over the offshore patrol vessel (OPV) project from Destini’s former 51%-owned subsidiary THHE Destini SB after discovering significant problems, including the need for the government to provide an additional loan of RM152.6m to ensure the completion of the first vessel within this year. (The Edge)

Stella: Wins RM41.2m contract from RSM Builders. Stella Holdings has secured a construction contract worth RM41.2m from RSM Builders SB. The company said the contract was for road construction at the UMW High Value Manufacturing Park (UMW HVMP) di Serendah, Selangor. The contract is for a period of 13 months and 12 days. The date of completion shall be on Feb 28, 2024. (StarBiz)

Revenue Group: Suspends two directors . Revenue Group has announced that the executive functions of Ng Shih Chiow and Ng Shih Fang have been suspended with immediate effect pending further investigation over certain complaints against them. Shih Chiow is the executive director and group chief operating officer while Shih Fang is the executive director and group chief technology officer. (StarBiz)

IPO: NationGate IPO oversubscribed by 16.5 times . The public portion of electronics manufacturing services provider NationGate Holdings IPO has been oversubscribed 16.5 times. The ACE Market-bound company said there was a total of 20,444 applications for 1.8bn new shares valued at RM689.2m received from the Malaysian public. (StarBiz)

Market Update

The FBM KLCI might open flat today as US stocks pared gains on Wednesday after minutes from the Federal Reserve’s latest meeting showed officials wanted to see more evidence of cooling inflation and supported continuing raising interest rates in 2023. Wall Street’s benchmark S&P 500 index gained 0.8% and the technology heavy Nasdaq Composite added 0.7% in a volatile trading session. Stock markets had been more than 1% higher before the minutes were released. Investors also seized on economic data released on Wednesday that showed a contraction in US manufacturing activity in December, the second month in a row, bringing it to its lowest level since May 2020. The report from the Institute for Supply Management also showed that a decline in prices paid by manufacturers accelerated last month. In European equities, the regional Stoxx Europe 600 added 1.4%, taking its gains for the week to more than 3%. France’s Cac 40 and Germany’s Dax rose 2.3% and 2.2%, respectively, the biggest one day gains since early November. London’s FTSE 100 added 0.4%. The moves higher come during a week in which French, German and Spanish inflation figures have undershot expectations, boosting hopes that price growth has peaked across the Eurozone.

Back home, Bursa Malaysia ended lower on a lack of catalysts, in line with most key regional markets. At the closing bell, the benchmark FBM KLCI eased by 4.44 points to 1,469.55 from Tuesday's closing of 1,473.99. In the region, Singapore's Straits Times Index eased 0.1%, and Japan's Nikkei 225 Index trimmed 1.45% while Hong Kong's Hang Seng Index jumped 3.22%. China’s CSI 300 index of Shanghai- and Shenzhen-listed shares gained 0.2%.

Source: PublicInvest Research - 5 Jan 2023