Economy

US: Factory orders show notable rebound in Dec. After reporting a steep drop in new orders for US manufactured goods in the previous month, the Commerce Department released a report showing a notable rebound in factory orders in the month of Dec. The Commerce Department said factory orders jumped by 1.8% in Dec after plunging by a revised 1.9% in Nov. Economists had expected factory orders to surge by 2.2% compared to the 1.8% slump originally reported for the previous month. (RTT)

US: Labour productivity surges 3.0% in Q4, more than expected. A report released by the Labour Department showed US labour productivity surged by more than expected in the 4Q2022. The labour productivity spiked by 3.0% in the fourth quarter after jumping by an upwardly revised 1.4% in the third quarter. Economists had expected labour productivity to shoot up by 2.4% compared to the 0.8% increase that had been reported for the previous quarter. The stronger than expected productivity growth came as output surged by 3.0%, while hours worked rose by 0.5%. Productivity is a measure of output per hour. (RTT)

US: Jobless claims unexpectedly show another modest decrease. The Labour Department released a report on Thursday unexpectedly showing another modest decrease by first-time claims for U.S. unemployment benefits in the week ended Jan 28th. The report said initial jobless claims edged down to 183,000, a decrease of 3,000 from the previous week's unrevised level of 186,000. The dip surprised economists, who had expected jobless claims to climb to 200,000. (RTT)

EU: ECB delivers 50bps hike, signals repeat in March. The ECB raised its key interest rates by 50bps, in line with expectations, and signalled that policymakers plan to repeat the move in March, when they will evaluate the future path of policy rates. The Governing Council, led by ECB President Christine Lagarde, had slowed the pace of interest rate hikes to 50bps from 75bps in Dec. Following the latest hike, the main refinancing rate, or refi, is at 3.00%, the deposit facility rate is at 2.50% and the lending rate is now 3.25%. (RTT)

UK: BoE hikes rate by 50 bps; softens guidance. The BoE raised its benchmark rate by a half%age point citing stronger-than expected wage growth but softened its stance on future tightening as inflation is set to return to the target in medium term. The Monetary Policy Committee voted 7-2 to raise the bank rate by 50bps to 4.00%, the highest since 2008. (RTT)

Hong Kong: Central bank raises base rate by 25bps. The Hong Kong Monetary Authority tightened its monetary policy, in tandem with the decision of the US Federal Reserve. The HKMA adjusted the Base Rate upwards to 5.00% from 4.75% with immediate effect. The Federal Reserve had raised the target range for the federal funds rate by 25bps to 4.50 to 4.75% on Wednesday. (RTT)

Markets

IHH Healthcare (Outperform, TP: RM7.60): IHH Healthcare subsidiary Acibadem expands into third largest city in Turkey with acquisition of Kent Health Group. IHH Healthcare subsidiary Acibadem Healthcare Group has announced that it has entered definitive agreements to acquire 100% of Kent Health Group. Izmir Kent Hospital will be Acibadem’s 19th hospital in Turkey and its 25th globally. (The Edge)

Comments: Acibadem Healthcare Group (Acibadem), IHH’s 90%- owned subsidiary, announced that it has entered into definitive agreements to acquire 100% of Kent Health, a leading private healthcare service provider in Izmir, Turkey for EUR55m (approx. RM253.5m). We are positive on this potential acquisition as it allows Acibadem to expand into the third largest city in Turkey. Given IHH’s net gearing ratio of only 0.22x, we believe funding should not be an issue. Kent Health currently has 340 beds with an attached cancer centre. Based on our preliminary estimates, Kent Health is not likely to contribute positively to the group in the immediate term. However, the acquisition may lead to potential synergies (i.e revenue expansion and streamlining of cost) that should be earnings accretive to IHH in the long run. We maintain our Outperform rating on IHH with an unchanged SOTP-based TP of RM7.60.

DNeX: Secures maintenance job for IRB tax system . Dagang Nexchange's (DNeX) has secured a maintenance contract from the Inland Revenue Board. IAC will undertake the application and maintenance of Malaysia Hasil Integrated Taxation Systems for the one-year duration of the contract. (StarBiz)

KNM: In talks with creditors to 'accelerate' monetisation of assets to resolve settlement . KNM Group which recently defaulted on debts amounting to over RM420m, is in talks with all its creditors to resolve the settlement of the monies due to them from the monetisation of non-core assets and sale of Borsig GmbH (The Edge)

Velesto: Bags jack-up drilling rig services worth RM59m from ROC Sarawak . Velesto Energy announced that its wholly-owned subsidiary Velesto Malaysian Ventures SB had received a Letter of Award from ROC Oil (Sarawak) SB for the provision of jack-up drilling rig services estimated at USD14m (RM59.3m). (The Edge)

Asdion: Independent auditors flag going concern over FY2022 financial statements . Asdion’s independent auditors Messrs CAS Malaysia PLT have issued an unmodified audit opinion with a material uncertainty related to going concern for Asdion’s statements for the financial year ended Sept 30, 2022. (The Edge)

Serba Dinamik: Three subsidiaries apply for temporary stay pending hearing of permanent stay of winding-up order. Serba Dinamik Holdings and three related companies, applied for a temporary stay of the winding up order granted by the High Court last month against them. (The Edge)

Pestech: Aborts second tranche of private placement . Pestech International has aborted its plan to raise RM6.5m via the second tranche of a private placement, as the identified investors had failed to complete the acceptance within the stipulated timeframe. (The Edge)

Market Update

The FBM KLCI might open higher today after investors piled into stocks and bonds on Thursday as they seized on signs that interest rates are close to peaking on both sides of the Atlantic. Stocks on Wall Street shot to their highest level since August, while government bonds in Europe staged their biggest one-day rally in years. In the US, the broad S&P 500 equities index closed 1.5% higher and the Nasdaq Composite rose 3.3%, led by tech stocks including Facebook owner Meta. The closing level for the Nasdaq was 19.5% higher than its recent low in late December. US Treasury bonds extended a rally that began on Wednesday after the Federal Reserve raised interest rates more modestly than in recent months and hinted that an aggressive series of rate rises was nearing an end. Europe’s Stoxx 600 closed more than 1.3% higher and Germany’s Dax climbed 2.2%. The FTSE 100 gained 0.8%.

Back home, shares on Bursa Malaysia finished the first trading day of February in positive territory, as bargain-hunting emerged following the selldown on Tuesday. At the closing bell, the benchmark FBM KLCI had risen 4.30 points to 1,489.80, from Tuesday's close at 1,485.50. In Asia, Hong Kong’s Hang Seng index dipped 0.5%, China’s CSI 300 slipped 0.3% and Japan’s Nikkei rose 0.2%.

Source: PublicInvest Research - 3 Feb 2023