Economy

US: Trade gap widened to record in 2022 on imports surge. The US trade deficit widened to a record last year on a surge in imports as American companies scrambled early on to ensure they had enough merchandise on hand to meet demand. The annual shortfall in goods and services increased 12.2% to USD948.1bn. The Dec gap widened to USD67.4bn from the prior month. The figures aren’t adjusted for prices. A record value of imports in 2022 reflects in part a push by retailers to replenish inventories well ahead of peak selling periods and avoid a repeat of shortages and supply-chain delays that clogged West Coast ports in 2021. (Bloomberg)

US: Wholesale egg prices have ‘collapsed.’ Why consumers may soon see relief. Wholesale egg prices have cratered in recent weeks from record highs, meaning consumers may soon see relief at the grocery store. But the dynamics of egg pricing from the wholesale to retail market, in addition to other factors, means that’s not a sure thing in the short term. Prices fell to USD2.61 per dozen eggs on Monday, a 52% decrease from the peak of around USD5.43 on 19 Dec and a 47% decrease from the beginning of 2023. In a year characterized by historically high inflation, egg prices were a standout in 2022, rising faster than almost all other consumer items. Average retail prices increased nearly 60% in 2022, according to the CPI. In Dec, a dozen large Grade A eggs cost consumers USD4.25 on average, more than double the USD1.79 a year earlier. (CNBC)

US: Fed Chair Powell says inflation is starting to ease, but interest rates still likely to rise. Inflation is beginning to ease, though he expects it to be a long process and cautioned that interest rates could rise more than markets anticipate if the economic data doesn’t cooperate. Markets briefly turned positive as investors are hoping the Fed soon will halt the aggressive interest rate hikes it began last year. However, the major averages later flipped back negative after Powell cautioned about strong economic data like last week’s jobs report for Jan, before turning positive again. The report showed that nonfarm payrolls rose by 517,000 in Jan, nearly triple the Wall Street estimate (CNBC)

EU: Decline in German industrial output biggest in 9 months. Germany's industrial production declined the most in nine months in Dec driven by the sharp fall in output of intermediate goods. Industrial production slid 3.1% on a monthly basis, reversing the 0.4% rise in Nov. This was the biggest fall since last Mar, when output was down 4.2% and also larger than the expected 0.7% decline. Within industry, the production of consumer goods gained 0.3% and that of capital goods remained unchanged in Dec. On the other hand, intermediate goods output decreased 5.8% due to widespread contraction across the sub-sectors. The monthly fall in the manufacture of chemicals and chemical product was particularly strong. (RTT)

UK: House prices remain stable amid subdued housing market outlook. House prices in the UK showed no variations at the start of the year after falling in the previous four months and are likely to witness a sluggish housing market throughout this year amid the rising cost of living and higher interest rates. The house price index registered no change over the month, following a 1.3% decrease in the prior month. Economists had forecast a 0.8% fall. Meanwhile, annual growth in house prices eased further to 1.9% in Jan from 2.1% in Dec. Further, this was the weakest house price inflation in over three years. (RTT)

Japan: Dec real wages rebound on one-off bonuses, household spending falls. Japanese real wages rose for the first time in nine months thanks to robust temporary bonuses, but uncertainty remains on whether pay hikes will continue to sustain Japan's economic recovery. Separate data showed household spending falling for a second month in Dec, as rising prices offset otherwise robust private consumption fuelled by the country's reopening from the COVID-19 pandemic. Japan's real wages rose 0.1% in Dec from a year earlier, posting the first gain since Mar. (Reuters)

Australia: Lifts rate by 25 bps, signals more hikes on cards. Australia's central bank raised its benchmark rate by a quarter-point and tweaked its forward guidance triggering expectations for more hikes. At the first board meeting of the year, the RBA policymakers decided to lift the cash rate target by 25 bps to 3.35%. The rate decision came in line with expectations. The interest rate on Exchange Settlement balances was also raised by 25 bps to 3.25%. The current sequence of policy tightening has taken the cash rate target to 3.35% from 0.10%, indicating a total 325 bps increases since April 2022. (RTT)

Taiwan: Jan exports down for 5th month, China shipments slump. Taiwan’s exports fell for a fifth straight month in Jan due to a deteriorating global economy and factory closures during the long Lunar New Year holiday, with the outlook remaining poor in the short term. Exports dropped 21.2% by value last month from a year earlier to USD31.5bn. That followed a 12.1% drop in Dec and was slightly worse than Reuters poll forecast for a 20% contraction. Ministry of Finance said seasonally weaker global demand after the year-end festive period and fewer working days, as the Lunar New Year fell in Jan this year, dragged on exports. (Reuters)

Philippine: Inflation rises to 8.7%, highest since Dec 2008. The Philippines' CPI accelerated unexpectedly at the start of the year to the highest level in just over fourteen years, largely driven by higher costs for utilities and food products, raising the likelihood of yet another rate hike from the central bank next week. The CPI climbed 8.7% YoY in Jan, faster than the 8.1% rise in Dec. Meanwhile, economists had forecast inflation to ease to 7.7%. Moreover, this was the strongest inflation rate since Dec 2008, when prices had grown the same 8.7%. The core CPI, which excludes prices of selected food and energy items, rose to 7.4% in Jan from 6.9% in Dec. (RTT)

Markets

Capital A: AirAsia to lease 15 new planes to meet demand driven by China's reopening. AirAsia plans to take on lease 15 additional aircraft to meet travel demand from China now that it has reopened its borders. The 15 aircraft are on top of the 326 planes already on the company's order book until 2030. Currently, AirAsia has 150 planes in the air and expects to put all 204 of its fleet back in service by Aug. (The Edge)

Artroniq: Proposes 20% private placement to raise up to RM36.8m; diversification into electronic bicycles business. Prices of the placement shares will be priced at not more than 20% discount to Artroniq shares’ five-day VWAP. Based on an illustrative issue price of 56 sen per placement share, the group may raise up to RM36.77m, of which 61% are meant for general working capital, 38% for spending in the electronic bicycles assembly and manufacturing business, and the remaining proceeds for expenses of this corporate exercise. (The Edge)

Tanco: Buys 50.1% stake in real estate sales processing platform operator for RM20m. The group is acquiring the stake in Gplex Properties SB from Googolplex Holdings, which will still own the other 49.9% stake after the acquisition. The Gplex Properties stake acquistion comes with profit guarantees of RM4.97m for FY23, RM6.m for FY24 and RM7.52m for FY25. The acquisition will be funded via internally-generated funds. (The Edge)

MN Holdings: Inks MOU with Intelligent Pie in conducting OT cybersecurity projects. MN Holdings has entered into a MOU with end-to-end cybersecurity solutions provider Intelligent Pie Consulting SB (IPIE) for collaboration in conducting potential operational technology (OT) cybersecurity projects in Malaysia. The collaboration with IPIE will aim at 5 market segments that includes Tenaga Nasional and its subsidiaries, Sarawak Energy, Sabah Electricity, Sabah Electricity, Independent Power Plant, and Solar & Battery Power Plant. (The Edge)

Willowglen: Bags contract in Singapore worth RM11.9m. Willowglen MSC has bagged an RM11.92m contract from SP PowerAssets Ltd in Singapore for comprehensive maintenance of a fence intrusion detection system. The contract was awarded to its wholly-owned subsidiary, Willowglen Services Pte Ltd. The commencement date of the contract is Feb 7 and will end on April 6, 2028. (The Edge)

Signature International: Appointed as Teka’s authorised dealer. Signature International has been appointed as the authorised dealer of built-in kitchen appliance specialist Teka Kuchentechnik (Malaysia) SB. The company was allowed to sell Teka kitchen products at the assigned sales area or point of sales of Signature in the country. The one-year deal came into force on Jan 1. (The Edge)

Bintai Kinden and Sarawak Consolidated: Team up to explore business opportunities. Bintai Kinden Corp and Sarawak Consolidated Industries (SCIB) have entered into a MOU to establish a JV for exploring business opportunities, securing new projects and sharing profits. The MOU is a preliminary step they are taking as they explore a working relationship and cooperation to combine skills, expertise, capabilities, experience and collectively bid for projects in Malaysia, as well as to set out the principal terms of the arrangement between the parties. (The Edge)

Market Update

The FBM KLCI might open higher today as US equities rose after Federal Reserve chair Jay Powell spoke for the first time since January’s blockbuster employment data sent a chill through markets. In a question-and-answer session with the Economic Club of Washington, Powell on Tuesday warned the US central bank may need to raise rates more than expected. But the remarks were less hawkish than some investors had anticipated, and the reaction in markets was one of relief. After a bout of choppy trading that briefly dragged stocks into negative territory, US equities rallied to close higher. The benchmark S&P 500 rose 1.3% and the tech heavy Nasdaq Composite gained 1.9%. The Bureau of Labour Statistics last week reported the US had added more than half a million jobs in January, roughly triple what economists had expected. The unemployment rate fell to 3.4%, the lowest level in 53 years. Investors had forecast that the hot labour market data would inspire hawkish rhetoric from the Fed boss. But Powell was seen to have largely reiterated the commentary he made last Wednesday when the central bank’s policymaking body slowed the pace of its interest rate raises, delivering a 0.25 percentage point increase. European stock markets paused from two days of selling, with Europe’s benchmark Stoxx 600 index closing up 0.2%. Germany’s Dax, which has risen 9% this year on hopes of a milder economic slowdown, finished down 0.2%. The FTSE 100 was a standout performer, up 0.4% after strong earnings from oil major BP.

Back home, the FBM KLCI closed broadly lower on renewed volatility as sentiment turned wary over the rising bond yield. At the closing bell, the benchmark FBM KLCI went down by 14.09 points or 0.95% to 1,476.38 compared with last Friday's close of 1,490.47. Meanwhile, the regional stocks mostly rose, with the Chinese CSI 300 rising 0.2%. Hong Kong’s Hang Seng index closed 0.4% higher.

Source: PublicInvest Research - 8 Feb 2023