Economy

EU: Euro area braces for era of central-bank losses after QE binge . The euro area’s central banks will disclose their first significant losses from a decade of money printing in the coming weeks, heralding a new era of scrutiny and the prospect of taxpayer bailouts. When the ECB reveals annual results, officials are expected to warn of big shortfalls this year and next across the region as higher interest rates make the cost of servicing deposits built up through quantitative easing soar. The ECB release will foreshadow a series of awkward national reports, with Germany’s Bundesbank potentially facing the biggest hit of all. (Bloomberg)

EU: Eurozone consumer confidence highest in over a year . Euro area consumer sentiment strengthened for the fifth month in a row to its highest level in over a year, preliminary data from the European Commission showed. The flash consumer confidence index for Eurozone climbed to -19.0 from -20.9 in Jan. That was in line with economists' expectations. The latest reading was the highest since Feb last year, when it was at -9.4. (RTT)

EU: Bundesbank expects German economy to pick up gradually . Germany's economy is set to fall again in the first quarter of this year but there would be a gradual pick up going forward, Bundesbank said in its monthly report. The central bank said economic output is set to fall again in the first quarter. However, a gas shortage is no longer expected and the electricity and gas price brakes are reducing energy costs. As tension on the energy markets eased significantly both corporate investment and industrial production would benefit from this. "Things could slowly pick up again as the year progresses," the bank said. "A significant improvement is not yet in sight." Official data released last month showed that the largest euro area economy logged a quarterly contraction of 0.2%, reversing the 0.5% expansion in the third quarter. (RTT)

UK: British business bank chief sees UK firms avoiding default wave. British businesses have headed off the threat of a defaults “Armageddon” as the possible end of painfully high interest rates and the energy crisis comes into view, according to the head of the government’s development bank. Louis Taylor, chief executive officer of the British Business Bank, said the UK is escaping the significant rise in default rates that many feared after last year’s market chaos caused by former Prime Minister Liz Truss’s budget. The BBB – which administered the Covid-19 loan program — had warned last Sept that an economic downturn would likely cause a spike in defaults, many firms loading up on debt during the pandemic. (Bloomberg)

China: Keeps key lending rates unchanged . China left its benchmark lending rates unchanged, as widely expected, despite the economy struggling to gain traction. The People's Bank of China retained its one-year loan prime rate, or LPR, at 3.65%. Likewise, the five-year LPR, the benchmark for mortgage rates, was kept unchanged at 4.30%. Previously, the bank had reduced the five year LPR rate by 15 bps each in May and Aug 2022, and by 5 basis points in Jan 2022. The one-year LPR was last lowered in Aug 2022. The LPR is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. The LPR replaced the central bank's traditional benchmark lending rate in Aug 2019. (RTT)

Taiwan: Export orders fall 19.3% . Taiwan's export orders declined at a slower-than-expected rate in Jan, data from the Ministry of Economic Affairs showed. Export orders fell 19.3% YoY in Jan. Economists had expected a decline of 25.2%. Bookings for plastics and related articles, rubber and related articles declined the most by 49.4% annually in January, closely followed by a 48.0% plunge in orders for optical, photographic, cinematographic apparatus. Orders for basic metals and articles thereof chemicals slumped 45.4% and those for chemicals fell 38.4%. Foreign demand for transport equipment was 30.4% lower and orders for textile products declined 19.1%. (RTT)

Indonesia: Plans to narrow 2024 fiscal deficit, sees higher GDP growth. Indonesia expects to bring its budget to a narrower fiscal deficit next year, even as its economic growth is predicted to accelerate, senior officials said, as President Joko Widodo aims to finish its remaining infrastructure projects. Indonesia recorded a IDR464.3trn (USD30.6bn) fiscal deficit in 2022, or 2.38% of GDP, based on unaudited data, the government. It expects a fiscal deficit of 2.84% of GDP in 2023 and, according to Finance Minister Sri Mulyani Indrawati, a 2024 state budget deficit in a range of 2.16% to 2.64% of GDP. (Reuters)

Markets

IJM (Outperform, TP: RM1.97): WCE shareholders give nod for disposal of 40% stake in Radiant Pillar t o IJM Properties Sdn Bhd, for RM494 million cash . The EGM for the related party transaction was held virtually on Feb 20. IJM Properties is an indirect wholly-owned unit of IJM Corp, who also owns 26.65% stake in WCE . (The Edge)

Comments: Following the acquisition of Radiant Pillar SB, IJM net gearing will inch up from 0.23x to 0.27x as at 2QFY23. The deal is priced at RM494m which represents a discount of 27% based on the market value of RM678m (40% of RM1.6bn appraised by independent market valuer). We are optimistic on this development as the acquisition will result in immediate earnings accretion of approx. 8% to its property arm. We will maintain our earnings forecast for now pending the completion of the deal by 4QFY23.

GUH Holdings: Proposes bonus issue of warrants, diversification into renewable energy business. Printed circuit board (PCB) maker GUH Holdings has proposed a bonus issue of 140.1m warrants on the basis of one warrant for every two shares held. The indicative exercise price of the warrants is assumed at 50 sen, which represents a premium of 19.85% to the five-day VWAP of the group’s shares up to the latest practicable date of 41.72 sen, in which it also announced its plan to diversify into the renewable energy business and related activities. (The Edge)

MCT: Acquires Seputeh land for RM58m. MCT is acquiring a 1.57-acre freehold plot of residential land at Seputeh, Kuala Lumpur, for RM58m. MCT had entered into an agreement with HPC Development SB for the acquisition, marking the group’s first land deal of 2023. MCT intends to develop 126 units of boutique apartments with an estimated gross development value of RM320m that is slated to open for registration of interest by the end of 2023. (StarBiz)

Sunview: Ventures into biogas renewable energy industry. Solar photovoltaic facilities provider Sunview Group and three other companies are jointly acquiring a firm engaged in the operation of generation facilities that produce electricity. The four buyers are acquiring Provectus Bioenergy SB for RM115,688 from Ee Hood Liang and Wong Pak Wei. Post-acquisition, Sunview will hold a 20% stake in Provectus. (The Edge)

YKGI: To co-develop RM271.62m affordable housing project with Sarawak HDC. YKGI Holdings will jointly develop a RM271.6m affordable housing project with the Sarawak Housing Development Corporation (HDC). The development project would comprise three phases, namely 426 units of Sri Pertiwi landed houses, 484 units of Sri Pertiwi affordable apartments and 96 units of affordable Spektra Medium apartments with community facilities on HDC’s land in Sungai Tengah, Kuching. (StarBiz)

SMTrack: Ventures into aviation business, buys helicopter. Radio-frequency identification (RFID) solutions provider SMTrack is buying a helicopter in line with its plan to venture into the aviation business. The group is buying the Airbus Eurocopter AS355 F2 helicopter from Grid Engineering SB for USD1.25m (RM5.54 million). Grid Engineering is involved in architectural and engineering activities. (The Edge)

Market Update

The FBM KLCI might open with a cautious note today after European stocks struggled for momentum on Monday, as investors weighed the prospect that the world’s biggest central banks would keep interest rates higher for longer to curb inflation. The region wide Stoxx 600 rose 0.1%, but the Dax in Frankfurt finished flat. Trading activity on global share and bond markets was muted as US markets were closed for a public holiday. In Europe the Zew and Ifo surveys, which measure confidence in the German economy, will be released on Tuesday and Wednesday respectively, and UK and German consumer confidence numbers are published on Friday.

Back home, Bursa Malaysia ended lower on Monday due to the absence of catalysts as investors stayed on the sidelines ahead of the re-tabling of Budget 2023 this Friday and amid the corporate financial reporting season. At the closing bell, the benchmark FBM KLCI shed 3.44 points, or 0.23%, to end at 1,473.46 compared with last Friday's close of 1,476.9. China bucked the trend, with blue chip stocks rising sharply as investors bet the equity rally had further to run. The Hang Seng index finished 0.8% higher, while China’s CSI 300 gained 2.45%— its best one-day performance since late November.

Source: PublicInvest Research - 21 Feb 2023