Economy

US: Further Fed hikes expected after data dashes 'disinflation' hopes. Expectations that the US Federal Reserve will need to push interest rates higher and keep them elevated longer than previously projected rose after data showed a key inflation gauge accelerated last month. Even so, Fed policymakers speaking did not push for a return to the kind of aggressive action that marked last year's interest-rate hikes, suggesting that for now central bankers are content to stick to a gradual tightening path despite signs that inflation is not cooling as they had hoped. (Reuters)

US: Consumer spending posts biggest gain in nearly two years, inflation picks up. US consumer spending increased by the most in nearly two years in Jan amid a surge in wage gains, while inflation accelerated, adding to financial market fears that the Fed could continue raising interest rates into summer. The report from the Commerce Department was the latest indication that the economy was nowhere near a much-dreaded recession. It joined data earlier this month showing robust job growth in Jan and the lowest unemployment rate in more than 53 years. (Reuters)

US: Business equipment borrowings grow 6% in Jan, ELFA. US companies borrowed 6% more in Jan to finance equipment investments from a year earlier, industry body Equipment Leasing and Finance Association (ELFA) said. "Business demand for equipment financing continues unabated despite uncertain and conflicting economic signals inflationary pressures, rising interest rates, a hot labour market and easing supply chain disruptions," said ELFA Chief Executive Ralph Petta. Companies had signed up for new loans, leases and lines of credit worth USD8.8bn last month, compared with USD8.3bn a year earlier. (Reuters)

EU: Euro zone bond yields rebound after hot US inflation data. Euro zone government bond yields rebounded to around their highest levels in more than a decade after US inflation data came in hotter than expected. The US personal consumption expenditures price index rose 5.4% YoY in Jan, up from 5% in Dec. Most worryingly for investors, the core inflation reading, which strips out food and energy costs and is closely watched by the Fed, unexpectedly rose to 4.7% from 4.4%. Yields on shorter-dated bonds, which are highly sensitive to interest rate expectations, soared after the data was released, after falling earlier in the session. Yields move inversely to prices. (Reuters)

EU: German economy worse than expected fall in Q4. Germany's economy shrank more than estimated at the end of the year amid fears of another contraction in the first quarter, signalling that hopes of a shallow recession in the biggest euro area economy was premature as high inflation continues to weigh on household spending. GDP shrank 0.4% from the 3Q, when the economy expanded 0.5%, detailed results from Destatis showed. The sequential contraction for the 4Q was double the 0.2% fall estimated on Jan 30. The latest decline in GDP was the worst since the 1Q of 2021, when the economy shrank 1.5% after the Covid pandemic ravaged the economic activity across the world. (RTT)

UK: Consumer confidence rebounds strongly, GfK. UK consumer sentiment improved in Feb from historic lows seen in the previous months to its highest level since April last year, as households were more optimistic about their personal finances and the future economic situation, despite headwinds from rising inflation, survey results from the market research group GfK showed. The consumer confidence index rose to -38 in Feb from - 45 in Jan. The score was forecast to rise slightly to -43. The latest increase was the biggest since March 2021 and came after a fall in the previous month. All the five components of the consumer confidence index improved in Feb. The latest survey was carried out from Feb 1 to 13. (RTT)

Japan: Consumer price inflation at 41-year high. Japan's consumer price inflation accelerated further in Jan to hit a fresh 41- year high, adding pressure on the central bank to withdraw its massive monetary stimulus. Core inflation that excludes volatile fresh food climbed to 4.2% in Jan from 4.0% in the previous month, data from the Ministry of Internal Affairs and Communications showed. The rate was the fastest since Sept 1981 and matched economists' expectations. Headline inflation rose to 4.3% from 4.0% in Dec. The 4.3% was the strongest since Dec 1981. Inflation has remained above the 2% target for the tenth straight month. (RTT)

Singapore: Industrial Production falls 2.7%. Singapore's industrial production declined for the fourth straight month in Jan, largely due to a slump in the general manufacturing and chemical output, data from the Economic Development Board revealed. Industrial production dropped 2.7% YoY in Jan, following a 2.6% fall in Dec. Meanwhile, economists had expected a recovery of 2.9%. Excluding bio-medical manufacturing, industrial production slid 6.3% annually in Jan, after a 0.3% rebound in the previous month. On a monthly basis, industrial production climbed 1.1% in Jan, reversing a 2.9% increase in the prior month. (RTT)

Hong Kong: Inflation rises to 2.4%, highest in 4 months. Hong Kong's consumer price inflation accelerated further in Jan to the highest level in four months, largely due to higher utility and food costs, data released by the Census and Statistics Department showed. The CPI climbed 2.4% year-over-year in Jan, faster than the 2.0% rise in Dec. Further, this was the strongest inflation since Sept 2022, when prices had risen 4.4%. Prices of utilities grew the most, by 20.6% annually in Jan. Clothing and footwear costs rose 5.8%, and basic food prices were 5.0% more expensive. (RTT)

Markets

Uzma (Outperform, TP: RM1.05): Bags 3-year job worth RM30m from Petronas Carigali. Uzma has bagged a RM30 million contract from Petronas Carigali SB to provide electrical submersible pump (ESP) equipment and services in Malaysia. Uzma Engineering SB had on 27 Jan accepted an award of contract from Petronas Carigali for the job.The duration of the contract will be for three years until 24 Jan 2026. (The Edge)

Comments: We expect this contract to contribute an average of 1.7% per annum to Uzma’s bottomline. Although, the contract only contribute marginally to the Group’s earnings, the contract validates our optimistic outlook on the Group as a key beneficiary of increasing brownfield activities especially on production enhancements on the back of steady Brent crude price. We expect more contracts will be awarded in the future.

Pasukhas: Plans 10-to-1 share consolidation . Pasukhas Group has proposed the consolidation of every 10 of its shares into one share to improve the company’s capital structure. “As the company has a large number of shares in issue and a relatively low trading price range, the board noted that a small movement in the share price may result in high percentage movement in the share price,” it said. “The proposed share consolidation would lead to a reduction in the number of shares available in the market and may reduce the magnitude of fluctuation of the company’s market capitalisation,” it added. (The Edge)

NationGate: Aims to surpass FY2022 record results this year, says MD . NationGate Holdings Bhd posted a net profit of RM22.2m in the 4QFY2022, underpinned by its networking and telecommunications segment. NationGate MD Ooi Eng Leong said the FY2022 results were a record for the group. “We will strive to surpass this record for FY2023 considering the strong support from our diversified customer base, particularly from non-consumer electronic segments. “The 5G network was launched in 2019 and we see the rise in electric vehicle (EV) adoption in 2020. That was when NationGate took a credit line to expand its production floor and capacity," he said in a statement. (The Edge)

MAHB: Local airports record 6.3m passenger traffic in Jan 2023 . Local airports operated by Malaysia Airports Holdings (MAHB) group registered a total of 6.3m passenger traffic movements in Jan 2023. The airport operator said this was the second consecutive month in which total traffic hit the six million mark and it represents 75% recovery against pre-pandemic levels. It said international traffic fared well with 2.8m passenger movements recorded, similar to levels seen in Dec 2022. This 62.5% recovery against 2019 levels was mainly driven by China’s reopening of international borders early last month, it added. (Bernama)

Farm Fresh: 3Q net profit soars 64% partly boosted by School Milk Program. Farm Fresh’s net profit for the 3QFY23 jumped 63.8% to RM18.8m from RM11.5m a year before, amid higher revenue. Quarterly revenue grew 39% to RM162.2m from RM116.7m a year before, driven by positive sales momentum accompanied by the launching of new products. Its revenue was further boosted by the School Milk Program. The group added that the higher quarterly revenue was also underpinned by higher revenue contribution from its Australia subsidiaries, whose revenue increased to RM29.9m from RM9.4m a year ago. (The Edge)

Market Update

The FBM KLCI might open flat today after US stocks have recorded their biggest weekly fall in more than two months, declining further on Friday after traders were shaken by the latest evidence of stubbornly high inflation in the world’s largest economy. The S&P 500 index closed down 1.1% in New York, bringing its losses for the week to 2.7%. The tech-heavy Nasdaq Composite was 1.7% lower for the day, for a 3.3% decline for the week. The weekly declines were the sharpest since early December. After an unexpectedly strong start to the year, US stocks have now declined for three consecutive weeks. Recent economic data has increased expectations that the Federal Reserve will have to hold interest rates at higher rates for an extended period to bring inflation back towards its 2% target, putting pressure on equity valuations. European stocks also dropped on Friday. The region-wide Stoxx 600 fell 1%, while London’s FTSE 100 dipped 0.4%. Germany’s Dax declined 1.7% and the French CAC 40 was down 1.8%.

Back home, Bursa Malaysia ended the trading week almost flat on weak sentiment, in line with most regional peers, despite the upbeat Wall Street performance overnight. At the closing bell, the benchmark FBM KLCI eased 0.85 of-a-point or 0.06% to end at 1,456.80, from Thursday’s close of 1,457.65. In the region, the Hang Seng index fell 1.7%, while China’s CSI 300 lost 1%. Although ecommerce group Alibaba beat analysts’ expectations with its fourth-quarter earnings, its shares fell 5.4%, suggesting investor skittishness over China’s economy despite the government easing Covid-19 restrictions.

Source: PublicInvest Research - 27 Feb 2023