Economy

US: Core capital goods orders post largest gain in five months, shipments surge. New orders for key US manufactured capital goods increased by the most in five months in Jan while shipments of those so-called core goods rebounded, suggesting that business spending on equipment picked up at the start of the first quarter. Some of the larger-than-expected rise in core capital goods orders which ended two straight monthly declines, likely reflected higher prices last month. It joined solid consumer spending and robust labor market data in painting an upbeat picture of the economy. The string of strong data has raised the risk that the Federal Reserve could hike interest rates to a higher level than currently estimated (Reuters)

US: Pending home sales post largest gain in 2-1/2 years in Jan. Contracts to buy US previously owned homes rose by the most in more than 2-1/2 years in Jan, but a resurgence in mortgage rates could delay a much-awaited housing market turnaround. Pending Home Sales Index, based on signed contracts, jumped 8.1% last month, the biggest increase since Jun 2020. Economists polled had forecast contracts, which become sales after a month or two, rising 1.0%. The second straight monthly increase in contracts could see existing home sales rebounding or posting another small decline after logging their 12th straight monthly decrease in January. Contracts increased in all four regions. Pending home sales decreased 24.1% in Jan on a YoY basis. (Reuters)

EU: Improvement in economic confidence halts. After rising for three straight months, Eurozone economic sentiment fell marginally as the weakness in industry and services were partially offset by the increasing confidence in retail and among consumers. The economic confidence index unexpectedly dropped to 99.7 from 99.8 in Jan. The reading was forecast to improve to 101. Due to a setback in managers' production expectations, the industrial confidence indicator fell to 0.5 in Feb from 1.2 in Jan, while economists expected the score to rise to 2.0. Similarly, the services sentiment index unexpectedly slid to 9.5 from 10.4 a month ago. The expected reading was 12.4. There were significant declines in managers' views on the past business situation and demand expectations. (RTT)

EU: Bank lending growth weakens further. Growth in the euro area bank lending continued to weaken and the narrow measure of money supply contracted for the first time on record, reflecting the impact of monetary policy tightening. The annual growth rate of credit to the private sector slowed to 3.8% from 4.3% in Dec. Similarly, adjusted loans to the private sector climbed 4.9%, weaker than the 5.4% rise in Dec. Loans to both households and businesses weakened further in Jan. The growth rate in loans to households eased to 3.6% from 3.8% and that to non-financial corporations slowed to 6.1% from 6.3%. The M3 monetary aggregate grew 3.5% from the last year, slower than the 4.1% increase in Dec. (RTT)

EU: Sweden retail sales fall 7.5%. Sweden's retail sales continued its declining trend in Jan, as sales of both durable and consumer goods contracted. Retail sales fell a working-day adjusted 7.5% YoY in Jan, faster than the 6.9% decrease in Dec. Sales have been falling since May 2022. Sales of durable goods dropped 9.9% annually in Jan, and those of consumables, excluding sales at the state-owned chain of liquor stores, slid 5.0%. On a monthly basis, retail sales edged down 0.1% in Jan versus a 1.0% fall in Dec. Sales decreased for the second straight month. (RTT)

China: Recovery still uneven with industrial sector lagging. China’s economy rebounded in February after the long holiday, although early indicators point to an uneven recovery with strong consumption following the scrapping of Covid rules but lagging industrial activity. According to Bloomberg’s aggregate index of eight early indicators, which showed growth momentum this month maintained the pace seen in Jan, with the overall gauge staying unchanged at 4. The economy slowed at the end of 2022 as the Covid spread around the country, before beginning to pick up last month. (Bloomberg)

Japan: Leading index at 2-year low. Japan's leading index declined to a two-year low in Dec, as initially estimated. The leading index, which measures the future economic activity, dropped to 97.2 in Dec from 97.7 in the previous month. The score came in line with the preliminary estimate released on 7 Feb and reached the lowest since Dec 2020, when the reading was 96.5. The coincident index that measures the current economic situation, also weakened to a 7-month low of 99.1 in Dec from 99.3 in the previous month. The flash score was 98.9. At the same time, the lagging index slid to 99.6 from 99.8 in the preceding month. The reading was revised from 98.9. (RTT)

Japan: Output falls as global slowdown weighs on production. Japan’s factory output fell for the first time in three months in January, as a global economic slowdown continued to cool demand, weighing on the country’s recovery momentum. Industrial production shrank 4.6% from Dec, according to the industry ministry. Economists had forecast a 2.9% decline. The lunar new year holidays across Asia were among the factors weighing on output. Cars, auto parts and chip making machinery led the drop while fuel production rose. Output decreased 2.3% from a year ago, below analysts’ estimates of a 0.7% slip. (Bloomberg)

Hong Kong: Trade balance swings to deficit on exports slump. Hong Kong's foreign trade balance turned to a deficit in Jan from a surplus in the previous year, as exports fell faster than imports amid the slackened external environment and the impact of the early arrival of the Lunar New Year this year. The visible trade balance showed a deficit of HKD25.3bn versus a surplus of HKD6.6bn in the same month last year. However, the deficit has decreased considerably from HKD51.64bn in Dec. The visible trade gap of HKD25.3bn was equivalent to 8.0% of the value of imports. The annual decline in exports was 36.7% in Jan, which was worse than the 28.9% fall in Dec. (RTT)

Australia: Company operating profits jump 10.6% in Q4. Australia's company gross operating profits surged a seasonally adjusted 10.6% in 4Q2022. That blew away expectations for an increase of 1.5% following the upwardly revised 11.5% decline in the three months prior (originally -12.5%). Business inventories eased 0.2% on quarter, in line with forecasts following the 1.7% increase in the previous three months. Wages and salaries rose 2.6% on quarter. On a yearly basis, operating profits jumped 16.0%, inventories gained 5.9% and wages advanced 11.6%. (Reuters)

Markets

PT Resources: Inks MOU to jointly develop RM1bn supply chain park in Kuantan . PT Resources Holdings has inked a deal to jointly develop the Malaysia East Coast International Supply Chain Intelligent Park. It said the project involves the establishment of an international supply chain intelligent park in Kuantan, Pahang, which is intended to drive the development of food and light industries’ supply-chain between Malaysia and Fuzhou. It had entered into a MoU with Ocean Exchange (Fujian) Foreign Trade Services Co Ltd (Ocean Exchange) to set up the park, inspired by the Marché International Cold Logistics and Cross-border E commerce project located in Fujian province, China. (The Edge)

Pharmaniaga: Is now a PN17 company . Pharmaniaga has been classified as an affected listed issuer under Practice Note 17 (PN17) of the Main Market Listing Requirements of Bursa Malaysia. The pharmaceutical company said it had triggered the PN17 criteria pursuant to its audited consolidated financial statements for the period ended Dec 31, 2022. (StarBiz)

CAB Cakaran: Sees poultry industry to remain challenging . CAB Cakaran Corp expects the local poultry industry continues to face challenges such as high cost of feed, outbreak of diseases and changes in weather condition. “The continuing subsidy given by the government to the industry will ensure that the poultry farmers will not be adversely affected by these challenges,” the poultry group said. CAB Cakaran said the demand for chicken meat is expected to remain high as it is the cheapest source of meat protein and the fact that per capita consumption of chicken meat in Malaysia is around 50kg, one of the highest in the world. (The Edge)

MyEG: 4Q net profit slips as revenue hit by cessation of Covid- 19 health screening. MyEG Services’ net profit decreased 7.25% to RM74.7m in the 4QFY2022 from RM80.6m a year earlier, as the e-government service provider's revenue was affected following the government's lifting of health screening and quarantine requirements. Quarterly revenue declined 29.61% to RM165m from RM234.4m in 4QFY2021, amid the cessation of the revenue contribution from Covid-19 health screening and quarantine, and an impairment in investment in digital solutions company Agmo Holdings Bhd as a result of mark-to-market practice. (The Edge)

Senheng: Higher operating expenses, weaker sales drag Senheng's 4Q profit down by 21% . Senheng New Retail Bhd's net profit dropped 21.03% to RM21.0m for the 4QFY2022, from RM31.2m a year earlier, due to higher operating and administrative expenses. The lower profit was also due to lower sales as consumer sentiment was hit by high inflation and interest rate hike, said the electrical and electronics (E&E) retailer. Earnings per share fell to 1.4 sen, from 2.08 sen in 4QFY2021, the group's Bursa Malaysia filing showed. Consumer spending in the country slowed down as interest rates continued to increase, affecting Senheng’s quarterly revenue, which dropped by a marginal 2.68% to RM444.2m, from RM456.4m in 4QFY2021. (The Edge)

AME REIT: Seeks to explore more acquisition opportunities. Following its maiden acquisition of three industrial properties in Iskandar Malaysia for RM69.3m, AME Real Estate Investment Trust (AME REIT)’s financing headroom still remains at RM430m. AME REIT said the financial headroom will enable the group to look into exploring future acquisitions within and outside Johor. This follows AME REIT’s recent proposed acquisition of the properties which received unitholders approval. (The Edge)

Market Update

The FBM KLCI might open higher today as US equities climbed higher on Monday afternoon after experiencing their biggest weekly tumble in two months last Friday. The blue-chip S&P 500 closed 0.3% higher, while the tech-heavy Nasdaq added 0.6%. Investors continue to study releases of economic data, which have so far pointed to an overheated economy, spurring central banks such as the US Federal Reserve and European Central Bank to commit to raising interest rates higher for longer. Elements of the latest US durable goods report on Monday suggested underlying strength in the domestic economy. Orders for non-defence capital goods excluding aircraft, a closely watched proxy for business investment, rose 0.8% in January from a month earlier, comfortably above economists’ forecasts. In Europe, the region-wide Stoxx 600 closed up 1.1%. Germany’s Dax rose 1.1%, while the French Cac 40 gained 1.5%. London’s FTSE 100 climbed 0.7%.

Back home, Bursa Malaysia ended a choppy session slightly lower on Monday, as a rally in banking stocks helped to offset losses in the barometer index, amid the downbeat performance of regional peers. At the closing bell, the benchmark FBM KLCI had lost 1.30 points to 1,455.50, from last Friday’s closing at 1,456.80. Hong Kong’s Hang Seng index fell 0.3% while China’s CSI 300 lost 0.4%.

Source: PublicInvest Research - 28 Feb 2023