Economy

US: Labor market stays resilient; Q4 labor costs revised higher. The number of Americans filing new claims for unemployment benefits fell again last week, pointing to sustained labor market strength and adding to financial market fears that the Fed could keep hiking interest rates for longer. Those worries were further heightened by another report showing labor costs grew much faster than previously estimated in the fourth quarter. The labor market remains tight despite rising risks of a recession, contributing to keeping inflation elevated via solid wage gains. Initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 190,000 for the week ended 25 Feb. It was the seventh straight week that claims remained below 200,000. Economists polled had forecast 195,000 claims for the latest week. (Reuters)

US: Fed wrestles whether recent data a 'blip' or a warning on inflation. US Fed officials wrestled with whether recent data showing inflation, jobs and spending all hotter than expected was a "blip" or a sign that even higher interest rates could be required to slow price rises. The separate comments from Fed Governor Christopher Waller and Atlanta Fed President Raphael Bostic posed a question central to the next phase of the Fed's battle to lower inflation. So far, even hawkish voices like Waller say the jury is out, with jobs and inflation data released between now and the Fed's upcoming 21-22 March meeting likely key to whether he and perhaps other policymakers tilt towards higher interest rates. Meanwhile, Bostic said he was ready to raise rates higher if upcoming data did not show inflation "clearly" heading back towards the central bank's 2% target from its Jan level of about 5.4%. (Reuters)

EU: Eurozone inflation slows less than expected; core price growth accelerates . Euro area inflation slowed less than expected, while core price growth continued to gain strength in Feb in the face of strong labor market conditions, strengthening the case for a long path of rate hikes from the ECB even as energy prices stayed on downward trend. The harmonized index of consumer prices rose 8.5% YoY in Feb, which was the slowest since May 2022. However, the rate was only marginally below Jan's 8.6% and also above economists' forecast of 8.2%. Meanwhile, core inflation that excludes energy, food, alcohol and tobacco, accelerated to 5.6% from 5.3%. Core inflation was expected to remain unchanged at 5.3%. (RTT)

EU: Dutch inflation accelerates in Feb. The Netherlands' consumer price inflation accelerated in Feb after moderating to an 11-month low, reflecting higher prices for food and non-energy industrial goods. Consumer prices advanced 8.0% in Feb from the last year, faster than the 7.6% increase in Jan. The 7.6% inflation posted in Jan was the slowest since Feb 2022. Inflation, based on the harmonized index of consumer prices, also advanced to 8.9% from 8.4% in Jan. Final data for Feb is due on 14 Mar. (RTT)

EU: Italy inflation slows to 9.2% on lower energy prices. Italy's consumer price inflation eased further in Feb amid a slowdown in energy costs, latest figures from the statistical office ISTAT showed Thursday. The consumer price index rose 9.2% YoY in Feb, slower than the 10.0% surge in Jan. Meanwhile, core inflation that excludes prices of energy and unprocessed food climbed to 6.4% from 6.0%. Prices of non-regulated energy products grew at a slower pace of 40.8% annually in Feb, after a 59.3% jump a month ago. The decline in prices of regulated energy products was more intense in Feb, falling 16.7% versus 12.0% in Jan. (RTT)

UK: Online job adverts fall by 2% in late Feb . Online job adverts in Britain fell by 2% in the week to 24 Feb compared with the previous week, adding to a series of falls. The total number of online job adverts was 23% lower than the level seen in the equivalent period of 2022. The BoE is watching the labour market closely for signs of further inflationary pressure. Official data has suggested a slight weakening of that pressure recently. (Reuters)

Japan: Consumer confidence rises slightly to 31.1, highest in 6 months. Japan's consumer sentiment improved marginally in Feb to the highest level in six months. The seasonally adjusted consumer confidence index rose to 31.1 in Feb from 31.0 in Jan. This was the highest since Aug 2022, when the reading was 32.5. Among the four sub-indexes, the indicator measuring the view on income growth increased to 36.2 in Feb, and that for employment rose to 38.0. The index reflecting households' willingness to buy durable consumer goods dropped to 23.0, and the index for overall livelihood fell to 27.0.The latest survey was conducted on 15 Feb among 8,400 households. (RTT)

Japan: Capital spending up 7.7% despite weaker profits. Japanese companies raised spending on plant and equipment for a seventh straight quarter in the fourth quarter of 2022, offering relief to policymakers counting on a private demand-led recovery from COVID. The data showed Japanese companies raised capital expenditure in October-December by 7.7% from the same period a year earlier. It was the seventh straight quarter of annual gains. The data is used to calculate revised GDP figures due on 9 March. Preliminary estimates showed Japan's economy rebounded an annualized 0.6% in the fourth quarter. (Nikkei Asia)

South Korea: Manufacturing PMI unchanged at 48.5 in Feb. The manufacturing sector in South Korea continued to contract in Feb, and at a steady pace, with a manufacturing PMI score of 48.5. That was unchanged from the Jan reading, and it remains beneath the boom-or-bust line of 50 that separates expansion from contraction. Order book volumes declined for the eighth month in a row in Feb, although the rate of reduction eased to the softest for three months. Subdued demand reportedly stemmed from weak domestic and global economic conditions and inflationary pressures, often caused by exchange rate weakness. As such, the latter was cited as a key driving force behind the latest drop in demand from overseas. New export orders have now fallen consistently for a year, though the rate of contraction was the softest since last Nov. (RTT)

Hong Kong: retail sales surge 7.0%, biggest rise in 9 months. Hong Kong's retail sales value grew at the fastest pace in nine months in Jan, underpinned by an improved consumer sentiment along with the impact of the early arrival of the Lunar New Year. The value of retail sales rose sharply by 7.0% YoY following a 1.2% rebound in Dec. Meanwhile, online sales, which accounted for 8.2% of the total sales value in Jan, dropped 4.2% from last year versus a 12.8% surge in the previous month. The retail sales volume gained 5.1% annually in Jan, reversing a 0.6% fall seen in the final month of 2022. This was the first increase in three months. (RTT)

Markets

TM (Outperform, TP: RM6.20): Expects contracts with access seekers to be finalised by 1H . Telekom Malaysia Bhd expects its contracts with access seekers riding on its network to be finalised by the first half of 2023 (1H2023), after the new Mandatory Standard on Access Pricing (MSAP) came into force on Wednesday (March 1). Its group chief executive officer Datuk Imri Mokhtar said that in view of the ongoing discussions on these contracts, the group will not be able to provide its 2023 guidance for now. (The Edge)

Boustead: LTAT to take Boustead private at 85.5 sen per share, about half its NTA of RM1.64 . Lembaga Tabung Angkatan Tentera (LTAT) has made a voluntary takeover offer for all shares it does not already own in Boustead Holdings at 85.5 sen apiece. The offer came on the heels of its large quarterly loss of RM402m, dragged down by the massive RM552m impairment of unsold Covid-19 vaccines at its pharmaceutical unit Pharmaniaga. Based on the number of outstanding shares — 822.51m, or 40.58% of Boustead — the armed forces pension fund is expected to fork out RM703.3m for the deal. “The offeror [LTAT] does not intend to maintain the listing status of [Boustead],” it said. The offer price is at a 30.5% premium over the last traded price of Boustead shares at 65.5 sen prior to the announcement. However, it is at a sharp discount of 52% over the conglomerate's net asset per share of RM1.64. (The Edge)

EATech: Gets six-month extension to submit regularisation plan . EA Technique (EATech), which could potentially see the emergence of a new shareholder, has received an extension up till Aug 24 to submit its regularisation plan to the authorities. The marine vessel operator said it had sought the six-month extension in an application to Bursa Malaysia Securities on Feb 9. (The Edge)

SCIB: Bags RM20.7m contract to rebuild Sarawak school. Sarawak Consolidated Industries has secured an engineering, procurement, construction, and commissioning (EPCC) contract from the Sarawak Public Works Department valued at RM20.7mil. The civil engineering specialist said the project involves rebuilding Sekolah Daif in Tebedu, Serian. The contract has has a duration of 24 months and comes under the third phase of the Sarawak government's RM1bn allocation for dilapidated schools. (StarBiz)

Aeon Co: Focuses on developing seamless customer experience . Aeon Co (M) is focused on developing its Aeon Living Zone growth strategy as it accelerates its digital integration into existing business models. The retailer said this will ensure customers enjoy a seamless shopping experience, which will help it stay ahead of the curve. “It essentially places all our malls and stores on a shared platform, with our customers as the main focus. (StarBiz)

Classita: Substantial shareholder, former CFO lodge police reports against ED, lawyers for witness intimidation. Classita Holdings’ substantial shareholder Datuk Seri Tee Yam @ Koo Tee Yam and former CFO Ting Yi En have lodged police reports against the group’s executive director Francis Leong Seng Wui and his lawyers for alleged witness intimidation. These reports, sighted by The Edge, alleged that Leong, together with Classita lawyers Wilson Lim Mao Shen and Huam Wan Ying, had intimidated Ting to amend the ex-CFO's affidavit in a civil suit. (The Edge)

Market Update

The FBM KLCI might open higher today after US stocks rebounded from early declines to close higher on Thursday, despite economic data exacerbating concerns that interest rates are set to stay higher for longer than previously forecast. The S&P 500 rose 0.8%, while the tech-heavy Nasdaq Composite climbed 0.7%, reversing two days of losses. Tesla was an exception to the positivity, becoming the worst performer in the S&P 500 with a decline of almost 6 % after it failed to specify when a new model would launch or what it might cost. The broader gains came despite new data highlighting the strength of the US labour market. Jobless claims fell to 190,000 in the week ended February 25, fewer than the 195,000 predicted. Signs of resilience in the US economy have counter-intuitively tended to spook investors in recent weeks, as they have been taken as signs the Federal Reserve will have to do more to bring inflation under control. The European stocks followed a similar pattern to those in the US, recovering from an early dip despite the disappointing data. The Stoxx 600 closed 0.5% higher, while London’s FTSE 100 rose 0.4%.

Back home, Bursa Malaysia’s main index ended in positive territory on Thursday, after being in the red for six consecutive days, thanks to a boost from bargain-hunting activities. At the closing bell, the benchmark FBM KLCI had climbed 5.29 points to 1,455.49, bolstered mainly by IHH Healthcare Bhd, Axiata Group Bhd and Tenaga Nasional Bhd. Asian markets declined on Thursday as investors reassessed the optimism over China’s economic recovery that had buoyed equities to strong gains a day earlier. Hong Kong’s Hang Seng index lost 0.9% while Japan’s Topix declined 0.15% and the China CSI 300 fell 0.2%.

Source: PublicInvest Research - 3 Mar 2023