Economy

US: Services sector grows steadily, prices stubbornly high. The US services sector grew at a steady clip in Feb, with new orders and employment rising to more than one-year highs, suggesting the economy continued to expand in the first quarter. The Institute for Supply Management (ISM) survey described companies as "mostly positive about business conditions." Though a measure of prices paid by businesses fell to the lowest level in just over two years, it stayed elevated, indicating that high inflation could persist. The survey added to robust consumer spending and labour market data in suggesting the economy was not near a recession. But the economy's resilience could see the Federal Reserve keep hiking interest rates into the summer. (Reuters)

EU: Eurozone private sector expands most since mid-2022. Alleviating fears of a recession, the euro area private sector activity grew the most since mid-2022 as there was a quick upturn in the services sector, while manufacturing activity landed on broad stabilization in Feb. The final composite output index rose to 52.0 in Feb from 50.3 in Jan, data released by S&P Global showed. The flash reading was 52.3. The reading was above the 50.0 level that separates growth from contraction for the second straight month. The service sector was the principal driver of Feb's quicker upturn. At the same time, manufacturing activity broadly stabilized ending an eight-month sequence of decline in production. (RTT)

EU: Eurozone Producer Price Inflation eases notably. French industrial production declined for the first time in three months in Jan largely due to falling transport equipment manufacturing, official data showed. Industrial production fell 1.9% from Dec, when output grew 1.5%, the statistical office INSEE reported. The decline was in contrast to the expected 0.1% gain and also the first decrease in three months. Likewise, manufacturing output dropped 1.8%, reversing a 0.2% rise in Dec. Within manufacturing, output in transport equipment production fell 6.7% and that in other manufacturing slid 2.0%. Manufacture of food products and beverages remained flat. (RTT)

EU: German auto industry confidence weakens in Feb. Optimism among Germany's automakers eased in Feb and they assessed the current economic situation as significantly worse as buyers were increasingly cautions amid fears of a recession, survey data from the ifo institute showed. The confidence indicator for the automobile manufacturing industry more than halved in Feb, to 6 points from 12.5 points in Jan. Business expectations among automakers also eroded in Feb and the corresponding indicator of the survey sunk to 2.8 points from 21.4 points. (RTT)

EU: Germany certain to exceed EUR9.8bn LNG terminal bill, EconMin. Germany said that new infrastructure for floating liquefied natural gas terminals (LNG) will exceed previously expected costs, forewarning taxpayers that there will be a price to pay for energy security. The Bundestag lower house of parliament has approved EUR9.8bn (USD10.4bn) for the 2022-2038 period, but "It is already clear now, that more cost increases will have to be added," according to a paper issued by the Economy Ministry. Germany, one of the most reliant in Europe on Russian gas, is looking for alternatives since Moscow turned off the taps in the energy crisis in the wake of war in Ukraine. (Reuters)

EU: German exports rise in Jan on robust US demand. German exports rose more than expected in Jan, increasing 2.1% on the month to bounce back from the prior month's slump thanks to strong demand from the US and Britain, data showed. A Reuters poll had predicted a MoM rise of 1.5%. Despite the rebound, exports are still only back to the levels of April last year, ING's global head of macro Carsten Brzeski noted. Exports to the US were up 3.1% on the month and exports to Britain rose 7.8%. (Reuters)

EU: Ireland Q4 GDP growth revised down to 0.3%. Ireland's economic growth slowed sharply in the final quarter of 2022, revised from an accelerated expansion seen in the initial estimate, latest figures from the statistical office showed. GDP advanced a seasonally adjusted 0.3% sequentially in the Dec quarter, after an upwardly revised 2.8% rise in the Sept quarter. In the preliminary report, the rate of GDP growth for the fourth quarter was 3.5%. On the expenditure side, personal consumption rose 1.1%, and government expenditure advanced 2.5%. (RTT)

China: Markets set for weak showing as growth target disappoints. Chinese markets may come under pressure again on concerns that authorities will withhold stimulus after unveiling a conservative economic growth target that is below many investors’ expectations. The consensus-lagging growth goal of around 5% for 2023, as Premier Li Keqiang outlined in a key address to open the National People’s Congress on Sunday, suggests strong monetary or fiscal help may be off the table for now. His last government work report at the annual parliamentary meetings also dampened hopes for more potent measures to ease an unprecedented property crisis. (Bloomberg)

India: Services growth at 12-year high on strong demand. India's service sector activity expanded at the fastest pace in twelve years in Feb on the back of strong demand conditions and easing price pressures, results of the purchasing managers' survey by S&P Global showed. The services Purchasing Managers' Index climbed to 59.4 in Feb from 57.2 in Jan. A score above 50 indicates expansion in the sector. New orders received by Indian service providers rose further in Feb, and at the fastest pace in twelve years, as competitive pricing boosted sales. The consumer services segment logged the fastest gain in sales among the four monitored sub-sectors. (RTT)

Markets

Hibiscus Petroleum (Neutral, TP: RM1.18),: Gets arbitration notice over RM37m dispute. Hibiscus Petroleum said a Sarawak based oil and gas services provider has initiated arbitration proceedings against its indirect wholly owned subsidiary Hibiscus Oil & Gas Malaysia Ltd over a RM36.6m claim. The group said Oceancare Corporation SB (OCSB) has issued the arbitration notice over a dispute arising from a contract with Hibiscus Oil & Gas, as operator of relevant production sharing contracts. OCSB is alleging, among other things, variation to the original scope of work, which Hibiscus Oil & Gas denies. (The Edge)

Bertam Alliance: Bags RM82m job. Bertam Alliance wholly owned subsidiary Bertam Development SB (BDSB) has bagged a sub contract worth RM82m from Akas Permai SB. The contract involved the construction and completion of building and infrastructure works for the proposed development of a hotel block in Kota Kinabalu, Sabah. BDSB shall commence the sub-contract works with immediate effect and the date for completion shall be 30 Nov 2024. (StarBiz)

Fajarbaru: Wins RM310.54m construction contract. Fajarbaru Builder Group Bhd has won a construction contract via tender exercise, for three blocks of condominium worth RM310.54m. Its wholly owned subsidiary Fajarbaru Builder SB secured the contract from WCT Holdings Bhd’s indirect subsidiary, Kekal Kirana SB. It said the construction work includes three blocks of condominium towers which comprise 341 units. There will also be three levels of podium and four levels of basement for carparks. The contract shall commence on 15 Mar and is expected to be completed in 35 months, or on 14 Feb 2026. (StarBiz)

PPB Group: Sees up to 38% increase in utility cost following electricity tariff hike. PPB Group sees an increase of between 30% and 38% in its utility cost, after the government removed electricity subsidies and raised the power tariff for medium- and high-voltage users to a surcharge of 20 sen per kWh from 1 Jan. The group is improving its operational efficiency as the new electricity rate would have a “significant” impact. Looking at the numbers, it is between RM20 million and RM25 million (the increase in cost) across the group. (The Edge)

N2N Connect: Calls off proposed transfer to Main Market. Integrated e-commerce securities trading solutions provider N2N Connect has called off its plan to transfer its listing from the ACE Market to the Main Market. The group, which had made the proposal in June 2020, said it has now decided to withdraw the application “after taking into consideration the continuing market volatility amid the expectation of softening in global growth”. “As such, the board is of the view that it is not the best time for the company to continue with the proposed transfer. “Nonetheless, it is the intention of the company to relook [at] the proposed transfer in the future”. (The Edge)

Eurospan: Sells unused property in Kulim for RM7m cash. Eurospan Holdings Bhd’s unit is selling its property in Kulim, Kedah, for RM6.95m in cash, which will be utilised for working capital. The group said the 88,060 sq ft land, including a single-storey office building, is presently not in use. Therefore, the disposal will realise the increase in value of the property it acquired in 1995. Its wholly owned unit Dynaspan Furniture SB has entered into the sale and purchase agreement with three individuals, namely Khoo Kok Seang, Khoo Kay Sen and Khoo Yi Sen. (The Edge)

Market Update

The FBM KLCI might open higher as US stocks notched up their biggest one-day gains in at least a month after Treasury yields retreated from recent highs, helping the S&P 500 end a three-week losing streak as investors turn their attention to critical jobs data in coming days. The blue-chip S&P 500 closed 1.5% higher on Friday, leaving it up 1.9% for the week. The tech-heavy Nasdaq Composite jumped 2% for an advance of 2.6% across the past five sessions. Both indices rebounded from a steep fall last week. Providing some relief for investors on Friday was a retreat in yields on US Treasuries after they had hit their highest level in years in the previous session. On Friday, a report on the vast US services sector showed stronger than expected growth for February. Data released on Thursday showed jobless claims fell to 190,000 in the week ending February 25, below expectations for the seventh week in a row, indicating a persistently tight labour market. In Europe, the region-wide Stoxx 600 and France’s Cac 40 both closed 0.9% higher, ending the week up 1.4% and 2.2% , respectively. The UK’s FTSE 100 was flat. Germany’s Dax gained 1.6% after the S&P Global composite purchasing managers’ index data for the eurozone’s largest economy was revised lower from 51.1 to 50.7.

Back home, Bursa Malaysia ended mixed on Friday as the market is stuck in a consolidation mode with investor sentiment remaining cautious on lack of buying catalysts domestically, amid concerns over a rate hike by the US Federal Reserve. At the closing bell, the benchmark FBM KLCI dipped 1.94 points to 1,453.55 from Thursday’s closing of 1,455.49. The regional markets finished broadly higher on Friday with shares in Japan leading the region. The Nikkei 225 added 1.56% while Hong Kong's Hang Seng rose 0.68% and China's Shanghai Composite tacked on 0.54%.

Source: PublicInvest Research - 6 Mar 2023