Economy

US: Fed, other central banks set joint liquidity operation. The US Federal Reserve said it had joined with the Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank in a coordinated action to enhance the provision of liquidity through the standing US dollar swap line arrangements. The move came on the heels of a deal brokered by Swiss authorities to have UBS buy rival Swiss Bank Credit Suisse to prevent its disorderly collapse and signals the depth of concern central bankers have over the recent turmoil in the financial system on both sides of the Atlantic. (Reuters)

US: Consumer sentiment unexpectedly drops in March, inflation expectations dip. Consumer sentiment in the US fell for the first time in four months in March, according to a preliminary report released by the University of Michigan. The report said the consumer sentiment index slid to 63.4 in March from 67.0 in Feb. Economists had expected the index to be unchanged. Surveys of Consumers Director Joanne Hsu noted the decrease was already fully realized prior to the failure of Silicon Valley Bank. (RTT)

EU: ECB hawks press case for more rate hikes to fight dogged inflation. The ECB will likely need to raise interest rates further to tame persistent inflation, two leading hawks on the bank's policymaking Governing Council said, while playing down the risk of repeat of the 2008 financial crisis. The comments from the central bank chiefs of Austria and Belgium backed up remarks a day earlier from two fellow hawks, their Slovakian and Lithuanian peers and pressed the case for higher rates to tame inflation running at 8.5% in the euro zone. The ECB raised interest rates as promised by 50 basis points. (Reuters)

China: Central bank cuts RRR by 25 bps to support economic recovery. The PBoC cut the reserve requirement ratio for banks by 25 basis points for the first time this year to support the nascent economic recovery and to ensure reasonable and sufficient liquidity in the banking system. The RRR represents the amount of cash that banks must hold as reserves. The latest reduction in the ratio is applicable to all banks except those that have already implemented a 5% reserve ratio, the central bank said in a statement. The new ratio is effective March 27. (RTT)

Japan: Tertiary activity rebounds 0.9%. Japan's tertiary activity increased more-than-expected in Jan after falling in the previous month, data from the Ministry of Economy, Trade, and Industry showed. The seasonally adjusted tertiary activity index rose 0.9% MoM in Jan, reversing a 0.4% fall in Dec. That was above the 0.5% increase expected by economists. Further, it was the biggest gain in eight months. (RTT)

Singapore: Non-Oil domestic exports decline in Feb. Singapore's non-oil domestic exports registered a double-digit contraction in Feb, data from Enterprise Singapore showed. Non-oil domestic exports plunged 15.6% on a yearly basis but slower than the 25.0% decline in the previous month. Both electronics and non electronics declined in Feb. Electronics exports plunged 26.5% and non-electronics shipments slid 12.1%. (RTT)

Markets

Uzma (Outperform, TP: RM1.05): Plans RM21.8m placement to partly fund 50MW LSS4 project in Sungai Petani. Uzma is proposing a private placement of up to 10% of its share capital to raise an estimated RM21.8m to partially fund the group’s development of a 50MW LSS4 project in Sungai Petani, Kedah. The group has estimated that the project's total cost would be RM229m. The group plans to tap bank borrowings and internal funds to fund the balance of the project's development cost. (The Edge)

Comments: We are neutral on this development as the private placement only comprises of c.10% of total project cost and the remaining will be funded by bank borrowing on the back of stable cash flow of the LSS4 project. Although Uzma has ample cash reserve, most of the cash is earmarked for debt repayment and for working capital to fund its growing order book. Since our TP is based on 10x PER FY24F, the TP could be lowered due to dilution of EPS by 10% upon the placement .

Petra Energy: Awarded two contracts from Petronas Carigali. Petra Energy announced that its subsidiary Petra Resources SB had received two contracts for the provision of accommodation workboats from Petronas Carigali Sdn Bhd (PCSB). The contracts are for its accommodation workboats Petra Orbit and Petra Galaxy. These are the first vessel chartering contracts received by Petra Energy this year. According to Petra Energy, the value of the contracts is based on work orders issued by PCSB throughout the contract duration of up to 255 days from the commencement date effective 17 Feb 2023, with an option to extend up to 60 days. (The Edge)

Hextar Industries: Commences winding up of subsidiary to streamline group. Hextar Industries, formerly known as SCH Group, has commenced the winding up of its wholly owned subsidiary Hextar Fertilizers Ltd, to streamline its organisation for greater efficiency. HFL, an investment holding company, holds 100% equity interest in Hextar Fertilizers Group SB, which in turn holds 100% equity interest in Hextar Fert SB, Hextar Solutions SB and PK Fertilizers SB. HIB said all shares held by HFL in HFGSB shall be distributed to HIB, and HFGSB shall be the wholly owned subsidiary of HIB. (The Edge)

AirAsia X: Not aware of reason behind UMA. AirAsia X (AAX), which was issued an UMA query by Bursa Malaysia earlier, is unaware of any reason for the recent sharp rise in its share price and volume. In a reply to the UMA query, AAX said except for its proposed regularisation plan to holistically restructure its business and financial condition, it is not aware of any other corporate development, rumour or report which may account for the UMA. (StarBiz)

Pentamaster: Calls off stake subscription in Epic after lengthy wait for approval. Pentamaster Corp said it is withdrawing from the subscription of a 29.9% stake in the enlarged capital of Taiwan based Everready Precision Industrial Corp (Epic) for USD6.78m (RM29.89m) because approval from Taiwanese authorities will not come soon. The group said its wholly owned subsidiary Pentamaster InnoTeq SB now plans to pursue strategic relevant investment into the Taiwan market on its own or with another strategic relevant partner. (The Edge)

Market Update

FBM KLCI is likely to trade lower today given the weaknesses in the US and Europe markets on Friday. Stocks fell as investors pulled back from positions in First Republic and other bank shares amid lingering concerns over the state of the US banking sector. The Dow Jones lost 384.57 points or 1.2% while the S&P 500 slid 1.1%. The Nasdaq was down 0.74%. First Republic slid nearly 33% to end the week down close to 72%. US-listed shares of Credit Suisse closed down nearly 7% as traders parsed through the bank’s announcement that it would borrow up to 50bn francs from the Swiss National Bank. Yesterday, Swiss banking giant UBS made an offer to buy its embattled rival Credit Suisse, paying USD3.3bn, about 60% less than what the bank was worth when markets closed on Friday. Credit Suisse shareholders will be largely wiped out, receiving the equivalent of just 0.76 Swiss francs in UBS shares for stock that was worth 1.86 Swiss francs on Friday. Like UBS, Credit Suisse is one of 30 banks around the world deemed to be Global Systemically Important Banks, of such importance to the international banking system that they are deemed too big to fail. European markets fell on Friday with the DAX, CAC and FTSE sliding 1.3%, 1.4% and 1.1% respectively. Asia-Pacific markets were higher on Friday after major Wall Street banks pledged a deposit of USD30bn in First Republic Bank in an attempt to bolster confidence in the banking system. The group of 11 banks included Bank of America, Wells Fargo, Citigroup and JPMorgan Chase. Shanghai Composite gained 0.7% while Hang Seng Index advanced 1.8%.

Back home, FBM KLCI added 20.13 points to close at 1,411.73. The International Trade and Industry Ministry (Miti) has secured potential investments worth RM24bn as well as RM4.2bn of potential exports of products and services through its recent trade and investment mission to South Korea. The International Trade and Industry Minister Tengku Zafrul said South Korean companies have expressed strong interest in Malaysia, particularly in the sustainable and green technology sectors such as carbon capture storage, hydrogen energy and electric vehicle.

Source: PublicInvest Research - 20 Mar 2023