Economy

US: Fed sees credit drawdown looming, shifts towards pause on rate hikes. Federal Reserve Chair Jerome Powell said banking industry stress could trigger a credit crunch with "significant" implications for an economy that US central bank officials projected will slow even more this year than previously thought. Banks either hit with sudden deposit outflows or worried about them may become steadily more reluctant to lend to businesses and households, a risk that prompted the US central bank to reset its own expectations for monetary policy as it waits to see how far any contraction of credit may spread and how long it may last. (Reuters)

US: Fed policymakers see one more rate hike this year, cuts in 2024. Federal Reserve policymakers believe beating back inflation may require just one more interest-rate hike this year but less easing next year than most thought would be appropriate just three months ago. US central bankers see the policy rate, now in the 4.75%-5.00% range after Wednesday's 25-basis-point increase, at 5.1% by year end, according to the median estimate in the Fed's latest quarterly summary of economic projections. (Reuters)

EU: High inflation remains ECB's main worry. Two key policymakers of the ECB warned on risks posed by high inflation and signalled that they are not done with raising interest rates despite the latest banking crisis that has put the aggressiveness of central banks in tightening policy under doubt. (RTT)

EU: Ban on fossil fuels cars not on summit agenda, German official. The EU's planned ban on new combustion engines from 2035 is not on the agenda of the upcoming EU summit but talks between the European Commission and Berlin about their differences over the plan are "very constructive", a German government official said. "We are confident that we will soon come to a solution," the official said ahead of the two-day meeting in Brussels starting on Thursday. (Reuters)

UK: Manufacturing orders weaken in March. UK factory order book balance weakened in March and selling price expectations among manufacturers declined to the lowest in two years, reports said citing survey results from the Confederation of British Industry. The order book balance unexpectedly fell to -20% in March from - 16% in the preceding period, the Industrial Trends survey revealed. This was the lowest since Feb 2021. The expected level was -15%. (RTT)

Hong Kong: Central bank raises rate after Fed hike. The Hong Kong Monetary Authority (HKMA) on Thursday raised its base rate charged through the overnight discount window by 25 basis points to 5.25%, hours after the US Federal Reserve delivered a rate hike of the same margin. Hong Kong’s monetary policy moves in lock step with the US as the city’s currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar. (Reuters)

Australia: Leading index continues to signal below trend growth. Australia's leading index continued to suggest below-trend growth for the coming three to nine months largely due to the lagged effects of rising interest rates, survey data from Westpac showed. The six-month annualized growth rate in the Westpac Melbourne Institute Leading Index rose slightly to -0.94% in Feb from -1.04% in Jan. The rate has remained negative for the seventh consecutive month, pointing to below-trend growth this year. (RTT)

Markets

Hap Seng: To dispose of entire stake in HS Credit Manchester for RM837.34m. Hap Seng Consolidated has entered into an agreement with Lei Shing Hong Capital Limited (LSHCL) to dispose of its entire stake of 50m shares in HS Credit (Manchester) Ltd (HCML) for GBP152.96m (RM837.34m). Hap Seng indirect wholly owned subsidiary, HSC Manchester Holding Pte Ltd (HSC Manchester), entered into a shares sales agreement with LSHCL on 22 March 2023. The group said it plans to utilise 77.63% of the proceeds from the disposal to repay borrowings, 22.26% would be for working capital requirements and the remaining for other expenses. (StarBiz)

Pavilion REIT: Shareholders approve RM2.2bn Bukit Jalil Pavilion acquisition. Pavilion Real Estate Investment Trust (Pavilion REIT) says its proposed acquisition of Pavilion Bukit Jalil Mall (PBJ Mall) for RM2.2bn has been approved by its non interested unitholders. Pavilion REIT said the acquisition, initially announced last 22 Nov would see MTrustee, as the trustee of Pavilion REIT, acquiring PBJ Mall and all related assets and rights from Regal Path SB (Regal Path), a wholly-owned subsidiary of Malton. (StarBiz)

Pecca: MCA ceases to be substantial shareholder in Pecca. Barisan Nasional component party Malaysian Chinese Association (MCA) has ceased to be a substantial shareholder of car leather upholstery maker Pecca Group after its investment vehicle Huaren Holdings SB disposed of 12.88m shares on 17 March. While the transacted price was not disclosed, based on the 96 sen closing price of Pecca shares, the block of shares was worth RM12.36m. (The Edge)

Parkson: Appeal Court orders PKNS-Parkson dispute to continue to trial. Parkson Retail Asia Ltd (PRA) announced that the Court of Appeal has allowed the appeal by PKNS Andaman Development SB against the decision given by the High Court of Malaya on 29 Jan 2021 allowing its subsidiary Parkson Corporation SB’s (PCSB) application to strike out a suit brought against it by PKNS. This means that the suit brought by PKNS Andaman against PCSB in regards to the company allegedly failing to pay rent for retail space in EVO Shopping Mall in Bangi, will continue for trial at the High Court. (The Edge)

Theta Edge: Termination of contract by IJN based on alleged default. Theta Edge said the purported termination of its contract to develop a hospital information system and electronic medical record for Institut Jantung Negara is based on alleged default by the company. Theta Edge announced that its wholly-owned unit Theta Technologies SB had received a notice of termination from Institut Jantung Negara SB. Theta Technologies had been awarded the four-year contract worth RM25.2m by Institut Jantung Negara SB. (The Edge)

SCIB: Auditor resigns citing difficulties in allocating resources. Nexia SSY PLT has resigned from its role as SCIB’s external auditor because of difficulties in allocating sufficient resources requested by the company based on the fees charged. Upon deliberation by the audit committee and board of directors of the company held today, the board has resolved to accept the resignation with regret and shall take the necessary steps to appoint new external auditors to fill up the casual vacancy. (The Edge)

Market Update

Overnight, US government bond prices rallied on Wednesday after the Federal Reserve signalled it was close to the end of its cycle of interest rate increases. The US central bank on Wednesday lifted its benchmark interest rate by 0.25 percentage points to a target range of 4.75% to 5%, despite recent problems in the banking sector. The yield on the two-year Treasury note, which is the most sensitive to short-term policy expectations, dropped 0.24 percentage points to 3.93%, while the benchmark 10-year yield fell 0.17 percentage points to 3.43%. Lower yields reflect higher prices. Stock markets struggled for direction in the aftermath of the Fed’s decision, with the S&P 500 index swinging between gains and losses before eventually closing 1.7% lower. The tech-heavy Nasdaq Composite fell 1.6%. Shares in US banks gave up gains after Treasury secretary Janet Yellen said on Wednesday that the Biden administration was not considering a broad expansion of bank deposit insurance or “blanket” guarantees for savers. The KBW Nasdaq Bank index fell 4.7%. Shares in First Republic, the hardest hit among regional banks that have been suffering massive outflows of deposits, fell 15%. European equities closed higher. The region wide Stoxx 600 rose 0.2% and the CAC 40 in Paris finished 0.3% higher.

Back home, Bursa Malaysia ended higher on Wednesday, in line with regional markets amid improving market sentiment globally, and ahead of the US Federal Reserve’s decision on interest rates later in the day. At the closing bell, the benchmark FBM KLCI had risen 5.49 points, or 0.39%, to 1,412.04, from Tuesday’s close at 1,406.55. In the region, Singapore’s Straits Times Index garnered 1.53% to 3,222.50, Hong Kong’s Hang Seng Index chalked up 1.73% to 19,591.43, Japan’s Nikkei 225 surged 1.93% to 27,466.61, while China’s SSE Composite Index put on 0.31% to 3,265.75.

Source: PublicInvest Research - 23 Mar 2023