Economy

US: Consumer spending slows, but seen boosting first-quarter GDP growth. US consumer spending rose moderately in Feb, and while inflation cooled, it remained high enough to possibly allow the Fed to raise interest rates one more time this year. Economists boosted their economic growth estimates for the first quarter to as high as a 3.25% annualized rate. Stronger growth this quarter is expected to help to ease worries of a credit crunch, triggered by the recent collapse of two regional banks, and keep the Fed focused on taming high inflation. Consumer spending, which accounts for more than two-thirds of US economic activity, increased 0.2% last month. Data for Jan was revised higher to show spending vaulting 2.0% instead of the previously reported 1.8%. Jan's increase was the biggest since Mar 2021. Economists had forecast consumer spending would gain 0.3. (Reuters)

US: Fed may stick with one more rate hike even as inflation cools. Fed policymakers may take some comfort from data on Friday showing a key gauge of inflation cooling in Feb, but it's far from clear if it marks enough headway for US central bankers to end their year-long campaign to hike interest rates. Personal consumption expenditures (PCE) price index rose 5.0% in Feb from a year earlier, down from the 5.3% increase in Jan. A measure of core inflation - seen as a better gauge of future price increases - came in a shade lower than expected at 4.6%. But with the Fed targeting 2% annual inflation, central bankers will likely be wary about declaring victory too soon. (Reuters)

EU: Eurozone inflation falls to 13-month low on energy prices. Eurozone inflation eased more than expected to the lowest level in more than a year in Mar driven by the fall in energy prices but the core figure edged up to a new record to keep the pressure on the ECB to tighten its policy further. Consumer prices advanced 6.9% on a yearly basis in Mar, slower than the 8.5% rise in Feb. Prices were expected to climb 7.1%. This was the weakest inflation rate since Feb 2022 when prices rose 5.9%. (RTT)

EU: Germany unemployment unexpectedly rises; retail sales fall . Germany's unemployment unexpectedly increased in Mar and retail sales logged a surprise fall, adding evidence to the view that the biggest euro area economy landed in a technical recession in the first quarter. The jobless rate rose to 5.6% in Mar. The rate was forecast to remain unchanged at 5.5%. The number of people out of work climbed notably by 16,000 in Mar after an increase of 6,000 in Feb. Unemployment was expected to rise moderately by 3,000. The labor market was robust overall in Mar as well. However, the weak economy is leaving its mark, the spring revival is only beginning to take hold. (RTT)

EU: Italy industrial turnover falls 1.1%. I taly's industrial turnover declined for the first time in three months in Jan. Industrial sales dropped a seasonally adjusted 1.1% MoM in Jan, in contrast to a 0.7% increase in the previous month. Domestic market turnover fell 0.3% after rising 0.8%. Similarly, foreign market turnover decreased 2.6% versus a 0.5% gain in Dec. After adjusting for calendar effects, turnover grew 8.6% annually in Jan, well below the 14.9% surge in the prior month. (RTT)

China: Factory activity growth challenges economic recovery prospects. China's manufacturing activity expanded at a slower pace in Mar, raising doubts about the strength of a post-COVID factory recovery amid weaker global demand and a property market downturn. The services sector was stronger, with activity expanding at the fastest pace in nearly 12 years after the end of China's zero COVID policy in Dec boosted transportation, accommodation, and construction. The official PMI stood at 51.9, against 52.6 in Feb. That slightly exceeded expectations of 51.5 tipped by economists, and led to the yuan strengthening against the dollar. The Feb figure had grown at the fastest pace in more than a decade. (Reuters)

Japan: Retail sales surge 6.6% on year in feb. The total value of retail sales in Japan was up 6.6% on year in Feb. That beat forecasts for an increase of 5.8% and was up from the downwardly revised 5.0% gain in Jan. Sales from large retailers climbed 5.0% on year, easing from 5.5% in the previous month. Wholesale sales climbed an annual 2.3%, accelerating from 1.2% a month earlier. (RTT)

South Korea: Data shows uneven economic recovery, suggests steady rates. South Korea's factory output slumped while retail sales jumped in Feb, signalling an uneven economic recovery, and bolstering the market's view that the central bank will keep rates on hold for the rest of the year. The industrial output index fell 3.2% in Feb from the month before after a 2.4% gain in Jan, while the retail sales index jumped 5.3% MoM after a 1.1% drop in Jan. (Reuters)

Hong Kong: Retail sales expand most in 13 years. H ong Kong's retail sales value grew at the fastest pace in thirteen years in Feb, underpinned by continued improvement in consumer sentiment and a sharp rebound in visitor arrivals, preliminary data from the Census and Statistics Department showed Friday. The value of retail sales surged 31.3% year-on-year in Feb, much faster than the 6.9% rise in Jan. Further, this was the strongest rate of growth since Feb 2010, when sales had surged 35.8%. Meanwhile, online sales, which accounted for 7.8% of the total sales value in Feb, dropped 4.1% from last year versus a 3.4% fall in the previous month. The annual growth in retail sales volume also accelerated to a 2-year high of 29.6% in Feb from 5.1% in the previous month. (RTT)

Markets

Axiata (Neutral, TP: RM3.40): Share subscription agreement in relation to the proposed digital bank. RHB Bank and Boost Holdings, an indirect subsidiary of Axiata, to subscribe shares in Boost Bhd (Bursa Malaysia) Comment : RHB Bank and Boost Holding will subscribe for 100m new ordinary shares in Boost Bhd for RM100m. Boost Holdings and RHB Bank will hold 60% and 40% of Boost Bhd respectively. Boost was incorporated as the legal entity to carry out a digital banking business in Malaysia. Boost Holdings and RHB are expected to combine their expertise to build an affordable and accessible digital banking solutions targeting the underserved and unserved segments such as the micro and SME community. Given Boost Holding’s extensive fintech experience and RHB’s capability in offering banking services and risk management, we believe there is strong value proposition for the Boost-RHB consortium. Although we are excited with Axiata’s digital banking venture, we do not expect this to make any meaningful impact at the group level, not at least in the next 3 years. Maintain Neutral on Axiata.

Compugates: To diversify into property development, agarwood plantation. Compugates Holdings has proposed to diversify into property development and agarwood plantation business to grow its business operations and reduce reliance on its trading and services segment, its major revenue contributor. On the diversification into property development, Compugates said its 70%- owned subsidiary Compugates Development and Mining SB inked a JVagreement with Jade Classic SB in Nov 2017 to develop a 62- acre piece of land in Selangor. (The Edge)

MR DIY: Creador confirms MR DIY exit for RM664m. Private equity firm Creador announced that it has completed its exit from MR DIY Group (M) for RM664m via a private placement exercise. The private equity fund said the exit was accomplished via a private placement of its remaining 464m shares or a 4.92% stake in MR DIY at RM1.43 apiece. The placement price represents a 6.5% discount to the last closing price of RM1.53. (The Edge)

Comintel: To develop 42-storey serviced apartments in Bukit Jalil for RM168.3m. Comintel Corp has bagged a contract to develop a 42-storey serviced apartment block in Bukit Jalil for RM168.3m. Comintel’s wholly-owned subsidiary, Binastra Builders SB on March 31 accepted the Letter of Award from Exsim Bukit Jalil City SB for the project. (The Edge)

Bioalpha: Obtains approval to develop a 21-acre Malaysia agriculture hub in China. Bioalpha Holdings (BHB) will be developing a Malaysian Agricultural Hub in China's Hainan Province. The project's master development plan has received approval from the local authority, the Longhu Town People's government. BHB managing director William Hon said that having received approval from the authority for its master development plan, the company is now working on the next steps to get the project started. (NST Business)

Symphony Life: Sues former partner for RM150m over terminated joint development agreement. Symphony Life Bhd is suing its former development partner for RM150m over a terminated agreement to jointly develop residential condominiums in Langkawi. Its wholly-owned subsidiary Symphony ORIC Development SB’s suit against Open Road Asia SB (ORA) pertains to a RM75m deposit ORA made as part of the joint development agreement. (The Edge)

Market Update

The FBM KLCI might open higher today after the Nasdaq Composite stock index has closed out its best quarter since 2020, buoyed from bets on Big Tech companies by investors who rolled back expectations for higher interest rates. The tech-heavy index gained 16.8% in the first three months of 2023 after rising 1.7% on Friday. That marked the Nasdaq’s strongest quarter since the second quarter of 2020, when tech stocks led a sharp rebound from a plunge at the start of the coronavirus pandemic. The broader S&P 500 index was also lifted by the strength in tech, adding 1.4% on Friday to bring its quarterly increase to 7%. The moves capped what has been a volatile start to the year, with a strong January followed by a weak February and a rebound over the past few weeks. Most recently, stock markets have picked up despite concerns about the health of the banking sector following the collapses of Silicon Valley Bank and other regional lenders in March. SVB’s failure and the fallout — including the forced merger of Credit Suisse and UBS — have convinced investors that the US Federal Reserve will not keep raising interest rates to fight inflation, boosting shares in large tech stocks heavily weighted in benchmark indices. Europe’s region-wide Stoxx 600 rose 0.6% after Eurozone inflation fell more than expected, leaving the index up 6.7% for the quarter.

Back home, Bursa Malaysia's main index ended the week on a negative note on Friday, after failing to sustain earlier session gains, as investors booked profit following the recent advance. At the closing bell, the FBM KLCI had lost 2.02 points to 1,422.59, from Thursday's close at 1,424.61. The regional equities also advanced on Friday, buoyed by stronger than expected economic data in China. Hong Kong’s Hang Seng index added 0.4%, and China’s CSI 300 rose 0.3%. South Korea’s Kospi and Japan’s Topix each advanced 1%. Activity in China’s non-manufacturing sectors grew at its fastest rate in more than a decade in March as business confidence rocketed and demand grew steadily, according to a closely watched official gauge.

Source: PublicInvest Research - 3 Apr 2023