Economy

Global: IMF sees risk of supply chain security leading to new Cold War. IMF warned policymakers against the danger of a new Cold War as they ramp up efforts to secure their industrial supply chains amid geopolitical tensions between major powers. G7 finance leaders pledged to give low- and middle-income countries a bigger role in diversifying supply chains to make them more resilient and sustainable. Their communique did not mention China by name, but the supply chain language fit in with “friend-shoring” efforts championed by US Treasury Secretary Janet Yellen and other Western leaders to trade more with allies and become less reliant on the Asian manufacturing powerhouse for battery minerals, semiconductors and other strategic goods. (Reuters)

US: Jobless claims climb more than expected to 239,000. First time claims for US unemployment benefits rose by more than expected in the week ended April 8th. Initial jobless claims climbed to 239,000, an increase of 11,000 from the previous week's unrevised level of 228,000. Economists had expected jobless claims to rise to 232,000. The Labour Department said the less volatile four-week moving also edged up to 240,000, an increase of 2,250 from the previous week's unrevised average of 237,750. Economist expect claims to trend higher through the rest of the year and peak in Q4 as the economy begins to emerge from a mild recession. The upcoming labour market downturn will be modest since the drop in demand will be fairly modest and the labour pool will stay relatively small. (RTT)

US: Producer Prices unexpectedly decrease in March, annual growth slows dramatically. Reflecting a steep drop in energy prices, US producer prices shown an unexpected decrease in the month of March. The PPI for final demand fell by 0.5% in March following a revised unchanged reading in Feb. Economists had expected producer prices to come in unchanged compared to the 0.1% dip originally reported for the previous month. The report also showed the annual rate of producer price growth slowed dramatically to 2.7% in March from 4.9% in Feb. Economists had expected the pace of growth to slow to 3.0%. The bigger than expected monthly decrease in producer prices came as energy prices plunged by 6.4% in March after slipping by 0.3% in Feb. (RTT)

EU: Eurozone industrial output growth accelerates in Feb. Eurozone industrial production grew at a faster pace in Feb underpinned by increases across all sub-sectors. Industrial production posted a monthly growth of 1.5% after rising 1.0% in Jan. This was the second consecutive increase in output. Production was forecast to grow again by 1.0% in Feb. Production of intermediate goods and energy gained 1.1% each. Capital goods production advanced 2.2% and durable goods output gained 0.2%. Output of consumer goods moved up 1.9%. On a yearly basis, industrial production logged a faster growth of 2.0% after Jan's 0.9% increase. Economists had forecast an annual increase of 1.5%. The EU27 industrial production climbed 1.4% on month, taking the annual growth to 2.1% in Feb. (RTT)

UK: Lenders to tighten credit standards for secured credit. UK lenders plan to tighten the availability of secured credit to households in the 2Q but they expect demand for secured lending to increase. The availability of secured credit to households was unchanged in the three months to end-Feb. Lenders forecast availability to fall over the next 3 months. Banks reported that the availability of unsecured credit to households decreased in the 1Q but was expected to climb slightly in the 2Q. Regarding credit to the corporate sector, lenders said the overall availability is forecast to remain unchanged in 2Q, as in the preceding period. (Reuters)

China: Exports log unexpected growth; imports fall. China exports posted a surprise growth in March, while imports continued to fall, albeit slowly, as foreign trade gained strength following the relaxation of the zero Covid policy. Exports expanded 14.8% on a yearly basis in March. This was the first growth in six months. Moreover, the annual growth was more than double the 6.8% increase logged in the first two months of the year. The gain also confounded forecasts for a 7.0% decline. Meanwhile, imports logged an annual fall of 1.4%. Nonetheless, the drop was slower than economists' forecast of 5.0% decrease as well as the 10.2% contraction seen in the Jan to Feb period. Consequently, the trade surplus totalled USD88.2bn, which was well above the expected USD39.2bn. (RTT)

Australia: Unemployment rate remains near 50-year low. Australia's unemployment rate remained unchanged at near a 50- year low in March. The jobless rate held steady at 3.5% in March. This was slightly below economists' forecast of 3.6%. The number of unemployed decreased 1,600 from the previous month to 507,000. At the same time, employment increased by 53,000 to 13.88m. The employment-to-population ratio and the participation rate were close to their historical highs in Nov 2022, reflecting a tight labour market. Further, data showed that monthly hours worked decreased 0.2% in March, following an increase of 3.8% in Feb. (Reuters)

Markets

Reservoir Link (Neutral, TP: RM0.39): Inks agreement to build wastewater treatment plant in Indonesia . Reservoir Link Energy has inked an agreement to undertake the construction, commissioning and operations of a new wastewater treatment plant in Indonesia. The group’s 85%-owned subsidiary PT EnviroTech Akva Indonesia entered into an agreement with PT Unilever Oleochemical Indonesia (PTUOI) on 13 Apr for the new plant in PTUOI's premises at Sei Mangkei, North Sumatra. (The Edge)

Comment: The execution of this agreement is a follow up from the binding Letter of Intent announced on 3 rd Mar 2023. As per our report issued on 6 th Mar 2023, although the venture will provide recurring income to the Group, it also presents execution and country political risk given substantial front-loaded capital expenditure for the project in an area other than the home country. Hence, we are cautiously positive on this development. We maintain our Neutral call and TP RM0.39.

PLS Plantations: Aborts cash crop JV in Pahang. PLS Plantations is aborting its RM50m investment into a 51:49 joint venture with Landasan Erajaya SB to undertake cash crop plantation activities in Pahang. both parties have mutually agreed not to further extend the binding term sheet (BTS), lapsed on 13 Apr. PLS Plantations said it aimed to transform into a leading, sustainable, agrofood company by building a sustainable food ecosystem that will contribute to the nation’s food sufficiency and elevate the agriculture industry. (StarBiz)

Hong Seng: Cancels plan to buy CSH Alliance’s EV distributor. Glove maker Hong Seng Consolidated Bhd has cancelled its plan to buy CSH Alliance Bhd's electric vehicle (EV) distribution business for RM20m, just two months after the parties inked the share sale agreement for the transaction. The deal was mutually terminated after it realised that the 55-acre land held by the EV business, Alliance EV SB (AEV), was not suitable for it to set up an EV battery manufacturing plant — dubbed as Project Volt. (The Edge)

Bintai Kinden: Believes it has good grounds of defence against Axbena’s RM28m claim for liquidated damages. Bintai Kinden Corporation said its sub-subsidiary Johnson Medical International SB (JMI), which is facing a RM27.7m liquidated damages claim, has good grounds of defence. JMI is being sued by Axbena SB for not completing a RM10.9m subcontract — for the supply of medical gas system for a teaching hospital at the Universiti Teknologi Mara (UiTM) campus in Puncak Alam, Selangor — by the completion date. Bintai Kinden said the delay in the completion was mainly due to the delay caused by Axbena as the main contractor which did not complete the project in time. (The Edge)

Country Heights: Unaffected by bankruptcy order against founder Lee Kim Yew. Country Heights Holdings Bhd (CHHB) has assured that its financial position has not been affected by the bankruptcy order against its founder, Lee Kim Yew. CHHB MD Datuk Mircle Yap said the recent personal incident involving Lee would not impact the company's financial performance or operations. Yap said investors can be confident that CHHB's financial performance and outlook are based on their strong business fundamentals, including a diversified real estate portfolio, strategic investments, and a proven track record of creating value for shareholders. (StarBiz)

Market Update

The FBM KLCI might open higher today after US stocks advanced on Thursday after cooler than expected inflation data boosted traders’ hopes that the Federal Reserve could tap the brakes on its tightening cycle. The blue-chip S&P 500 rose 1.3% in New York, closing at its highest level since February 15. The tech-heavy Nasdaq gained 1.9%. Traders were encouraged by data showing a cooling of the US economy, as producer prices unexpectedly fell 0.1% in March, which could signal relief for consumers who have had higher operating costs passed on to them. New jobless claims data showed the number of people filing for unemployment benefits climbed more than expected to 239,000. European industrial production data released on Thursday was higher than forecasts at 1.5%, a half percentage point more than the previous month. Europe’s region-wide Stoxx 600 closed up 0.4%, London’s FTSE 100 was up 0.2% and Germany’s Dax was up 0.2%. France’s Cac 40 was the standout, rising 1.1% as strong earnings from LVMH boosted demand for luxury stocks.

Back home, Bursa Malaysia pared earlier losses to end marginally lower as bargain hunting emerged in selected heavyweight counters during the final hour of trading. At the closing bell, the FBM KLCI slipped 0.52 of a point to 1,434.22 from Wednesday's close of 1,434.74. In the region, Hong Kong’s Hang Seng index closed up 0.2% and China’s CSI 300 was down 0.7%.

Source: PublicInvest Research - 14 Apr 2023