Economy

Global: IMF raises Asia's economic forecast on China recovery, warns of risks . The IMF raised Asia's economic forecast as China's recovery underpinned growth, but warned of risks from persistent inflation and global market volatility driven by Western banking-sector woes. The reopening of China's economy will be pivotal for the region with the spillover to Asia seen focused on consumption and service-sector demand rather than investment, the IMF said. "Asia and Pacific will be the most dynamic of the world's major regions in 2023, predominantly driven by the buoyant outlook for China and India," the IMF said its regional economic outlook report. (Reuters)

US: Job openings drop; layoffs hit highest level in more than two years . US job openings fell for a third straight month in March and layoffs increased to the highest level in more than two years, suggesting some softening in the labor market that could aid the Fed's fight against inflation. Still, the labour market remains tight, with the monthly Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department showing 1.6 vacancies for every unemployed person in March. That compared to 1.7 in Feb. (Reuters)

US: Factory orders rebound slightly more than expected in March . Reflecting a surge in new orders for durable goods, the Commerce Department released a report showing new orders for US manufactured goods increased by slightly more than expected in March. The Commerce Department said factory orders advanced by 0.9% in March after slumping by a revised 1.1% in Feb. Economists had expected factory orders to climb by 0.8% compared to the 0.7% decrease originally reported for the previous month. (RTT)

EU: ECB says euro-area banks curbed credit by more than expected. Banks in the eurozone curbed lending more than anticipated after borrowing costs jumped and turmoil gripped the financial sector, reinforcing calls for the ECB to slow the pace of its interest-rate hikes. Credit standards “tightened further substantially” in the first quarter, according to the ECB’s Bank Lending Survey, published on May 2. “The tightening for loans to firms and for house purchase was stronger than banks had expected in the previous quarter, and points to a persistent weakening of loan dynamics.” (Bloomberg)

UK: Retailers report record food inflation but see falls ahead . Food prices at British supermarkets rose 15.7% in the year to April, the biggest annual increase in records going back to 2005, but lower prices are on horizon, the British Retail Consortium (BRC) said May 2. Overall inflation among BRC members dropped to 8.8% from March's 8.9% as price increases for non-food items slowed due to heavy discounting of clothing, footwear and furniture. Costlier coffee beans and more expensive packaging and production of ready-meals pushed up food inflation, but prices of butter and vegetable oil were starting to decline. (Reuters)

UK: Manufacturing downturn continues in April . The British manufacturing sector contracted further at the start of the second quarter, as output and new orders fell amid headwinds of client uncertainty, destocking, and tightening cost controls, survey results from S&P Global revealed. The Chartered Institute of Procurement & Supply manufacturing Purchasing Managers' Index, or PMI, edged down to 47.8 in April from 47.9 in March. The flash estimate was 46.6. (RTT)

Australia: Central bank stuns with 25bps hike, warns more might be needed . Australia's central bank stunned markets by raising its cash rate 25 bps when traders had looked for an extended pause, saying inflation was way too high and warned that even further tightening may be needed to bring it to heel. The unambiguously hawkish policy stance sent the Australian dollar soaring and bond futures tumbling as markets quickly lifted the peak for interest rates. Wrapping up its May policy meeting, the Reserve Bank of Australia (RBA) raised rates to 3.85% and said "some further tightening" may be required to ensure that inflation returns to target in a "reasonable timeframe". (Reuters)

Markets

DRB-Hicom (Outperform, TP: RM2.10): Geely transfers entire equity interest in Proton. Zhejiang Geely Holding Group Co Ltd’s (Geely) wholly-owned subsidiary, Geely International (Hong Kong) Ltd (GIHK) has completed the transfer of its entire equity interest in Proton Holdings. The transfer comprised 547.2m ordinary shares, representing 49.9% equity interest in Proton to its affiliate, Linkstate Overseas Ltd, pursuant to the completion of an internal restructuring in Geely group. (StarBiz)

Axiata (Neutral, TP: RM3.40): To merge Dialog Axiata in Sri Lanka with Airtel Lanka. Axiata Group Bhd has entered into a binding term sheet to combine the operations of its 82.27%-owned subsidiary, Dialog Axiata Plc, with Indian telco Bharti Airtel Ltd’s operations in Sri Lanka, Bharti Airtel Lanka (Private) Ltd (Airtel Lanka). Discussions of the proposed transaction are ongoing between the three parties and also with the relevant regulatory authorities as per applicable laws and regulations. (The Edge)

Cosmos Technology: Bags RM4m job from Air Selangor. Integrated water technology solutions provider Cosmos Technology International has bagged a RM4.2m contract from Pengurusan Air Selangor SB for the supply, deliver, commissioning and integration of the electromagnetic meters complete with data loggers for the country’s largest water operator. The contract period is 24 months commencing from April 19, 2023 and shall expire on April 18, 2025 (Year 1 and Year 2), with an option to extend the contract period for a further term of 12 months (Year 3), subject to terms in the framework agreement. (The Edge)

Mulpha: Indirect unit secures approximately RM478m loan facility. Mulpha International’s (MIB) indirect wholly-owned subsidiary, Mulpha Norwest Quarter Development Pty Ltd, has secured a green syndicated construction facility of about RM478m jointly from Australia and New Zealand Banking Group Ltd and Clean Energy Finance Corp. The purpose of the green syndicated construction facility was to finance the construction of stage one of Norwest Quarter, a mixed-use residential apartment development located in Norwest, New South Wales, Australia. (StarBiz)

GDB: 8 Conlay dispute referred to arbitration following GDB’s RM102m claim against project owner KSK Land. GDB Holdings’ unit Grand Dynamic Builders SB (GDBSB) has been issued with a notice of arbitration by KSK Land SB’s wholly owned subsidiary Damai City SB (DCSB), over the 8 Conlay project termination dispute. DCSB claimed for costs and expenses incurred for the delayed completion of the project. The claims included loss of profits, reputation, and general damages for breach of contract. (The Edge)

Zelan: Slips into PN17 status after external auditors express disclaimer of opinion. Zelan has been categorised as a PN17 company after its external auditors Nexia SSY PLT expressed a disclaimer of opinion on its audited financial statements for the FY2022.The company has 12 months to regularise its financial condition, failing which trading in its securities could be suspended and it could be delisted from Bursa Malaysia. (The Edge)

Ageson: Fails to submit annual report, suspended from May 10. Trading in the securities of Ageson will be suspended with effect from May 10 after it failed to submit its annual report for FY2022. (StarBiz)

Market Update

The FBM KLCI might open lower as US treasuries rallied and Wall Street stocks retreated on Tuesday, as a sell-off in US regional banks unnerved investors ahead of crucial decisions from big central banks this week. Investors piled into US government debt, pushing the yield on interest rate-sensitive two-year Treasuries 0.15 percentage points lower to 3.98%, while the yield on 10-year Treasuries fell 0.13 percentage points to 3.44%. In equity markets, Wall Street’s benchmark S&P 500 fell 1.2%, dragged down by the energy sector, which lost 4.3% as fuel demand weakened in the US and China. The tech-heavy Nasdaq Composite ceded 1.1%. In Europe, stocks were lower as rising eurozone inflation data raised investors’ concerns that the European Central Bank would increase interest rates this week. The pan-European Stoxx 600 shed 1.2%, with the Cac 40 in Paris down 1.5%. The FTSE 100 lost 1.2% as investors grew more cautious in response to falling oil stocks such as BP and Total. Back home, Bursa Malaysia closed higher on Tuesday due to bargain hunting, led by banking, gaming, and oil and gas stocks. At the closing bell, the FBM KLCI had risen 0.72%, or 10.16 points, to 1,426.11, from last Friday’s close at 1,415.95. The regional trading was mixed on Tuesday, with Hong Kong’s benchmark Hang Seng index rising 0.2% and Japan’s Topix falling 0.1%. Markets in China remained closed for Golden Week.

Source: PublicInvest Research - 3 May 2023