Economy

US: Banks tighten credit terms, see loan demand drop. Credit conditions for US business and households continued tightening in the first months of the year but the results seemed to mark the accumulating impact of Fed monetary tightening rather than the cliff-like decline in credit some feared after the Mar collapse of Silicon Valley Bank. (Reuters)

US: Wholesale inventories unchanged for second straight month; sales drop. US wholesale inventories were unchanged for the second straight month in Mar, while softening demand meant that it would now take wholesalers the longest time in nearly three years to clear the current stock of goods. Last month estimated wholesale inventories gained 0.1% in Mar. Economists polled by Reuters had expected that inventories would be unrevised. They increased 9.1% in Mar on a yoy basis. (Reuters)

EU: Euro zone inflation will slow but momentum still high. Euro zone inflation will slow sharply this year but price growth momentum remains high for now, including for underlying goods and services, ECB chief economist Philip Lane said. The ECB has lifted rates at its past seven meetings but slowed the pace of hikes last week, arguing that plenty of policy tightening is already in the pipeline and overall inflation has already turned around after double-digit readings last autumn. Lane argued that sharply lower energy prices and easing bottlenecks should speed disinflation while corporate profit margins, a key driver of prices last year, should also come down. (Reuters)

EU: German industrial output slumps, recession fears rise. German industrial production fell more than expected in Mar, partly due to a weak performance by the automotive sector, spurring again recession fears in Europe's largest economy. Production decreased by 3.4% on the previous month following a slightly revised increase of 2.1% in Feb, the federal statistical office said on Monday. In a Reuters poll, analysts had pointed to a 1.3% fall. The manufacture of motor vehicles and automotive parts fell by 6.5% on the previous month. (Reuters)

UK: Shoppers cut spending amid pressure on BoE over inflation. Consumers are cutting back on purchases amid growing pressure on the BoE to tame inflation. Retail sales increased 5.2% on a like-for-like basis in Apr compared with the same period a year earlier. But that headline growth in retail sales, which is not adjusted for inflation, masked slumping volumes of goods and services. (The Guardian)

China: Gets first corn shipment from South Africa, bolstering push to diversify away from US. With China increasingly looking to friendly nations to help lower its grain reliance on the United States and war-torn Ukraine, the first shipload of South African feed corn was offloaded last week. The noteworthy milestone was achieved by China’s largest food processor, manufacturer and trader – COFCO Group, which has for years been cultivating markets in South Africa, a fellow member of the BRICS group of emerging markets and also a participant in China’s Belt and Road Initiative. (SCMP)

Japan: Service activity grows at record pace in April. J apan's services activity grew at a record pace in April, a private-sector survey showed on Monday, helped by a boost in consumer spending following the end of COVID-19 pandemic restrictions. The final au Jibun Bank Japan Services PMI climbed to a seasonally adjusted 55.4 last month from March's 55.0. It was also higher than the flash reading of 54.9 and well above the 50-mark that separates expansion from contraction for a seventh straight month. (Reuters)

Australia: Business conditions ease; confidence improves in Apr. Australia's business conditions continued to ease in Apr but remained elevated reflecting the resilience of demand and a robust labor market. Meanwhile, confidence improved slightly from March led by the increase in wholesale trade. (RTT)

Markets

Axis REIT (Neutral, TP: RM1.96): Provides RM7m impairment as tenant Yongnam defaults on rental . Axis Real Estate Investment Trust (Axis REIT) said a tenant at its property in Nusajaya, Johor, which contributed about 5% of its total revenue last year, has defaulted on its rental payments. Axis REIT said it has issued a notice to terminate its lease agreement with Yongnam Engineering SB (YESB), which is a major tenant at the Axis Steel Centre @ SiLC, following the default. (The Edge)

Comments: The management company of Axis-REIT terminated the lease agreement with the tenant of Axis Steel Centre @ SiLC i.e. Yongnam Engineering Sdn Bhd(YESB) as the tenant has defaulted in its rental payments to Axis-REIT. The asset contributed c.RM15m or 5% to the Group’s FY22 revenue. The Group has provided RM3.5m in 1QFY23. It said that provision for impairment of a total RM7.3m has been allocated to date on the outstanding rental payments. We understand that Management will take the necessary actions to recover the outstanding rental payments from YESB including rentals for the unexpired period of the lease agreement and will be marketing asset upon delivery of vacant possession by YESB back to Axis-REIT. Pending more clarifications, we keep our earnings unchanged for now.

Barakah Offshore: Drops legal action against Petronas . Barakah Offshore Petroleum has decided to discontinue its legal action against Petroliam Nasional Bhd (Petronas) for suspending its wholly-owned unit’s licence to bid for new projects from the national oil company in 2019. Barakah also drops the legal action against former Petronas president-cum-chief executive officer (CEO) Tan Sri Wan Zulkiflee Wan Arifin, current president and Group CEO Datuk Tengku Muhammad Taufik Tengku Aziz and six defendants, including Petronas chief financial officer Liza Mustapha as defendants, according to its filing on May 8. (The Edge)

Harbour-Link: Unit buys industrial lands in Telipok, Kota Kinabalu for RM8.5m . Harbour-Link Group, which is involved in shipping and integrated logistics services, is buying three pieces of vacant industrial lands in Telipok, Kota Kinabalu, Sabah for RM8.5m cash. Harbour Link said its wholly-owned subsidiary Harbour-Link Logistics SB (HLL) has entered into a conditional sale and purchase agreement with three vendors, namely Loh Hien Khong, Loh Hien Khiong and Wong Kin Nyuk, on May 8. HLL is acquiring a land plot measuring 2,761.8 square metres (sq m) for RM2.1m, a 4,100.6 sq m land for RM3.1m, and another 4,720.4 sq m land for RM3.4m. (The Edge)

Pegasus Heights: To undertake RM180m capital reduction . Pegasus Heights (PHB) will undertake a capital reduction of RM180m of its issued share capital, which is lost and unrepresented by available assets. As of May 3, 2023, the total issued share capital of PHB is RM210.2m, comprising 10.8m ordinary shares. (StarBiz)

Icon Offshore: Wins contract from PETRONAS Carigali. Icon Offshore has secured a contract from PETRONAS Carigali SB (PCSB) for the provision of an anchor handling tug vessel with crew and equipment for 24 hour services. Icon Offshore said the services will be utilised to support and maintain drilling rigs, offshore installations, derrick barges, towing and anchor jobs required by PCSB during their drilling and project activities. (StarBiz)

Market Update

The FBM KLCI might open flat today after US stocks wavered on Monday as an early rally in regional banking stocks faded and investors assessed a Federal Reserve survey that warned of tighter lending standards this year. The S&P 500 finished fractionally higher, while the Nasdaq Composite added 0.2%. US regional bank stocks, which had rallied in early trade, were unable to hold on to their initial gains. The pan-European Stoxx 600 rose 0.3% despite lingering worries that interest rates will remain high to combat inflation, even as economic growth stumbles. London was closed for a public holiday. 

Back home, Bursa Malaysia ended mixed on Monday, in tandem with the regional performance, with the key index moving in a tight range. At the closing bell, the FBM KLCI closed 0.19%, or 2.70 points higher, at 1,433.74, from last Friday’s close at 1,431.04. Hong Kong’s benchmark Hang Seng index rose 1.2%, while China’s CSI 300 climbed 1.1%. Japan’s Topix broke ranks with the rest of the region, falling 0.2%.

Source: PublicInvest Research - 9 May 2023