Economy

US: Annual inflation slows to below 5%, price pressures still strong. The annual increase in US consumer prices slowed to below 5% in April for the first time in two years, while a key inflation measure monitored by the Federal Reserve subsided, potentially providing cover for the central bank to pause further interest rate hikes next month. Nevertheless, inflation remains too strong, with the report showing monthly consumer prices rising solidly because of sticky rents as well as rebounds in the costs of gasoline and used motor vehicles. (Reuters)

US: Government posts smaller USD 176bn April surplus as revenues shrink. The US government reported a USD 176bn surplus in April, down sharply from a year-ago record as revenues fell, the US Treasury Department 1 June deadline for a potential debt ceiling default drew closer. The April surplus, which reflects tax filing season receipts, was down USD 132bn, or 43%, from an April 2022 surplus of USD 308bn, a record for any month that was fuelled by massive COVID-19 spending and a strong stock market performance in 2021. Revenues for April totalled USD 639bn, the second-highest level since the April 2022 record of USD 864bn, but a decrease of 26%. (Reuters)

US: Debt ceiling standoff talks look at COVID clawbacks, energy permits. Talks on raising the U.S. federal government’s USD 31.4trn debt ceiling enter a new phase on Wednesday, after Democratic President Joe Biden and top congressional Republican Kevin McCarthy’s first negotiating meeting in three months. Time is tight to avoid a historic and economically destabilizing default, which the Treasury Department has warned could come as soon as 1 June, but some areas of potential compromise emerged after Tuesday’s White House meeting. (Reuters)

EU: German inflation slows as estimated in April. Germany's CPI softened as initially estimated in April largely due to base effects. CPI slowed to 7.2% in April from 7.4% in March. The rate matched the estimate published on 28 April. "The rate of inflation has therefore slowed for the second month in a row but remains at a high level", Federal Statistical Office President Ruth Brand said. Food prices continued to be the biggest driver of inflation in April. (RTT)

EU: Italy's industrial output falls for third month. Italy's industrial production declined for the third successive month in March. Industrial production fell 0.6% MoM in March, following a 0.2% drop in Feb. Among components, both the production of consumer goods and energy fell by 1.4%. Intermediate goods output slid 0.4% over the month. Meanwhile, output produced in the capital goods sector was 0.7% higher compared to a month ago. (RTT)

UK: Bank of England set for 12th straight interest rate hike, but the outlook remains murky. The Bank of England is expected to hike interest rates for the 12th consecutive meeting on Thursday as inflation continues to run hot, but the summit may be drawing near. The U.K. economy has held up better than expected so far this year, though GDP flatlined in Feb as widespread strikes and the cost-of-living squeeze hampered activity, while the labor market continues to look resilient. (CNBC)

Japan: BOJ's Ueda vows to communicate exit path once inflation sustainable. BOJ Governor Kazuo Ueda said on Wednesday the central bank will debate an exit strategy from its ultra-loose monetary policy, and communicate it to the public, once prospects to achieve stable inflation are in place. Speaking in parliament, Ueda said it was too early to discuss specific plans of an exit from the BOJ's massive stimulus programme, including how it could unload its huge holdings of exchange-traded funds (ETF). (Reuters)

Japan: Leading index falls to 97.5 more than forecast. Japan's leading index declined more-than-expected in March after improving in the previous month. The leading index, which measures future economic activity, dropped to 97.5 in March from a 4-month high of 98.2 in the previous month. (RTT)

Indonesia: Retailers expect sales to rise further. Indonesia's retail sales increased for the second successive month in March, and retailers expected sales to maintain the growth momentum in April. Retail sales rose strongly by 4.9% YoY in March, faster than the 0.6% rebound in the previous month. The growth in March was largely driven by more sales of food, beverages, and tobacco, as well as cultural and recreational goods as well as clothing. On a monthly basis, retail sales advanced 7.0% in March versus a 3.4% fall in Feb. This was the first increase in three months. (RTT)

Markets

TM (Outperform, TP: RM6.20): Joins CelcomDigi to withdraw equity participation in DNB. A week after CelcomDigi announced it was pulling out from participating in the equity of Digital Nasional Bhd (DNB), Telekom Malaysia has announced that it has terminated the share subscription agreement (SSA) with DNB to be effective immediately. (The Edge)

Petronas Dagangan: Eyes aggressive expansion of convenience segment. Petronas Dagangan (PetDag) will continue to embark on an aggressive expansion of its convenience business, even though profit for the segment dropped markedly YoY in FY2022. Its managing director and CEO Azrul Osman Rani said the decrease was only to be expected, given that the convenience segment was still in the early stages of development. For FY2022, PetDag’s convenience segment contributed RM16.1m or 1.4% of its operating profit of RM1.15bn. (The Edge)

Lotte Chemical Titan: Signs MOU with British biotech firm to commercialise biodegradeable resin. Lotte Chemical Titan Holding’s (LCT) unit Lotte Chemical Titan (M) SB has signed a nonlegally binding MOU with British biotech company Polymateria Ltd to commercialise "Resin+", a biodegradeable resin. The five-year partnership, which LCT’s subsidiary entered into on May 10, is part of the group’s corporate vision to manage climate change issues, minimise the environmental impact of its business operations, and provide sustainable solutions for customers, said LCT president and CEO Park Hyun Chul. (The Edge)

Kimlun: Wins RM94.5m contracts in Johor. Kimlun Corp has secured two contracts worth RM94.5m contract from Horizon Hills Development SB. Kimlun said the contracts were for the main building works for 78 units of shop offices and a shopping mall with facilities in Pulai, Johor. The projects are expected to be completed by the second quarter of 2025. (StarBiz)

Impiana Hotels: To acquire SOULed OUT and WIP. Impiana Hotels is proposing to acquire a 70% equity interest in Cafelink (M) SB, which owns the SOULed OUT and WIP brands. Upon completion of the acquisition, Impiana said it will own, operate and manage the two brands, which are located throughout Klang Valley and Sabah. “Given Impiana’s extensive experience in operating hotels and resorts, the proposed acquisition is part of a progression to complement its existing businesses and serve as an opportunity to further grow the group’s portfolio by expanding the number of outlets under these two brands,” it said. (StarBiz)

Bahvest: To pay RM13m over mining land dispute. Bahvest Resources has announced that a temporary resolution had been agreed between Southsea Gold SB and its wholly-owned subsidiary Wullersdorf Resources SB, pertaining to the shareholders and boardroom tussles that it is facing. The first part of the temporary resolution is for Wullersdorf to pay a non-refundable deposit of RM13m in two tranches to commence negotiations relating to a final sum for compensation over the wrongful occupation of Southsea Gold’s land from September 2017 till April 2023. (The Edge)

Samaiden: Samaiden and Aneka mutually terminate JV to enter RE sector in Indonesia. Samaiden Group and Aneka Jaringan Holdings have agreed to mutually terminate a joint venture agreement (JVA) to penetrate into the renewable energy (RE) business in Indonesia. Samaiden told Bursa Malaysia that the mutual termination is due the to divergence of business objectives and views of both parties. (The Edge)

MARKET UPDATE

The FBM KLCI might nudge higher today after US treasuries rallied and Wall Street stocks advanced on Wednesday as US inflation data came in slightly weaker than expected, adding to traders’ belief that the Federal Reserve will halt its rate tightening campaign. The yield on the interest rate-sensitive two-year Treasury fell 0.11 percentage points to 3.91%, while the yield on the 10-year note dropped 0.07 percentage points to 3.44%. The tech-heavy Nasdaq Composite added 1%, closing at its highest level since June. Meanwhile, the blue-chip S&P 500 finished 0.4% higher in a choppy day of trading. The moves came after data from the US Bureau of Labor Statistics this morning showed the US consumer price index for April eased to 4.9% in April, the lowest annual reading since April 2021 and slightly below forecasts of 5%. In Europe, the regionwide Stoxx 600 benchmark fell 0.4%, while London’s FTSE 100 was 0.3% lower.

Back home, the FBM KLCI extended its decline for a second consecutive day on Wednesday, dragged down by selling mainly for banking stocks, in tandem with the weak regional performance. At the closing bell, the market bellwether had eased by 6.95 points or 0.49% to 1,425.68, from Tuesday’s close at 1,432.63. In the region, Hong Kong’s Hang Seng index fell 0.5%, and China’s CSI 300 lost 0.8%. China’s import volume contracted by the most in a year last month, while exports expanded at a slower pace than expected, heightening concerns over the pace of the country’s economic recovery since Beijing ditched strict zero-Covid measures in late 2022.

Source: PublicInvest Research - 11 May 2023