Economy

US: Housing starts unexpectedly rebound but building permits  extend slump. New residential construction in the US unexpectedly  saw a significant rebound in the month of April. Housing starts  jumped by 2.2% to an annual rate of 1.401m in April after plunging  by 4.5% to a revised rate of 1.371m in March. Economists had  expected housing starts to drop to an annual rate of 1.405m from  the 1.420m originally reported for the previous month. Single-family  housing starts shot up by 1.6% to a rate of 846,000, while multifamily housing starts surged by 3.3% to a rate of 555,000.  Meanwhile, building permits slumped by 1.5% to an annual rate of  1.416m in April after tumbling by 3.0% to a revised rate of 1.437m in  March. (RTT)

EU: Eurozone inflation accelerates as expected. Eurozone  inflation rose as estimated in April on higher food and energy prices,  while core inflation slowed slightly. The harmonized index of  consumer prices posted an annual growth of 7.0% in April, following  a 6.9% rise in March. The rate was in line with the preliminary  estimate released on May 2. By contrast, excluding energy, food,  alcohol and tobacco prices, core inflation slowed slightly to 5.6%  from 5.7% a month ago. The core rate was also confirmed. On a  monthly basis, the HICP rose 0.6%, slightly weaker than the flash  estimate of 0.7%. (RTT)

EU: Europe new car registrations growth moderates in April.  Europe's new car registrations registered a double-digit growth in  April but the pace of growth slowed from March. New car sales  advanced 17.2% from the last year, following March's 28.8%  expansion. All the EU major markets registered robust growth in  April, with Italy posting the biggest annual increase of 29.2%. Sales  in France and Germany rose 21.9% and 12.6%, respectively. At the  same time, Spain reported an increase of 8.2%. There was a  significant upturn in the market share of battery electric cars in April.  The share of battery electric cars increased to 11.8% from 9.1%.  Most EU markets reported double- and triple-digit percentage gains.  (RTT)

Japan: Industrial production grows 1.1%, more than estimated. Japan's industrial production expanded more than initially estimated  in March. Industrial production rose by a seasonally adjusted 1.1%  MoM in March, slower than the strong rebound of 4.6% in Feb. In  the flash report, the rate of increase was 0.8%. Shipments  advanced 0.8% monthly in March, and the rise in inventories was  0.2%. The data showed that the inventory ratio showed a  comparatively faster increase of 1.1%. On a yearly basis, industrial  production fell 0.6% in March after a 0.5% decline in the prior  month. (RTT)

Japan: GDP climbs 0.4% on quarter in Q1. Japan's GDP  expanded a seasonally adjusted 0.4% on quarter in the first quarter  of 2012. That beat expectations for a gain of 0.1% following the flat  reading in the three months prior. On an annualized basis, GDP  jumped 1,6% - again topping forecasts for an increase of 0.7%  following the downwardly 0.1% contraction in the previous three  months (originally +0.1%). Capital expenditure climbed 0.9% on  quarter, beating forecasts for a decline of 0.4% following the  downwardly revised 0.7% contraction in the previous quarter  (originally -0.5%). External demand fell 0.3% on quarter, while  private consumption rose 0.6% on quarter. (RTT)

Singapore: Trade surplus SGD4.7bn in April. Singapore posted a  merchandise trade surplus of SGD4.713bn in April. That was shy of  expectations for a surplus of SGD6.346bn following the  SGD6.207bn surplus in March. Non-oil domestic exports were up  2.7% on month, beating forecasts for a decline of 3.0% following the  18.4% surge in the previous month. On a yearly basis, non-oil  domestic exports slumped 9.8%, missing forecasts for a drop of  9.4% after sinking 8.3% a month earlier. (RTT)

Australia: Wage price index rises 0.8% in Q1. The wage price  index in Australia was up a seasonally adjusted 0.8% on quarter in  1Q2023. That was shy of expectations for an increase of 0.9% but  was unchanged from the previous three months. On a yearly basis,  the index rose 3.7% - beating expectations for 3.6% and  accelerating from 3.4% in the three months prior. Private sector  wages were up 0.8% on quarter and 3.8% on year, while public  sector wages rose 0.9% on quarter and 3.0% on year. (RTT)

Markets

IGB REIT (Neutral, TP:RM1.77): Cause of Mid Valley fire  believed to be overheated cooling oil, says Bomba. The fire at  the main power substation at Mid Valley City here is believed to  have occurred after oil meant to cool the electrical transformer  overheated and ignited. City Fire and Rescue Department assistant  director (operations) M Fatta M Amin said that based on initial  checks, there were 12,400 litres of cooling oil used to cool the  transformer. "This cooling oil has a flash point of 137°C," he told  reporters at the scene on Wednesday (17 May). The flash point is  when a liquid releases enough vapours into the air to produce a  flammable mixture. (StarBiz)

Comments: Mid Valley City was closed yesterday but we  understand it will be reopened for business from today. Mid Valley  Megamall’s rental revenue is about 55% of IGBREIT’s total revenue  in our estimates in FY23 but we believe the impact to earnings is  immaterial for now as it is likely covered by its fire insurance. No  change to call and TP.

Boustead Holdings: Privatisation gains strong momentum. - Lembaga Tabung Angkatan Tentera (LTAT) is firmly on track in its  bid to privatise Boustead Holdings (BHB). LTAT said the latest  shareholdings of LTAT in BHB is approximately 90.49%,  accumulated via open market acquisition as well as through  shareholders' acceptances of the offer. (Bernama)

Pavilion REIT: To raise RM720m from private placement. Pavilion Real Estate Investment Trust (Pavilion REIT) said it has  fixed the issue price of the first tranche of its private placement  exercise at RM1.22 per unit to raise approximately RM720m.  Pavilion REIT said that it is the largest private placement ever  recorded for Malaysian REITs (M-REITs). The issue price  represents a discount of approximately 6.6% to the five-day volume weighted average market price of the units up to and including 16  May 2023 of RM1.31. (Bernama)

Pecca Group: Expands presence in Indonesian automotive  market. Automotive upholstery supplier Pecca Group has  completed the acquisition of an 80% stake in PT Gemilang Maju  Kencana (GMK). The automotive upholstery supplier said GMK is a  company associated with Indonesia’s PT. Multi Pratama Interbuana  Group (MPI). GMK’s principal business activity is the supply of  upholstery leather wrapping and seat cover for the automotive  industry in Indonesia. On 10 March 23, Pecca announced that its  wholly-owned subsidiary Pecca Leather SB (PLSB) had signed  shares transfer agreements with PT Multi Berjaya Asindo, CSC  Automotive SB and Tan Kim Cheang, for the acquisition of 80%  equity interest in GMK. (StarBiz)

Kobay Technology: To stay agile amidst challenging business  environment. Kobay Technology will stay agile and adjust its  strategies and operations to ensure ongoing competitiveness and  profitability. In overall, barring unforeseen circumstances, the  management is of the view that the financial year ending 30 June  2023 (FY23) will be a challenging year in view of inflationary  pressure on operating costs and at risk of recession in the global or  local economy. In the third quarter ended March 31, Kobay saw its  net profit tumble to RM7.9m, or earnings per share of 2.47 sen from  RM15.1m, or 4.92 sen a year ago. Revenue for the quarter fell  26.4% to RM73.6m versus RM100.1m a year prior. (StarBiz)

MARKET UPDATE

The FBM KLCI might open higher today after Wall Street stocks  advanced on Wednesday as investors grew more confident the  White House would reach a deal with Congress to avoid a  government default. Wall Street’s benchmark S&P 500 closed 1.2%  higher on Wednesday, driven by gains in the financial and energy  sectors, while the tech-heavy Nasdaq Composite rose 1.3%.  European stocks were subdued, with the region-wide Stoxx 600  falling 0.2%, FTSE 100 down 0.4%, and France’s CAC 40 ending  the day down 0.1%.

Back home, Bursa Malaysia staged a mild recovery on Wednesday  as investors took some profits, but the continuous buying support in  selected heavyweight counters managed to push the key index into  positive territory at the close. At the closing bell, the FBM KLCI  added 0.84 of a point to 1,424.34 from 1,423.50 at Tuesday's close.  In the region, China’s CSI 300 shed 0.5% and Hong Kong’s Hang  Seng index fell 2.1%. Japan’s Topix was the outlier, rising 0.3%,  following stronger than expected gross domestic product figures.

Source: PublicInvest Research - 18 May 2023