Economy

US: Industrial suppliers face a rocky road if US defaults on debt. A failure to break the deadlock on raising the US debt ceiling before the deadline could pose a challenge to capital-intensive businesses such as industrial suppliers. The US government could fall behind on its bills next month, and even default on its debt, if  Congress does not raise a USD31.4trn cap on government borrowing, a failure that could trigger economic calamity and panic on global financial markets. A US debt default would also spike borrowing costs, leaving the suppliers of parts and components to manufacturers such as Deere Co and Caterpillar Inc scrambling to fund their operations. (Reuters)

US: Yellen maintains early June as US debt ceiling deadline.  US Treasury Secretary Janet Yellen maintained early June as a  debt ceiling default deadline and said she will update Congress shortly about government finances. Speaking at a Wall Street  Journal forum, Yellen said it was hard to be precise about exactly which day the US government will run short of funds, but added that she will try to increase the level of precision on a date, based on incoming government receipts. Some private forecasters, including  Goldman Sachs and Moody's Analytics, have estimated that a  default could come a few days after June 1, between June 6 and  June 9. (Reuters)

US: Fed's Waller sees a rate hike or a skip in June, but no stop.  Fed Governor Christopher Waller is concerned about the lack of progress on inflation, and while skipping an interest rate hike at the US central bank’s meeting next month may be possible, an end to  the hiking campaign isn’t likely. Earlier this month the Fed increased the target for its policy rate to the 5%-5.25% range, and Fed Chair  Jerome Powell signalled that may be high enough for central bankers to pause their tightening campaign and assess the impact so far on the economy, especially given uncertainty over the outlook for credit conditions. (Reuters)

EU: Iceland central bank raises key interest rate to 8.75%.  Iceland's central bank raised its key interest rate sharply at its May meeting to contain the risk of a wage-price spiral in the face of strong demand pressures, and the policy board hinted that further rate hikes would bring inflation back to the target range and thereby ensure a better-balanced economy. The MPC of the Central Bank of  Iceland, chaired by Governor Asgeir Jonsson, decided to raise the benchmark interest rate, which is the rate on seven-day term deposits, by 125bps to 8.75%. The previous change to the rate was in March, when the policy rate was hiked by 100bps. (RTT)

EU: German Ifo business confidence weakens for first time in 7  months. Germany's business confidence weakened for the first time in seven months in May as managers were sceptical about the upcoming summer amid the tightening monetary policy and mounting fears of recession in the US. The business confidence index fell more than expected to 91.7 in May from a revised 93.4 in  the previous month. The expected score was 93.0. The Ifo index marked the first decline after six consecutive increases. This development was driven by significantly more pessimistic expectations. Moreover, managers were somewhat less satisfied with their current conditions. (RTT)

EU: Finland jobless rate rises to 7.9%, highest in 11 months.  Finland's unemployment rate increased further in April to the  highest level in nearly a year. The jobless rate climbed to 7.9% in  April from 6.9% in March. In the same month last year, the unemployment rate was also 6.9%. Moreover, this was the highest unemployment rate since May 2022, when it was also 7.9%. The number of unemployed people rose to 222,000 in April from  193,000 in the previous month. The youth unemployment rate,  which is for people aged 15 to 24, also rose to an 11-month high of  22.6% from 18.1%. (RTT)

UK: Inflation strengthens call for June rate hike. UK CPI slowed  less than expected in April and the core rate accelerated unexpectedly to a 31-year high, strengthening the case for another  interest rate hike from the BoE in June. The CPI registered an annual increase of 8.7% in April after a 10.1% gain in March.  Although inflation eased from April, the rate was above economists'  forecast of 8.3%. Core inflation that excludes energy, food, alcoholic beverages and tobacco advanced to 6.8% in April from 6.2% in the previous month. (RTT)

South Korea: Producer prices dip 0.1% in April. Producer prices  in South Korea were down 0.1% on month in April. That was shy of expectations for an increase of 0.3% and down from the 0.1% gain  in March. Individually, prices for agricultural, forestry & marine products fell 1.8% on month; manufacturing products rose 0.2%,  utilities slumped 2.8%; and services gained 0.3%. On a yearly basis, producer prices rose 1.6%, again missing expectations for 2.3% and down from 3.3% in the previous month. (RTT)

Markets

Uzma (Outperform, TP: 1.05): Bags PETRONAS Carigali  contract. Uzma has secured a contract from PETRONAS Carigali  SB (PCSB) for the provision of gas lift valve and insert strings  equipment, accessories and services. (The Edge)

Comments: Based on our channel checks, the value of the contract  is minimal, hence will have immaterial though positive impact throughout the 3-year contract period. However, for Uzma, the contract is a significant milestone as it is now broadening its services into artificial lifts for gas. We make no changes to our estimates and recommendations.

Iris Corp: Gets one-year extension for NIISe contract. Iris Corp’s  contract to provide the National Integrated Immigration System  (NIISe) to the government has been extended by 12 months. The  identity products and solutions provider said its wholly owned  subsidiary Iris Information Technology Systems SB (IITS) on May  23 received a letter of contract extension from the Ministry of Home  Affairs of Malaysia (KDN). KDN agreed to extend the duration of the  contract for a period of 12 months from Sep 1, 2025, to Aug 31,  2026. (The Edge)

Bintai Kinden: To conduct internal probe on its own directors,  trading activities. Bintai Kinden Corp will be initiating an internal  investigation into the conduct of "certain directors", as well as the  trading activities of the company. However, it did not identify the  directors who will be investigated. The scope of the investigation is  set to include, but not be limited to, examining unauthorised trading  of shares, potential insider trading, involvement of other directors or  former company secretary, and the overall effectiveness of our  corporate governance controls. (The Edge)

Kim Teck Cheong: Gets SC nod to transfer to Main Market. Kim  Teck Cheong Consolidated (KTC) has received clearance from  Securities Commission Malaysia to transfer its listing to the Main  Market of Bursa Malaysia Securities. KTC was listed on the ACE  Market in 2015, and booked a revenue and net profit of RM341.2m  and RM2.0m respectively for its financial year ended June 30, 2016  (FY2016). (The Edge)

Chin Hin: Founder tightens grip. Over the past five months, Chin  Hin Group’s controlling shareholder Datuk Seri Chiau Beng Teik  has been actively raising his stake in the building material specialist,  breaching the 60% mark. Chiau is the founder and executive  chairman of Chin Hin. Last Dec, his stake stood at 55.5%. With the  continued accumulation of shares, his shareholding has increased  to 60.1%. He now owns a 22% direct stake and a 38.1% indirect  stake — via his private entity Divine Inventions SB. (The Edge)

IPO: Cloudpoint 1Q net profit surges 223% to RM3.01m. Net  profit for 1Q ended March 31, 2023 surged 223% to RM3.01m from  RM933,000 a year earlier, on the back of revenue RM19.40m  versus RM10.25m previously. EPS rose to 0.71 sen from 0.22 sen.  Revenue for quarter was mainly derived from the group’s offering of  project-based income which comprises of networking and  cybersecurity solutions, which contributed a revenue of RM13.5  million or 69.5% of its total revenue. (The Edge)

MARKET UPDATE

The FBM KLCI might open lower after US stocks slid and short-term  Treasury yields held near two-decade highs on Wednesday, as investors fretted over the looming debt-ceiling deadline while policymakers struggled to reach an agreement. Wall Street’s benchmark S&P 500 closed 0.7% lower, with all sectors in the red except energy. The tech-heavy Nasdaq Composite fell 0.6%. In  Europe, the region-wide Stoxx 600 traded down 1.8%, hitting its lowest point in almost two months. France’s CAC 40 fell 1.7% and  Germany’s Dax lost 1.9%, extending their losses from the previous session. The FTSE 100 was down 1.7% and short-term UK bond yields moved sharply higher, after data showed inflation fell to 8.7 %  in April, a much smaller drop than the Bank of England had forecast.

Back home, Bursa Malaysia ended slightly lower on Wednesday despite late gains in selected industrial products and services as well as telecommunications and media counters. At the closing bell,  the FBM KLCI fell 1.92 points to close at 1,409.62 compared with  1,411.54 at Tuesday's close. Meanwhile, China’s benchmark CSI  300 index fell 1.4%, erasing gains from a rebound rally that had pushed the gauge up more than 10% earlier in the year. Elsewhere  in the region, Japan’s Topix index — which this month hit its highest  point since 1990 — shed 0.4%, and Australia’s S&P/ASX 200 fell  0.5%

Source: PublicInvest Research - 25 May 2023