Economy

US: Biden says debt ceiling deal ready to move to Congress for vote. US President Joe Biden said he had finalized a budget agreement with US House Speaker Kevin McCarthy to suspend the  USD31.4trn debt ceiling and that the deal was ready to move to  Congress for a vote. “I think it’s a really important step forward,”  Biden told reporters in brief remarks at the White House, after a call with McCarthy to finalize the agreement. “It takes the threat of catastrophic default off the table, protects our hard-earned and historic economic recovery.”. (Reuters)

US: Fed 'pause' on rate hikes in doubt after strong US data.  Federal Reserve policymakers got a dose of unexpectedly strong  US economic data that bolstered the case for further monetary policy tightening to bring down persistently high inflation. Consumer spending surging 0.8% last month from March was good news in showing the economy is not on the precipice of a recession, but discomforting for policymakers looking for a slowdown that could ease upward pressure on prices. (Reuters)

US: Treasury's Yellen says June 5 is last date for debt ceiling to be raised. US Treasury Secretary Janet Yellen on Friday set a  deadline for raising the federal debt limit, saying the government would default if Congress does not increase the USD31.4trn debt ceiling by June 5. Yellen had previously said a default could potentially happen as early as June 1, but is now characterizing  June 5 as the precise deadline. "We now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if  Congress has not raised or suspended the debt limit by June 5,"  she wrote. (Reuters)

US: Durable goods orders unexpectedly jump 1.1% In April. A  report released by the Commerce Department unexpectedly showed a continued surge in new orders for US-manufactured durable goods in the month of April. The Commerce Department said durable goods orders jumped by 1.1% in April after spiking by  3.3% in March. The continued increase surprised economists, who had expected durable goods orders to slump by 1.0%. Orders for transportation equipment led the way higher once again, shooting up by 3.7% in April after soaring by 9.9% in March. Excluding orders for transportation equipment, durable goods orders dipped by 0.2% in April after rising by 0.3% in March. Economists had expected ex-transportation orders to edge down by 0.1%. (RTT)

EU: French consumer confidence remains stable in May.  France's consumer confidence remained unchanged in May, survey results from the statistical office INSEE showed. The consumer confidence index held steady at 83 in May, while the score was forecast to rise to 84.0. The index has remained below its long-term average of 100. The balance of opinion among households regarding their future financial situation increased two points to -18.  Conversely, households' assessment about their past financial situation dropped one point to -33. (RTT)

EU: Italy consumer confidence moderates in May. Italy's consumer confidence moderated in May from a 14-month high,  survey results from the statistical office Istat showed. The consumer confidence index fell to 105.1 in May from 105.5 in April. The score also remained below economists' forecast of 105.2. Within in the  CCI, only the economic climate improved in May, to 119.8 from  119.0, while all other indicators worsened. The current climate index dropped to 100.0 from 100.2 and the index for future situation slid to  112.6 from 113.3. Finally, the personal climate index sank to 100.1  from 100.9. (RTT)

UK: Govt to ask supermarkets to cap prices of basic food items. The British government is looking at plans to have retailers cap the prices of basic food items such as bread and milk, the  Telegraph reported, as the cost of such essentials continued to rise in the double digits. However, asked about such price controls,  health minister Steve Barclay told BBC TV it was “not my understanding” on Sunday. Prime Minister Rishi Sunak’s No. 10  Office is in talks with supermarkets on a deal similar to one in  France where major retailers charge the “lowest possible amount”,  the Telegraph reported on Saturday. (Reuters)

China: Industrial profits tumble 18% in April as demand sputters. Profits at China's industrial firms slumped in the first four months of 2023, official data showed, as companies continued to struggle with margin pressures and soft demand amid a faltering economic recovery. Profits fell 20.6% in Jan-Apr from a year earlier,  compared with a 21.4% decline in the first three months, according to data from the National Bureau of Statistics (NBS). In Apr alone,  industrial firms posted a 18.2% drop in profit YoY, according to the  NBS, which only occasionally gives monthly figures. Profits shrank  19.2% in March. (Reuters)

Singapore: Industrial output falls more than expected.  Singapore's industrial production declined for the seventh straight month in April and the pace of decline was worse than expected. Industrial production posted an annual fall of 6.9% in April, bigger than the 3.8% decrease in March, the Economic Development  Board said. This was also larger than the expected 3.9% decline. Excluding biomedical manufacturing, manufacturing output slid  6.1%. On a monthly basis, industrial output was down 1.9%, in contrast to April's 9.7% increase and economists' forecast of 0.9%  gain. (RTT)

Markets

TNB (Outperform, TP: RM12.42): Inks three MOUs in Vietnam and Laos to explore collaboration in RE power generation. Tenaga Nasional Bhd (TNB) has inked three MoU with the major energy players in Vietnam and Laos to explore potential collaboration in renewable energy power generation. The two  MOUs signed in Vietnam were between TNB Renewables SB and  Saigon Gia Dinh Electric Joint Stock Company and between TNB  Repair and Maintenance SB and North Power Service Joint Stock  Company. Meanwhile, the MOU in Laos was signed between TNB  Genco and Electricite Du Laos. (The Edge)

Sapura Energy (Underperform, TP: RM0.02): Amid merger talks, Sapura Energy brings in former top staff of MHB and  Petronas as directors. Sapura Energy has appointed a former top staff of Malaysia Marine and Heavy Engineering Holdings (MHB)  and Petroliam Nasional (Petronas) into its boardroom, amid talks of  merger between Sapura Energy and MHB — a unit of Petronas.  The company announced that MHB’s former MD and CEO Wan  Mashitah Wan Abdullah Sani has joined the board as an independent and non-executive director. (The Edge)

Nestcon: Unit bags RM190m condominium construction  contract. Nestcon’s wholly owned subsidiary Nestcon Builders SB  has secured an award from Nescaya Etika SB for the construction and completion of a 40-storey condominium in Kuala Lumpur for  RM190m. The construction engineering company said the overall completion for the contract works would be within 28 months, with  June 1, 2023, being the date of site possession. It said that the project is expected to be completed on Sept 30, 2025. (Bernama)

Boustead: To build five combat vessels, instead of six, at higher contract cost of RM11.2bn. Boustead Holding announced that its 68.85%-owned subsidiary, Boustead Naval Shipyard SB,  has inked a sixth supplemental contract with the government with regard to the construction of littoral combat ships. It will build five combat vessels instead of six originally, and at a higher contract cost of RM11.2bn. (The Edge)

Bahvest: 1Q results delayed due to MACC raid, appoints three directors. Bahvest Resources said it is unable to submit its 1Q  results by May 31 due to the recent raid by the Malaysian Anti-Corruption Commission (MACC) on the goldmine and business premises of its wholly-owned unit Wullersdorf Resources SB in  Tawau, Sabah. MACC had raided its accounting records on May 16  and therefore Bahvest's finance team was unable to finalise the results for the quarter ended March 31, 2023 within two months as required by Bursa Securities. (The Edge)

KNM: Unit proposes sale of FBM Hudson Italiana to British  Midland. KNM Group said its unit has proposed to divest FBM  Hudson Italiana SpA to British Midland FZE for EUR12m  (RM59.1m). The deal between KNM Europa BV and British Midland is dependent on satisfactory due diligence within three weeks, said  KNM in a bourse filing. FBM Hudson Italiana manufactures heat exchangers and high pressure equipment for the oil & gas industry.  KNM had earlier aborted its proposed flotation of FBM Hudson  Italiana and FBM-KNM FZCO (collectively known as FBM Group)  by way of an initial public offering on Catalist, the sponsor-supervised board of the Singapore Stock Exchange. The proposal was called off as it was deemed not feasible to be carried through,  said KNM. (The Edge)

MARKET UPDATE

The FBM KLCI might open higher today after US stocks hit a  nine-month high on Friday, propelled by solid economic data and growing investor optimism that a deal on the US debt ceiling will land in the coming days. The S&P 500 closed 1.3%  higher, its highest level since mid-August, in a relatively broad rally in which investors scooped up stocks more sensitive to economic growth prospects and spurning traditionally defensive sectors such as utilities, healthcare and consumer staples. The benchmark index added 0.3% in the week, notching its second straight week of gains. The Nasdaq Composite rose 2.2%,  boosted by the rally around AI-related stocks for the second successive day. The tech-heavy index advanced 2.5% to notch a five-week winning streak. In Europe, the region-wide Stoxx  600 added 1.1% and France’s CAC 40 added 1.2%. London’s  FTSE 100 rose 0.7%.

Back home, Bursa Malaysia recouped earlier losses to close marginally higher on Friday, lifted by late buying in utilities and technology counters, in line with the upbeat performance in most regional bourses. At the closing bell, the FBM KLCI edged up 0.50 of-a-point to close at 1,402.98 compared with 1,402.48  at Thursday's close. Asian stocks were subdued, with Hong  Kong’s Hang Seng index falling 1.9% while China’s CSI 300  was flat.

Source: PublicInvest Research - 29 May 2023