Economy

Global: Equity funds see biggest weekly outflows in 12 weeks. Global equity funds posted outflows for the eighth consecutive week in the seven days leading up to 7 June, as concerns over stubbornly high inflation and sluggish economic growth prompted investors to pull back from riskier assets. According to data from Refinitiv Lipper, investors withdrew a net USD18.84bn from global equity funds, the largest weekly net selling since 15 March. Hit by a slowdown in global demand, Chinese exports shrank much more than expected in May, while imports also declined due to sluggish domestic consumption. Factory activity also contracted in the U.S. and Europe. In the United States, April data revealed an acceleration in core inflation along with robust consumer spending. (Reuters)

EU: France strong-arms big food companies into cutting prices. French shoppers should pay less for their food from next month, Finance Minister Bruno Le Maire said on Friday, after he secured a pledge from 75 food companies including Unilever to cut prices on hundreds of products. The companies, which together make 80% of what the French eat, could face financial sanctions if they don't follow through, Le Maire said. The government is furious that supermarket prices have hit record levels in recent months even though the costs of many raw materials used by food producers have been declining. (Reuters)

UK: Housing market strains grow as mortgage rates creep higher. Mortgage rates in Britain rose again on Friday as economists warned that rising borrowing costs would put the housing market under renewed strain. The average rate on a two year mortgage deal across the range of loan-to-value ratios rose on Friday to 5.82%, compared with 5.30% a month ago, financial data provider Moneyfacts said. Stubbornly high British inflation data last month sparked a big jump in market interest rates as investors scrambled to price in more increases in borrowing costs from the BoE in coming months. (Reuters)

Japan: Bank of Japan set to keep ultra-low rates, may signal in monetary policy this week and its forecast for a moderate economic recovery, as robust corporate and household spending cushion the blow from slowing overseas demand, sources said. The central bank also may signal that inflation is overshooting its forecasts, which would heighten the chance of an upgrade in its price projections at a quarterly review of its estimates due in July, they said. But any upgrade in its inflation view is unlikely to automatically trigger an interest rate hike, as BOJ Governor Kazuo Ueda has stressed the need to maintain ultra-loose policy until durable wage growth accompanies the price rise. (Reuters)

China: Central bank upbeat on Q2 GDP growth, confident on 2023 targets. China's economic growth is expected to be "relatively high" in the second quarter compared to the prior year, mainly due a low base of comparison, while consumer inflation is projected to be above 1% by December, the central bank governor said. As rising interests rates and inflation squeeze demand in the United States and Europe, China's core CPI has been soft and factory gate prices fell sharply in May, suggesting the world's second-largest economy is losing steam. At present, China's economy is recovering from the impact of COVID-19, and the balance sheets of its companies are being repaired. (Reuters)

China: Factory deflation steepens as demand wanes. China's factory gate prices fell at the fastest pace in seven years in May and quicker than forecasts, as faltering demand weighed on a slowing manufacturing sector and cast a cloud over the fragile economic recovery. As rising interests rates and inflation squeeze demand in the United States and Europe, China is in contrast battling a sharp decline in prices with factories receiving less for their products from key overseas markets. The producer price index (PPI) for May fell for an eighth consecutive month, down 4.6%. That was the fastest decline since February 2016 and bigger than the 4.3% fall in a Reuters poll. China's economy grew faster than expected in the first quarter, but recent indicators show demand is rapidly weakening with exports, imports and factory activity falling in May. (Reuters)

Australia: Recession risk heightens after RBA warns of bumpy path to low inflation. The risk of Australia's economy slipping into recession has risen sharply, after the central bank surprised markets this week by raising rates and warned it could tighten again to tamp down on high inflation even at the cost of preserving jobs. For a year, RBA Governor Philip Lowe has been talking of successfully navigating a narrow path to lower inflation while keeping unemployment near 50-year lows. But this week the governor's tone changed. After a surprise rate rise to 4.10% and a hawkish promise of even more to come, Lowe warned the narrow path would also be bumpy and that getting high inflation down would take priority over preserving jobs. (Reuters)

Philippine: Jobless rate falls to 4-month low. The Philippines' unemployment rate dropped for the second straight month in April to the lowest level in four months. The unemployment rate edged down to 4.5% in April from 4.7% in March. Further, this was the lowest jobless rate since December last year, when it was 4.3%. In the corresponding month last year, the rate was 5.7%. The number of unemployed persons declined to 2.26m in April from 2.76m a year ago. Data showed that the employment rate increased somewhat to 95.5% from 95.3% in the prior month. The labor force participation rate was 65.1% in April, down from 66.0% in the preceding month. (RTT)

Markets

Cypark (Neutral, TP: RM0.63): Claims RM61m from govt for loss and expenses through arbitration. Cypark Resources is claiming RM61.34m from the government for loss and expenses arising from various instructions that caused delays in the completion of a job through arbitration. The renewable energy engineering company alleged that the claimed amount has not been paid despite acknowledgement of its rights to claim, notices provided and submission of its finalised claim for the loss and expenses dated 3 Jan 2022. (The Edge)

MBSB: To acquire MIDF via RM1.01bn share deal. Malaysia Building Society (MBSB) will acquire the entire equity interest in Malaysian Industrial Development Finance (MIDF) from Permodalan Nasional Bhd (PNB) via a RM1.01bn share deal. The RM1.01bn purchase consideration is to be satisfied via the issuance of 1.05bn MBSB shares, which amount to 12.78% of its enlarged share base to PNB at an issue price of 96.52 sen per share. (The Edge)

Pos Malaysia: KWAP ceases to be substantial shareholder of Pos Malaysia. Pos Malaysia announced that Kumpulan Wang Persaraan (Diperbadankan) (KWAP) has ceased to be a substantial shareholder of the national postal service firm. This came after the civil service pension fund offloaded 100,000 shares on the open market to trim its stake to 4.99% or 39.09m shares. KWAP began disposing of Pos Malaysia shares in May this year. (The Edge)

Bioalpha: Plans 3-for-8 rights issue of warrants. Bioalpha Holdings has proposed a rights issue of warrants to raise up to RM19.19m, mainly for the expansion of its pharmacy business as well as repayment of bank borrowings. The rights issue of up to 639.5m warrants will be on the basis of three warrants for every eight existing shares held on an entitlement date to be determined later. Based on an assumed price of three sen per warrant, the group will raise gross proceeds of RM3m under the minimum scenario and RM19.19m under the maximum scenario. (The Edge)

Serba Dinamik: Third quarter results will be ready on June 13. Serba Dinamik Holdings has delayed the release of its third quarter results by a week, telling Bursa Malaysia Securities that it will be ready on June 13. The company said it is in the midst of finalising its financial report for the third quarter ended March 31, 2023 (3Q23). On May 31, 2023, Serba Dinamik notified Bursa Malaysia that it would not be able to meet its reporting deadline for the quarter due to a significant loss of manpower and critical personnel. (New Straits Times)

Kimlun: Wins RM95.4m construction contracts. Kimlun Corp’s wholly-owned subsidiary Kimlun SB has secured two construction contracts worth RM95.41m from Bandar Nusajaya Development SB. The contracts were for the construction of an affordable apartment block, 166 link houses, ancillary buildings and infrastructure in Pulai, Johor Bharu, Johor. The projects are estimated to be completed in the second quarter of 2025. (The Star)

Market Update

The FBM KLCI might open higher today after Wall Street’s benchmark S&P 500 index inched higher on Friday in subdued trading, as traders largely stayed on the sidelines ahead of the Federal Reserve’s policy meeting next week. The S&P 500 ended the day up 0.1%, having reached a 10-month high in intraday trading. The gain pushed the blue-chip stock index deeper into bull market territory as it rose more than 20% above its most recent low in October. Trading in the S&P was muted, with the lowest daily trading volume since October 2022, suggesting investors were holding off on making large bets ahead of the US central bank’s meeting this week. The Fed is expected to hold off on raising interest rates, marking the first pause in its 14-month endeavour to tame inflation. Expectations of a pause in June gained steam after US unemployment data on Thursday pointed to a cooling labour market. On a weekly basis the S&P 500 rose 0.4% to record its fourth consecutive weekly winning streak, while the Nasdaq Composite was up 0.2% over the same period for its seventh consecutive week of gains. In Europe, equities ended the day lower, with the region-wide Stoxx 600 falling 0.1% and Germany’s Dax shedding 0.3%. London’s FTSE 100 fell 0.5%.

Back home, Bursa Malaysia snapped a two-day losing streak to close slightly higher on Friday, in tandem with the uptrend in regional bourses. At the closing bell, the FBM KLCI was marginally higher by 1.44 points, or 0.10%, at 1,376.08, from 1,374.64 at Thursday’s close. The regional markets finished broadly higher on Friday with shares in Japan leading the region. The Nikkei 225 jumped 1.97% while China's Shanghai Composite added 0.55% and Hong Kong's Hang Seng rose 0.47%.

Source: PublicInvest Research - 12 Jun 2023