Economy

US: Consumer price increases slow; underlying inflation sticky. US consumer prices barely rose in May and the annual increase in inflation was the smallest in more than two years, though underlying price pressures remained strong, supporting the view that the Federal Reserve would keep interest rates unchanged on Wednesday while adopting a hawkish posture. The smaller-than expected rise in the CPI, reflected decreases in the costs of energy products and services, including gasoline and electricity. But rents remained sticky and prices of used cars and trucks rose further. The CPI increased 0.1% last month after gaining 0.4% in April. Gasoline prices dropped 5.6%, while electricity declined for a third straight month. (Reuters)

EU: France tightens limits for bank exposure to highly indebted companies. France's financial stability council will soon tighten its limits for bank exposure to highly-indebted French companies. The council, which is headed by the finance minister and includes the governor of the central bank, said in a statement it was wary of the risks posed by the rapid increase of interest rates on debt-laden groups. As a result, the council confirmed its intent to ask France's four systemic lenders -- BNP Paribas SA, Societe Generale, Credit Agricole SA and BPCE to set aside capital equivalent to 3% of their exposure to highly indebted French companies exceeding 5% of their equity. A company is considered highly-indebted when its debt to EBITDA ratio exceeds six or is negative. (Reuters)

UK: Surprise wage jump raises likelihood of higher interest rates. British wage growth soared and employment also jumped in the three months to April, raising expectations that the BoE will  raise interest rates again, perhaps several times, to contain unrelenting inflationary pressures. The figures added to signs that the economy is not cooling as the central bank had hoped as Britain contends with one of the highest inflation rates among major advanced economies. BoE Governor Andrew Bailey said the data showed the labour market was "very tight". Annual growth in wages excluding bonuses rose to 7.2% during the three months to April, up from 6.8% in the three months to March. Including bonuses, wage growth jumped to 6.5% from 6.1% previously, but it still lagged consumer price inflation at 8.7% in April, meaning that Britons are suffering declining pay in real terms. (Reuters)

China: Cuts short-term borrowing costs to support recovery. China's central bank lowered a short-term lending rate for the first time in 10 months on Tuesday, to help restore market confidence and prop up a stalling post-pandemic recovery in the world's second-largest economy. The cut to the lending rate signals possible easing for longer-term rates over the next week and beyond as demand and investor sentiment weaken, adding to the case for urgent policy stimulus to sustain growth. The PBOC cut its seven-day reverse repo rate by 10 bps to 1.90% from 2.00% on Tuesday, when it injected 2bn yuan (USD279.97m) through the short-term bond instrument. (Reuters)

China: May new loans miss forecasts, more stimulus likely. China's new bank loans picked up in May from the previous month, as the central bank kept policy accommodative to support the economy, but signs of slowing momentum have raised expectations that more stimulus may be needed to sustain the recovery. The weaker-than-expected credit data could strengthen the case for policymakers to roll out more support steps, including a cut in the benchmark lending rate this month, analysts said, amid deflationary risks and mounting local government debt. New bank lending rose to 1.36tr yuan (USD190.18bn) in May, up from April but missed analysts' estimates. (Reuters)

India: Disinflation process to be slow, protracted. The disinflation process in India will be slow and protracted, with the 4% inflation target likely to be met only over the medium term, RBI Governor Shaktikanta Das said on Tuesday. "The cumulative impact of our monetary policy actions over the last one year is still unfolding and yet to materialise fully. "While our inflation projection for the current financial year 2023-24 is lower, at 5.1%, it would still be well above the target," he added. The country's MPC, headed by the RBI chief, is tasked with bringing down inflation to 4% over the medium term and holding it between 2% and 6% over the long term. Latest data showed India's annual retail inflation cooled to 4.25% in May from 4.7% in April. (Reuters)

New Zealand: Economy likely in recession as rate hikes take hold. The New Zealand central bank’s aggressive hiking of the cash rate likely pushed the country into a technical recession in the first quarter, a Reuters poll found, giving traction to the idea the cash rate may have peaked. GDP is expected to be down 0.1% in the March quarter, below the RBNZ forecast of 0.3% growth, according to a Reuters poll of 13 economists. This would mean the country moved into a technical recession - two consecutive quarters of negative growth - after the economy contracted by 0.6% in the fourth quarter. New Zealand's central bank last month signalled it was done tightening after raising rates by 25 bps to the highest in more than 14-years at 5.5%, ending its most aggressive hiking cycle since 1999. (Reuters)

Markets

Sapura Energy (Underperform, TP:RM0.02): Extension to submit regularisation proposal. Sapura Energy has been granted an extension of up to Nov 30, 2023, to submit its PN17 regularisation plan to the relevant regulatory authorities. Its principal adviser MIDF Amanah Investment Bank announced on behalf of the company that Bursa Malaysia had given the extension to Sapura Energy via its letter dated June 12, 2023. (SunBiz)

Pharmaniaga: Plans private placement to raise RM44.5m for recovery and expansion. PN17 company, Pharmaniaga, is planning to undertake a private placement of up to 131.02m new shares, representing 10% of its total issued shares, to raise approximately RM44.55m in funds for working capital. The issue price of the shares will be determined at a later stage. (The Malaysian Reserve)

SL Innovation: Considering transfer to ACE Market from LEAP Market. The board of LEAP Market-listed SL Innovation Capital is contemplating a transfer to the ACE Market of Bursa Malaysia. SL Innovation shared that it had received a letter from its major shareholder Soon Seng Teck, who is also the group’s managing director, requesting the board to consider undertaking the proposed transfer of its listing. (The Edge)

Bahvest: Proceeds with EGM but withdraws all resolutions after founder-led management steps down. Bahvest Resources dropped the resolutions proposed for its EGM on June 13 following the resignation of three board members it had earlier wanted to remove. All eight EGM resolutions were withdrawn, including a proposal to establish an employee’s share option scheme. (The Edge)

L&P Global: Seeks transfer to Main Market after Bursa debut six months ago. Packaging solutions provider L&P Global is seeking a transfer to the Main Market of Bursa Malaysia, six months after debuting on the ACE Market. It had fulfilled all the requirements for the proposed transfer. It has also proposed to amend its constitution in order to facilitate the transfer. (The Edge)

Green Packet: Subsidiary First Wireless gets shareholders' nod to voluntary wind-up. Telecommunication and tech firm Green Packet said its 70%-owned subsidiary First Wireless SB has obtained shareholders' approval to commence a member’s voluntary winding-up. First Wireless’ members’ voluntary winding-up is in accordance with Section 439(1)(b) of the Companies Act 2016. (The Edge)

Radium: 80%-owned unit sued for alleged breach of contract in relation to Residensi Platinum OUG development. Newly-listed Radium Development’s 80%-owned unit Vistarena Development SB is being sued by 241 individual purchasers for alleged misrepresentation and breach of contract in the sale of its property project in Bukit OUG, Kuala Lumpur. (The Edge)

PetChem: To produce maleic anhydride at Kuantan plant by 2H25. Petronas Chemicals Group (PetChem) has reached the final investment decision (FID) to fully acquire the 113 kilo-tonnes per annum maleic anhydride (MAn) plant in Gebeng, Kuantan, from BASF Petronas Chemicals SB (BPC). The plant will broaden PetChem’s product portfolio and its derivatives to further strengthen the group’s derivatives product offerings. (SunBiz)

Market Update

The FBM KLCI might open higher today after Wall Street stocks hit fresh 14-month highs on Tuesday after the pace of US inflation eased to its lowest level in more than two years, bolstering investors’ bets that the Federal Reserve will not raise interest rates this week. The benchmark S&P 500 index rose 0.7%, pushing higher into the bull market territory it entered last week. The tech heavy Nasdaq Composite also added 0.8%. The latest US consumer price index report showed headline inflation slowed to 4% year on year in May, down from 4.9% in the previous month, marking its lowest level since March 2021. In Europe, the region wide Stoxx 600 and France’s CAC 40 ended the day 0.6% higher, while Germany’s Dax climbed 0.8%.

Back home, Bursa Malaysia retreated from Monday's gains to close lower on Tuesday, despite the upbeat regional market performance ahead of the release of US consumer price index (CPI) data later on Tuesday. At the closing bell, the FBM KLCI had eased 6.16 points, or 0.44%, to 1,380.61, from 1,386.77 at Monday’s close. In the region, Japan's Nikkei 225 added 1.80% to 33,018.65, Hong Kong’s Hang Seng Index put on 0.60% to 19,521.42, and China’s Shenzhen Index rose 0.76% to 10,955,96, while Singapore’s Straits Times Index slipped 0.16% to 3,190.82.

Source: PublicInvest Research - 14 Jun 2023