Economy

US: Fed leaves rates unchanged, sees two small hikes by end of 2023. Fed left interest rates unchanged on Wednesday but signaled in new projections that borrowing costs may still need to rise by as much as half of a percentage point by the end of this year, as the U.S. central bank reacted to a stronger-than-expected economy and a slower decline in inflation. Fed Chair Jerome Powell described U.S. growth and the job market as holding up better than expected under the weight of the aggressive monetary policy tightening of the past year - likely lengthening the Fed's fight to lower inflation but also letting it proceed with less economic damage. The pause was out of caution, Powell said, to allow the Fed to gather more information before determining if rates do need to rise again, with the pace of its moves now less important than finding a proper endpoint that slows price increases while minimizing any rise in unemployment. (Reuters)

US: Producer inflation subsides as energy, food prices drop. US producer prices fell more than expected in May as the costs of energy goods and food declined, signaling that inflation pressures were abating throughout the economy and could eventually provide relief to consumers. The report showed the annual increase in producer inflation last month was the smallest in nearly 2-1/2 years. Underlying producer prices were muted. It followed data on Tuesday showing consumer prices edging up in May, with the YoY rise the smallest since March 2021. (Reuters)

EU: ECB to raise rates further even as economy stutters. ECB is all but certain to raise borrowing costs to their highest level in 22 years on Thursday and leave the door open to more hikes, extending its fight against high inflation even as the euro zone economy flags. Growth across the 20 countries that share the euro is at best stagnating and inflation has been moderating for months, courtesy of lower energy prices and the steepest increase in interest rates in the ECB's 25-year history. But inflation in the euro zone is still unacceptably high for the ECB at 6.1% - more than three times its 2% target - and underlying price growth, which typically excludes food and energy, is only starting to slow. (Reuters)

EU: German wholesale prices drop sharply in May. Germany's wholesale prices decreased by 2.6% on the year in May, the sharpest drop in nearly three years, according to data released, in a sign that inflation in Europe's largest economy will continue to ease. May's YoY decrease was the strongest since July 2020, when the outbreak of the coronavirus pandemic led to economic distortions. Compared with the previous month, wholesale prices were down 1.1%, As wholesale price pressures fall, inflation in Germany could also continue to ease: Wholesalers are the link between manufacturers and end customers, and price changes usually reach consumers with a delay. (Reuters)

UK: Rishi Sunak scraps plan for supermarket price cap after backlash. British Prime Minister, Rishi Sunak has abandoned plans to ask supermarkets to impose a price cap on basic goods after a backlash from retailers. Downing Street had been considering a voluntary price cap scheme for major supermarkets, modelled on a similar plan in France that saw the price of basic goods frozen. The idea sparked fury from supermarket chains and Cabinet ministers, who warned that a “1970s-style” cap could lead to shortages or increases in the price of other goods. Last month, a statement backed by Morrisons, Waitrose, Sainsbury’s and Tesco said such a scheme “will not make a lot of difference to prices”. (The Telegraph)

South Korea: Jobless rate falls to record low, factory sector still shaky. South Korea's jobless rate fell in May to a record low, official data showed on Wednesday, indicating a still robust labour market although conditions were softer in the manufacturing sector amid slowing economic growth. The country's seasonally adjusted unemployment rate dropped to 2.5% in May from 2.6% in April, the lowest since the data series began in June 1999. (Reuters)

India: Wholesale prices fall 3.48% in May. India's annual wholesale prices fell for the second consecutive month in May on easing input costs brought about by lower commodity prices. The wholesale price index fell 3.48%, compared with a 2.35% fall estimated by economists in a Reuters poll. It fell 0.92% in April. The food index fell 1.59% year-on-year against a rise of 0.17% in April, while fuel and power fell 9.17% compared with rise of 0.93% in the previous month. Manufactured product prices fell 2.97% in May, the data showed. Inflation pressure in the South Asian country have shown signs of easing in the past few months. (Reuters)

Markets

K Seng Seng: To raise RM41m from private placement to fund stake buy, working capital. K Seng Seng Corp (KSSC) is seeking to raise up to RM41.47m from a private placement to finance the acquisition of a majority stake in a precision machined parts manufacturer, and for working capital. The placement entails the issuance of up to 34.56m new shares, representing not more than 20% of the group's issued shares, to independent investors to be identified later. (The Edge)

Hong Leong Industries: To dispose of wholly-owned unit to Saint-Gobain Malaysia. Hong Leong Industries (HLI) has entered into a conditional SPA with Saint-Gobain Malaysia SB to dispose of the entire issued and paid-up share capital of its wholly-owned unit, Hume Cemboard Industries SB (HCB), for a cash consideration to be determined. (StarBiz)

APB Resources: Hits limit-up as Press Metal co-founder emerges as new substantial shareholder. Shares of APB Resources hit limit-up after Press Metal Aluminium Holdings’ co founder and executive director Datuk Koon Poh Tat emerged as its new substantial shareholder. A filing with the stock exchange showed that Koon bought a 5.72% stake or 6.35m shares on the open market on Tuesday. (The Edge)

Ewein: NationGate MD makes unconditional takeover offer for Ewein. Electrical and electronics equipment maker Ewein received today a notice of unconditional mandatory take-over offer from Aminvestment Bank on behalf of electronics manufacturing services provider NationGate Holdings’ managing director. Ewein said Ooi Eng Leong has entered into a SSA with Hijauwasa SB to acquire 120.59m ordinary shares in Ewein, representing a 39.99% stake, for a total cash consideration of RM72.36m or 60 sen per share. (Free Malaysia Today)

Pharmaniaga: Utilises share placement proceeds to clear outstanding payments to suppliers and trade creditors. Pharmaniaga, a financially troubled company classified as a PN17 entity, has clarified its intentions regarding the funds raised through a share placement. The company plans to utilise the proceeds, which are expected to amount to RM44.21m, to settle outstanding payments owed to suppliers and trade creditors. (The Edge)

Tomypak: To purchase flexible plastic packaging maker for up to RM105m. Tomypak Holdings has revived its efforts to purchase a stake in flexible plastic packaging manufacturer and seller EB Packaging SB, after earlier MoU for the deal lapsed in Nov. Tomypak's unit Tomypak Flexible Packaging SB (TFP) entered into two conditional SSA with the four vendors of EB Packaging to acquire their stakes in the company amounting to 70% for RM73.5m in cash. (The Edge)

Serba Dinamik: Posts largest quarterly loss of close to RM1bn on trade receivables impairment. The troubled oil and gas company, which has been in the red for seven straight quarters, recorded RM89.67m net loss in 2QFY23. For 3QFY22, its net loss was RM434.19m. Loss per share increased to 26.1 sen from 11.7 sen. Quarterly revenue tumbled 97% to RM6.18m from RM205.48m, due to lower contribution from all business divisions. (The Edge)

Market Update

The FBM KLCI might open with a cautious note as US stocks whipsawed on Wednesday after the Federal Reserve held interest rates steady following 10 consecutive increases. Wall Street’s benchmark S&P 500 closed out a choppy session with a 0.1% gain, while the tech-heavy Nasdaq Composite added 0.4%. The Russell 2000 gauge, whose constituents are more sensitive to perceptions about the US economy, ended the day 1.2% lower. The moves came after the US central bank announced a widely-anticipated decision to keep the federal funds rate steady, maintaining its target range of between 5% to 5.25%. The pause follows a streak of consecutive rate rises from a base of near-zero over 14 months, as the Fed took aggressive action to tackle persistently high inflation. But the Fed’s decision was published alongside an updated “dot plot” that gathers officials’ forecasts for the fed funds rate until the end of 2025, which indicated that most policymakers are projecting two more quarter-point increases this year. Europe’s region-wide Stoxx 600 and Germany’s Dax both rose 0.5%.

Back home, Bursa Malaysia recouped earlier losses to close higher on Wednesday amid a mixed regional market performance, ahead of the US interest rate decision later in the day. At the closing bell, the FBM KLCI had risen 4.81 points, or 0.35%, to 1,385.42, compared with 1,380.61 at Tuesday’s close. The regional performance was mixed, with Japan’s benchmark Topix index rising 1.3%, while China’s CSI 300 index was flat and Hong Kong’s Hang Seng index lost 0.6%. Shares in China were buoyed earlier in the day by growing hopes for policy support from the People’s Bank of China after the central bank lowered its short-term lending rate on Tuesday for the first time in nine months.

Source: PublicInvest Research - 15 Jun 2023