Economy

US: Motor vehicles, building materials lift retail sales in May. US retail sales unexpectedly rose in May as consumers stepped up purchases of motor vehicles and building materials, which could help to stave off a dreaded recession in the near term. While other data on Thursday showed first-time applications for state unemployment benefits holding steady last week at more than a 1- 1/2-year high, indicating layoffs could be rising, economists continued to view the labor market as tight. Minnesota recently changed policy to make non-instructional educational staff eligible for unemployment benefits during the summer break, boosting claims in the state. (Reuters)

EU: ECB raises rates to 22-year high and signals more to come. The ECB raised interest rates for the eighth successive time as expected on Thursday and signalled further policy tightening, as it battles high inflation.The ECB has now increased borrowing costs by a combined 4 ppts in a year, its fastest pace on record, but a peak is now clearly in sight and the debate is slowly shifting to how long rates will need to be kept at current levels. (Reuters)

Japan: BOJ to keep ultra-low rates, focus on Ueda's inflation views. The BoJ is widely expected to maintain ultra-easy monetary policy on Friday despite stronger-than-expected inflation, as it focuses on supporting a fragile economic recovery amid a sharp slowdown in global growth. The central bank is also likely to keep intact a pledge to "patiently" sustain massive stimulus to ensure Japan sustainably achieves its 2% inflation target accompanied by wage hikes. (Reuters)

Japan: Kishida to focus on spending, wages in policy roadmap. Japanese PM Fumio Kishida's administration will pledge to boost childcare spending and focus on sustaining wage hikes in its mid-year economic policy roadmap, a final draft seen by Reuters. The blueprint, expected to be approved by cabinet on Friday, comes amid speculation Kishida could dissolve parliament and call a snap election later this year. Kishida told reporters he was not thinking of dissolving parliament during the current Diet session that closes this month, ending weeks of speculation he could do so as early as Friday. (Reuters)

China: Economy slows in May, more stimulus expected. China's economy stumbled in May with industrial output and retail sales growth missing forecasts, adding to expectations that Beijing will need to do more to shore up a shaky post-pandemic recovery. The economic rebound seen earlier this year has lost momentum in the second quarter, prompting China's central bank to cut some key interest rates this week for the first time in nearly a year, with expectations of more to come. (Reuters)

China: Cuts medium-term lending rates as economy sputters. China's central bank cut the borrowing cost of its medium-term policy loans for the first time in 10 months, in line with expectations, as Beijing ramps up stimulus measures to shore up a shaky economic recovery. The PBOC said it lowered the rate on 237 bn yuan (USD33.1 bn) of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 bps to 2.65% from 2.75% previously. (Reuters)

Australia: Strong May employment leaves RBA little breathing room. Australian employment blew past expectations in May, while the jobless rate edged lower and participation rate climbed to a record high, an extraordinarily strong report that adds pressure on the central bank to raise interest rates further. Figures showed net employment rose by 75,900 in May from April, when they fell by a revised 4,000, a result likely due to the Easter holiday. Market forecasts had been for a rise of 15,000 jobs. (Reuters)

New Zealand: Dips into recession, putting rate hikes in doubt. New Zealand slipped into recession as the economy shrank in the first quarter, reducing the risk the central bank would need to hike interest rates further but creating a new headwind for the government's re-election hopes. GDP matched analysts' expectations of a 0.1% contraction in the March quarter but was well below the Reserve Bank of New Zealand's (RBNZ) forecast of 0.3% growth. (Reuters)

Markets

Capital A: Set to launch AirAsia Cambodia in 4Q. AirAsia Cambodia, a new low-cost airline in Cambodia, is expected to start operating in 4QFY2023. We are expanding across Asean based on a wide network and a strong brand, with the launch of AirAsia Cambodia expected to start operating in 4Q. Capital A’s aviation group saw a total of 157 aircraft reactivated as of 1Q2023, with enhanced profitability amid rationalised airfares and stabilising external factors. The aviation group had reactivated 229 routes, with a target to operate 290 routes as of 4Q2023. (The Edge)

Seremban Engineering: Sued over payments for subcontract works. Seremban Engineering (SEB) is being sued by construction firm See Yong & Son Construction SB (SYS) over payments for subcontract works. SYS is demanding that SEB pays the first portion of the retention sum amounting to RM579,016, a performance incentive of RM463,212, and late payment interest of RM33,348. (The Edge)

Resintech: Unit inks MOU with Sarawak's SEDC Energy to venture into renewable energy. Resintech has inked a MOU with SEDC Energy SB to establish a joint venture company to expand its business in Sarawak and get itself into the renewable energy sector. SEDC is responsible for kickstarting the “new renewable energy” ecosystem in Sarawak. The partnership will enable the parties to leverage each other's strengths and resources to operate in the plastic industry. (The Edge)

Bintai Kinden: Ceases to be MGRC’s substantial shareholder. Bintai Kinden Corp has ceased to be a substantial shareholder of Genomics Resource Centre (MGRC). The Group had disposed of 1.82m shares in MGRC on June 13. This trimmed its stake in MGRC to 3.56% from 5.19% as at July last year. Bintai Kinden emerged as a substantial shareholder of MGRC in Feb 2022 after acquiring a 5.03% stake to diversify its business into the healthcare sector. (The Edge)

Leong Hup: Director buys 50m shares in company for RM22.52m. Non-independent executive director of Leong Hup International Tan Sri Lau Eng Guang, has acquired 50.05m shares in the poultry producer for RM22.52m. On June 12, Lau, who is also the executive chairman of Comfort Gloves, bought two blocks of shares — the first of 30m shares and the second of 20.05m shares — for 45 sen apiece. This raised his direct stake in Leong Hup to 2.803% from 1.431% as at end-March. He also holds a 0.313% indirect stake in the group. (The Edge)

F&N: To invest RM1bn in milk business, aims to be net exporter. F&N is venturing into the upstream fresh milk business, following the ground-breaking ceremony of the group’s integrated dairy farm in Gemas, Negeri Sembilan, with an investment of at least RM1bn for the development of Phase 1 of the farm. The farm is expected to put the group on track to becoming one of Malaysia's largest milk producers, when Phase 1 reaches full production of 100m litres of fresh milk. Spanning over 2,726 hectares, the farm will eventually house 20,000 dairy cattle, producing 200m litres of fresh milk per year for the local and international markets. (The Edge)

Market Update

The FBM KLCI might open higher after US stocks advanced on Thursday as economic data showed signs of the labour market softening and consumer spending moderating, potentially lessening the need for further interest rate rises from the Federal Reserve. The gains also came as the European Central Bank raised interest rates and warned on inflation while China’s policymakers cut a crucial interest rate in response to slowing growth. Wall Street’s benchmark S&P 500 closed 1.2% higher. The tech-heavy Nasdaq Composite rose by the same amount, marking a six-session winning streak. The moves come a day after the US central bank announced a widely anticipated decision to keep the federal funds rate steady at a target range of between 5% and 5.25%, the central bank’s first pause in more than 14 months. In Europe, the region wide Stoxx 600 ended the day 0.1% lower after the ECB lifted its deposit rate on Thursday, by 0.25 percentage points to 3.5%, the highest level since July 2001. Germany’s Dax fell 0.1% and France’s CAC 40 slid 0.5%.

Back home, Bursa Malaysia retreated from gains on Wednesday to close lower on Thursday due to profit-taking activities, bucking the mostly positive regional market performance. At the closing bell, the FBM KLCI had slid 3.69 points, or 0.27%, to 1,381.73, from 1,385.42 at Wednesday’s close. Meanwhile, stocks rallied in Asia after the People’s Bank of China cut its medium-term policy rate in the face of slowing economic growth. The Hang Seng China Enterprises index, which tracks mainland Chinese companies listed in Hong Kong, rose 2.2% and the CSI 300 of Shanghai- and Shenzhen-listed stocks gained 1.6%. The gains came after the PBoC lowered its medium-term lending facility rate by 0.1 percentage point to 2.65%, having cut its seven-day lending rate earlier in the week by the same amount, which was its first move to boost short-term liquidity in the country’s interbank market in nine months. Data released alongside the announcement underscored the slowing pace of China’s economic recovery.

Source: PublicInvest Research - 16 Jun 2023