Economy

US: Housing starts unexpectedly skyrocket to 13-month high in May. A report released by the Commerce Department showed new residential construction in the US unexpectedly skyrocketed in the month of May. Housing starts soared by 21.7% to an annual rate of 1.631m in May after tumbling by 2.9% to a revised rate of 1.340m in April. With the substantial increase, housing starts spiked to their highest annual rate since hitting 1.803m in April 2022. The report showed single-family housing starts shot up by 18.5% to a rate of 997,000, while multi-family housing starts skyrocketed by 27.1% to 634,000. (RTT)

Eurozone: Construction output contracts further. Eurozone construction output declined for the second straight month in April, though at a slower pace compared to March. Production in the construction sector decreased 0.4% MoM in April, following a 1.7% fall in March. The downward trend was led by a 0.6% fall in the output of the building sector. At the same time, civil engineering production showed an increase of 0.4%. On a yearly basis, total construction output rebounded 0.2% in April, after a 0.7% fall a month ago. (RTT)

Eurozone: Current account surplus plunges in April. The euro area current account surplus plunged from a near two-year high largely due to the fall in visible trade surplus in April. The current account surplus declined sharply to EUR4bn in April from EUR31bn in the previous month, which was the highest since April 2021. The surplus on goods trade slid to EUR16bn from EUR41bn in March. At the same time, the services trade surplus dropped to EUR4bn from EUR5bn. Primary income showed a negative balance of EUR2bn compared to a deficit of EUR1bn a month ago. The shortfall on secondary income widened to EUR15bn from EUR14bn. (RTT)

UK: BoE set to deliver another 25 bps hike. The BoE is all set to raise its benchmark rate for the 13th straight policy session this week in the face of elevated inflation and persistent labour market tightness in the UK. The nine-member Monetary Policy Committee of the central bank is expected to lift the rate by 25bps in a split vote as there will be discussion among hawkish members favouring actions to fight second-round effects and the minority of doves who expect inflation to fall sharply this year. The outcome of the meeting is due on June 22. (RTT)

China: Lowers loan prime rate. In a bid to support the struggling economy, the PBoC lowered its benchmark rate after reducing other major policy rates earlier this month. The central bank cut its one year LPR to 3.55% from 3.65%. Likewise, the 5-year LPR, the benchmark for mortgage rates, was lowered to 4.20% from 4.30%. Markets had widely expected the reduction after the bank had trimmed the one-year MLF rate by 10bps to 2.65% last week. (RTT)

Japan: Industrial production grows 0.7%. Japan's industrial production expanded for the 3rd straight month in April. Industrial production rose by a seasonally adjusted 0.7% MoM in April, following a 0.3% increase in March. Industrial output showed a decline of 0.4%. The data showed that the inventory ratio climbed at a faster pace of 1.8% monthly in April. Meanwhile, shipments dropped 0.2%, and the fall in inventories was 0.1%. (RTT)

South Korea: Producer prices sink 0.3% in May. Producer prices in South Korea were down 0.3% on month in May. That missed expectations for a decline of 0.2% following the 0.1% drop in April. Individually, prices for agricultural, forestry and marine products were up 1.5% on month, while prices for manufacturing products dropped 0.8%, utilities were up 0.6% and services were flat. On a yearly basis, producer prices rose 0.6% - exceeding expectations for a gain of 0.5% and up from 1.6% in the previous month. (RTT)

Taiwan: Export orders plunge 17.6%, less than forecast. Taiwan's export orders continued to decline sharply for the 9th consecutive month in May. Export orders registered a double-digit annual fall of 17.6% in May, which was slightly slower than the 18.1% plunge in April. That was also below the 20.0% decline that economists had expected. (RTT)

Hong Kong: Inflation eases slightly to 2%. Hong Kong's CPI moderated unexpectedly in May, though marginally. The CPI, climbed 2.0% YoY in May, after a 2.1% increase in April. Economists had expected inflation to rise to 2.3%. Netting out the effects of all the government's one-off relief measures, the underlying inflation remained stable at 1.8%. (RTT)

Markets

Uzma (Outperform, TP:RM1.10): Secures RM225m Islamic financing for solar project. Uzma Bhd's indirect wholly-owned unit, Uzma Kuala Muda Sdn Bhd, has secured RM225m in Islamic financing facilities for its large-scale solar photovoltaic (LSSPV) plant project. The financing facilities have been extended by Affin Islamic Bank Bhd and Export-Import Bank of Malaysia Bhd. "This project is under the government’s Large Scale Solar 4@MEnTARI (LSS4@MEnTARI) programme (and) the funds will primarily be utilised to finance the development and construction of a 50MWac LSSPV plant. (StarBiz)

MISC: To develop ammonia engines for ships. MISC Group has signed an agreement to develop ammonia engines for ships, marking a step towards zero-emission shipping operations. MISC owned AET and Akademi Laut Malaysia (ALAM) have signed an agreement with WinGD to develop engines for ammonia dual fuelled vessels, a first for deep-sea vessels. ALAM also signed an agreement with shipping classification society DNV for the training, research and development of maritime professionals to meet workforce needs for a low- and zero-carbon pathway. (Reuters)

Cahya Mata: PPA with Secso intact, denies termination claim. Cahya Mata Sarawak (CMS) has rejected Sarawak utilities firm Syarikat Secso Bhd's claim that the agreement for the supply of electricity to the group's phosphate production plant is deemed terminated. "The arbitration proceedings surrounding the PPA have commenced, and we firmly believe that the PPA is intact and in force and not terminated as alleged by Sesco," CMS said in a filing on Tuesday in response to Bursa Malaysia's query on the matter. (The Edge)

Pharmaniaga: Auditor flags group’s material uncertainty as a going concern. Independent auditor Messrs PwC PLT has reported a material uncertainty that may cast significant doubt on Pharmaniaga’s ability to continue as a going concern. PwC, in its audit of Pharmaniaga’s financial statements for the financial year ended 31 Dec 2022 (FY2022), indicated that the group’s current liabilities exceeded its current assets by RM632.1m while the company’s current liabilities exceeded its current assets by RM411.2m. (TheEdge)

Maybulk: Proposes RM139m vessel disposal to fund future diversification move. Malaysian Bulk Carriers (Maybulk) has proposed to dispose of its bulk carrier Alam Kekal to realise the vessel's increased market value amid elevated commodity demand. It proposes to obtain a shareholders’ mandate for the vessel’s disposal to a non-related third party for a cash consideration of not lower than 90% of the market value as ascribed by an independent valuer. The group said it forked out an original cost of investment of RM121.94m for Alam Kekal in Oct 2018. (The Edge)

GHL Systems: Provides Alipay+ payment to over 2,600 local biz in Thailand. GHL Systems has enabled Alipay+ for over 2,600 local businesses in Thailand to accept cross-border digital payments from leading Asian mobile wallets. The payments will also include AlipayHK (Hong Kong SAR), Kakao Pay (South Korea), Touch 'n Go eWallet (Malaysia) and Alipay (Chinese mainland), which has been accepted by Thai merchants since 2015, GHL said in a joint statement with Alipay+ and Jim Thompson Ltd. (The Edge)

Market Update

The FBM KLCI might open lower after Wall Street stocks wavered on Tuesday as strong housing data raised the prospect of higher interest rates taking the steam out of a weeks-long rally in US equities. The benchmark S&P 500 closed down 0.5% while the tech-heavy Nasdaq Composite ended 0.2% lower following a federal holiday on Monday. The weakness followed an unexpected spurt in new home construction that put housing starts at their highest level in more than a year. In Europe, the region-wide Stoxx 600 and Germany’s Dax both ended the day 0.6% lower, while London’s FTSE 100 shed 0.3%. Raw materials stocks led losers in the region, with the Stoxx 600 Basic Resources index dropping for the fourth successive session, as investors fretted that China’s sluggish economic recovery would curb demand. The moves came after the People’s Bank of China lowered the country’s mortgage linked five-year loan prime rate to 4.2% from 4.3%, undershooting investors’ expectations of a 0.15 percentage point cut.

Back home, Bursa Malaysia ended mixed on Monday, trading cautiously in a tight range, with buying interspersed with selling in selected heavyweights. At the closing bell, the FBM KLCI edged up one point, or 0.07%, to 1,388.33 from 1,387.33 at Monday’s close. China’s benchmark CSI 300 stock index fell 0.2%, dragged down by losses in property stocks. The Hang Seng China Enterprises index of Hong Kong-listed mainland companies dropped 1.5%. Elsewhere, Hong Kong's Hang Seng Index fell 1.54%, South Korea’s Kospi slid 0.18%, Singapore's Straits Times Index lost 0.49% and Japan’s Nikkei 225 gained 0.06%.

Source: PublicInvest Research - 21 Jun 2023