Economy

US: Powell expects further rate hikes as inflation remains stubbornly elevated. F ollowing last week's widely expected pause, the Federal Reserve is likely to resume raising interest rates later this year. Powell reiterated the Fed is likely to continue raising interest rates in an effort to contain stubbornly elevated inflation. Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year. The Fed left rates unchanged last week, but the central bank's latest projections suggest it plans to resume raising rates later this year, forecasting a rate of 5.6% by the end of 2023. If the Fed decided to revert to its recent quarter-point increases, the forecast suggests the central bank will raise rates two more times this year. (RTT)

EU: Italy's construction output contracts 3.8%. Italy's construction output decreased for the first time in three months in April. Construction production fell a seasonally adjusted 3.8% MoM in April, reversing a 0.7% gain in the previous month. On a yearly basis, construction output contracted 6.3% in April, which was worse than the 2.4% fall in the previous month. On an unadjusted basis, the annual decline in construction production was 9.5% versus a 2.4% fall in the prior month. During the first four months of 2023, total construction production fell 1.7% compared to the same period last year. (RTT)

EU: Car sales continue strong growth on robust EV demand. The European passenger car market logged further strong expansion in registrations in May amid sharp increases in the four major markets in the region along with robust demand for electric vehicles. New car sales in the European Union rose 18.5% YoY in May, following a 17.2% growth in April. The number of units sold totalled 938,950 in May versus 792,215 units in the corresponding month last year. Further, this was the tenth successive monthly increase. Battery electric car registrations logged a massive annual growth of 70.9% to reach 129,847 units in May, equal to the market share of 13.8%. Most EU markets recorded impressive double- and triple-digit percentage gains. (RTT)

UK: House price inflation eases to 31-month low. UK house prices increased at the slowest pace in just over 2.5 years in April. The house price index climbed 3.5% YoY in April, slower than the 4.1% increase in the previous month. Further, this was the weakest rate of inflation since Sep 2020, when prices had risen 3.4%. The average UK house price was GBP286,000 in April, which is GBP9,000 higher than 12 months ago, but GBP7,000 below the recent peak in Sep 2022. On a monthly basis, house prices moved up 0.4% in April, following an increase of 0.7% in the previous month. (RTT)

UK: Net debt exceeds 100% for first time since 1961. The UK public sector net debt exceeded 100% of GDP for the first time since 1961. At the end of May, public sector net debt totalled GBP2.57trn. This was equivalent to 100.1% of GDP. Further, data showed that the budget deficit reached the second highest level for the month of May since records began in 1993, due to the additional costs of the energy support schemes and increases in benefit payments and staff costs. Public sector net borrowing increased by GBP10.7bn from a year ago to GBP20bn in May. (RTT)

Japan: Yen hits JPY142.36 per dollar, its weakest since Nov. The yen slid to its weakest against the dollar since Nov after Federal Reserve Chair Jerome Powell said officials expect interest rates need to move higher to curb inflation, highlighting diverging expectations for policy in Japan and the US. The yen dropped as much as 0.6% to 142.36 per dollar before paring losses to trade around the 141.80 level in early Thursday trading in Tokyo. The Japanese currency has slid nearly 8% against the dollar this year, the second-worst performer among its developed-market peers. It has fared even worse relative to other trading partners: The euro-yen cross has hit its highest since 2008. Anything above 145.00 should make the yen shorts very concerned. The decline in a trade-weighted gauge of the yen to the lowest in more than two decades may mean there will be some fireworks on the horizon. (Bloomberg)

New Zealand: Has NZD46m trade surplus in May. New Zealand posted a merchandise trade surplus of NZD46m in May. That beat expectations for a deficit of NZD350m following the downwardly revised NZD236m surplus in April (originally NZD427m). Exports were worth NZD6.99bn, up from the downwardly revised NZD6.61bn in the previous month (originally NZD6.80bn). Imports were worth NZD6.95bn following the downwardly revised NZD6.37bn a month earlier (originally NZD6.38bn). (RTT)

Markets

AEON Credit: To reduce high-risk borrowers. AEON Credit Service is targeting to reduce its high-risk borrowers group to around 20% moving forward from about 30% of total borrowers at the moment. MD Daisuke Maeda said the company is not only focusing on reducing the number of possible non-performing loans but at the same time increasing the good credit score borrowers in its portfolios. Daisuke said the company has been focusing on portfolio management to manage risks as it navigates the rapidly changing post-pandemic market environment. (Bernama)

Bonia: Sells 30% stake in Sembonia bagmaker for RM18m in related party deal. Bonia Corp is disposing of its 30% stake in wholly-owned SBG Holdings for RM17.6 million cash, to a company owned by its executive director and shareholder Datuk Seri Chiang Fong Tat, to fund its working capital. Bonia inked a conditional share sale agreement with Chiang's private vehicle Remarkable Success SB (RSSB) to sell 60.3m shares in SBG, which is involved in the manufacturing and retailing of bags, footwear and accessories under the Sembonia brand. (The Edge)

Ann Joo: Acquires controlling stake in loss-making wire maker for RM10.1m. Ann Joo Resources said its 55%-owned indirect subsidiary Konsortia Etiqa SB (KESB) has acquired a 99.9% stake in Kinsteel Bhd's Perfect Channel SB (PCSB) for RM10.1m in a bid to expand its upstream steel division. Ann Joo said KESB acquired 102,000 shares or a 51% stake in PCSB from Kinsteel, which is in liquidation, for RM10m and subscribed to another 100m new shares in the company for RM100,000. In turn, KESB emerged with 99.9% equity interest in PCSB, while the company’s remaining shareholder Maju Holdings SB shareholding of 98,000 shares was diluted to a 0.1% stake. (The Edge)

EcoWorld International: On track to declare first tranche dividend of RM300m. EcoWorld International has achieved sales of RM619m plus reserves of RM299m, totalling RM918m in the first seven months of financial year ending 31 Oct 2023 (FY23). This places the group on track to achieve the full year sales target of RM1.4bn. it said, its focus on selling its completed stocks have generated substantial cash.(StarBiz)

Radium: Respects Apex court decision in Jalan Jejaka apartment case. Radium Development’s 80%-owned Pavilion Integrity Sdn Bhd said that it is committed to respecting the court’s decision and promptly and amicably resolving the case involving its apartment development on Jalan Jejaka, KL. .P avilion Integrity said that it is also committed to providing reassurance to the affected purchasers that the situation will be handled transparently and directly, and keeping them informed every step of the way. (The Edge)

Glomac: Anticipates continuing challenges in FY24 Glomac expects the current financial year ending 30 April 2024 (FY24) to remain challenging with mounting concerns surrounding inflation, labor shortages, increasing interest rates, and rising material costs. The property developer said these factors are expected to have a significant impact on the property sector. In the fourth quarter ended April 30, Glomac’s net profit fell 15.6% to RM13.9m against RM16.5m a year ago. (StarBiz)

Market Update

The FBM KLCI might open lower after Wall Street stocks dropped on Wednesday, with tech leading the decline, as investors grew cautious after US Federal Reserve chair Jay Powell warned interest rates would need to rise to bring inflation back to target. The S&P 500 fell 0.5% and the tech-heavy Nasdaq Composite lost 1.2%. Both indices recorded their third successive session of losses. In Europe, the region-wide Stoxx 600 and France’s CAC 40 ended the day 0.5% lower, while Germany’s Dax lost 0.6%. The moves came after official data in the UK showed the annual rate of consumer price inflation remained at 8.7% in May, well above analysts’ expectations of 8.4%, reinforcing investors’ view that the Bank of England is far from the end of its tightening cycle. Core inflation, which excludes volatile food and energy prices, rose again to 7.1% in May, from 6.8% in the previous month. London’s FTSE fell 0.1 %, dragged lower by real estate stocks.

Back home, Bursa Malaysia rebounded to end on a firmer note on Wednesday, bucking the mainly negative regional trend. At the closing bell, the FBM KLCI rose 5.12 points, or 0.37% to 1,393.45 from 1,388.33 at Tuesday’s close. In the region, the Nikkei 225 gained 0.56%, while the Hang Seng led the Shanghai Composite lower. They fell 1.98% and 1.31% respectively.

Source: PublicInvest Research - 22 Jun 2023