Economy

US: New York Manufacturing Index points to modest growth in July. After reporting a significant turnaround in New York manufacturing activity in the previous month, the Federal Reserve Bank of New York released a report showing a pullback in the pace of growth in the month of July. The New York Fed said its general business conditions index fell to 1.1 in July after surging to 6.6 in June, although a positive reading still indicates growth. Economists had expected the index to drop to zero. The pullback by the headline index was partly due to a notable slowdown in the pace of shipment growth, as the shipments index tumbled to 13.4 in July from 22.0 in June. On the other hand, the number of employees index jumped to a positive 4.7 in July from a negative 3.6 in June, returning to positive territory for the first time since Jan . (RTT)

US: NY Fed report finds Americans increasingly facing borrowing headwinds. Americans are increasingly getting shot down when they seek out loans, new data from the New York Fed, released Monday. The bank reported that in June, across a number of fronts, credit was the hardest to get in years, with fewer people seeking out loans, at least for now. The report’s findings were compiled as part of the New York Fed’s monthly Survey of Consumer Expectations, with respondents polled every four months about credit access issues. (Reuters)

EU: German economy may contract slightly in 2023. Germany's economic output may shrink slightly this year due to the energy price shock and tightening financial conditions, the IMF said. GPD is expected to regain momentum gradually in 2024 and 2025, as the lagged effects of monetary tightening gradually dissipate and the economy adjusts to the energy shock, the IMF said in its country report for Germany. last year. Over the medium term, average GDP growth is expected to fall back below 1% due to accelerating headwinds from population aging and a lack of significant increases in productivity. (RTT)

EU: Italy inflation unrevised at 14-month low. I taly's consumer price inflation moderated to the lowest level in more than a year in June, as initially estimated, preliminary data from the statistical office. The CPI, rose 6.4% YoY in June, slower than the 7.6% rise in May. That was in line with the flash data published on June 28. Further, this was the weakest inflation since April 2022, when prices had risen 6.0%. The slowdown in inflation was largely due to non regulated energy products, with price growth easing markedly to 8.4% from 20.3% in May. The inflation was, to a lesser extent, impacted by a weaker rise in prices for processed food goods, which grew 13.2% in June after an 11.5% growth in the prior month. (Reuters)

China: Frail Q2 GDP growth raises urgency for more policy support. China's economy grew at a frail pace in the second quarter as demand weakened at home and abroad, with the post COVID momentum faltering rapidly and raising pressure on policymakers to deliver more stimulus to shore up activity. Chinese authorities face a daunting task in trying to keep the economic recovery on track and putting a lid on unemployment, as any aggressive stimulus could fuel debt risks and structural distortions. (Reuters)

China: Rolls over medium-term policy loans, rate unchanged. China's central bank rolled over maturing medium-term policy loans and kept the interest rate unchanged as expected on Monday, however markets expect authorities will need to unleash more stimulus to support slowing economic growth. The economic recovery has lost momentum after an initial burst in the first quarter, prompting monetary authorities to lower key policy rates last month. (Reuters)

India: Needs to grow at 7.6% a year for 25 years to be a developed nation. India will need to grow at a rate of 7.6% annually for the next 25 years to become a developed nation, according to a research paper published by the central bank in its monthly bulletin. India's per capita income is currently estimated at USD2,500, while it must be more than USD21,664 by 2047, as per World Bank standards, to be classified as a high-income country. (Reuters)

Markets

IJM Corporation (Outperform, TP: RM2.10): Undertakes logistic hub development. IJM has entered into a joint venture (JV) agreement with FMM Elmina SB to develop two logistics hubs in the City of Elmina, Shah Alam. (StarBiz) Comments: We believe the JV will add to the Group’s recurring income through the leasing of logistic hubs once completed and also replenish the its construction orderbook which currently stands at about RM5.2bn. We estimate that the construction works for the 2 logistic hubs could cost approximately RM79.4m assuming RM1,708 per sqm (based on recent similar jobs undertaken by IJM). Details are still sketchy currently and hence we keep our earnings estimates unchanged for now. All told, we retain our forecasts and TP of RM2.10 unchanged, pending further development of the JV. Reinterate Outperform .

CelcomDigi (Neutral, TP: RM3.80): Partners Huawei, ZTE for network integration, modernisation. CelcomDigi is partnering with Huawei Technologies (Malaysia) SB and ZTE (Malaysia) Corporation SB for the purchase of network services, solutions and equipment for its nationwide network integration and modernisation project. The company commenced its full-scale programme to build Malaysia’s future digital network recently - integrating and modernising the largest 4G network in the nation with the latest LTE (long-term evolution) and 5G-ready technologies. "The exercise will entail upgrades and site consolidation of almost 25,000 existing Celcom and Digi sites nationwide. (StarBiz)

Ni Hsin: Signs letter of intent with UniKL to promote electric motorcycles . Ni Hsin Group announced that its wholly owned subsidiary Ni Hsin EV Tech SB (NH EV Tech) has signed a letter of intent (LOI) with Universiti Teknikal Mara SB (UniKL) to promote electric Ebixon EV motorcycles. The premium cookware manufacturer said NH EV Tech and UniKL signed the LOI on July 16, with both parties agreeing to exercise their best efforts to explore various potentials within any field related to the electric motorcycle industry that are beneficial to the parties. “The collaboration shall cover the areas of education, research and development (R&D), project management, social and culture and aims to establish the industrialmanship programme in UniKL,” it said. (The Edge)

NationGate, Ewein: Independent adviser says NationGate MD’s Ewein takeover offer not fair, not reasonable. The unconditional mandatory takeover offer on Ewein by NationGate Holdings MD and major shareholder Ooi Eng Leong is "not fair and not reasonable" and shareholders should reject the offer, says independent adviser UOB Kay Hian Securities (M) SB (UOBKH). UOBKH said the offer price of 60 sen per share is not fair as it represents a discount of 44 sen or 42.31% to the estimated value of Ewein shares derived using the sum-of-parts valuation methodology of RM1.04. (The Edge)

Al-Salam REIT: Ink MoU to build pedestrian bridge . Al-Salam REIT and Mass Rapid Transit Corporation SB (MRT Corp) via its subsidiary Malaysia Rapid Transit System SB (MRTS) have inked a MoU to construct a pedestrian overhead bridge (POB) worth between RM10m and RM15m. Johor works, transportation and infrastructure committee chairman Mohamad Fazli Mohamad Salleh said the 42-metre-long air-conditioned POB connecting Komtar JBCC to the planned bridge of the Bukit Chagar Link Rapid Transit System (RTS) station is expected to be opened in 2027. (StarBiz)

Market Update

The FBM KLCI might open higher today after Wall Street stocks rallied on Monday as investors weighed the outlooks for the world’s two biggest economies and prepared for this week’s wave of US corporate results. Wall Street’s benchmark S&P 500 closed 0.4% higher, driven by tech and financial stocks, while the tech-focused Nasdaq Composite gained 0.9%. Helping boost US equities at the opening bell was a manufacturing index compiled by the Federal Reserve Bank of New York that came in well above expectations, in a sign that businesses remain resilient to rising interest rates. The index fell to 1.1 in July but remained well above the minus 4.3 consensus forecast. Europe’s region-wide Stoxx 600 gave up 0.6%, led lower by declining cyclical stocks, as investors fretted that low consumer spending in China could damp demand for the region’s exports. France-based luxury groups LVMH and Hermès International both lost about 4%, taking the Cac 40 index down 1.1%. Swiss company Richemont dropped 10.4%. The declines for those stocks came after official data on Monday showed China’s gross domestic product rose 0.8% quarter on quarter in the April to June period. The reading was well below the 2.2% recorded in the previous three months.

Back home, the FBM KLCI ended lower on Monday, weighed by profit-taking in heavyweights amid a mixed regional market performance. At the closing bell, the FBM KLCI fell 5.99 points, or 0.42%, to 1,406.10 from 1,412.09 at last Friday’s close. China’s benchmark CSI 300 index extended the trend, slipping 0.8%, while Hong Kong’s stock exchange suspended trading owing to a weather warning. Japanese markets were closed for a holiday.

Source: PublicInvest Research - 18 Jul 2023