Economy

US: Fitch downgrades US debt on debt ceiling drama and governance worries. Fitch Ratings downgraded its US debt rating from the highest AAA rating to AA+, citing a steady deterioration in standards of governance. The downgrade comes after lawmakers negotiated up until the last minute on a debt ceiling deal earlier this year, risking the nation’s first default. But the Jan 6th insurrection was also a major contributing factor. In a meeting with Biden administration officials, representatives from Fitch Ratings repeatedly highlighted the Jan 6th insurrection as a significant concern as it relates to US governance. The credit agency did not mention the insurrection in their full report on the downgrade. (CNN)

US: Manufacturing slowdown fails to rebuild diesel stocks. US manufacturers reported another decline in activity in July 2023, but industrial electricity and especially diesel consumption have declined less than expected in recent months, explaining why prices remain relatively firm. The Institute for Supply Management’s PMI increased slightly to 46.4 (13th percentile for all months since 1980) in July from 46.0 (11th percentile) in June but down from 52.8 (51st percentile) a year ago. (Reuters)

US: Small businesses boost US private payrolls in July. US private payrolls rose more than expected in July as small businesses boosted hiring, pointing to continued labor market resilience that could shield the economy from a recession. A moderation in wage growth, which bodes well for the inflation outlook. It added to recent upbeat data ranging from inflation to consumer spending in raising hopes that the economy will have the soft landing envisioned by Fed officials. (Reuters)

EU: Spain tourist arrivals rise 10.9% in June. Spain's visitor arrivals increased at a slower pace at the end of the second quarter. Tourist arrivals climbed 10.9% YoY to 8.3m in June. However, the rate of growth eased sharply from 17.6% in May. In June, the UK was the main country of residence, with almost 2.0m tourists, accounting for 23.8% of the total and an increase of 9.6% compared to last year. This was followed by Germany and France with 1.1m and 0.925m tourists, respectively. During the first half of this year, the number of tourists visiting Spain increased by 23.7%, reaching 37.5m. (RTT)

EU: Spain unemployment lowest since 2008. Spain's unemployment declined for the fifth consecutive month in July to hit the lowest level since 2008. The number of registered unemployed fell by 10,968 or 0.41% from the previous month. The total jobless people stood at 2.68m, the lowest level for any month since 2008. Compared to July 2022, unemployment decreased by 205,938 people or 7.14%. Registered unemployment decreased across the board. Unemployment in the service sector declined 7,126 and by 1,861 in the agriculture sector. Unemployment was down by 964 in industry. (RTT)

EU: Ireland jobless rate falls slightly to 4.1%. Ireland's unemployment rate declined somewhat in July after a slight increase in the prior month. The seasonally adjusted unemployment rate dropped to 4.1% in July from 4.2% in the previous month. In the corresponding month last year, the rate was 4.2%. The seasonally adjusted number of unemployed fell to 111,900 in July from 115,500 in June. A year ago, it was 111,800. (Reuters)

South Korea: Inflation rises 2.3% on year in July. CPI in South Korea were up 2.3% on year in July, touching a two-year low. The July reading was shy of expectations for 2.4% and down from 2.7% in June. On a monthly basis, CPI rose 0.1%, also below forecasts for a gain of 0.2% following the flat reading a month earlier. Core CPI, which excludes the volatile price of food, slowed to an annual 3.3% in July from 3.5% in June. (RTT)

New Zealand: Jobless rate climbs to 3.6% in Q2. The unemployment rate in New Zealand came in at a seasonally adjusted 4.6% in the Q2 2023. That missed forecasts for 3.5% and was up from 3.4% in the three months prior. The underutilization rate was 9.8% on quarter, up from 9.1%, while the employment rate was 69.8%, compared with 69.6% in Q1. On a yearly basis, all salary and wage rates including overtime increased 4.3 percent, while average weekly earnings including overtime for full-time equivalent employees increased to NZD1,531. (RTT)

Thailand: Central bank hikes rate for seventh straight meeting. Thailand's central bank raised its benchmark interest rate for the seventh straight meeting amid rising concerns about upside risks to inflation. The MPC of the Bank of Thailand unanimously voted to lift the policy rate by 25 bps to 2.25%. This was the seventh consecutive rate hike. The bank has lifted the benchmark rate by a cumulative 175 bps since Aug 2022. The interest rates are set to remain on hold for the rest of the year as inflation stayed well below the target amid mounting headwinds to the economic recovery. (RTT)

Markets

AMMB Holdings (Trading Buy, TP: RM4.20): In early talks with Singapore's Great Eastern for possible sale of AmMetLife. AMMB Holdings has started preliminary discussions with Great Eastern Holdings Limited pertaining to AmMetLife Insurance and AmMetLife Takaful. The discussions are an ordinary part of its business review. It is crucial to note that these talks are still at a very preliminary stage. At this juncture, there is no certainty that the company will enter into any definitive or binding agreement. (BTimes)

Hibiscus Petroleum (Neutral, TP: RM1.18): Receives consent for Teal West field development plan. Hibiscus Petroleum has received development and production works consent for a field development plan (FDP) for the Teal West field from the North Sea Transition Authority (NSTA) on August 1, 2023. The next stage after the FDP approval is the internal final investment decision, which if reached, would result in first oil from the Teal West field expected by late 2024/early 2025. (BTimes)

Vinvest: Files lawsuit against EA Holdings over loss of shares. Vinvest Capital Holdings has initiated a civil action in the High Court over the alleged loss of its shares in EA Holdings. This includes urgently applying for the necessary prohibitory injunctive orders to stop further derogation of the company’s rights over those shares. The injunction application against EA Holdings was called up for hearing on Aug 2 and an interim injunction was granted by the court. (The Edge)

Mudajaya: Secures ECRL works worth RM195.1m. Mudajaya Group has secured a contract worth RM195.1m for works related to the ECRL in Terengganu from CCC SB. Mudajaya had accepted the letter of award on Aug 1, 2023, to undertake the construction and completion of stations, ancillary buildings and other associated works for the rail project. The project is targeted to be completed by 2026, with a construction period of 32 months from the date of site possession. (The Edge)

Hiap Teck: JV company ignites new blast furnace plant. Hiap Teck Venture’s 27.3%-owned JV company, Eastern Steel SB (ESSB) — has ignited its newly completed 1,380 cu m blast furnace plant on Aug 1. Hiap Teck shared that with the successful ignition of the new blast furnace, ESSB’s production capacity will increase from the current 700,000 tonnes of steel slabs and billets to 2.7 metric tonnes annually. ESSB’s production is mainly targeted to be sold locally to satisfy domestic demand and also to export to Southeast Asia and North Asia. (The Edge)

Ni Hsin: Teams up with foodpanda Malaysia to use electric bikes for food delivery. Ni Hsin Group has entered into a partnership with Delivery Hero Malaysia SB (foodpanda) to promote the use of Ebixon electric motorcycles among its riders. NH EV Tech, which distributes the bikes, signed a business collaboration agreement with foodpanda on Aug 1. Under the agreement, NH EV Tech will give two complimentary units of its Ebixon Bold motorcycles to foodpanda and offer its riders discounts to purchase the bikes. (The Edge)

Market Update

Stocks hit selloff mode with the Nasdaq Composite registering its worst day since February, after Fitch downgraded the long-term rating for the US and risk-off sentiment resurfaced. The tech-heavy index shed 2.2% while the S&P 500 pulled back 1.4%. The Dow Jones Industrial Average fell 1%. The last time the US got a downgrade from a major ratings agency was in 2011 when Standard & Poor’s cut the rating to AA+ from AAA. European shares also tumbled with broad-based losses as investors fled riskier assets. Germany’s DAX and the UK’s FTSE 100 both declined by around 1.4% as France’s CAC 40 dropped 1.3%. However, economists pointed out that Fitch’s decision did not rely on new fiscal information and is therefore not expected to have a lasting impact on market sentiment beyond immediate shock selling on Wednesday. Meanwhile, JP Morgan CEO Jamie Dimon said the US should scrap the debt ceiling altogether, after Fitch cited the country’s difficulty in agreeing to raise the debt limit as a key reason for its downgrade. Asian markets also suffered similar setback with Nikkei 225 and the Hang Seng Index tumbling 2.5% while Shanghai Composite lost 0.9%.

Back home, FBM KLCI closed 0.5% lower to settle at 1,444.56. Malaysian Resources Corp Bhd is set to be involved in the redevelopment of the transportation hub Kuala Lumpur Sentral, according to Transport Minister Anthony Loke. In a press conference, Loke announced that the Cabinet has approved, in principle, the redevelopment of KL Sentral. He disclosed that the project will be done via privatisation at a cost estimated to be more than RM1bn, which will be borne by MRCB. In return, MRCB would be given the rights to develop the area above the station with commercial and residential buildings.

Source: PublicInvest Research - 3 Aug 2023