Economy

US: Factory orders jump in June on transportation equipment demand. New orders for US made goods surged in June, boosted by strong demand for transportation equipment and other goods, showing some pockets of strength in manufacturing despite higher interest rates. Factory orders increased 2.3% after rising 0.4% in May. Economists polled by Reuters had forecast orders would accelerate 2.2%. Orders advanced 0.9% on a YoY basis in June. (Reuters)

US: Productivity jumps by most since 2020, blunting labor costs. US labor productivity logged its biggest increase in the second quarter in nearly three years, helping to offset rising labor costs. Productivity, or nonfarm business employee output per hour, rose at a 3.7% annual rate in the second quarter after registering a decline in the first three months of the year. (Bloomberg)

US: Services sector slows in July while prices pick up. The US services sector slowed in July, but businesses faced higher prices for inputs as demand continued to hold up, suggesting a long and slow road to low inflation. Non-manufacturing PMI fell to 52.7 last month from 53.9 in June. A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy. Economists polled by Reuters had forecast the non manufacturing PMI would decrease to 53.0. (Reuters)

EU: Eurozone private sector shrinks most in 8 months. Euro area private sector contracted the most in eight months in July due to the deepening downturn in manufacturing and a near-stalling of services output. The final HCOB composite output index fell to an eight-month low of 48.6 in July from 49.9 in June. (RTT)

EU: Eurozone producer prices fall most in 3 years. Eurozone producer prices declined for the second straight month in June and at the fastest pace in three months on a sharp reduction in energy prices. The PPI posted an annual decline of 3.4% in June, faster than the 1.6% decrease in May. Prices were forecast to fall 3.1%. Moreover, this was the steepest decline since June 2020, when prices had fallen 3.7%. (RTT)

UK: BoE lifts rate by 25 bps. The BoE raised its benchmark interest rate by a quarter point, after a half percentage point hike last time, citing persistence of high inflation. In a three-way split, the nine-member MPC decided to lift the bank rate to 5.25%, the highest since early 2008. This was the fourteenth consecutive rate hike. (RTT)

UK: Services growth slowest in 6 months. The UK private sector expanded at the slowest pace in six months in July amid weaker growth in new orders and rising inflationary pressures. The final services business activity index dropped to 51.5 in July from 53.7 in the previous month. There was no change in score compared to the flash estimate. (RTT)

India: Services growth strongest in over 13 years. India's service sector activity expanded at the fastest pace in just over thirteen years amid a substantial improvement in demand conditions. PMI climbed to 62.3 in July from 58.5 in June. A score above 50 indicates expansion in the sector. During July, Indian service demand improved to its highest level in over 13 years, boosted by a pickup in international sales. New export orders grew at the second-fastest increase since series started in Sept 2014. (RTT)

China: Service sector growth strengthens on new business. China's service sector expanded at a faster pace at the start of the third quarter, underpinned by the solid growth in new business. The Caixin services PMI rose more-than-expected to 54.1 in July from a five-month low of 53.9 in June. The expected reading was 52.5. A score above 50.0 indicates expansion. The reading suggested that the services economy has expanded for the seventh straight month. (RTT)

Australia: Services sector slips into contraction. The services sector in Australia fell into contraction territory in July, with a services PMI score of 47.9. That's down from 50.3 in June, and it moves beneath the boom-or-bust line of 50 that separates expansion from contraction. The latest reduction in services activity was principally associated by panelists to the adverse impact of rising interest rates, which negatively affected spending and business confidence. This also caused a softening of demand as new business increased only marginally across the service sector. Incoming new business from abroad meanwhile fell for the second time in the past three months, weighed down by elevated charges according to panelists. (RTT)

Markets

QL Resources (Outperform, TP: RM6.60): Launches arbitration proceedings against Indonesian JV partners to resolve disputes. QL Resources has commenced arbitration proceedings against Hang Ting Pte Ltd (HT) and PT Pipit Citra Perkasa (PCP) to resolve disputes relating to a master joint venture agreement (MJVA) signed by the three parties in 2006. PCP initiated a lawsuit in Indonesia against Pipit Mutiara Indah, QL Mutiara, as well as QL Resources director Chia Seong Fatt in his capacity as a director of PMI, for alleged management negligence and sought compensation amounting to about RM221.9m. (The Edge)

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. Vinvest emerged as a substantial shareholder of EA Holdings in Nov 2021 after acquiring 17.82% stake in the company, at 2.11 sen per share or a total of RM23.2m. (The Edge)

AWC: Secures RM10m sub-contract works from Crest Builder unit. AWC has been awarded sub-contract works for a multi-block mixed development in Klang, Selangor, from a unit of Crest Builder Holdings worth RM10m for the project's water and sanitary plumbing system and rainwater downpipe system for CB Land SB. The sub-contract works commenced on July 1, 2023 and would be completed by June 30, 2026. (The Edge)

Ge-Shen: To buy controlling stake in Kedah-based rubber and medical device maker for RM17m cash. Ge-Shen Corp is buying a controlling 60% equity interest in Kedah-based Kibaru Manufacturing SB (KMSB) for RM16.8m cash. The proposed acquisition will expand Ge-Shen Group’s scale of operations and further complements the group’s presence in the medical device segment, which is higher in value per unit and yields better profit margin. (The Edge)

Sunview Group: Aborts plan to venture into biogas renewable energy sector. Sunview Group has aborted plans to venture into the biogas renewable energy industry after it terminated the proposed acquisition of Provectus Bioenergy SB. Provectus Bioenergy is engaged in the operation of generation facilities that produce electric energy. The termination was due to the parties' inability to reach a consensus on the terms of the share sale agreement (SSA) for the entire shareholding in Provectus Bioenergy. (The Edge)

Kumpulan Kitacon: Bags RM62m contract from KL Kepong to build cluster house. Kumpulan Kitacon has secured a RM62.3m contract from Kuala Lumpur Kepong (KLK) to build 128 units of two storey cluster houses within a period of 18 months in Bandar Seri Coalfields, Sungai Buloh. (The Edge)

Litrak: Shares to be suspended from Aug 9 to facilitate capital repayment. Lingkaran Trans Kota Holdings (Litrak) shares will be suspended with effect from Aug 9 to facilitate the implementation of the company's capital reduction and repayment exercise. The capital repayment involves a cash distribution of 50.63 sen for each share held, or a total sum of RM275.8m. The entitlement date for the capital repayment is Aug 10. (The Edge)

Market Update

The FBM KLCI might lose a few points today after US stocks closed the day slightly lower. The S&P 500 fell 0.3%, after its biggest one day drop on Wednesday since April. The Nasdaq Composite gave up 0.1%. US Treasury yields climbed to a nine-month high, continuing their ascent following an announcement from the government that it would increase its borrowing in the coming months. The 10-year Treasury yield climbed 0.11 percentage points to 4.19%, extending a rise that began on Wednesday after the US government lifted its issuance target for the coming quarter and strong private payrolls data The US on Friday will publish its closely watched hiring figures for July, which are expected to show that employers added fewer jobs last month. Europe’s region-wide Stoxx Europe 600 index ended the day down 0.6%, its third successive session of losses. The index has declined almost 3% since the start of the month. France’s Cac 40 lost 0.7%, Germany’s Dax gave up 0.8% and London’s FTSE 100 fell 0.4%.

Back home, Bursa Malaysia closed lower for the third consecutive day, in tandem with the regional selldown following the negative cue from global equities overnight. At the closing bell, the FBM KLCI slipped 2.71 points to 1,441.85 from 1,444.56. In the region, Hong Kong’s Hang Seng index fell 0.5 %, while South Korea’s Kospi lost 0.4% and Japan’s Topix dropped 1.5%. China’s benchmark CSI 300 was the only outlier in the region, adding 0.9% after fresh data showed that the country’s services activity expanded faster than expected in July. The Caixin services purchasing managers’ index rose to 54.1, well above the forecast 52.4.

Source: PublicInvest Research - 4 Aug 2023