Economy

Global: China is headwind for US, global economy, Treasury official says . US Deputy Treasury Secretary Wally Adeyemo said China’s economic issues are proving to be a headwind for the US and global economies and that the Asian nation’s fortunes are a result of its own policy choices. “The US economy is the engine of growth for the global economy, not by mistake,” Ademeyo said in an interview with Annmarie Hordern and Joe Mathieu. The expansion is due to “policy choices we’ve made — like the inflation Reduction Act, which is leading to a manufacturing boom here.” Adeyemo said China has made “a set of different decisions” and now presents “a headwind — not just to the US economy, but to the global economy.(Bloomberg)

US: Fed minutes set to show only a minority saw end of tightening . A record of the US Fed July policy meeting due is set to show only a minority of officials favoured holding interest rates steady over the remainder of the year, according to Bloomberg Economics. At the same time, a majority “likely maintained cautious optimism” that the US economy is in for a soft landing, Bloomberg economists Anna Wong and Stuart Paul wrote on Tuesday in a preview of minutes of the Federal Open Market Committee’s (FOMC) July 25-26 meeting. “Officials who favoured holding rates steady after July — the minority on the FOMC — may be more concerned about deteriorating credit conditions,” Wong and Paul said. (Bloomberg)

US: Housing starts show substantial rebound in July . New residential construction in the US saw a substantial rebound in the month of July, according to a report released by the Commerce Department. The Commerce Department said housing starts surged 3.9% to an annual rate of 1.452m in July after plunging by 11.7% to a revised rate of 1.398m in June. Economists had expected housing starts to increase to a rate of 1.448m from the 1.434m originally reported for the previous month. Meanwhile, the report said building permits inched up by 0.1% to an annual rate of 1.442m after tumbling by 3.7% to a revised rate of 1.441m in June. (RTT)

EU: GDP logs growth in 2Q . The euro area economy expanded as initially estimated in the 2Q despite tight credit conditions and high inflation damping demand. GDP registered a sequential growth of 0.3% after remaining unchanged in the 1Q, flash estimate from Eurostat showed. YoY, economic growth eased to 0.6% from 1.1%. Both quarterly and annual growth rates matched the preliminary estimate released on July 31. Capital Economics' economist Adrian Prettejohn said the economy is set to contract in the second half of this year as the effects of monetary tightening intensify. (RTT)

UK: Inflation pressure stays strong despite fall in headline rate. Worries about persistently high inflation in Britain grew as key measures of price growth monitored by the BOE failed to ease in July, despite a sharp drop in the headline inflation rate. The annual consumer price inflation rate cooled to 6.8% from June's 7.9%, the Office for National Statistics said — as the central bank and a Reuters poll of economists had predicted and moving further away from Oct's peak of 11.1%. (Reuters)

South Korea: Export prices rise 12.8% on year in July . Export prices in South Korea were up 12.8% on year in July, the Bank of Korea said. That was below estimates for a decline of 16.5% following the 15.0% drop in June. Import prices fell an annual 13.5% versus expectations for a decline of 20.8% following the 16.1% decline in the previous month. On a monthly basis, export prices rose 0.1% and import prices gained 0.4%. (RTT)

New Zealand: Central bank leaves key rate unchanged . New Zealand central bank kept its key rate unchanged for the second straight meeting but policymakers turned more hawkish so as to bring inflation back to the target range. The Monetary Policy Committee of the Reserve Bank of New Zealand governed by Adrian Orr, decided to leave the Official Cash Rate at 5.50%, as widely expected. The central bank has lifted the OCR by a cumulative 525 bps since Oct 2021. Policymakers said the current level of interest rates is constraining spending and hence inflation pressures. (RTT)

Markets

IJM (Outperform, TP: RM2.10): MAHB to terminate Pestech's RM743m aerotrain contract. The airport operator’s decision came after the progress of the project was more than 250 days behind the schedule as stated in the contract. (The Edge). Comment: Based on our back-of-the-envelope calculation, the termination of the KLIA aerotrain contract could potentially shave Pestech’s outstanding orderbook by 32% from RM1.56bn. However, pending more clarity on the job cancellation especially impact to earnings, we keep our estimates unchanged for now. To recap, IJM entered into a conditional subscription agreement with Pestech for the subscription of 800m ordinary shares, representing 44.8% of the enlarged share capital for RM124m. The deal is anticipated to be completed by 3QFY23.

Country Heights: Defaults on RM89m of Islamic loans, not RM181m. Country Heights Holdings clarifies that it has defaulted on RM89m payment for Islamic financing facilities and not RM181m as reported. (BTimes)

Eversendai: Secures RM188m worth of new projects. The Eversendai Corp has secured RM188m worth of new projects by its subsidiaries in the Kingdom of Saudi Arabia and India for structural steel works scope. (BTimes)

PWF Corp: Proposes one-for-three bonus issue. PWF Corp, whose share price has risen by 69% over the past one year, has proposed a bonus issue of up to 74.46m shares on the basis of one bonus share for every three existing shares. The entitlement date for the bonus issue will be determined later, the Penang-based poultry player said in a bourse filing on Aug 16. (The Edge)

LFE Corp: Teams up with landowner to jointly develop housing project in Kedah. LFE Corp's unit signed a deal to jointly develop a housing project on 175 ha land in Gurun, Kedah. The group inked the JVA with Aziho Trading SB for the development of the project known as Taman Residensi Mesra Phase Four. (The Edge)

Velesto Energy: Units bags two contracts from Jadestone Energy, ExxonMobil E&P Malaysia. Velesto Energy’s units were awarded a USD6.1m (RM28.3m) contract for the group’s jack-up rig Velesto NAGA 2 from Jadestone Energy (Malaysia) Pte Ltd, and another on-demand job to provide a hydraulic workover unit (HWU) for ExxonMobil Exploration and Production Malaysia Inc. (The Edge)

Seacera Group: PN17 status to be uplifted. Seacera Group will no longer be a PN17 company from Aug 17. Seacera said the uplifting of the PN17 status came after the bourse regulator granted the group a waiver from having to submit a regularisation plan. (The Edge)

HextTechn, SWS Capital: Mutually agree to terminate land deal. Hextar Technologies (HexTech) has agreed to terminate the deal to sell two parcels of land measuring a total of 235,213sqft, located in Pasir Gudang and Klang, to SWS Capital for RM23.66m. (The Edge)

Serba Dinamik: Faces possible delisting on Aug 28. Serba Dinamik may be delisted from the Main Market of Bursa Malaysia on Aug 28, as Bursa Securities has rejected the troubled oil and gas company's application for more time to submit its regularisation plan. (The Edge)

Market Update

The FBM KLCI might open lower today after yields on longer-term US Treasuries reached their highest levels since October and US stocks declined as investors assessed minutes from the Federal Reserve’s July meeting and the outlook for interest rates. Declines for Wall Street stocks accelerated as borrowing costs rose. The S&P 500 closed 0.8% lower and the tech-focused Nasdaq Composite dropped 1.2%. In Europe, the region-wide Stoxx Europe 600 ended the day 0.1% lower, while London’s FTSE 100 gave up 0.4% and France’s Cac 40 shed 0.1%. Investors in US and Europe generally remain concerned that sticky inflation could prompt central banks on both sides of the Atlantic to keep interest rates higher for longer.

Back home, late buying in selected utilities and financial services counters pushed Bursa Malaysia back into positive territory at the close on Wednesday amid weaker sentiments on the regional stock markets. At the closing bell, the FBM KLCI rose 3.23 points to 1,463.51 from 1,460.28 at Tuesday’s Aug 15 close. Meanwhile, markets in the region were overshadowed by gloomier data from China, which signalled that new home prices declined 2.5% month on month in July, following a 2.2% fall in the previous month. Hong Kong’s Hang Seng index slipped 1.4%, nearing its lowest level since the start of the year, while China’s benchmark CSI 300 dropped 0.7%. Elsewhere in the region, South Korea’s Kospi shed 1.5% and Japan’s Topix lost 1.3%.

Source: PublicInvest Research - 17 Aug 2023