Economy

US: Existing home sales slide again, but prices up from a year earlier. US existing home sales dropped to a six month-low in July as home owners who are locked into cheap mortgages refrained from selling their properties with the cost of new mortgages for another home at the highest levels in decades. That limited inventory, however, helped drive prices higher on a year-over-year basis for the first time since January. Existing home sales fell 2.2% in July to a seasonally adjusted annual rate of 4.07m units, the lowest level since January, from an unrevised 4.16m units in June. Economists polled by Reuters had forecast home sales would be little changed at 4.15m units. Sales fell in the Northeast, Midwest and South, but rose in the West, where home prices have fallen most sharply in the past year. All regions experienced annual sales declines. Home resales, which account for a big chunk of US housing sales, fell 16.6% on a YoY basis in July. (Reuters)

US: Small business confidence is tanking again. As President Biden begins to more forcefully build a reelection case citing Bidenomics, Wall Street forecasts and actual GDP data are supportive, as are recent improving sentiment scores from consumers and CEOs. But on Main Street, small business owners remain a difficult group for Biden to win over.Small business confidence is back at an all-time low, according to the just-released CNBC | SurveyMonkey Small Business Survey for the third quarter. That's nothing new for Biden, as small business confidence has hung around a low throughout his presidency. In fact, the latest decline in the confidence index to a score of 42 out of 100 matches the all-time low from exactly one year ago. (CNBC)

UK: Borrows less than expected in July, raising tax cut hopes. Britain recorded a smaller-than-expected budget deficit in July, official data showed on Tuesday, giving finance minister Jeremy Hunt a bit of hope that he can cut taxes later this year, before an election expected in 2024. Some economists warned, however, that an economic slowdown or a recession in the coming months, as the Bank of England keeps on raising interest rates to fight high inflation, could deny Hunt the room for manoeuvre for pre-election giveaways. Net borrowing, excluding state-owned banks, stood at GBP 4.3bn (USD 5.49bn) last month, less than the median forecast of GBP 5.0bn pounds in a Reuters poll of economists. In the first four months of the financial year, borrowing stood at GBP 56.6bn. That was almost GBP 14bn pounds more than the same period last year but GBP 11.3bn less than forecast by the Office for Budget Responsibility (OBR) whose projections underpin the government's fiscal plans. (Reuters)

Japan: BOJ's Ueda meets premier, says didn't discuss recent yen volatility. Bank of Japan Governor Kazuo Ueda said that he and prime minister Fumio Kishida held talks on Tuesday on economic developments but did not discuss recent volatile currency moves. The discussions took place in the wake of the dollar's recent ascent above 145 yen, a level that in September 2022 triggered Japan's first yen-buying operation since 1998. "There wasn't anything in particular discussed today," Ueda told reporters after the meeting, when asked whether the two held talks on recent exchange-rate volatility. Ueda also said he explained to Kishida the Bank of Japan's decision last month to loosen its grip on long-term interest rates. "The premier said he well understood," Ueda added. The dollar briefly slid against the yen on news the two were to meet, before bouncing back to around 145.98. Ueda said Tuesday's meeting was a continuation of his predecessor Haruhiko Kuroda's practice of conferring with the premier once every few months on economic and financial developments. (Reuters)

India: Inflation pressures warrant government, central bank vigilance. Inflationary pressures in India caused by global uncertainty and domestic disruptions will require greater vigilance by the government and the Reserve Bank of India, the finance ministry said in its monthly economic report. The ministry's comments come weeks after data showed retail inflation in July rose to its highest in 15 months, as vegetable and cereals prices skyrocketed. "Global uncertainty and domestic disruptions may keep inflationary pressures elevated for the coming months, warranting greater vigilance by Government and the RBI," the government said. The finance ministry expects price pressures to abate thereafter. "The price pressure in food items is expected to be transitory, as evident in the steady performance of the agriculture sector, along with fresh arrivals in the market," it said. (Reuters)

South Korea: Manufacturers' business sentiment weakens to 5- month low for Sept. South Korean manufacturers’ business sentiment for September weakened to the lowest level in five months on growing worries about weak exports, a central bank survey showed on Wednesday. The business outlook index for the manufacturing sector fell to 67 for September from 71 in August on a seasonally adjusted basis, according to the Bank of Korea’s monthly survey of companies. The index marked its lowest reading since April and the biggest monthly drop since February. In the survey, 19.1% of manufacturers cited uncertain economic conditions as a major difficulty, down from 23.5% the month before, while 16.8% cited weak domestic demand, up from 16.1%, and those citing weak exports jumped to 16.2% from 12.4%. (Reuters)

South Korea: Bank of Korea seen on hold for rest of year, to cut rates early in 2024. The Bank of Korea will leave its key policy rate unchanged at 3.50% for a fifth consecutive meeting on Thursday and hold it steady for the rest of this year as inflation continues to ease and household debt remains high, a Reuters poll found. With inflation easing to 2.3% in July, the lowest in over two years and close to the BOK's 2.0% target, financial markets are also indicating a tightening cycle that took rates up 300 basis points in 17 months is over. Despite the central bank's expectation inflation will rise in coming months, slowing economic growth and high household debt will likely deter the BOK from further hikes, instead opting for a hawkish stance to deter markets from pricing in rate cuts. (Reuters)

UK: Borrows less than expected in July, raising tax cut hopes. Britain recorded a smaller-than-expected budget deficit in July, official data showed on Tuesday, giving finance minister Jeremy Hunt a bit of hope that he can cut taxes later this year, before an election expected in 2024. Some economists warned, however, that an economic slowdown or a recession in the coming months, as the Bank of England keeps on raising interest rates to fight high inflation, could deny Hunt the room for manoeuvre for pre-election giveaways. Net borrowing, excluding state-owned banks, stood at GBP 4.3bn (USD 5.49bn) last month, less than the median forecast of GBP 5.0bn pounds in a Reuters poll of economists. In the first four months of the financial year, borrowing stood at GBP 56.6bn. That was almost GBP 14bn pounds more than the same period last year but GBP 11.3bn less than forecast by the Office for Budget Responsibility (OBR) whose projections underpin the government's fiscal plans. (Reuters)

Markets

MBSB: Sues Country Heights over RM89.7m default . MBSB Bank is suing Country Heights Holdings, following its default on the payment of Islamic term financing facilities totalling RM89.7m, to recover the sum owed. Country Heights said the group had on Monday (Aug 21) received a writ of summons, statement of claim and notice of case management from the solicitors acting for MBSB. According to Country Heights, MBSB is claiming for total sales price outstanding and payable under Term Financing-i amounting to RM89.7m as of Aug 1. (The Edge)

Ecoscience: Proposes private placement, 1-for-2 free warrants . Ecoscience International has proposed a private placement to raise RM11.2m, as well as the issuance of free warrants. The private placement comprises the issuance of 34m shares, representing 10% of its current share base, to third-party investors to be identified later, said the company. Meanwhile, the free warrant issuance, which involves 187m warrants, is to be undertaken after the private placement on the basis of one warrant for every two existing shares held on an entitlement date to be announced later. (The Edge)

Magna Prima: To acquire remaining 30% stake in property development unit for RM46m . Magna Prima is acquiring the remaining 30% stake in Magna Ecocity SB for a cash consideration of RM45.6m. Magna Prima said it had inked a sale and purchase agreement with Lee Shu Shun for the proposed acquisition. Magna Ecocity’s principal activity is property development. Lee is a minority shareholder of Magna Prima, holding a 1.93% stake in the group, its 2022 annual report showed. (The Edge)

Iris: Disputes termination of NIISe contract. Iris Corp has written to the Home Ministry to dispute the invalid and unlawful termination of its National Integrated Immigration System (NIISe) contract. On Aug 14, Iris’ wholly-owned subsidiary, Iris Information Technology Systems SB (IITS), was contracted as a developer for the new immigration system. Iris said it is seeking independent legal advice on the matter. “IITS firmly disputes the termination as stated in the notice of termination and will take necessary actions to protect its interest and exercise its legal rights in relation to the NIISe contract.” (StarBiz)

Pappajack: To expand pawnbroking network. Pappajack will continue expanding its network of pawnbroking outlets and at the same time penetrate into new geographical markets within Peninsular Malaysia. “By expanding the group’s network of pawnbroking outlets, the group would be able to increase its market presence and serve a wider customer base,” the pawnbroker said. It added that the expansion would support and contribute positively to the group’s financial performance. (StarBiz)

OpenSys: Acquires eight offices for RM10.5m to support growing business . OpenSys (M) is acquiring eight offices at Pinnacle Petaling Jaya, Selangor, from JH Yong Holding SB for RM10.5m to support its growing business. The group said the purchase is to cater to the needs of additional staff, especially those engaged in operational, software development and hardware support roles. It said these parcels are located above the current company’s headquarters, whose proximity will significantly ease staff movement between the two offices, streamlining communication and decision-making processes. (The Edge)

Market Update

The FBM KLCI might open weaker today after US stocks turned lower on Tuesday, with banks leading the declines, as investors assessed recent ratings downgrades and look ahead to the Jackson Hole economic conference later this week. Wall Street’s benchmark S&P 500 closed down 0.3%, with financials dragging the index lower, with most other sectors also in the red. Rating agency Standard & Poor’s on Monday night lowered its ratings on five US regional banks — Associated Banc Corp, Comerica, KeyCorp, Valley National and UMB Financial — assigning “stable” outlooks to them. Elsewhere in equities, the tech-focused Nasdaq Composite gauge advanced 0.1%, building on gains from the previous session. In Europe, the region-wide Stoxx 600 rose 0.7%, while France’s Cac 40 added 0.6% and Germany’s Dax gained 0.7%. The Stoxx Europe 600 Technology index was among the top gainers in the region, up 2%, as news that British chip designer Arm had been valued at $64bn in an internal transaction this month boosted valuations.

Back home, Bursa Malaysia ended trading mixed on Tuesday on lack of buying momentum. At the closing bell, the FBM KLCI edged up 0.96 of a point to 1,451.53, from 1,450.57 at Monday's close, after opening 0.3 of a point better at 1,450.87. The regional markets finished higher today with shares in Hong Kong leading the region. The Hang Seng added 0.95% while Japan's Nikkei 225 rose 0.92% and China's Shanghai Composite tacked on 0.88%.

Source: PublicInvest Research - 23 Aug 2023