Economy

US: Economy near stalling point as consumer demand weakens. US business activity approached the stagnation point in August, with growth at its weakest since February as demand for new business in the vast service sector contracted. S&P Global said its flash US Composite PMI index, which tracks manufacturing and service sectors, fell to a reading of 50.4 in August from 52 in July, the biggest drop since November 2022. While August's reading was the seventh straight month of growth, it was only fractionally above the 50 level separating expansion and contraction as demand weakened for both manufactured goods and services. (Reuters)

US: 30-year mortgage rate soars to highest since 2000. The interest rate on the most popular U.S. home loan last week shot to the highest since December 2000, helping drive mortgage applications to a 28-year low. The Mortgage Bankers Association said the average contract rate on a 30-year fixed-rate mortgage climbed 15bps to 7.31% in the week ended Aug. 18. That came after yields on the government bonds that influence home-loan rates surged to the highest since the 2007-2009 financial crisis. As borrowing costs surged, home sales tumbled all last year and a hoped-for recovery this year has yet to materialize. (Reuters)

EU: Slide in euro zone service sector sharpens ECB's rates dilemma. Euro zone business activity declined far more than thought in August with the slide in Germany particularly fast, while some inflationary pressures returned, surveys showed. Wednesday's purchasing managers' indexes complicate matters for the ECB which wants to control still rampant price rises without causing a recession. It is expected to pause interest rate hikes in September, according to a narrow majority of economists polled by Reuters, despite elevated inflation. (Reuters)

EU: German business activity suffers steepest decline since May 2020. German business activity contracted at the fastest pace for more than three years in August. The HCOB German Flash Composite Purchasing Managers' Index (PMI), compiled by S&P Global, fell to 44.7 from July's 48.5, hitting its lowest since May 2020 and confounding analysts' expectations for a reading of 48.3. The indicator was below the 50 level denoting growth in activity for the second consecutive month. The composite PMI index tracks the services and manufacturing sectors, which together account for more than two-thirds of Germany's economy. (Reuters)

UK: Economy shows signs of slowdown as BoE rate hikes mount. Britain's economy is slowing and might be heading for a recession as it feels the impact of 14 back-to-back interest rate increases by the BoE to fight high inflation. Despite being buffeted by Brexit, the COVID-19 pandemic and last year's surge in energy prices, the British economy has defied forecasts of contraction so far this year. (Reuters)

Japan: Price trend gauges hit record, signal broadening inflation. Japan may be seeing early signs of sticky inflation with several measures of broad price trends hitting record highs in July, data showed, heightening the case for a retreat from decades of ultra-loose monetary policy. Based on the government's consumer price data, the BOJ releases several measurements of underlying inflation that look at the distribution of price changes. (Reuters)

Markets

TNB (Outperform, TP: RM12.42): Aims to expand renewable energy portfolio in Asia-Pacific, Europe. Tenaga Nasional Bhd (TNB) aims to expand its portfolio in renewable energy (RE) in existing international markets, such as the UK, as well as throughout Asia-Pacific and Europe. TNB chief new energy officer Mohd Zarihi Mohd Hashim said the expansion of the portfolio will be implemented through the establishment and increased expertise in asset development, covering solar and wind energy, whether on land or at sea, supported by utility storage (battery storage). He said one of the main drivers of the exploration strategy is a strategic collaboration to increase the rate of market penetration, and the development of capabilities or competencies to provide operational excellence. (The Edge)

Serba Dinamik: Submits appeal against de-listing . Serba Dinamik Holdings has submitted an appeal to Bursa Malaysia Securities (Bursa Securities) against the de-listing of the company’s securities on the local exchange. The oil and gas service provider said this is in relation to the company being classified as an affected listed issuer under the PN17 of the Main Market Listing Requirements of Bursa Securities on Aug 16, 2023. (The Edge)

Pos Malaysia: To stick to revamp plan. Pos Malaysia will remain focused on its transformation plan and improve services to return to the black. The company its net loss widened to RM27m in the second quarter ended June 30 from a RM5.2m loss in the same quarter last year. Revenue for the period fell 10% YoY to RM465.2m while loss per share stood at 3.45 sen from 0.67 sen last year. (StarBiz)

Citaglobal: Order book stands at RM691m . Citaglobal will continue to embark on opportunities to improve contributions of its civil engineering and construction sector besides the energy division. The engineering company said it would be actively tendering for projects to further strengthen its financial performance. As at June 30, it had a total outstanding order book of RM691.4m. “Citaglobal, through its indirect subsidiary, has diversified into property development business namely the PR1MA phase two project with an estimated remaining gross development value of RM368.6m,” it said. (StarBiz)

E&O: Expects better quarters ahead on higher sales, stable property market. Eastern & Oriental Bhd (E&O) anticipates an improvement in earnings in the coming quarters, driven by its encouraging sales performance and a stable market environment. Speaking at a media and analysts' results briefing, E&O managing director Kok Tuck Cheong said that Malaysia's property market is anticipated to improve — especially in strategic locations — which bodes well for the group's outlook. “The tourism sector is also witnessing a steady recovery driven by the rise in demand for hotel bookings. (The Edge)

Amway: Issues profit warning for FY2023 amid weaker consumer spending . Amway (M) Holdings issued a profit warning for the financial year ending Dec 31, 2023 (FY2023) as inflation took a toll on consumers’ purchasing power and appetites to spend. “The group’s operating environment remains challenging largely due to both inflation which affects consumers’ ability and willingness to spend, as well as a softer demand for health supplements post Covid-19 pandemic,” said Amway. (The Edge)

Market Update

The FBM KLCI might open higher today after US stocks rose on Wednesday as long-term Treasury yields moderated from their recent highs, and new data signalled a slowdown in economic growth ahead of the symposium of central bankers in Wyoming. Technology and media stocks helped the benchmark S&P 500 finish 1.1% higher, while the Nasdaq Composite added 1.6%, aided by a 3.2% rise for Nvidia, the world’s most valuable semiconductor company. The US chipmaker, whose shares are up more than 200 % this year and has helped propel the rally in artificial intelligence related tech stocks, released forecast-beating earnings after the market close. The region-wide Stoxx Europe 600 traded 0.4% higher, while France’s CAC 40 added 0.1% and Germany’s Dax was up 0.2%.

Back home, Bursa Malaysia ended broadly lower on Wednesday, with the key index dipping by 0.79% amid brisk selling activities in index-linked stocks led by Petronas Chemicals Group Bhd and Public Bank Bhd. At the closing bell, the FBM KLCI slipped 11.42 points to 1,440.11 from 1,451.53 at Tuesday's close. Meanwhile, the regional markets were mixed on Wednesday, with China’s CSI 300 falling 1.6% and South Korea’s Kospi down 0.4%, while Hong Kong’s Hang Seng rose 0.3% and Japan’s Topix advanced 0.5%.

Source: PublicInvest Research - 24 Aug 2023