Economy

US: Powell speech adds to uncertainty about interest rates. Investors were seeking clarity about the outlook for interest rates from a Jackson Hole economic symposium but found little from Federal Reserve Chair Jerome Powell, who compared monetary policy to navigating by the stars under cloudy skies. While Powell reiterated the Fed's target of 2% inflation, he called it "challenging" to know when monetary policy is restrictive enough to know in real time when such a stance has been achieved. (RTT)

EU: German ifo business confidence at 10-month low. German business sentiment deteriorated for the fourth month in a row in Aug to the lowest since late 2022 as companies' assessment of the current situation weakened sharply and they turned more pessimistic regarding the outlook. The ifo business climate index dropped more-than-expected to 85.7 points from 87.4 in July. Economists had forecast a reading of 86.7. This was the lowest reading since October 2022. The current situation index fell to 89.0 from 91.4 in the previous month. (RTT)

EU: Spain producer prices fall for fifth straight month. Spain producer prices declined for the fifth consecutive month in July driven by weak energy prices. Producer prices posted an annual fall of 8.4% after easing 8.0% in June. Prices have been falling since March. Meanwhile, the underlying producer price index that excludes energy prices rose at a pace of 1.9% but slower than the 2.1% increase in June. On a monthly basis, producer price gained 0.1% following June's 0.9% increase. The annual fall in overall producer prices was driven by the sharp 26.2% decline in energy prices. Intermediate goods prices also decreased in July, down by 5.7%. Partially offsetting these declines, prices of consumer goods and capital goods climbed 10.1% and 2.6%, respectively. (RTT)

China: Worsening economic slowdown is rippling across the globe. China’s economy was meant to drive a third of global economic growth this year, so its dramatic slowdown in recent months is sounding alarm bells across the world. Policymakers are bracing for a hit to their economies as China’s imports of everything from construction materials to electronics slide. Chinese demand for machines used on building sites is worse than previously thought. US President Joe Biden called the economic problems a “ticking time bomb.” Global investors have already pulled more than USD10bn from China’s stock markets, with most of the selling in blue chips. Goldman Sachs Group Inc. and Morgan Stanley have cut their targets for Chinese equities, with the former also warning of spillover risks to the rest of the region. China’s momentum is fading after decades of supercharged growth. (Bloomberg)

India: Further tightens rice shipments in threat to global supply. India, the world’s biggest exporter of rice, imposed more curbs on shipments of the grain in a move that’s likely to further squeeze global supplies of the food staple. The government will set a floor price of USD1,200 per ton for basmati rice exports. That will prevent some traders from trying to smuggle non-basmati white rice, which has been banned for exports, through customs masked as the more expensive aromatic variety. The latest move follows the imposition of a 20% export tax on parboiled rice on Aug 28, which had a share of about 40% in the global rice trade last year, has now either banned or put some sort of restriction on exports of all varieties of the grain. Asian rice prices soared to their highest in almost 15 years earlier this month, and could climb further, raising costs for importers such as the Philippines and some African nations. India’s recent protectionist measures are in line with its aggressive efforts to cool local food prices ahead of a general election early next year, when Prime Minister Narendra Modi will seek a third term. (Bloomberg)

Singapore: Industrial output falls less than expected. Singapore's industrial production logged a slower-than-expected fall in July. Manufacturing output fell 0.9% from a year ago, slower than the 6.6% decrease in June. Production has declined for the tenth straight month. However, the pace of decline was less severe than economists' forecast of 3.8% decrease. Excluding biomedical manufacturing, manufacturing output advanced 1.7%. MoM, manufacturing output advanced at a faster pace of 4.1% after a 3.3% gain in June. Excluding biomedical manufacturing, output grew 6.9%. Should demand for electronics improve further, we could see industrial production finally move back into expansion as early as Aug, which could in turn signal an eventual reversal for NODX before the end of the year. By cluster, transport engineering output surged 20.7% annually and electronics output increased 5.1%. Output of chemicals cluster rose 2.3%, while that of precision engineering decreased 7.6%. (RTT)

Markets

IHH Healthcare (Outperform, TP: RM7.63): Acquires another 24.53% stake in India’s RGE for INR7,400m in bids to expand market position. IHH Healthcare has upped its stake in Ravindranath GE Medical Associates Private Ltd (RGE) to 98.17% from 73.64%, following shares acquisition for a cash consideration of INR7,400m (RM415m). (The Edge)

Comment: IHH’s acquisition of another 24.53% stake in RGE to 98.17% will allow the group to strengthen its position in India and take full control of RGE’s operations. RGE group through Gleneagles Global Hospitals operates 6 hospitals with 1500 beds in Hyderabad, Chennai, Bangalore and Mumbai. We gather that the 6 hospitals are currently running at c.54% occupancy rate. We expect minimal earnings impact and hence, maintain our core earnings forecast and Outperform call on IHH.

CTOS Digital: Buys credit scoring firms in Indonesia, Philippines for RM29.4m. CTOS Digital Bhd has announced the acquisition of two fast-growing credit scoring companies in the Philippines and Indonesia for US$6.34m (RM29.42m). The group said it is acquiring the entire 100% stake in Philippine-based Finscore Inc for RM27.22m, and an 80% stake in PT Prime Analytics Indonesia for RM2.2m. This will allow CTOS to expand its presence in the Philippines and Indonesia,and establish a leading alternative data platform. CTOS aims to leverage the two companies' "strong market presence and expertise to provide an unparalleled suite of credit-related products and services" in the two countries, added the group. "This strategic move aligns perfectly with our vision of advancing financial inclusion and bringing superior credit solutions to individuals and businesses throughout the Asean region," said CTOS group CEO Erick Hamburger in a statement. (The Edge)

Berjaya Land: Back in the black after three straight years of losses. Berjaya Land (BLand) returned to the black with a net profit of RM148.8m for the year ended June 30, 2023 (FY2023) on the back of higher revenue, after three consecutive years of losses. The group had reported net losses of RM242.9 million for FY2022, RM247.6m for FY2021 and RM36.8m for FY2020. In FY2019, BLand recorded a net profit of RM154.1m. (The Edge)

Uchi Technologies: 2Q net profit dip 13% on absence of asset disposal gain. Uchi Technologies Bhd’s net profit dipped 13.7% to RM28.37m in the second quarter ended June 30, 2023 (2QFY2023), from RM32.89m a year ago, due to the absence of asset disposal gain recognised a year earlier. Quarterly revenue grew 1.2% to RM57.81m from RM57.13m recorded a year ago. The group registered a 7% growth in 2Q operating profit of RM35.6m mainly due to the strength of the US dollar against the ringgit, despite revenue in US dollar for the quarter decreasing by 3% to USD12.9m as a consequence of lower sales of the group's products and services. (The Edge)

PetGas: 2Q earnings lifted by stronger revenue, higher product prices. Petronas Gas Bhd's (PetGas) net profit jumped 22% to RM485.4m for the second quarter ended June 30, 2023 (2QFY2023) from RM396.5m posted in the same period a year ago, lifted by higher gross profit coupled with higher share of profit from joint venture companies. The stronger profit was also attributed to higher interest income from fund investments and lower exposure from foreign exchange movement following early settlement of USD lease liabilities for floating storage units at LNG regasification terminal in Sungai Udang, Melaka. (The Edge)

Market Update

The FBM KLCI might open higher today as US Treasury yields and the dollar rose after Federal Reserve chair Jay Powell said the central bank would consider another interest rate rise, and that it intends to hold policy at a restrictive level to temper inflation. Wall Street’s benchmark S&P 500 finished a choppy session 0.7% higher, and advanced 0.8% for the week. The tech-focused Nasdaq Composite climbed 0.9%, and rose 2.3% over the week. The gains across five sessions ended a three-week losing streak for both indices. The dollar, which tends to rise when investors anticipate higher rates, gained 0.2% against a basket of currencies after Powell’s remarks to close at its highest level since May 31. In Europe, the region-wide Stoxx Europe 600 index, which had earlier advanced as strong commodity prices lifted energy and utility stocks, ended the day fractionally lower.

Back home, Bursa Malaysia ended the week lower, in tandem with most regional markets, ahead of a speech from US Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium later on Friday. At the closing bell, the FBM KLCI had shaved 0.26 of a point to 1,444.41, from 1,444.67 at Thursday's close. In the region, Hong Kong’s Hang Seng index fell 1.4 %, while China’s CSI 300 lost 0.4% and Japan’s Topix shed 0.9%.

Source: PublicInvest Research - 28 Aug 2023