Economy

Eurozone: M3 money supply shrinks, bank lending growth weakens. Eurozone broad money supply posted its first decline in more than a decade, and bank lending grew at a slower pace in July as higher borrowing costs dampen the growth outlook. The monetary aggregate M3 dropped 0.4% from a year ago after rising 0.6% in June, the European Central Bank reported. This was the first fall since May 2010, when M3 was down 0.1%. M3 was forecast to remain flat. At the same time, the narrow measure M1 that comprises currency in circulation and overnight deposits plunged 9.2% in July, following June's 8.0% decline. Regarding the dynamics of credit, data showed that credit to euro area residents slid 0.1% and that to general government declined 2.9%. Within borrowing sectors, loans to households registered a slower growth of 1.3% after a 1.7% gain. The rate was forecast to ease to 1.4%. Likewise, growth in loans to companies slowed to 2.2% from 3.0%. Economists had forecast an annual growth of 2.5%. The ECB has raised its rates by a cumulative 375 basis points with hikes in every policy session of the current tightening cycle that began in July last year. (RTT)

UK: Labour faces backlash over pledge for no further tax rises. Britain’s opposition Labour party is facing a backlash from its left wing after ruling out wealth taxes and promising to cut business regulations as it looks to shore up its economic credentials ahead of a general election expected next year. In an interview over the weekend, Shadow Chancellor of the Exchequer Rachel Reeves said Labour would not propose any tax increases beyond those already committed because the burden is already high enough, as she sought to neutralize traditional Conservative party claims that Labour lacks economic discipline. It also marked a major shift by reversing leader Keir Starmer’s pledge from 2020 to increase the top rate of income tax. Reeves had also previously said that “people who get their income through wealth should have to pay more.” The focus on fiscal prudence, with Reeves insisting her rules are “non negotiable” and the party scaling back its green investment plans to demonstrate borrowing will remain under control, appears to be paying off. (Bloomberg)

UK: Food inflation cools to lowest level in almost a year. The slowest increase in grocery bills in almost a year drove down inflation in British shops in August, relieving some of the pressure on the Bank of England to keep raising interest rate hikes. The British Retail Consortium said that shop price inflation fell sharply again from 6.9% in August from 7.6% the month before. Food price led the decline, particularly for meat, potatoes and cooking oils. Prices are still rising much more rapidly than the BOE’s 2% target, but the slowdown in the pace of increase indicates hope that a sharp squeeze on households may pass soon. BRC’s measure of grocery prices climbed 11.5% in the 12 months to August, the lowest rate since September 2022 and down from 13.4% in July. The figures suggest that the marked cooling in food inflation in official data will continue after grocery bills surged at their fastest pace in more than four decades earlier this year. The Bank of England is considering how much further it needs to raise rates to contain inflation across the whole economy, which is still more than triple its target. (Bloomberg)

Japan: Jobless rate rises in slight negative signal for BOJ. Japan’s unemployment rate rose for the first time in four months in July, in a slightly negative signal for both the Bank of Japan and the government. The jobless rate increased to 2.7% from June. Economists had expected the reading to hold at 2.5%. The number of workers fell by 100,000 from the previous month, while those without jobs rose by 110,000. Separate data provided a slightly negative outlook for Japan’s labour market conditions, with the jobs offers-to-applicants ratio declining to 1.29 in July from 1.30. The data is a leading indicator of the labour market trend and implies that there were 129 jobs available for every 100 applicants. The service sector may have reduced job postings after securing sufficient labour to cope with stronger demand over the first summer holidays in years without Covid warnings. Tuesday’s data hints that the tightness in the Japanese labour market may be nearing its peak. (Bloomberg)

Japan: Leading index falls as estimated. Japan's leading index weakened as initially estimated at the end of the second quarter. The leading index, which measures future economic activity, dropped to 108.9 in June from a six-month high of 109.1 in May. That was in line with the flash data published on Aug 7. The coincident index that measures the current economic situation rose to a 10-month high of 115.1 in June from 114.3 in the previous month, as estimated. Data showed that the lagging index rose somewhat to 107.3 from 107.2 in the previous month. The reading was the strongest since Jan 2020. (RTT)

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%. 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%. General manufacturing output was down 8.5%. Output of biomedical manufacturing plunged 22.6% due to a sharp reduction in the production of pharmaceutical segment. (RTT)

Markets

Oppstar: Does not deal with US sanctioned entities: Oppstar emphasised that its recent JV with a Chinese national does not involve any party that have been sanctioned from accessing US technology. Earlier this month, Oppstar announced a JV — Shanghai Longhuixin Integrated Circuit Group Co Ltd — with Chinese national Chen Junhua, with Chen holding a 50% stake in the entity while Oppstar holds a 45% stake. Private equity firm Shenzhen City Yixin Investment (Limited Partnership) holds a 5% stake. Chen is the controlling shareholder of Oppstar’s major customer Xiamen KirinCore IOT Technology Ltd. (The Edge)

Destini: Mohd Zahir quits as MD after holding post for less than six months. Destini has announced the resignation of its managing director, Datuk Mohd Zahir Zahur Hussain, effective Monday. The company said Mohd Zahir, 48, is vacating the position “to pursue personal interest and other commitment”. Mohd Zahir was appointed to Destini’s board as an independent and non executive director in October 2020. He was redesignated as the managing director on March 1 this year. In a separate filing, Destini announced the appointment of Datuk Kabol Surat and Ismail Mustaffa as the group’s new executive directors. (The Edge)

Ecobuilt: To jointly undertake RM148m police office building project in KL. Ecobuilt Holdings Bhd is partnering TJ Civil & Structural Contractor (TJCS) to jointly build a 24-storey police office building in Kuala Lumpur for a contract sum of RM148.04m. Ecobuilt said it is forming a joint venture company with TJCS for the project, for which TJCS has been appointed as the main contractor by PNB Merdeka Ventures SB. Ecobuilt said its wholly owned Eko Bina SB, who will be forming the JV, shall be paid 49% of the monies that TJCS receives to undertake the construction work of the project from PNB Merdeka Ventures. (The Edge)

DNeX: Profit for April-June dives as tech biz falls into the red. Dagang Nexchange (DNeX) reported a 70.4% drop in its net profit to RM47.51m for the April-June 2023 period, from RM160.59m in the corresponding three months in the previous year, as its tech business fell into a loss amid lower wafer shipments. The tech business reported a loss before tax of RM25.72 million, as opposed to a profit before tax (PBT) of RM85.66m previously. (The Edge)

Hengyuan Refining: Posts fourth straight quarterly loss, says global oil market to remain volatile. Hengyuan Refining Co Bhd posted a net loss of RM95.51m for its second quarter ended June 30, 2023 (2QFY2023), marking the group's fourth straight loss making quarter, as revenue fell on lower sales volume and prices, with a steep drop in the crack prices of its main products. With the latest quarterly loss of RM95.51m, it recorded a loss per share of 31.84 sen, as opposed to an earnings per share of 222.49 sen in 2QFY2022, when the group made a net profit of RM667.49m. (The Edge)

Skyworld: Plans new Klang Valley projects worth over RM1bn. Skyworld Development plans to launch new projects in Klang Valley with a total estimated gross development value exceeding RM1bn. Despite challenges and uncertainties in both local and global economic outlook, the property developer said it is cautiously optimistic that the financial and operation performances of the group remain satisfactory in its current financial year. For its first quarter ended June 30, 2023, Skyworld reported a net profit of RM42m on revenue of RM210.82m and basic earnings per share of 7.32sen. (StarBiz)

Market Update

The FBM KLCI might open higher today as US and European stocks followed Asian markets higher on Monday, as traders assessed stimulus measures from Beijing and looked ahead to US inflation and jobs data. Wall Street’s S&P 500 closed 0.6% higher, while the technology-heavy Nasdaq Composite gauge added 0.8%. In Europe, the regional Stoxx 600 gauge closed 0.9% higher, following two successive days of losses. Tech stocks led the gains, with the Stoxx 600 Technology index rising 1.7%. Markets in the UK were closed for a public holiday. European luxury goods stocks, which are closely linked to China’s consumer spending expectations, also advanced, with heavyweights Hermès and LVMH gaining 1.8% and 1.7%, respectively.

Back home, Bursa Malaysia’s key index ended slightly lower while the broader market was firmer on Monday on lack of buying interest as investors shifted their focus on small- and mid-cap stocks, said a trader. At the closing bell, the FBM KLCI eased 0.35 of a point to 1,444.06. China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks closed 1.2% higher, having climbed as much as 5.5% earlier in the session. Hong Kong’s Hang Seng index finished 1% higher. Elsewhere in Asian markets, Japan’s Topix index rose 1.5% and Australia’s S&P/ASX 200 gained 0.6%.

Source: PublicInvest Research - 29 Aug 2023