Economy

US: Construction spending climbs more than expected In July. Construction spending in the US increased more than expected in the month of July. Construction spending climbed 0.7% to an annual rate of USD1.973trn in July after rising by 0.6% to a revised rate of USD1.959trn in June. Economists had expected construction spending growth to match the 0.5% increase originally reported for the previous month. The bigger than expected increase came as spending on private construction jumped by 1.0% to an annual rate of USD1.549trn. Spending on residential construction surged by 1.4% to a rate of USD879.0bn, while spending on non residential construction rose by 0.5% to a rate of USD670.0bn. (RTT)

US: Manufacturing index indicates modestly slower contraction in Aug. Indicating a slower pace of contraction, the Institute for Supply Management released a report showing an uptick by its reading on US manufacturing activity in the month of Aug. Manufacturing PMI rose to 47.6 in Aug from 46.4 in July, although a reading below 50 still indicates a contraction. Economists had expected the index to inch up to 47.0. The modest increase by the headline index came as the production index climbed to 50.0 in Aug from 48.3 in July, indicating production was unchanged following two months of contraction. (RTT)

US: Job growth exceeds estimates in Aug but unemployment rate unexpectedly jumps. While the Labor Department released a closely watched report showing modestly stronger than expected job growth in the month of Aug, the report also showed an unexpected increase in the unemployment rate. Employment climbed by 187,000 jobs in Aug compared to economist estimates for the addition of 170,000 jobs. (RTT)

EU: Irish economy recovers less than estimated. Ireland's economy expanded less than initially estimated in the second quarter after contracting in the previous two quarters. GDP advanced a seasonally adjusted 0.5% sequentially in the June quarter, in contrast to a revised 2.6% fall in the March quarter. The economy contracted 0.9% in the final quarter of 2022. The overall expansion in the second quarter was mostly driven by 6.2% growth in multinational-dominated sectors, the agency said. (RTT)

EU: Austria Q2 GDP falls 0.7%, more than estimated. Austria's economy contracted more than initially estimated in the second quarter after recovering in the previous quarter. GDP decreased 0.7% sequentially in the second quarter, reversing a revised 0.4% rise in the second quarter. In the initial estimate, the rate of decline for the June quarter was 0.4%. On a yearly basis, GDP fell 1.1% in the June quarter, reversing a 1.9% rise in the March quarter. The latest rate of decline was revised from a 0.3% drop. (RTT)

UK: Manufacturing shrinks most since May 2020. The British manufacturing downturn deepened in Aug and was the steepest in more than three years as output and new orders fell at faster rates amid the weak market conditions both domestically and internationally. The Chartered Institute of Procurement & Supply Manufacturing PMI, dropped to a 39-month low of 43.0 in Aug from 45.3 in July. The flash estimate was 42.5. A PMI reading below 50 suggests contraction in the sector. (RTT)

China: Ramps up campaign to boost fragile economy, currency. China intensified efforts to stimulate the economy and support its currency, as investor concerns over the growth outlook persist. The central bank will trim the amount of foreign currency deposits banks are required to hold as reserves for the first time this year. The move came hours after authorities announced fresh stimulus for the beleaguered property sector and unveiled plans to expand tax breaks for child and parental care and education. (Bloomberg)

India: Manufacturing PMI hits 3-month high in Aug, but job growth slows. India’s manufacturing sector experienced its fastest growth in three months in Aug, propelled by robust increases in new orders and production. The Manufacturing PMI surged to 58.6 last month from July's 57.7, reaching its highest point since May. Notably, this expansion marked a 26-month stretch above the 50- mark, a demarcation indicating growth over contraction. (India Today)

Indonesia: Aug inflation rises modestly despite climbing rice prices. Indonesia's annual inflation inched up in Aug, remaining within the central bank's target range despite rice prices rising at the fastest pace in over a decade. The CPI rose 3.27% in Aug, below analysts' expectations of 3.33% in a Reuters poll, from 3.08% in July. That was within Bank Indonesia's 2023 inflation target range of 2% to 4%. The annual core inflation, which strips out government-controlled prices and volatile food prices, eased in Aug to 2.18% from 2.43% in the previous month. (Reuters)

Markets

MGB (Outperform, TP: RM1.15): Signs deal to improve ops at Jeddah IBS factory. MGB has inked a memorandum of collaboration (MOC) with Italy's Nordimpianti System S.R.L. and MCT Italy S.R.L. to improve efficiency of machinery and optimise operations of MGBI's factory that produces IBS precast concrete products in Jeddah, Kingdom of Saudi Arabia effective from Aug 30, 2023. (BTimes)

Comments: The MOC serves as an agreement for Nordimpianti and MCT Italy to supply MGBI for the purchase of parts and machineries required to modify the current IBS facility in Jeddah. Recall, from our report dated July 31 and Aug 1, MGBI would inject SAR10-20m (approx. RM12-24m) as working capital to operate the said facility. Hence, there will be no impact to MGB’s earnings in terms of the joint venture agreement for the supply and installation of precast concrete products with SANY Alameriah from the MOC.

Sunview: Plans private placement to fund EPCC projects. Sunview Group has planned a private placement to raise an estimated RM39.31m to fund its engineering, procurement, construction and commissioning (EPCC) projects. The placement entails the issuance of up to 46.8m new shares — representing 10% of Sunview’s issued shares — to independent investors at an issue price to be determined later. The assumed price of 84 sen represents a discount of 9.87% to the five-day VWAMP price of Sunview’s shares up to the latest practicable date of 93.20 sen. (The Edge)

Solarvest: To help set up hyperscale green data centre testbed, training programme in Sarawak. A hyperscale green data centre testbed and training programme is poised to be established in Sarawak, through collaboration involving clean energy solutions provider Solarvest Holdings, the Sarawak Foundation’s subsidiary Centre for Technology Excellence Sarawak (CENTEXS), Huawei Technologies (Malaysia) SB, and GreenBay CES SB. Solarvest inked a MOU with the three other companies in Beijing, China, towards fostering the hyperscale green data centre industry in the Borneo region. (The Edge)

Comintel: Bags RM161m construction job in KL. Comintel Corp has bagged a RM161.3m contract to undertake the construction of two building blocks for a data centre project in Bukit Jalil, Kuala Lumpur. Comintel said its wholly-owned subsidiary Binastra Builders SB accepted the letter of award from Exsim Jalil Link SB (EJL). The two blocks of building in Jalan Jalil Perkasa 1 comprise a seven-storey data centre and a five-storey data centre. The contract is expected to provide an additional income stream for the group over the next two financial years. (The Edge)

Sersol: Suspends CEO for insubordination. Sersol has suspended its CEO Datuk Justin Lim Hwa Tat, effective Aug 30, for insubordination. The functions of Justin Lim as CEO has been suspended for insubordination and failure to act as a responsible CEO, by not responding to any of the official requests made by the company's board since July 20. The company had asked Justin Lim to return to the office to report to the board. Pending his return, Justin Lim was also requested to provide a written response on the MACC inquiry about him and the work he has been doing as CEO while he is abroad. (BTimes)

Market Update

The FBM KLCI might open higher today after US stocks notched their biggest weekly gain since mid-June in a five-day period full of economic data that concluded with jobs data suggesting the economy could be on track for “soft landing” despite elevated interest rates. The S&P 500 gained 0.2% on Friday, to take its weekly advance to 2.5%. The technology-heavy Nasdaq Composite ended fractionally lower, and gained 3.2% across five sessions. The moves followed the release of the August non-farm payrolls report, which contained several data points shaping investors’ outlook on the domestic economy and interest rates, but suggested a potential “Goldilocks” scenario in which inflation comes under control without causing a recession. The US economy added 187,000 jobs last month, the Bureau of Labor Statistics reported on Friday. Elsewhere, Europe’s Stoxx 600 index was flat, while Germany’s Dax fell by 0.7%. The moves came a day after eurozone core inflation, which excludes volatile energy and food prices and is closely watched by the European Central Bank, fell to 5.3 % in August from 5.5 % in July. London’s FTSE 100 rose 0.3%, led by energy and basic material groups including BP, Shell and Glencore.

Back home, Bursa Malaysia ended higher on Friday in sync with regional bourses’ upbeat performance as market sentiment turned positive and fuelled investors' risk appetite. At the closing bell, the FBM KLCI rose 11.49 points to end at the intraday high of 1,463.43 from 1,451.94 at Wednesday's close. In the region, meanwhile, China’s CSI 300 gained 0.7% after an unexpected increase in Chinese manufacturing activity last month. In commodity markets, Brent crude, the international benchmark, settled 2 % higher at $88.55 a barrel after Russia signalled support for further supply cuts.

Source: PublicInvest Research - 4 Sept 2023