Economy

US: Factory orders show significant pullback in July. After reporting a sharp increase in new orders for US manufactured goods, showing a significant pullback in factory orders in the month of July. Factory orders tumbled by 2.1% in July after surging by 2.3% in June. Economists had expected factory orders to plunge by 2.6%. The sharp pullback in factory orders came as durable goods orders plummeted by 5.2% in July after soaring by 4.3% in June. Orders for transportation equipment led the way lower, diving by 14.3%. (RTT)

US: Mortgage rate tipping point roughly 5% is the magic number to move. After bottoming out below 3% in Jan 2021, the average rate for a 30-year, fixed-rate mortgage now sits above 7%, which is just too high for many homeowners to consider selling. At today’s rates, most homeowners would need to finance a new home at a higher rate than the rate they currently hold, adding hundreds of dollars a month to their mortgage payment. That has created an incentive to stay where they are. (CNBC)

EU: ECB survey shows 3-year inflation expectations rising. A survey by the ECB showed that consumer inflation expectations for the euro area for the next 12 months were unchanged, while those for the three years ahead edged up. The July median expectations for inflation over the next 12 months were steady at 3.4%. Expectations for inflation three years ahead edged up to 2.4% from 2.3% in June. (RTT)

UK: Services activity contracts for first time in 7 months. The UK services sector witnessed a downturn for the first time this year, mostly due to weaker business and consumer spending. The final services business activity index dropped to 49.5 in Aug from 51.5 in the previous month. The flash score was 48.7. Any score below 50 indicates contraction in the sector, while a reading above 50 suggests expansion in the sector. (RTT)

UK: Car registrations surge 24.3% in Aug. UK car sales continued to increase strongly in Aug, boosted by the highest monthly market share for electric vehicles, though regulatory concerns stand as a threat in the future. Car registrations grew by 24.4% YoY in Aug. Data showed that 85,657 new cars were registered in Aug, up from 68,458 units in the corresponding month last year. (RTT)

China: Slowdown means it may never overtake US economy. China is no longer set to eclipse the US as the world’s biggest economy soon, and it may never consistently pull ahead to claim the top spot as the nation’s confidence slump becomes more entrenched. The economists now see growth in China’s economy, the world’s second largest, slowing to 3.5% in 2030 and to near 1% by 2050. That’s lower than prior projections of 4.3% and 1.6%, respectively. (Bloomberg)

Australia: Central bank keeps rate unchanged. Australia's central bank left its benchmark interest rate unchanged for the third straight meeting. The policy board of the RBA, led by Governor Philip Lowe, decided to hold the cash rate target at 4.10%. The interest rate paid on Exchange Settlement balances was kept unchanged at 4.00%. The RBA has raised the key rate by 4ppts since May last year. The board observed that the higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so. (RTT)

India: Service sector growth remains strong on robust foreign demand. India's service sector activity logged a further sharp expansion in August amid a series-record increase in new export business. The PMI dropped to 60.1 in Aug from 62.3 in July. Nonetheless, a score above 50 indicates expansion in the sector. Further, the business activity index indicated one of the strongest increases in output seen since mid-2010, linked to positive consumer appetite, favorable market conditions, and successful events. (RTT)

Singapore: Retail sales growth improves slightly. Singapore's retail sales growth accelerated somewhat in July. Retail sales climbed 1.1% YoY in July, just above the 1.0% gain in June. Excluding motor vehicles, retail sales rose only 0.4% annually in July after a 2.3% increase in the preceding month. In July, most industries recorded annual increases. Sales of food and alcohol grew the most, by 21.0% YoY, mainly driven by higher demand for alcoholic products. (RTT)

Markets

Axis REIT (Neutral, TP: RM1.96): Sues ex-tenant to recover RM105m in outstanding rental payments. Axis REIT is suing a former tenant at Axis Steel Centre @ SiLC in Nusajaya, Johor to recover outstanding rental payments amounting to RM105.4m. The suit against Yongnam Engineering SB (YESB) was filed by its trustee, RHB Trustees, at the High Court in Johor Bahru. (The Edge)

Brahim: MAG mulls buyout of catering arm. Malaysia Aviation Group (MAG), the parent company of Malaysia Airlines Bhd (MAB), is considering taking full control of Brahim's Food Services SB (BFS). MAB currently holds a 30% stake in BFS, while Brahim's Holdings (BHB) controls the other 70%. The airline group is contemplating buying the 70% stake it doesn’t already own from BHB. This follows the discontinuation of its long-standing partnership on catering services previously provided by BFS on selected domestic and international routes within the MAB network on Aug 31. (The Edge)

SCIB: Contract for development of solid waste station in Johor terminated. Sarawak Consolidated Industries (SCIB) said a RM16.28m contract secured by the group two years ago for the development of a solid waste transfer station in Pontian, Johor has been terminated. SCIB and Satria Kasturi have mutually terminated the contract and agreed to release each other from all claims and obligations related to the contract, except for the claims for work done. (The Edge)

Hextar Industries: Buys office supplies firm. Hextar Industries (HIB), which plans to seek a transfer of its listing to the Main Market, is acquiring an office supplies firm for RM16.5m. The group has signed an agreement with the shareholders of Pacific Office (M) SB to acquire an 100% equity interest in the firm, with the deal expected to be completed in 4Q this year. (The Edge)

Theta Edge: Join hands with Nova MSC for prospective e government solution projects. Theta Edge and Nova MSC have partnered up to identify and procure future e-government solution projects in Malaysia. The pair inked a JV (60% Theta Edge and 40% by Nova MSC) to regulate the rights and relationship for a JVCo to jointly provide e-government solutions and other IT solutions, including system integration, outsourcing, consultancy, and infrastructure system services. (The Edge)

Maybulk: To offload vessel to Tokyo Century for RM140m. Malaysian Bulk Carriers (Maybulk) is to sell its Alam Kekal bulk carrier to Tokyo Century Corp, for JPY4.4bn (RM140.1m). Maybulk expects a pro-forma net gain of RM23.6m from the disposal — RM140.6m disposal consideration against the RM112.2m net book value and RM4.2m in disposal expenses. (The Edge)

Lagenda Properties: Buys 3 Damansara office tower from CLMT. CapitaLand M Trust (CLMT) will see the disposal of 3 Damansara Office Tower to Lagenda Properties for RM52m. The sale consideration is at a 4% premium to its valuation of RM50m at end-July. Net proceeds of RM50.5m from the sale will be used to repay borrowings, which will reduce CLMT’s gearing to 43.5%, from 44.1%. (The Edge)

Market Update

The FBM KLCI might open lower today after the dollar climbed to a six-month high on Tuesday, while government bonds came under pressure, as investors weighed the future path of monetary policy and corporate debt issuance compounded market moves. The dollar rose 0.6% against a basket of six peer currencies, touching its highest level since March. At the same time, the 10-year Treasury yield rose 0.1 percentage points to 4.27% while the policy-sensitive two-year yield gained 0.09 percentage points to 4.96%. In equity markets, Wall Street’s benchmark S&P 500 closed 0.4% lower while the tech-focused Nasdaq Composite lost 0.1%. The pan-European Stoxx Europe 600 closed 0.2% lower, marking its fifth successive day of declines, while France’s Cac 40 and Germany’s Dax both fell 0.3%.

Back home, Bursa Malaysia ended lower on Tuesday, driven by continuous selling in selected plantation and financial services counters, in tandem with the weaker performance on the regional markets. At the closing bell, the FBM KLCI declined 7.89 points to end at 1,454.83 from 1,462.72 at Monday’s close. In China, the benchmark CSI 300 dropped 0.7% and Hong Kong’s Hang Seng was down 2.1%, erasing most of the gains both indices made a day earlier after news of fresh government support for the property sector. Shares in China’s troubled developer Country Garden fell 1%, paring larger losses from earlier in the day, after the company narrowly avoided a default by making late payments on two dollar bonds within their grace periods.

Source: PublicInvest Research - 6 Sept 2023