Economy

Global: GDP set for 3.1% pace in next decade, down from 3.5%. Over the next 10 years, the world economy is expected to see average annual growth of around 3.1%, below the 3.5% pace of the five years leading up to the pandemic. Beneath that headline figure, the situation in major economies will keep shifting. Already facing a drag from aging populations, advanced economies are on a slowing path. Their growth is expected to average 1.4% in the next decade, falling to 1.1% at the end of the horizon. China should continue to outperform, but debt, demographics and diminished room for catch-up will put growth on a lower trajectory. Other major emerging markets are expected to pick up pace, particularly India. (Bloomberg)

US: Homebuilder confidence unexpectedly deteriorates amid high mortgage rates . Homebuilder confidence in the US has unexpectedly deteriorated in the month of Sept, according to a report released by the National Association of Home Builders. The report said the NAHB/Wells Fargo Housing Market Index slumped to 45 in Sept after tumbling to 50 in Aug. Economists had expected the index to come in unchanged. The housing market index dropped below the key breakeven measure of 50 for the first time in five months, as persistently high mortgage rates above 7% continue to erode builder confidence. (RTT)

US: Striking unions impacting the economy at a level not seen in decades . The auto workers’ strike is the latest in a series of labor-management conflicts that economists say could start having significant growth impacts if they persist. So far, the United Auto Workers stoppage has impacted just a small portion of the workforce with limited implications for the broader economy. But it is part of a pattern in labor-management conflicts that has resulted in the most missed hours of work in some 23 years, according to Labor Department statistics. “The immediate impact of the auto workers strike will be limited, but that will change if the strike broadens and is prolonged,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said. (CNBC)

UK: Final rate hike on cards . The Bank of England is all set to end its tightening cycle with a final rate hike this week as any further increase will push the UK economy into a deep recession. The record high wage growth as well as persistently high inflation strengthened the call for additional policy tightening. However, the past rate hikes have started to damp the economic activity. Recent economic indicators suggest that the economy has entered a mild recession. (RTT)

China: Chinese state firms' help to troubled shadow bank does little to address investor concerns . The involvement of two Chinese state-owned financial firms in Zhongrong International Trust Co's operations and management may diffuse risk at the troubled shadow bank but does little to ease concerns about missed payments, had sizable real estate exposure, missed payments on dozens of analysts and investors said. The shadow bank, which traditionally so-called trust products since late July, roiling markets and raising fears that China's financial system may be at risk from the property sector crisis. (Reuters)

China: Copper industry is struggling when it should be booming. Copper demand in the world’s biggest user of the metal is slowing down at a time of the year when it usually picks up. The copper market, traditionally a bellwether of economic health, is finding some support from the energy transition and Beijing’s efforts to revitalize growth. But buyers lack conviction and the view from the factory floor remains cautious as margins are suppressed and profits wither. (Bloomberg)

Thailand: To tighten tax rules on overseas income to aid economy . Thailand will tighten loopholes in its tax rules on overseas income, as the new government seeks to lower income inequality as well as raise revenue to pay for measures to stimulate the Southeast Asian economy. The finance ministry last week issued the stricter rule on overseas income Prime Minister Srettha Thavisin told a business forum on Monday. The new rule, which will take effect Jan. 1, 2024, will enable authorities to tax foreign income of individuals if they have been a resident of Thailand for at least 180 days in the particular assessment year, according to the Thai Revenue Department’s announcement. (Bloomberg)

Markets

Dayang Enterprise (Outperform, TP:RM1.85): Bags contract extension from PTTEP. Dayang Enterprise Holdings has secured a contract extension from PTTEP Sarawak Oil Limited and PTTEP Sabah Oil Limited (PTTEP). Dayang wholly-owned subsidiary Dayang Enterprise SB (DESB) secured the contract extension for for the provision of pan malaysia maintenance, construction and modification (PM-MCM). The value of the contract is based on work orders issued by PTTEP throughout the contract duration. (StarBiz)

Comment: The contract extension is broadly expected. Including this, seven out of ten contracts have been extended for the period until 31st Dec 2024. We make no changes on the numbers as we already counted this into our replenishment orderbook. Maintain our Outperform call with an unchanged target price of RM1.85.

MBSB: To dispose of non-financial units, non-performing conventional loans to SPV. Malaysia Building Society Bhd (MBSB) has proposed to undertake a members’ scheme of arrangement which entails the disposal of its non-financial subsidiaries and non-performing conventional loans. MBSB said five of its companies in the property development business will be transferred to a corporate share trustee, while disposal of the loans carrying a book value of RM279m shall be settled in cash and on a deferred basis. (The Edge)

ITMAX: Bags 15-year video surveillance job worth RM105m from MBJB. ITMAX System's (ITMAX) subsidiary has secured a contract entailing the provision of video surveillance services for the Johor Bahru City Council (MBJB) worth RM105.3m for a 15- year period. The contract will commence from Sept 2023 to Sept 2038. (The Edge)

Ewein: Buys 3.9ha land in Seberang Perai for RM39.8 m. Ewein is buying a 3.93-hectare vacant piece of freehold land in Seberang Perai Tengah, Penang for RM39.77m. The property developer is buying the land through its indirect wholly-owned subsidiary SkyDorm SB, which is principally involved in construction and letting of industrial properties. (The Edge)

Capital A: Airasia Digital rebrands to Move Digital. Capital A’s digital arm, airasia Digital SB, has changed its name to Move Digital SB as a strategic step to emphasise its commitment towards travel. Capital A CEO and Move executive chairman Tan Sri Tony Fernandes said the rebranding marks an exciting chapter in its next phase of growth through both its businesses, airasia Superapp and BigPay. (StarBiz)

Cape EMS: To acquire US-based iConn Inc for approximately RM76.6m. Cape EMS is acquiring 50,072 common stock in the US-based company iConn Inc, representing all the issued capital stock worth approximately RM76.6m. (StarBiz)

Sunview: Inks deal with UOB Malaysia for solar power services. Sunview has signed an agreement with UOB Malaysia to provide installation and management services of solar power systems for local businesses and consumers. (StarBiz)

Market Update

The FBM KLCI might open higher today after US stocks inched higher on Monday as investors weighed up the latest advance to multi-month highs for crude oil prices and looked ahead to a busy week of central bank meetings. The S&P 500 and tech-focused Nasdaq Composite each closed less than 0.1% higher in an otherwise choppy trading session after notching minor losses last week. Gains for energy stocks, as the price of crude rose, as well as a 1.7% advance for index heavyweight Apple helped offset declines from the S&P 500’s materials and consumer discretionary sectors. European markets posted declines, with the region-wide Stoxx Europe 600 ending the day 1.1% lower.

Back home, Bursa Malaysia closed marginally lower due to mild profit-taking following last Friday's rally. At the closing bell, the FTSE Bursa Malaysia KLCI fell 1.04 points to 1,457.99 from last Friday’s closing of 1,459.03. in the region, performance was mixed with the Hang Seng rose 0.75% while the Shanghai Composite lost 0.28%.

Source: PublicInvest Research - 19 Sept 2023