Economy

Global: Economy poised to slow as higher rates bite, OECD says . The world economy is set for a slowdown as interest-rate increases weigh on activity. Growth will ease to 2.7% in 2024 after an already “sub-par” expansion of 3% this year, according to the latest OECD forecasts. With the exception of 2020, when Covid struck, that would mark the weakest annual expansion since the global financial crisis. Moreover, the Paris-based the organisation warned that risks to its prediction are tilted to the downside as past rate hikes could yet have a stronger impact than expected and inflation may prove persistent, requiring further monetary tightening. “After a stronger-than-expected start to 2023, helped by lower energy prices and the reopening of China, global growth is expected to moderate,” the OECD said. (Bloomberg)

US: Housing starts lowest since 2020 while permits rise . New US home construction dropped in Aug to the lowest level since June 2020, highlighting the toll of declining housing affordability. Residential starts decreased 11.3% last month to a 1.28m annualised rate, according to government data released. The drop was largely driven by a sharp decline in multifamily construction. Applications to build, a proxy for future construction, picked up to 1.54m. That’s the most in nearly a year. Permits to build one-family homes accelerated to the fastest pace since May 2022, indicating optimism about future demand. (Bloomberg)

EU: Eurozone inflation actually eased last month, revised data show. Euro-area inflation slowed last month after all, according to revised data that will support ECB officials saying no more interest rate hikes are needed. Consumer prices increased 5.2% in Aug, down from an initial reading of 5.3%, which had matched July’s number. Core inflation, which excludes volatile elements like food and energy and is a key gauge for policymakers, was confirmed at 5.3%. The ECB raised borrowing costs for a 10th consecutive time last week, pushing the deposit rate to a record 4% in what investors reckon was the final step in this tightening cycle. (Bloomberg)

China: Chinese yuan's depreciation pressure against dollar is temporary — state media. The depreciation pressure on the CNY against the USD is temporary, state media said, noting that its value against major trading partner currencies is stable. The remarks made by the official Economic Daily follow several other similar comments by authorities in recent months, both through state media and at press conferences, and come a time the yuan has been facing persistent weakness against the US currency. It is down more than 5% on the greenback year-to-date and is the one of the worst performing Asian currencies in 2023. (Reuters)

Japan: Industry minister predicts eventual end to ultra-easy policy . The Bank of Japan's ultra-loose monetary policy, which was aimed at "buying time" to push through structural reforms, will eventually end as inflation accelerates, Japanese industry minister Yasutoshi Nishimura said. "The BOJ is sustaining monetary easing since various events (affecting the economy) occurred such as the Covid-19 pandemic and Russia's invasion of Ukraine," Nishimura told a regular post-cabinet news conference. "But inflation is now accelerating. Given what's happening across the globe, the BOJ's policy aimed at buying time will eventually end and normalise," he said. (Reuters)

Australia: RBA policymakers discussed lifting rate in Sept, minutes show . Policymakers of the Reserve Bank of Australia discussed raising the interest rate by a further quarter point at the Sept meeting, the minutes of the meeting showed. At the final policy-setting meeting of Philip Lowe as governor, board members considered both lifting the rate by 25 bps and holding the cash rate target at 4.1%. The case to raise the interest rate was based on the assumption that inflation will remain above the target for a prolonged period and the risk that this period might be extended. Consumption could be weaker than expected and the downside risks to the Chinese economy had increased, they noted. (RTT)

Hong Kong: Jobless rate remains stable at 2.8%. Hong Kong's unemployment rate stayed stable in the June-Aug period, labour force statistics from the Census and Statistics Department showed. The seasonally adjusted unemployment rate came in at 2.8% in the June-Aug period, the same as in the May-July period, which was the lowest rate in four years. (RTT)

Markets

VSI (Outperform, TP: RM1.02): Acquires 11% stake in HTPW for RM2.6m. V.S. Industry (VSI) has entered into a Share Sale Agreement (SSA) with Tan Eng Kwee and Yeo Teck Hoe to acquire 2,200,000 ordinary shares in HT Press Work SB (HTPW) representing 11% equity interest, for a total consideration of RM2.6m. (Business Today)

Comment: This synergistic acquisition will see HTPW becoming a subsidiary with a 51% stake owned and the possibility of VSI consolidating an additional RM11m in net profit., though we keep our estimates unchanged at this juncture. Part of the deal will see RM6m advanced by shareholders to HTPW for working capital purposes. Our Outperform call and RM1.02 TP are unchanged.

I-Bhd (Neutral, TP: RM0.26): Announces partnership with Wyndham Hotels & Resorts. I-Bhd has announced a partnership with Wyndham Hotels & Resorts to manage a 50-storey property known as Wyndham Suites KLCC in Kuala Lumpur city centre. The existing property is a luxury condominium with a GDV of RM820m. (The Edge)

Comment: We view this development positively as it will help to generate income from a valuable asset (8KiaPeng) once slated for sale, but which had been hampered by the recent pandemic. The Group appears to be making more notable headway in sweating its investment properties. We maintain our Neutral call at this juncture, pending further clarity on its earnings consistency.

Epicon: Gets RM34.5m apartment job. Epicon has secured a letter of award worth RM34.5m from Wonson Construction SB for the completion of structural works on an apartment block in Pantai Dalam, Kuala Lumpur. The contract will entail the supply of labour, materials, plants, machinery, equipment and tools for the expeditious and proper completion of the works. (StarBiz)

Bursa: Inks MOU with Thai, Indonesian bourses to set up Asean ESG ecosystem. Bursa Malaysia signed a MOU with the Indonesia Stock Exchange (IDX) and the Stock Exchange of Thailand (SET) to collectively explore establishing an inter regional environmental, social, and governance (ESG)-linked ecosystem to drive business value creation while fostering sustainable development across Asean. (The Edge)

YTL REIT: Proposes rental revisions, refurbishment of AC Hotel chain. YTL Hospitality REIT (YTL REIT) has entered into three supplemental lease agreements for rental revisions and proposed refurbishment of its three hotels (AC Hotels) in Kuala Lumpur, Penang and Kuantan. (The Edge)

MyEG: Says still finalising terms of immigration services concession with Putrajaya. MyEG Services said it is still finalising terms of an immigration-related services concession with Putrajaya, as it confirmed it had stopped accepting applications from customers on its portal. (The Edge)

Cypark: Sees emergence of new substantial shareholder. Cypark Resources has reported the emergence of a new substantial shareholder, Chung Dao, with a 5.5% stake or 42.97m shares after acquiring 40m shares on Sept 14. (The Edge)

Market Update

The FBM KLCI might open lower today after US yields hit a 16- year high ahead of the conclusion of the Federal Reserve’s policy meeting on Wednesday, at which the central bank is expected to hold rates steady, but may indicate its willingness to keep monetary policy tighter for longer. The benchmark 10-year Treasury yield reached a session high of 4.371%, its highest level since early November 2007. Elsewhere, Wall Street’s S&P 500 closed 0.2% lower, with energy and industrials ranking as the benchmark’s worst-performing sectors. The tech-heavy Nasdaq Composite also fell 0.2 %. In Europe, the region-wide Stoxx Europe 600 index closed less than 0.1% lower, with positive moves for real estate, financials and energy stocks cancelled out by declines for healthcare groups and industrials. London’s FTSE 100 rose 0.1%, as did France’s CAC 40.

Back home, Bursa Malaysia’s key index ended slightly lower after a bumpy trading session while the broader market was firmer on lack of buying interest as investors focused on small- and mid-cap stocks. At the closing bell, the FBM KLCI fell 0.33 of a point to 1,457.66 from Monday’s close of 1,457.99. China’s benchmark CSI 300 index fell 0.2 %, while Japan’s Topix was up 0.1 % as markets reopened after a holiday.

Source: PublicInvest Research - 20 Sept 2023