Economy

US: Fed leaves interest rates unchanged but forecasts higher rates for longer . In a widely anticipated move, the Federal Reserve announced that it has decided to leave interest rates unchanged. The Fed said it decided to maintain the target range for the federal funds rate at 5.25 to 5.50% after raising rates by 25bps in July. However, the central bank's latest projections suggest Fed officials expect one more rate hike this year, forecasting a median rate of 5.6% by the end of 2023. While the forecast for the end of the year was unchanged from June, the latest projections indicate officials expect rates to remain higher for longer than previously anticipated. The forecast for rates at the end of 2024 was raised to 5.1% from 4.6% in June, while the outlook for rates at the end of 2025 was increased to 3.9% from 3.4%. (RTT)

US: Home insurance ‘bubble’ closer to popping as climate risks mount . Home insurance costs that have soared in much of the US may get even higher. Tens of millions of properties around the country are insured at prices that haven’t caught up with the danger of hurricanes, wildfires and floods, according to a new report from the First Street Foundation, a nonprofit that works to define and communicate risks posed by climate change. First Street estimates that 39m US homes are insured at artificially suppressed prices compared with the risk they actually face. Of those, nearly 6.8m homes are covered by state-backed “insurer of last resort” policies. Until now, state regulations that cap increases in insurance premiums and subsidised insurer-of-last-resort programmes have hidden the magnitude of the problem, the report’s authors say. (Bloomberg)

EU: New car registrations rise sharply on robust demand for EVs . The European car market continued to grow sharply in Aug amid rising demand and market share for battery-powered electric vehicles, data released by the European Automobile Manufacturers' Association, or ACEA, showed. New car registrations advanced 21.0% on a yearly basis in Aug, following a 15.2% gain in July. Sales volume increased for the thirteenth straight month. The number of units sold totalled 787,625 in Aug versus 650,806 units in the corresponding month last year. Despite Aug typically being a slower month for car sales, double-digit gains indicate that the EU market is rebounding from last year's component shortages, the ACEA said. (RTT)

EU: Swiss expect economic growth 'significantly below average' in 2023 and 2024 . Switzerland's economy is expected to grow by 1.3% this year, the government said, significantly below the country's long-term average as industry struggles with weak demand abroad and a strong Swiss franc. The forecast was a slight upgrade from the previous expectation for growth at 1.1%, but still lower than Switzerland's long-term average growth rate of 1.7%. The State Secretariat for Economic Affairs (SECO) also cut its growth forecast for 2024 to 1.2% from the 1.5% expectation it gave in June. The tepid growth in one of Europe's more resilient economies is expected despite strong consumer demand at home and growth in the service sector. (Reuters)

UK: Inflation unexpectedly falls, raising questions about BOE rates plan . British annual consumer price inflation (CPI) unexpectedly fell to 6.7% in Aug, official data showed, raising questions about how much higher the BoE will take interest rates a day before its next policy announcement. Economists polled by Reuters had forecast CPI would rise to 7.0% from July's 6.8% due to a jump in fuel prices and an increase in a tax on alcoholic drinks. The surprise drop in the inflation rate pushed down sterling sharply against the USD and the euro as investors scaled back their bets on future interest rate increases by the BOE. The Office for National Statistics said the fall was driven by a drop in hotel prices and air fares, which are often volatile, and by food prices rising by less than at the same time last year. (Reuters)

China: PBOC says policy room is ample as analysts bet on rate cuts. China’s central bank said it has sufficient policy space to support the economy’s recovery, adding to expectations there could be more easing to come — including interest rate cuts — after this month’s pause. The PBOC has “ample policy room” to react to challenges, Zou Lan, the head of the monetary policy department at the PBOC, told reporters at a briefing in Beijing. The central bank will step up counter-cyclical adjustment, he said, reiterating the PBOC’s previous policy stance. The comments came shortly after Chinese banks left their benchmark loan rates unchanged, in line with the PBOC’s pause last week. Economists expect policymakers to add more stimulus, though, since the economy’s recovery remains fragile despite showing some early signs of stabilising. (Bloomberg)

Singapore: Beats Hong Kong to become ‘world’s freest economy’ for first time . Hong Kong’s half-century reign as the world’s freest economy has ended, according to the most recent rankings compiled by a Canadian think tank that cited eroding judicial independence as one factor. The Asian financial hub fell to second place in the Economic Freedom of the World Index for the first time since it began in 1970. The Fraser Institute report released is based on data from 2021, and the organisation said the city’s ranking is expected to fall even further in the following years. (Bloomberg)

Taiwan: Export orders tumble 15.7%, more than forecast . Taiwan's export orders continued to decline sharply for the thirteenth consecutive month in Aug, and at a faster-than-expected pace, according to data released by the Ministry of Economic Affairs. Export orders registered a double-digit annual fall of 15.67% in Aug, which was worse than the 12.04% decrease in July. The expected drop was 10.5%. Orders for mineral products fell the most, by 29.4%, followed by transport equipment with a 25.0% slump. Similarly, foreign orders for chemicals were down, notably by 17.5%. (RTT)

Markets

Capital A: ADE partners with Sivilai Asia for Cambodia MRO venture. Capital A’s wholly owned subsidiary, Asia Digital Engineering SB (ADE) has entered into a shareholders agreement (SHA) with Sivilai Asia Co Ltd to establish a maintenance repair and overhaul (MRO) business in Cambodia. Capital A said under the SHA, ADE will subscribe to 60% of the issued and paid-up capital of a Cambodian JV company incorporated under the name ADE (Cambodia) Co Ltd (ADE Cambodia). Sivilai Asia will invest the remaining 40%. (StarBiz)

Opcom: Expands into satellite networking. Opcom Holdings wholly-owned subsidiary Opcom VC SB is expanding into the satellite communications space by acquiring 70m shares, representing 18.03% equity interest, in Binasat Communications (Binacom) for RM39.2m or 56 sen per share. (The Edge)

Meta Bright: In 25-year solar photovoltaic agreement. Meta Bright Group was granted the exclusive rights to develop solar photovoltaic (PV) systems for GE Mining SB, which will establish a 25-year recurring income stream for the former. Under the collaboration, Meta Bright’s wholly-owned unit, FBO Land (Setapak) SB, will construct and operate a solar plant with rated capacity of 2,152.80 kWp in Jerantut, Pahang. (StarBiz)

Central Global: Files lawsuit over outstanding payments from Penang apartment construction job. Central Global’s (CGB) wholly-owned unit Proventus Bina SB has commenced a legal suit against Tang Kae Shih for outstanding payments related to a residential apartment contract in Penang worth RM42.24m. (The Edge)

Ramssol: To subscribe for 10% stake in Elmu Education group. Ramssol Group is buying 10% stake in Elmu Education Group SB for RM1.5m cash, by subscribing for 16,000 new ordinary shares and 1.48m redeemable convertible preference shares (RCPS). Elmu is currently 70%-owned by AB Management & Consultancy Services SB and 30%-owned by Datin Noraini Aripin. (The Edge)

Harvest Miracle: To divest 40% stake in Viewnet Computer System to related party. Harvest Miracle Capital, formerly known as Vortex Consolidated, has proposed to dispose of a 40% stake in its wholly-owned subsidiary Viewnet Computer System SB (VCS) in a related party transaction. The group is selling the stake for RM14m to Basetex SB, whose sole director and shareholder Pang Kim Moon is also a director of VCS. (The Edge)

PTT Synergy: In logistics deal. PTT Synergy Group (PTTS) has inked a MOU with Rhong Khen International, to establish a system pallet business. PTTS noted the parties will develop, supply and maintain the pallets to support the ecosystem of automated warehousing and total intralogistics solutions. (StarBiz)

PJBumi: In Indonesian O&G venture. PJBumi’s wholly-owned subsidiary, PJBumi Heavy Engineering & Services SB (PJBumiHES) has entered into a joint management agreement with PT Indodrill Bumi Persada (IBP). The collaboration will enable PJBumiHES to leverage on the expertise of IBP as an integrated drilling services company that provides engineering services and solutions in the oil and gas sector within Indonesia as well as regionally. (StarBiz)

Market Update

The FBM KLCI might open lower today as the two-year US Treasury yield hit a 17-year high on Wednesday and stocks fell after the Federal Reserve left its benchmark policy rate unchanged but officials projected more monetary tightening in 2023. The policy-sensitive two-year yield rose 0.07 percentage points to almost 5.18% in late afternoon trading in New York — its highest level since July 2006 — having fluctuated in the hours after the Fed’s announcement and chair Jay Powell’s accompanying speech. In a choppy session for equity markets, Wall Street’s benchmark S&P 500 closed 0.9% lower and the tech-heavy Nasdaq Composite dropped 1.5%. Elsewhere in global equity markets, the region-wide Stoxx Europe 600 rose 0.9%. London’s FTSE 100 also rose 0.9% after UK inflation fell from 6.8% in July to 6.7% in August, surprising economists ahead of the Bank of England’s rate-setting announcement on Thursday.

Back home, Bursa Malaysia ended lower for the third day in a row on Wednesday amid a mainly negative regional performance. At the closing bell, the FBM KLCI fell 6.1 points to 1,451.56 from Tuesday’s close of 1,457.66. The regional stocks also declined, with China’s CSI 300 down 0.4%, Japan’s Topix falling 1% and Hong Kong’s Hang Seng index losing 0.6%.

Source: PublicInvest Research - 21 Sept 2023