Economy

US: Business activity nears stand-still in Sept. US business activity showed little change in Sept, with the vast services sector essentially idling at the slowest pace since Feb, and overall new order activity slipping to the lowest level this year. S&P Global said its flash US Composite PMI index, which tracks the manufacturing and service sectors, dipped to a reading of 50.1 in Sept from a final reading for Aug of 50.2. Sept's result was negligibly above the 50 level that separates expansion and contraction. The survey's composite new orders index slid to the lowest since Dec at 47.7 from 49.2 last month, marking the second straight month of declining new business. Input cost pressures ticked higher for a second month as well. The US economy so far this year has defied projections for sliding into a recession that most economists had expected would be triggered by the Federal Reserve's aggressive interest rate increases aimed at quelling inflation. (Reuters)

EU: Euro zone economy likely contracted this quarter. The euro zone economy is likely contract this quarter and won't return to growth anytime soon, a survey showed, as the dampening effect of central banks' long campaign of interest rates rises becomes clearer. HCOB's flash euro zone Composite PMI, compiled by S&P Global and seen as a good gauge of overall economic health, rose to 47.1 in September from Aug's 33-month low of 46.7. The reading was still below the 50 mark separating growth from contraction, however, and Hamburg Commercial Bank said the bloc's economy would contract 0.4% this quarter, far worse than the flatlining predicted in a recent Reuters poll. "The increase in the ECB key interest rate by 450 basis points in the meantime is slowing down the economy in all euro countries." Although two years of unprecedented global policy tightening may have reached a peak, major central banks have served notice they will keep interest rates as high as needed to defeat inflation. (Reuters)

EU: German housing prices show sharpest drop since 2000 YoY . German housing prices fell by the most since records began in the second quarter as high interest rates and rising materials costs took their toll on the property market in Europe's largest economy, government data showed on Sept 22. Residential property prices fell by 9.9% YoY, the steepest decline since the start of data collection in 2000, the federal statistics office said. Prices fell by 1.5% on the quarter, with steeper declines in larger cities than in more sparsely populated areas. In cities such as Berlin, Hamburg and Munich, apartment prices fell by 9.8% and single and two-family house prices dropped by 12.6% on the year. (Reuters)

UK: Recession risk deepens but consumers stay unfazed. Britain's economy displayed clear recession signals on Sept 22, a day after the BoE called a halt to its long run of interest rate increases that have turned the tide on inflation but at the expense of a hit to businesses. A business survey, which the BoE factored into its decision to keep rates on hold, showed companies endured a much tougher Sept than feared, marked by growing unemployment. The preliminary reading of the UK S&P Global PMI for the services sector sank to its lowest since the pandemic lockdown of Jan 2021 and below all forecasts in a Reuters poll of economists. A separate survey by the Confederation of British Industry (CBI) showed factory output fell and was expected to be stagnant in the remainder of 2023. Official data showed retail sales rose in Aug, partially recovering from a rain-induced plunge in July, and a measure of consumer confidence climbed to its highest since Jan 2022. (Reuters)

China: Central-bank adviser proposes structural reforms to revive economy. China has limited room for further monetary policy easing, and it should pursue structural reforms such as encouraging entrepreneurs rather than counting on macroeconomic policies to revive growth. Liu Shijin, a member of the PBOC monetary policy committee, told a financial forum in Shanghai that Beijing's room for monetary policy easing was limited by widening interest rate differentials with the US. Fiscally, Chinese governments at various levels are under stress, he told the annual Bund Summit conference. "If China continues to focus on macro policies in its efforts to stabilise growth, there would be more and more side effects," said Liu, vice president of the Development Research Center of the State Council. "More importantly, we will again miss the opportunity for structural reforms.(Reuters)

Japan: BOJ keeps ultra-loose policy, dovish guidance, yen skids. The BOJ maintained ultra-low interest rates on Friday and its pledge to keep supporting the economy until inflation sustainably hits its 2% target, suggesting it was in no rush to phase out its massive stimulus programme. The BOJ's decision contrasts with those of US and ECB, which in recent meetings have signalled their resolve to keep borrowing costs high to rein in inflation. Governor Kazuo Ueda said Japanese companies were hiking prices more than expected, preventing inflation from slowing, suggesting that conditions for dialing back monetary support were gradually falling into place. But he stressed the need to spend more time assessing data, particularly wages and service prices, before raising interest rates. "We have yet to foresee inflation stably and sustainably achieve our price target. (Reuters)

Japan: Aug inflation stays above BOJ target for 17th month. Japan's core inflation was steady in Aug and stayed above the central bank's 2% target for a 17th straight month, data showed on Sept 22, a sign of broadening price pressure that could heighten the case for an exit from ultra-easy monetary policy. The data comes hours before the BOJ concludes its two-day policy meeting that began on Sept 21. While the BOJ is widely expected to keep ultra-easy monetary settings unchanged, markets are focusing on any hints from Governor Kazuo Ueda on how soon it could phase out stimulus. The nationwide core CPI, which excludes volatile fresh food but includes fuel costs, increased 3.1% in Aug from a year earlier, government data showed, compared with a median market forecast for a 3.0% gain. It followed a 3.1% rise in July. (Reuters)

Markets

KLK (Neutral, TP: RM21.39): KLK-Boustead Plantation deal cut-off date postponed again to Oct 6 . The cut-off date for the proposed disposal of a 33% stake in Boustead Plantations (BPlant) by the Armed Forces Fund Board (LTAT) has been extended for the second time. KLK, which is acquiring the 33% stake from LTAT and Boustead Holdings, said the three parties have agreed for the cut-off date for the strategic collaboration agreement to be extended for another two weeks to Oct 6. (The Edge)

ITMAX: Secures second smart city contract in Johor worth RM111.2m . ITMAX System has secured a RM111.2m contract from Iskandar Puteri City Council to provide a closed circuit camera system with artificial intelligence features and smart traffic light system. Under the terms of the contract, the company is responsible for designing, installing, and maintaining a smart command centre, a closed circuit camera system with artificial intelligence features as well as a smart traffic light system within the city of Iskandar Puteri for a period of 15 years on a service subscription basis. (Bernama)

Symphony Life: Proposes 1-for-2 rights issue of warrants to repay bank borrowings . Symphony Life has proposed a renounceable rights issue of warrants for the basis of one warrant for every two existing shares, to raise up to RM35.8m. The actual amount depends on the final issue price of the warrants, but the company plans to utilise this for its bank borrowing repayments amounting to RM34.97m in a maximum scenario, according to its filing on Sept 22. Symphony Life has 716.01m issued shares excluding treasury shares, the filing said. (The Edge)

Chin Hin: Triggers MGO after raising stake in Ajiya . Chin Hin Group has proposed to acquire 2.11%, or 6.2 million shares in in Ajiya for RM9.51m cash or RM1.53 per share. Chin Hin said it entered into a conditional share sale agreements (SSAs) with How Lian Yeong and Ong Hang Ping respectively for the proposed acquisition. As at Sept 11, Chin Hin and its persons acting in concert (PACs), hold in aggregate 94.4m ordinary shares in Ajiya, representing 32.0% equity interest in Ajiya. Upon completion of the proposed acquisition, the aggregate shareholdings of Chin Hin and its PACs in Ajiya will increase to 34.1% from 32%. (StarBiz)

Compugates: Unit to seek leave to appeal court order requiring return of part of deposit to JV partner . Compugates Holdings said its 70%-owned unit, Compugates Development and Mining SB (CDMSB), will apply for leave to appeal against the Court of Appeal order requiring CDMSB to refund RM3m from the initial deposit paid by its JV partner for a proposed mixed development project. The JV partner, Main Uptown SB, had appealed to the Court of Appeal against the decision made earlier by High Court relating to the proposed project, and the Appeals Court had on Aug 28 allowed the appeal in part. (The Edge)

CTOS Digital: Units enter into RM4m worth of recurrent related party transactions . CTOS Digital’s wholly-owned subsidiaries, CTOS Data Systems SB, CTOS Basis SB and CTOS IDS SB, have entered into recurrent related party transactions (RRPTs) of a revenue or trading nature for an aggregated value of RM4.06m. CTOS Digital said the RRPTs were entered into with CIBI Holdings Pte Ltd, Credisense Ltd, Creador SB and CIBI Information Inc. (The Edge)

Market Update

The FBM KLCI might open flat today after US stocks endured a choppy session of trading, capping a week in which equities have been dragged down by the effects of rising oil prices and growing expectations that interest rates will stay higher for longer. Wall Street’s benchmark S&P 500 closed 0.2% lower on Friday, and shed 2.9% over the week. The tech-heavy Nasdaq Composite dropped 0.1% on Friday, taking its weekly loss to 3.6%. Both indices have fallen for three consecutive weeks. Stocks sold off on Wednesday and Thursday, and yields on Treasuries reached their highest levels since before the financial crisis, spurred by hawkish monetary policy guidance from the Federal Reserve, which signalled its intention to raise interest rates further this year, and limit cuts in 2024. Europe’s region-wide Stoxx Europe 600 fell 0.3%, ending the week 1.3% lower. The CAC 40 in Paris declined 0.4% on Friday and the Dax in Frankfurt gave up 0.1%.

Back home, Bursa Malaysia ended the week higher due to a positive regional performance, according to an analyst, breaking a four-day losing streak. At the closing bell, the FBM KLCI had risen 2.02 points to 1,450.23, from Thursday’s close at 1,448.21. Japan’s benchmark Topix index declined 0.3 %. Elsewhere in Asia, China’s CSI 300 advanced 1.8 % and Hong Kong’s Hang Seng gained 2.3%.

Source: PublicInvest Research - 25 Sept 2023