Economy

US: Consumer confidence dives to four-month low. US consumer confidence dropped to a four-month low in Sep, weighed down by persistent worries about higher prices and rising fears of a recession, though households remained generally upbeat about the labor market. The second straight monthly decline in confidence reported by the Conference Board on Tuesday also reflected higher interest rates and concerns about the political environment. The Conference Board said its consumer confidence index dropped to 103.0 this month, the lowest reading since May, from an upwardly revised 108.7 in Aug. Economists polled by Reuters had forecast the index easing to 105.5 from the previously reported 106.1. Consumers' perceptions of the likelihood of a recession over the next year ticked back up. (Reuters)

US: Annual home price growth accelerates in July. US annual home price growth accelerated for a second straight month in July, signaling that softening prices in the market may be bottoming out, according to a report released on Tuesday. Home purchase prices increased 4.6% on a YoY basis in July, up from a revised 3.2% increase in the prior month. June marked the first acceleration in annual price growth since Feb 2022, the Federal Housing Finance Agency (FHFA) said. The report also showed prices rose moderately on a month-over-month basis, in line with the trend over the past quarter. Prices were up 0.8% in July, compared with a revised 0.4% MoM increase in June. The weekly average rate on a fixed 30-year mortgage has remained above 7% since Aug, marking the highest rates since 2002. (Reuters)

EU: Borrowing pressures to push European default rates to 3.75%-5.5%. Higher interest rates and a near stalling of Europe's economy will put pressure on the credit ratings of the region's companies, property firms and banks and drive up default rates, S&P Global said on Tuesday. "The trend in credit quality is turning negative for corporates, especially for speculative-grade issuers, as financing conditions tighten," the rating firm said in a new report. "Real estate remains one of the most exposed sectors. For European banks, while asset quality deterioration will emerge, credit losses are expected to only normalize," the report added. S&P said it expected the ratio of "speculative-grade" or junk-rated firms to gradually increase to 3.75% by June 2024 from 3.4% in Aug. It could be as high as 5.5% if the region suffers a painful recession. The rapid rise in global interest rates over the last 18 months means companies and households are now having to refinance at much higher costs than they have been used to over the last decade. (Reuters)

EU: Italy to raise 2024 deficit goal to 4.1%-4.3% of GDP. Italy's government plans to raise its 2024 budget deficit target to between 4.1% and 4.3% of GDP, up from the 3.7% goal set in April, sources familiar with the matter told Reuters on Monday. The fiscal gap next year is, however, seen below 4% of GDP under current trends. That allows leeway worth several billion euros which will help Prime Minister Giorgia Meloni to fund measures in the upcoming 2024 budget. Among her top priorities, Meloni intends to earmark more than EUR9bn (USD9.5bn) to extend to 2024 the tax cuts that have helped middle and low-income workers cope with high consumer prices this year. Italy is also preparing to raise this year's budget deficit above the current target of 4.5% of GDP due to the growing impact of costly fiscal incentives for home improvements. Separate sources last week said the updated 2023 goal would be in the region of 5.5% as a proportion of GDP. For 2024, the upcoming budget has been made challenging by a slew of weak data that cast a shadow over Italy's near-term growth prospects, hurting tax revenues. (Reuters)

Japan: Warns markets as yen nears intervention danger zone. Japan's finance minister said on Tuesday that authorities won't rule out any options in dealing with excessive currency volatility, underlining a warning that has kept traders on alert for intervention to prop up the weak yen. Pressured by Japan's ultra-easy monetary policy, the currency has slipped in recent days towards 150 per dollar , a level seen by financial markets as a red line that would spur Japanese authorities to intervene, like they did last year. "Excessive volatility is undesirable," the minister, Shunichi Suzuki, told reporters. Later as the yen fell beyond 149 per dollar, its weakest since Oct 2022, he said "we are closely watching currency moves with a high sense of urgency." That verbal warning prompted a mini rally in the yen, highlighting how sensitive markets are to potential intervention. The minister signalled that Japan is trying to win the consent of its key Group of Seven (G7) allies to take action if needed. (Reuters)

South Korea: Consumer confidence weakens to 4-month low. South Korea's consumer sentiment weakened in September to the lowest level in four months, as households' current and future living conditions worsened, survey results from the Bank of Korea showed on Tuesday. The consumer confidence index fell to 99.7 in September from 103.1 in Aug. This was the lowest reading since May 2022, when it was 98.0. The consumer confidence survey was conducted between September 11 and 18, among 2,500 households. The sub-index for households' assessment of the prospective living standards dropped to 92 from 95, and the measure for the current living standards dropped to 89 from 91. Similarly, the index measuring consumers' prospective household income decreased to 99 to 100 in July. (RTT)

Thailand: Approves USD908m plan to suspend farmers' debts for 3 years. Thailand's cabinet has approved a plan to suspend debt repayments for millions of farmers for three years at a total cost of about THB 33bn (USD 908m) to the government, a deputy finance minister said on Tuesday. The suspension of both the principal and interest payments will begin on 1 Oct, Julapun Amornvivat told reporters, adding that farmers who have kept up with interest payments would also be allowed to borrow up to THB 100,000 from the state-owned Bank for Agriculture and Agricultural Cooperatives. The aim of the measure is to help ease the burdens of farmers so that they "come back strong", he said. About 2.7m farmers are eligible to join the programme. Thailand, the world's second largest rice exporter, has one of Asia's highest levels of household debt. In 2021, 66.7% of all agricultural households were in debt, largely from farming-related activities, according to government data. Many farming families are financially burdened after borrowing to fund their crops, with debt spanning generations. (Reuters)

Markets

TNB (Outperform, TP: RM11.50): Expects RM7bn recovery from ICPT . Tenaga Nasional Bhd (TNB) has estimated a recovery of about RM7bn from the imbalance cost-pass-through (ICPT) mechanism in the first half of financial year 2024 (1H24), based on the current fuel price trends. The utility giant said the forward looking perspective reflected TNB’s proactive stance in managing its financial outlook and controlling fuel-related expenditures. President and CEO Datuk Baharin Din said the development significantly enhances TNB’s working capital, boosting its cash flow and improving gearing levels in 2023. (StarBiz)

Ecoscience: Gets RM38m construction job. Ecoscience International has received a letter of award involving construction works worth RM38m from the Maitreya Moral Society Malaysia (PAMM). Ecoscience said the contract will involve the construction of a six-storey building with a two-storey basement, an electrical sub-station and others, at Kerling, Selangor. “The completion period of the project shall be a total of 36 months and the defects liability period shall be 24 months from the date of the Certificate of Practical Completion of the works,” said the company. (StarBiz)

Samaiden: Partners Meta Bright Group to expand clean energy business in Asia Pacific . Samaiden Group is partnering with hospitality group Meta Bright Group (MBGB) to pursue business opportunities and accelerate the growth of renewable energy solutions, particularly for the mining sector, within the Asia Pacific (APAC) region. The two companies have inked a partnership agreement for the collaboration that aims to establish a strategic relationship focused on mutual advancement in the clean energy sector. (The Edge)

TT Vision: Khazanah Nasional offloads another 1.92% stake for RM10.8m . Khazanah Nasional has continued offloading its stake in Penang-based automated test equipment (ATE) maker TT Vision Holdings, this time selling a 1.92% stake for RM10.8m. The sovereign wealth fund via Malaysian Technology Development Corp SB offloaded 6m shares or a 1.28% stake on Sept 22, and 3m shares or a 0.64% stake a day prior. A look at Bloomberg showed that both blocks of shares were sold at RM1.20 per share, totalling RM10.8m for all 9m shares. The disposals pared Khazanah Nasional’s stake in TT Vision to 16.94% or 79.3m shares. (The Edge)

Sedania: Major shareholder seeks to set aside RM14m order in Offspring equity dispute . Sedania Innovator’s major shareholder Sedania Corp SB (SCSB) has filed an application at the High Court here to set aside and stay (postpone) the court's order to compensate RM14.5m to two individuals claiming to own a 49% stake in Sedania’s consumer healthcare products business. Sedania said the application was filed by SCSB and Sedania’s consumer healthcare products business Offspring Inc SB, both of whom are defendants in the suit filed by Karine Low and Tan Kien Yeow. (The Edge)

Berjaya Corp: Disposes of 2.24% stake in BLand to rectify public shareholding spread . Berjaya Corp (BCorp) has disposed of a 2.24% stake in Berjaya Land (BLand), ahead of its end-Sept deadline to comply with a public shareholding spread requirement of 20%. BCorp disposed of 110m shares in BLand held under Juara Sejati SB via a direct business transaction on Sept 22. (The Edge)

Market Update

The FBM KLCI might open lower today after global equities sold off on Tuesday as investors braced for a prolonged period of high interest rates, while the dollar jumped to a 10-month high and Treasuries sold off. Wall Street’s benchmark S&P 500 closed 1.5% lower, while the tech-focused Nasdaq Composite dropped 1.6%, both hitting their lowest levels since early June. The latest decline for stocks comes as investors have raised their expectations that the Federal Reserve will keep interest rates higher for longer. European equities extended losses into the fourth straight trading session, with the region-wide Stoxx Europe 600 falling 0.6%, while Germany’s Dax declined 1% to close at its lowest level since March.

Back home, Bursa Malaysia ended marginally higher due to bargain-hunting activities following Monday’s sell-off. At the closing bell, the FBM KLCI was 2.1 points higher to 1,445.55 from Monday’s close of 1,443.45. The regional markets finished broadly lower today with shares in Hong Kong leading the region. The Hang Seng was down 1.48% while Japan's Nikkei 225 lost 1.11% and China's Shanghai Composite gave away 0.43%.

Source: PublicInvest Research - 27 Sept 2023