Economy

US: Personal income increases 0.4% in Aug, in line with estimates. Personal income in the US increased in line with economist estimates in the month of Aug. The report said personal income climbed by 0.4% in Aug after rising by 0.2% in July. The advance matched economist estimates. Disposable personal income, or personal income less personal current taxes, rose by 0.2% in August after coming in unchanged in July. Personal spending also increased by 0.4% in Aug after jumping by an upwardly revised 0.9% in July. Economists had expected personal spending to rise by 0.4% compared to the 0.8% advance originally reported for the previous month. Real personal spending, which excludes price changes, inched up by 0.1% in Aug after climbing by 0.6% in July. The annual rate of consumer price growth accelerated to 3.5% in Aug rom 3.4% in July. (RTT)

EU: German unemployment rises less than forecast. German unemployment increased less than expected in Sep despite weak economic activity. The number of unemployed increased by only 10,000 in Sep after climbing 20,000 in Aug. Unemployment was expected to rise 15,000. At the same time, the jobless rate held steady at 5.7% in Sep and also matched economists' expectations. The onset of autumn recovery is comparatively small this year. Both unemployment and underemployment are falling, but less than usual in Sep. The labour market is still stable. Based on the labour force survey, the adjusted unemployment rate held steady at 3.0% in Aug. Unemployment increased by 4,000 or 0.3% MoM to 1.33m in Aug. (RTT)

EU: French inflation steady at 4.9%, producer prices fall. France's consumer price inflation held steady in Sep after rising in the previous month. Separate official report showed that producer prices increased for the first time in five months in Aug. The consumer price index climbed 4.9% YoY in Sep, the same rate of increase as in the previous month. Meanwhile, economists had forecast inflation to rise to 5.1%. The annual slowdown in the prices of food, services, and manufactured products should indeed be compensated by the acceleration in energy prices due to the rebound in those of petroleum products, the agency said. On a monthly basis, consumer prices dropped 0.5% in Sep, reversing a 1.0% rise in the previous month. EU harmonised inflation moderated slightly to 5.6% from 5.7% in the prior month. Monthly, the HICP dropped 0.6% versus a 1.1% gain. (RTT)

China: PMIs show policy driving an unbalanced recovery. China’s Sep official PMI survey contains a number of encouraging signs — signalling a pickup in the economy and emergence of new drivers of growth. The data also showed the rebound is highly unbalanced, with significant parts of the economy still in rough shape — a reminder that without more policy support, the recovery could stumble. Policy stimulus started get traction, with the manufacturing sector breaking a five-month contraction and the non-manufacturing expansion accelerating even with the boost from summer travel now gone. Consistent, rapid expansions in the media and communications and financial service sectors in recent months suggest that they are becoming key drivers of the recovery. On the downside, the PMI for small firms extended its streak in contraction to six months — highlighting the fragility of the economy. The Caixin manufacturing PMI’s surprise pullback in expansion also signalled parts of the economy remain fragile. (Bloomberg)

South Korea: Export decline eases further, adding to optimism. The slump in South Korean exports eased further in Sep in a positive sign for an economy that depends heavily on trade. Shipments adjusted for working-day differences decreased 2.1% from a year earlier, the customs office said Sunday. Headline exports fell 4.4% in Sep, compared with a 8.3% drop in the previous month. Economists had forecast a 9.3% decline. Overall imports fell 16.5%, resulting in a trade surplus of USD3.7bn. Korean exports began to sink late last year as semiconductor prices slid and demand from China weakened. Higher energy costs and interest rates have also weighed on the global demand that South Korea depends on to power its economy. Exports to US increased 9% in Sep, while those to China gained for a second month. South Korea is one of the world’s largest exporters, with its manufacturers embedded in a wide swath of global supply chains. Its exposure to global trade makes the nation a useful indicator for the health of the world economy. (Bloomberg)

Australia: Manufacturing PMI sinks to 48.7 in Sep. The manufacturing sector in Australia continued to contract in Sep, and at a faster rate with a manufacturing PMI score of 48.7. That's down from 49.6 in Aug, and it moves further beneath the boom-or-bust line of 50 that separates expansion from contraction. Incoming new orders within the manufacturing sector shrank for a tenth straight month in Sep, attributed to softer market conditions and high interest rates. Foreign demand likewise deteriorated as economic conditions in key export markets worsened. Consequently, production levels fell at an accelerated rate in September and for the tenth consecutive month. The decline was only mild, however. This was partly reflective of manufacturers working through their backlogs, clearing work-in-hand at a faster pace in the latest survey period. (RTT)

New Zealand: Building permits sink 6.7% in Aug. The total number of building permits issued in New Zealand was down a seasonally adjusted 6.7% on month in Aug coming in at 3,170. That followed the downwardly revised 5.4% drop in July (originally - 5.2%) and it included consents for 1,478 townhouses, 1,243 houses, 310 retirement village units and 139 apartments. In the year ended Aug 2023, the actual number of new dwellings consented was 42,110, down 17% from the year ended Aug 2022. The annual value of non-residential building work consented was USD9.9bn, up 8.3% from the year ended Aug 2022. (RTT)

Markets

Reservoir Link (Trading Buy, TP:RM0.40): Wins RM21m subcontract from Samaiden for Kedah LSS project. Reservoir Link Energy said its 51%-owned unit Founder Energy SB has received a letter of award (LOA) from Samaiden SB for a RM21m subcontract work of a 50MW large scale solar (LSS) project in Sungai Petani, Kedah. The scope of work comprises civil and structure, mechanical and electrical work within the site including supply of (solar) PV (photovoltaics) mounting structure, Reservoir Link said. The LOA was received by Founder Energy on 8 Sept 2023, and the work shall be completed over 10 months by 9 June 2024. (The Edge)

Comment: The contribution solely from this contract is insignificant towards the Group’s bottomline due to 49% minority interest of Founder Energy. Nevertheless, we believe more subcontract works will be secured from 800MW Corporate Green Power Purchase (CGPP) programmes. Maintain Trading Buy with TP RM0.40.

UEM Sunrise (Underperform, TP:RM0.42): Issues RM350m in Islamic medium-term notes. UEM Sunrise has issued Islamic medium-term notes (IMTNs) worth RM350m in nominal value. The property developer issued the new IMTNs in two tranches: a RM200m first tranche with a five-year tenure and a RM150m second tranche with a seven-year tenure. The first tranche will mature on 29 Sept 2028, while the second matures on 27 Sept 2030. UEM Sunrise said the proceeds from the new IMTNs will be used for the group’s Shariah-compliant general corporate purposes. (The Edge)

MMAG: Divests entire holdings of shares, warrants in CSH Alliance for RM37.36m. MMAG Holdings has ceased to be a major shareholder of CSH Alliance after divesting of its entire 16.61% stake in the CSH, together with 194.5m warrants, for RM37.36m, cash. Its original investment, made since May 2021, was RM36.5m. MMAG said it was selling 229.5m CSH Alliance shares for RM21.8m and 194.5m warrants B for RM15.56m. Prior to the disposals, MMAG was CSH’s largest shareholder, followed by ChipSeng Heng Holdings SB with a 12.17% stake. It now no longer holds any more shares or warrants in CSH Alliance, also a loss-making transports and logistics services provider. (The Edge)

Yinson: 2Q net profit climbs 61% to RM230m, declares two sen dividend. Yinson Holdings Bhd’s net profit for the second quarter ended 31 July 2023 (2QFY2024) climbed 60.84% higher to RM230m, from RM143m a year ago, on the back of higher profit from its operations. Quarterly revenue surged 92.16% to RM3.11bn from RM1.62bn, mainly due to higher contribution from the group’s engineering, procurement, construction, installation and commissioning (EPCIC) business activities. As a result, earnings per share rose to 6.70 sen from 4.10 sen. (The Edge)

Aurelius Tech: 2Q net profit jumps to RM11m on stronger US dollar, declares 2.3 sen dividend. Aurelius Technologie’s net profit in the second quarter ended 31 July 2023 (2QFY2023) jumped 49.16% higher to RM10.55m from RM7.07m in the previous year's corresponding quarter, despite a dip in revenue, thanks to the optimisation of operation efficiencies and the stronger US dollar. Quarterly revenue, however, dipped 2.6% to RM109.04m from RM111.95m, due to lower contribution from its communication and Internet of Things (IoT) products. (The Edge)

Market Update

US markets ended the month lower ahead of the September 30 deadline to avoid a government shutdown, which was incidentally averted when the Senate passed a continuing resolution with just hours to spare before the stroke of midnight. The Bill nevertheless only keeps the government running for 45 more days, giving more time to legislators to finalize funding proposals. On the day, the Dow Jones Industrial Average and S&P 500 slipped 0.5% and 0.3% respectively though the Nasdaq Composite inched 0.1% higher. European markets managed to close off September on a positive note, though also weaker for the month. Inflation data was the key highlight of the day, with Eurozone consumer prices falling to its lowest level since October 2021. Germany’s DAX led gainers on the continent with a 0.4% gain. France’s CAC 40 and UK’s FTSE 100 were 0.3% and 0.1% higher meanwhile. Asian markets were mixed last Friday, though expected to see some gains this week on account of China’s official factory activity data showing an expansion for the first time in six months. China’s purchasing managers’ index (PMI) reading climbed to 50.2 in September from 49.7, beating market expectations of 50.0. China’s markets are closed for the week-long Golden Week holiday however. South Korean and Hong Kong’s markets are also closed for holidays. The Hang Seng Index surged 2.5% higher last Friday however, as Japan’s Nikkei 225 slipped 0.1%. Closer to home, Singapore’s Straits Times Index rose 0.3% while the FBM KLCI succumbed to profit-taking and selling pressure to end 1.1% lower.

Source: PublicInvest Research - 2 Oct 2023