Economy

US: Construction spending increases in line with estimates in Aug. Construction spending in the US increased in line with economist estimates in the month of Aug. The construction spending climbed 0.5% to an annual rate of USD1.984trn in Aug after jumping by an upwardly revised 0.9% to a rate of USD1,847.3bn in July. Economists had expected construction spending to rise by 0.5% compared to the 0.7% increase originally reported for the previous month. The report said spending in private construction climbed by 0.6% to an annual rate of USD1.552trn in Aug. (RTT)

US: Manufacturing PMI climbs to ten-month high in Sep. There was a modest slowdown in the pace of contraction in US manufacturing activity in the month of Sep. The manufacturing PMI rose to 49.0 in Sep from 47.6 in Aug, although a reading below 50 still indicates a contraction. Economists had expected the index to inch up to 47.7. The US manufacturing sector continued its contraction trend but at a slower rate, recording its best performance since Nov 2022, when the PMI also registered 49%. (RTT)

EU: Eurozone manufacturing sector stuck in deep contraction. The euro area manufacturing activity remained in the deep contraction zone in Sep on account of considerable weakness in new orders and accelerated fall in jobs. Meanwhile, official data suggested that the unemployment rate dropped to record lows in Aug indicating the resilience of the labour market. The HCOB manufacturing PMI, fell to 43.4 in Sep from 43.5 in Aug. (RTT)

UK: Manufacturing downturn continues. The UK factory downturn continued in Sep on weak output, new orders and employment. The Chartered Institute of Procurement & Supply factory PMI posted 44.3 in Sep, up from a 39-month low of 43.0. The reading was above 44.2 estimated initially. Although the reading improved from Aug, this was among the weakest seen over the last 14 years. All five sub-indices of PMI signalled weakening of underlying sector performance. Companies reduced production in response to lower order intakes. (RTT)

UK: House prices continue to log sharp decline. UK house prices fell sharply again in Sep as stretched affordability damps housing market activity. The Nationwide house price index posted an annual decline of 5.3%, the same pace of decrease as seen in Aug. The decrease was the biggest since July 2009. Nonetheless, prices were forecast to fall more markedly by 5.7%. House prices remained flat on the month in Sep following the previous month's 0.8% decrease. The nil growth was in contrast to the expected fall of 0.4%. (RTT)

Japan: Manufacturing sector continues to contract. The manufacturing sector in Japan continued to contract in Sep, and at a faster rate with a manufacturing PMI score of 48.5. 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. Total new work decreased for the fourth month running in the latest survey period, and at the sharpest rate for seven months. (RTT)

Indonesia: Inflation eases to 2.28%, lowest in 19 months. Indonesia's CPI moderated in Sep to the lowest level in just over one-and-a-half years, largely amid a sharp slowdown in transport costs. The CPI climbed 2.28% YoY in Sep, slower than the 3.27% increase in Aug. Economists had expected inflation to ease to 2.2%. The latest rate of inflation was the weakest since Feb last year, when prices had risen 2.06%. Moreover, the inflation rate has remained within the central bank's target range of 2-4%. (RTT)

Vietnam: Manufacturing sector slips into contraction. The manufacturing sector in Vietnam fell into contraction territory in Sep, with a manufacturing PMI score of 49.7. That's down from 50.5 in Aug, and it moves beneath the boom-or-bust line of 50 that separates expansion from contraction. The most positive aspect of the latest survey was a second successive monthly increase in new orders, with the rate of expansion broadly in line with that seen in the previous survey period. (RTT)

Markets

Astro Malaysia (Neutral, TP: RM0.59): Go Shop to cease operations after eight years. Astro Malaysia Holdings Bhd announced that it will close down its home shopping business under “Go Shop” from Oct 11, citing “challenging overall economic landscape and the changes in consumer shopping behaviour”. "There has been a significant downturn in this mode of shopping since the Covid-19 pandemic and closure will ensure that Astro Malaysia’s resources are focused on business lines that contribute the biggest difference to the overall operations,” said Astro Malaysia. (The Edge)

Comment: Astro GS Shop (AGSS) operates the home shopping business since 2015. It is a 60:40 joint venture between Astro Malaysia and its Korean partner GS Retail Co Ltd. Given a challenging economic landscape and the changes in consumer shopping behaviour, the decision to cease Go Shop operations would allow Astro to allocate resources on profitable business lines. We view this positively as Go Shop has been consistently making losses since its inception, except in FY21 during the Covid- 19 lockdown period. The group had fully impaired its cost of investment amounting to RM48.1m in FY23. Based on our estimate, Astro may see an earnings uplift of c.5% in FY24F following this cessation.

MBSB: Completes RM1.01bn acquisition of MIDF. Malaysia Building Society Bhd (MBSB) has completed its acquisition of Malaysian Industrial Development Finance Bhd (MIDF) from Permodalan Nasional Bhd (PNB) for RM1.01bn worth of new share issuance at 96.52 sen per share. MBSB told Bursa Malaysia on Monday that 1.0bn new shares were allotted to PNB, resulting in PNB emerging as a substantial shareholder with a 12.78% stake. Meanwhile, the Employees Provident Fund’s (EPF) shareholding in MBSB was reduced from 65.78% to 57.45%. (The Edge)

Pestech: Secures RM21m smart meter contract from TNB. Pestech International Bhd’s unit Pestech SB (PSB) has received a RM21.17m contract from Tenaga Nasional Bhd (TNB) for the supply and delivery of smart meters in line with TNB’s advanced metering infrastructure implementation. The group said PSB will implement the project together with its other unit, Pestech Energy SB which is spearheading the smart metering infrastructure business of the group. (The Edge)

Kimlun: Secures two construction contracts worth RM140.22m in Johor. Kimlun Corporation has secured two contracts totalling RM140.22m from Eco World Development Group relating to the construction of a service apartment and a series of linked houses in Johor. In a bourse filing on Monday, the engineering and construction services provider said the contract was awarded to its wholly owned subsidiary Kimlun SB. The scope of work includes the design and construction of a service apartment block and amenities, with an expected completion date of 1 April 2026. (The Edge)

Econpile: Bags RM101m job for SOHO project in KL. Econpile Holdings Bhd has bagged a contract worth RM101.34m to undertake sub-structure works of three blocks of small office home office (SOHO). Econpile said its wholly-owned subsidiary Econpile (M) SB has accepted the letter of award from Suriamega Development Sdn Bhd for the job. The sub-structure works for three blocks of SOHO comprise two blocks of 50-storey SOHO and a block of 51-storey SOHO with podium and basement carpark floors. (The Edge)

MARKET UPDATE

The FBM KLCI might open lower today after the S&P 500 ended nearly flat on Monday with utilities falling sharply and investors weighing the likelihood the Federal Reserve will need to hold interest rates higher for longer. The Dow Jones Industrial Average fell 74.15 points, or 0.22%, to 33,433.35, the S&P 500 gained 0.34 points, or 0.01%, at 4,288.39 and the Nasdaq Composite added 88.45 points, or 0.67%, at 13,307.77. Economic data showed US factory activity decreased at a shallower-than-expected pace in September, while US construction spending increased in August. Investors anxiously await the monthly US jobs report due on Friday. European markets finished broadly lower with shares in London leading the region. The FTSE 100 lost 1.28% while France's CAC 40 edged down 0.94% and Germany's DAX gave away 0.91%.

Back home, Bursa Malaysia ended at an intraday low on Monday due to cautious sentiment and a lack of fresh catalysts amid mixed performance by regional markets. At the closing, the FBM KLCI dropped 5.41 points to 1,418.76 from last Friday’s close at 1,424.17.

Source: PublicInvest Research - 3 Oct 2023