Economy

US: Budget gap soars to USD1.7trn, largest outside COVID era. The US government posted a USD1.7trn budget deficit in fiscal 2023, a 23% jump from the prior year as revenues fell and outlays for Social Security, Medicare and record-high interest costs on the federal debt rose. The Treasury Department said the deficit was the largest since a COVID-fueled USD2.78trn gap in 2021. It marks a major return to ballooning deficits after back-to-back declines during President Joe Biden's first two years in office. The deficit comes as Biden is asking Congress for USD100bn in new foreign aid and security spending, including USD60bn for Ukraine and USD14bn for Israel, along with funding for US border security and the Indo-Pacific region. The big deficit, which exceeded all preCOVID deficits, including those brought about by Republican tax cuts passed under Donald Trump and from the financial crisis years, is likely to enflame Biden's fiscal battles with Republicans in the House of Representatives, whose demands for spending cuts pushed the U.S. to the brink of default in early June over the debt ceiling. (Reuters)

US: Fresh growth numbers set to show US remains economic powerhouse. The world’s largest economy probably expanded at the quickest pace in nearly two years during the third quarter on the back of a steadfast US consumer, a challenge for Fed officials who are debating whether additional policy tightening is needed. GDP advanced at a 4.3% annualised pace in July-Sept, according to the median projection in a Bloomberg survey of economists. Such growth illustrates that the US remains the global economic powerhouse as Europe stagnates and Asia contends with a struggling China. Personal consumption, the primary engine of the US economy, is projected to advance at a 4% rate. Resilient demand is testing the policy skills of Fed officials after nearly two years of interest-rate hikes. While inflation is well off its peak, price pressures are still running almost twice as fast as their goal. (Bloomberg)

EU: German producer prices continue to fall at record pace. Germany's producer prices declined at a record pace for the second straight month in Sept, mainly due to the base effect caused by the very high price level of the previous year, preliminary data from Destatis showed. The producer price index, or PPI, fell 14.7% YoY in Sept, faster than the 12.6% decline in the prior month. Further, the latest rate of fall was the biggest since data collection began in 1949. The sharp downward trend in Sept was attributable to a base effect caused by the very high price level of the previous year, the agency said. Energy prices slumped 35.3% over the year because lower electricity prices had the biggest influence on the rate of change for energy. (RTT)

UK: BoE governor signals UK’s inflation fight has further to run. Bank of England (BOE) governor Andrew Bailey hinted that policymakers can’t let up yet in their fight against inflation, even as signs amassed that the UK economy is weakening. Wages are growing too quickly to be compatible with the central bank’s 2% inflation target, and declining pressure on food prices had “got quite a way to go yet”, Bailey said in an interview with the Belfast Telegraph published. The remarks coincided with official figures showing an unexpectedly sharp drop in retail sales in September, and a boom in tax receipts from soaring inflation. Together, the data indicated the searing pressures on prices that the BOE is trying to tackle. “Persistently high inflation, an unseasonably warm September, and high borrowing costs all point to a depressed consumer with disappearing confidence in the direction the economy is going,” said Charles Hepworth, an investment director at GAM Investments. “This now appears to be increasingly reflected in voter intent.” (Bloomberg)

UK: Retail sales fall more than expected. UK retail sales logged a bigger-than-expected decline in Sept as the cost of living pressures damped spending and consumer sentiment. Retail sales dropped 0.9% on a monthly basis, in contrast to the 0.4% increase in Aug, the Office for Statistics reported. Sales were forecast to ease 0.2%. Food store sales grew only 0.2%, following a rise of 1.4% in Aug. Due to the high cost of living and the unseasonably warm weather reducing sales of autumn-wear clothing, non-food store sales declined 1.9%. Non-store retailing sales, predominantly online retail sales, decreased 2.2% after a 0.9% drop in Aug. On the other hand, automotive fuel sales grew 0.8%, rebounding from a 1.0% fall in Aug. (RTT)

Hong Kong: Inflation rises to 2.0%, highest in 4 months. Hong Kong's CPI accelerated to the highest level in four months in Sept after remaining stable in the previous month, data released by the Census and Statistics Department showed. The consumer price index, or CPI, climbed 2.0% YoY in Sept, following a 1.8% rise in Aug. Clothing and footwear prices alone grew 6.5% annually in Sept, and utility costs were 2.9% higher. Food prices showed an increase of 3.0%, while those for durable goods dropped by 1.8%. The annual price increase in basic food items was mainly due to the extreme weather conditions in the early part of the month. (RTT)

Taiwan: Export orders plunge 15.6%, more than expected. Taiwan's export orders continued to decline sharply in Sept, and at a faster-than-expected pace, according to data released by the Ministry of Economic Affairs. Export orders registered a doubledigit annual fall of 15.6% in Sept, following a 15.7% decline in Aug. The expected drop was 13.9%. Orders for transport equipment fell the most, by 28.2%, followed by machines with a 19.1% slump. Similarly, foreign orders for electronic products declined, notably by 16.7%. On a monthly basis, export orders dropped by a seasonally adjusted 0.3% in September. (RTT)

Markets

EPMB: Plans EV facility in Melaka. EP Manufacturing (EPMB) has proposed to set up an automotive manufacturing facility in Melaka that will serve as a hub for energy-efficient vehicles (EEVs) and electric vehicles (EVs) in Malaysia. The new facility, which will cost about RM100m, will be established in several phases at the Hicom Pegoh Industrial Park. (StarBiz)

Pestech: Receives notice of arbitration from SPYTL in GemasJB double track dispute. Pestech International has been issued a notice of arbitration from Syarikat Pembinaan Yeoh Tiong Lai (SPYTL) under the Asian International Arbitration Centre (AIAC). The group said Pestech act as an guarantor to guarantee the due performance of the subcontracting agreement dated Dec 2018 entered between SPYTL and Pestech Technology SB (PTECH) for the maintenance of the Electrified Double Track project from Gemas to Johor Bahru. (The Edge)

Mestron: Wins RM60m solar project. Mestron accepted a letter of award from Fabulous Sunview SB (FSSB) to perform and undertake the procurement of the equipment and materials, provision of the logistic works, installation works, testing works and the maintenance of the equipment in the connection with the general LSS project. With this new contract, the group’s renewable energy (RE) orderbook value stands at RM71m. (StarBiz)

K Seng Seng: To diversify into intermediate metal products manufacturing. K Seng Seng Corporation has proposed to diversify its business to include the manufacturing of intermediate metal products through the acquisition of Metalmach Group. Metalmach has an established profit track record and has consistently generated positive cash flow over the years. Upon the completion of the acquisition, Metalmach will be a subsidiary of the group and it will consolidate the financial results of Metalmach. (The Edge)

Industronics: Inks MOA for development of Langkawi dutyfree city. Industronics had entered into a memorandum of agreement (MOA) to negotiate a proposed collaboration to construct an international duty-free city on Pulau Langkawi. The company signed the MOA with Echo Asia (Hong Kong) Ltd, an affiliate of Hong Kong-listed Echo International Holdings Group Ltd, and CHEC Construction (M) SB, a wholly-owned subsidiary of China Harbour Engineering Company Ltd. (The Edge)

AAX: Relief application rejected. Bursa Malaysia has rejected AirAsia X’s (AAX) application for proposed relief and PN17 upliftment. Bursa Securities had, vide its letter dated Oct 18, 2023, rejected the company’s application for the proposed relief PN17 upliftment. Bursa has granted the company an extension of time until Jan 17, 2024 to submit its regularisation plan to the regulatory authorities. (StarBiz)

Minho: Unit acquires land for RM18m. Minho’s wholly-owned subsidiary Syarikat Minho Kilning SB has entered into a sales and purchase agreement with Kheng Joo Realty SB and Kin Seng Properties SB. The deal is for the acquisition of a tract of freehold land measuring 7.8433ha in Jeram, Kuala Selangor, for RM18.4m cash. (StarBiz)

MARKET UPDATE

The FBM KLCI might open weaker today after US stocks ended sharply lower for the day and week on Friday as investors worried about more interest rate hikes and the Israel-Hamas conflict spreading. The Dow Jones Industrial Average fell 286.89 points, or 0.86%, to 33,127.28, the S&P 500 lost 53.84 points, or 1.26%, to 4,224.16 and the Nasdaq Composite dropped 202.37 points, or 1.53%, to 12,983.81. All of the S&P 500 index's 11 sectors ended lower in broad-based selling, with technology and financials among the biggest drags. European shares also fell on Friday and posted their biggest weekly loss in seven months with the pan-European STOXX 600 hit its lowest level in seven months, down 1.4%.

Back home, Bursa Malaysia ended marginally lower on Friday amid the weakness in regional markets as higher US bond yields weighed on the global risk appetite while rising tension in the Middle East further dampened sentiments. At the closing bell, the FBM KLCI dipped 1.62 points to 1,441.04 from Thursday’s closing of 1,442.66. In the region, Japan’s Nikkei 225 dropped 0.54% to 31,259.36 and Hong Kong’s Hang Seng Index fell 0.72% to 17,172.13. Elsewhere, China’s SSE Composite lost 0.74% to 2,983.06 and South Korea’s Kospi fell 1.69% to 2,375.

Source: PublicInvest Research - 23 Oct 2023