Economy

US: Fed rate cuts firmly in view for 2024, even as rate-setters shift. The annual rotation on the US Federal Reserve’s (Fed) interest-rate-setting committee means its 2024 voting members lean slightly more hawkish than the outgoing group from 2023 — but that won’t budge the outlook for a pivot to interest-rate cuts next year. In fact, plenty of analysts make the opposite argument: if inflation continues to fall more quickly than expected, Fed policymakers will want to reduce rates even more than the threequarters-of-a-percentage point implied in fresh projections published last week. (Reuters)

US: Consumer sentiment improves more than previously estimated in Dec. Revised data released by the University of Michigan showed consumer sentiment in the US improved by slightly more than initially estimated in the month of Dec. The University of Michigan said its consumer sentiment index for Dec was upwardly revised to 69.7 from a preliminary reading of 69.4. Economists had expected the index to be unrevised. (RTT)

US: New home sales unexpectedly plunge to one-year low in Nov. New home sales in the US unexpectedly saw a substantial decrease in the month of Nov, according to a report released by the Commerce Department. The report said new home sales plummeted by 12.2% to an annual rate of 590,000 in Nov after tumbling by 4.0% to a revised rate of 672,000 in Oct. The nosedive surprised economists, who had expected new home sales to climb 0.9% to an annual rate of 685,000 from the 679,000 originally reported for the previous month. (RTT)

EU: Germany import prices fall at slower pace. Germany's import prices declined at a slower pace in November, data released by Destatis showed. Import prices were down 9.0% from the previous year. The annual rate was slower than the 13.0% decline posted in Oct and a 14.3% decrease in Sept. Destatis said the decline was primarily due to a base effect originating from the high price increases in 2022. Data showed that energy import prices plunged 31.7% annually and prices of imported intermediate goods decreased 8.0%. (RTT)

EU: Italy consumer confidence, business morale strengthens in Dec. Italy's consumer confidence improved in Dec to the highest level in five months, and business morale also strengthened, survey results from the statistical office Istat showed. Consumer sentiment rose to 106.7 in Dec from 103.6 in the previous month. Economists had expected the index to increase slightly to 103.8. (RTT)

UK: Recession might be under way after economy shrinks in 3Q. Britain's economy might now be in a recession according to data which showed output shrank in the July-to-Sept period, shortly after finance minister Jeremy Hunt suggested the BOE might cut interest rates to help boost growth. GDP contracted by 0.1% in the third quarter, the Office for National Statistics (ONS) said. (Reuters)

Japan: Core inflation slows in Nov, eases pressure on BOJ. Japan's core consumer prices rose 2.5% in November from a year earlier, data showed, marking the slowest pace of increase in over a year in a sign of easing cost-push pressures in the world's thirdlargest economy. (Reuters)

Markets

IJM (Outperform, TP: RM2.46): Secures RM260m Kuching job via joint venture. IJM has bagged a RM260m contract for the Kuching Urban Transportation System (KUTS) project. The job was secured via a joint venture (JV) comprising two other companies – Azam Sehasrat SB and Unique Deco SB. (StarBiz).

Comment: We estimate that this job would contribute approximately 1-2% per annum to the Group’s FY24-26F earnings, assuming a 30% stake in the JV and a high single digit pre-tax margin for this job. Scope of work includes the construction and completion of the KUTS Rembus autonomous rapid transit depot in Samarahan and other associated works. Though a rather small win for IJM, we are encouraged on this win as it marks the Group’s first rail job in East Malaysia. Including this new job of c.RM87m net to IJM, YTD new wins amounted to RM2.5bn (excluding jobs from IJM Land), representing 58% of our FY24 orderbook replenishment assumption of RM4.3bn.

MRCB: To acquire PJ Sentral office tower development rights from PKNS for RM270m. Malaysian Resources Corp (MRCB) has proposed to acquire the rights to carry out the development of an office tower in the PJ Sentral commercial development from the Selangor State Development Corp (PKNS), for RM270m. The acquisition consideration will be satisfied through the disposal of malls and several residential units to PKNS, and funding through internally generated funds. MRCB said the group plans to dispose of Plaza Alam Sentral Mall and the adjoining land in Section 14, Shah Alam, to PKNS, for RM178m. (The Edge)

Leong Hup: To challenge MyCC's findings that its unit engaged in 'chicken feed cartel'. Leong Hup International has reiterated its stand that its wholly owned subsidiary Leong Hup Feedmill Malaysia SB (LFM) was not involved in price-fixing practices involving poultry feed as part of a chicken feed cartel, as alleged by the Malaysia Competition Commission (MyCC). MyCC’s finding of infringement by LFM is without merit and the group will challenge the decision. (The Edge)

Jiankun: Eyes northern expansion. Property and construction company Jiankun International is expanding its real estate development activities in the northern states with the acquisition of Penang-based Oriental Link Properties (M) SB. Jiankun is upbeat about the Penang property market, given that the effects of Covid- 19 have generally subsided in the state, especially since the start of the endemic phase in April 2022. (BTimes)

TRC Synergy: Bags RM24m flood mitigation dam construction job. Construction outfit TRC Synergy has secured a RM23.8m contract from the Department of Irrigation and Drainage (DID) to design and build a flood mitigation dam in Gombak, Selangor. Its wholly-owned subsidiary Trans Resources Corp SB had received the letter of acceptance from the department. (The Edge)

Sunview: Raises stake in Winstar Aluminium to 30%. Sunview Group, a participant in the renewable energy sector, says its fullyowned Vafe System SB has boosted its ownership in Winstar Aluminium Manufacturing SB to 30%. This is through the acquisition of a 10% stake from Mestron Holdings for RM6.0m. (StarBiz)

MARKET UPDATE

The S&P 500 rose Friday after cooler inflation data, with the major averages registering an eighth straight winning week as Wall Street looked to extend its year-end rally. The broad market index and the Nasdaq gained 0.2% while the Dow Jones was flat falling 18.38 points. Dow component Nike dropped nearly 12% after lowering its sales outlook, and announcing plans to cut costs by about USD2bn over the next three years. European markets were mostly flat. London markets closed early, with the FTSE 100 index ending marginally higher. Sportswear retailers crowded round the bottom of Stoxx losses, with Adidas and Puma both down by more than 5%. Asia-Pacific markets were mixed on Friday with Hong Kong’s Hang Seng index tumbled 1.7%, leading losses in Asia as shares of heavyweights Tencent and NetEase plunged after China released draft rules on curbing excessive gaming and spending while Singapore’s Straits Times rose 0.9%. During yesterday’s trading, Shanghai Composite and Nikkei 225 added 0.1% and 0.3% respectively.

Back home, FBM KLCI closed 0.1% lower to settle at 1,454.38. Sarawak announced that it will produce green hydrogen on a large scale mainly for the Japanese market under a tripartite agreement inked between Sarawak Economic Development Corp (SEDC) and two Japanese firms. The tripartite agreement, which involved SEDC’s wholly-owned subsidiary, SEDC Energy, Japan’s oil firm Eneos and trading house Sumitomo Corp, signifies a strategic alliance for the H2ornbill project within the Sarawak H2 Hub framework in Bintulu.

Source: PublicInvest Research - 26 Dec 2023