Economy

US: Homebuyer confidence up in Dec; more see loan rates falling. US homebuyer confidence improved in Dec, with more homeowners anticipating that mortgage rates would fall further this year, but it could take some time for housing supply to recover as many remain hesitant to sell their homes. Mortgage finance agency Fannie Mae said its Home Purchase Sentiment Index rose 2.9 points to 67.2 in Dec. It was up 6.2 points YoY. The rate on the popular 30-year fixed-rate mortgage has plunged from a 23-year high of 7.79% in late Oct, tracking the decline in U.S. Treasury yields. It averaged 6.62% last week, according to data from mortgage finance agency Freddie Mac. (Reuters)

US: Consumers see smaller inflation gains ahead, New York Fed says. US consumers' projection of inflation over the short run fell to the lowest level in nearly three years in Dec, the New York Federal Reserve said. Inflation one year from now is expected to be at 3%, the lowest reading since Jan 2021, versus a projection of 3.4% in Nov, the regional Fed bank said. Poll respondents saw inflation three years from now at 2.6%, compared to 3% in Nov, while price pressures five years ahead were at 2.5% versus 2.7% in Nov. The survey also found that respondents projected bigger increases for college costs in Dec relative to Nov, while expectations for food and rent increases fell. The expected yearahead rise in gasoline prices held steady at 4.5% in Dec, with expectations for home price rises unchanged at 3% (Reuters)

EU: Property boom lowered inequality, ECB says. Wealth inequality declined in the euro zone over the past five years, confounding some expectations, as a large middle class with widespread property ownership benefited from a house price boom, the ECB said. The new data comes after the ECB faced years of criticism that a decade of ultra-low interest rates and copious asset purchases mostly favoured wealthy people with ample financial assets. ECB found that the gap between the top 5% and bottom 50% of society has actually been on a narrowing path for years. (Reuters)

EU: German exports rise more than expected in Nov. German exports rose much more than expected in Nov as demand in the European Union increased strongly, data from the federal statistics office showed on Monday. German exports rose by 3.7% in Nov compared with the previous month. The result followed a forecast of a 0.3% increase in a Reuters poll. Imports rose by 1.9% from Oct, the federal statistics office reported, versus analysts´ expectations of a 0.2% rise. Exports to EU countries rose by 5.4% compared with the previous month, while exports to countries outside the EU went up 1.8%, the office said. (Reuters)

EU: German industrial orders rise 0.3% in Nov. German industrial orders rose less than expected in Nov, data from the federal statistics office showed, as demand weakened. Industrial orders rose by 0.3% month-on-month on a seasonally and calendar adjusted basis, the federal statistics office said. A Reuters poll of analysts had forecast a rise of 1%. Domestic orders rose by 1.4%, while foreign orders fell by 0.4% on the month, the office said. Orders from the euro zone declined by 1.9% and orders from the rest of the world increased by 0.6%. (Reuters)

China: Closes local government offshore financing loophole - sources. Chinese regulators have closed a regulatory loophole that last year allowed heavily indebted local government financing vehicles (LGFVs) to further increase their borrowing, four sources familiar with the matter told Reuters. LGFVs, set up by Chinese local governments to fund infrastructure investment, have been told to stop issuing offshore bonds with a 364-day duration, the sources said. (Reuters)

Japan: Urges early signing of debt MoU between Sri Lanka and creditors. Japan restated the importance for early completion of signing of a MoU between Sri Lanka and creditor nations on debt restructuring, after an agreement was reached in principle late last year. It also emphasised the need to ensure transparency and comparability in agreements with creditors outside the Official Creditor Committee (OCC), according to a statement. Japan, along with France and India, co-chair the committee of 15 creditor nations. Battling its worst financial crisis since independence in 1948, the South Asian island nation is trying to restructure deals with creditors after soaring inflation, currency depreciation and low foreign reserves sent its economy into free fall, forcing it to default on foreign debt in May 2022. (Reuters)

Thailand: Gets green light to borrow to fund USD14.3bn handout plan - official. Thailand has received a green light to borrow to finance its controversial THB500bn (USD14.29bn) digital handout scheme, a senior official said on Monday, in a boost to a government eager to stimulate a sluggish economy. The Office of the Council of State, an independent panel that provides legal guidance to governments, had found no reason that would prohibit the government from borrowing to fund the plan, deputy finance minister Julapun Amornvivat told reporters. The programme to give away THB10,000 (around USD285) to 50m Thais to spend in their local communities was the signature election policy of the ruling Pheu Thai party. (Reuters)

Markets

Kerjaya Prospek (Neutral, TP: RM1.52): Bags two contracts worth RM95.1m for construction projects in Penang. The first job, for a contract sum of RM69.2m, is in relation to the execution of the superstructure works on Gurney Marine Bridge Phase 2. The second job, which is worth RM25.9m, involves the execution and completion of the piling and sub-structure contract works on a proposed 50-storey serviced apartment on Andaman Island. (The Edge)

Comments: KPGB’s outstanding orderbook added another 2% to RM4.6bn. We estimate both jobs would contribute 1-2% per annum on average to the Group’s earnings during the contracted period, assuming high single digit margins. YTD new wins crossed 17% of our FY24 job replenishment assumption of RM1.5bn. No changes made to our earnings estimates. Hence, we reiterate our Neutral call with an unchanged SOTP-based TP of RM1.52, pegged at 11x PER.

Straits Energy: Bags RM41m hospital construction project. Straits Energy Resources’ subsidiary, Straits CommNet Solutions SB, has accepted a letter of award from Puncabahan SB for a construction project at Hospital Canselor Tuanku Muhriz, Pusat Perubatan Universiti Kebangsaan Malaysia. The project, valued at RM40.7m, involves additional space construction and upgrading the emergency medical department. The LOA is part of a collaboration with Puncabahan, the main contractor for the project. Straits sees this move as aligned with its strategy to broaden its business network, enhance revenue streams, and foster strategic collaborations. (The Malaysian Reserve)

Pentamaster: Commits RM200m for expansion. Pentamaster Corp will spend RM200m in 2024 and 2025 to complete its third plant and set up two design and development centres in the United States and Europe. The group had already invested RM80m into the third plant. The third plant will design and manufacture automation solutions for medical technology devices, consumer electronics and semiconductors. The plant should be ready in early 2025. The group planned to set up design and development centres in California and Munich this year to serve EV and medical technology customers. (StarBiz)

AHB: Makes entry into electric vehicle industry with potential 100,000 e-motor order. AHB Holdings is making swift strides into the EV industry through a MoA to acquire 100% equity in KSP Vista Co Ltd. The move positions AHB to potentially receive a historic order of 100,000 electric motorcycles (e-motor). AHB recently announced the signing of the MoA with Kok Seng Ping, outlining the acquisition of KSP Vista’s entire equity. (The Malaysian Reserve)

Advancecon: Partners Perak Corp in RM1bn Silver Valley Technology Park venture. Perak State Development Corp (PKNPk) has entered a joint venture agreement with its subsidiary, Perak Corp, to develop the Silver Valley Technology Park (SVTP) on industrial land in Kanthan, Perak. The estimated gross development value for SVTP is RM1bn. Advancecon Holdings, an earthworks and engineering specialist, has been welcomed as the joint developer for the project. The collaboration aims to secure RM14bn in private investment with the support of the Perak state government, contributing to Perak’s GDP. (The Malaysian Reserve)

MARKET UPDATE

The FBM KLCI might open higher today after the Nasdaq scored its first gain of at least 1% in 2024 yesterday, as a fall in Treasury yields helped lift megacap stocks, while a sharp drop in Boeing shares kept gains on the Dow Industrials in check. The Dow Jones Industrial Average rose 216.90 points, or 0.58%, to 37,683.01, the S&P 500 gained 66.30 points, or 1.41%, to 4,763.54 and the Nasdaq Composite gained 319.70 points, or 2.20%, to 14,843.77. Meanwhile, Boeing shares plunged 8.03% after the plane maker and US regulators gave the go-ahead yesterday for airlines to inspect jets that were grounded after a panel blew off an Alaska Airlines-operated 737 MAX 9 in mid-flight which forced a dramatic landing of the airliner over the weekend. European shares ended higher on Monday, clawing back some losses following a dismal start to the year with technology and retail stocks leading gains, while energy shares languished following a drop in crude oil prices. The pan-European STOXX 600 closed 0.3% higher after falling as much as 0.7% during the day.

Back home, Bursa Malaysia saw follow-through buying from last week with the FBM KLCI ending broadly higher for the fourth consecutive day on Monday, led by construction and energy stocks. At the closing bell, the KLCI increased 0.54% or 8.09 points to 1,495.70 from last Friday’s close of 1,487.61. Hong Kong market led losses in Asia-Pacific on Monday, followed by China stocks which dropped after shadow banking conglomerate Zhongzhi Enterprise Group filed for bankruptcy liquidation late Friday. The Hang Seng index plunged over 2% in its final hour as healthcare stocks fell, while mainland China’s CSI 300 dropped 1.29% to close at 3,472.19. In Australia, the S&P/ASX 200 fell 0.50% to close at 7,451.50, while South Korea’s Kospi lost 0.4%, ending at 2,567.82.

Source: PublicInvest Research - 9 Jan 2024