Economy

US: Homebuilder confidence improves more than expected in Jan. There is a significant improvement in US homebuilder confidence in the month of Jan. The NAHB/Wells Fargo Housing Market Index jumped to 44 in Jan from 37 in Dec. Economists had expected the index to rise to 39. Lower interest rates improved housing affordability conditions this past month, bringing some buyers back into the market after being sidelined in the fall by higher borrowing costs. Single-family starts are expected to grow in 2024, adding much needed inventory to the market. (RTT)

US: Business inventories edge down in line with estimates in Nov. Business inventories in the US edged slightly lower in the month of Nov. The business inventories slipped by 0.1% in Nov, matching the dip seen in Oct as well as economist estimates. The slight decrease came as wholesale inventories fell by 0.2% and retail inventories edged down by 0.1%, while manufacturing inventories crept up by 0.1%. Meanwhile, business sales rose by 0.2% in Nov after tumbling by 1.1% in Oct. (RTT)

EU: Eurozone inflation rises in Dec. Eurozone inflation accelerated in Dec after slowing for seven straight months but core inflation continued its downward trend as initially estimated. Confirming the initial estimate, data from Eurostat showed that consumer prices rose 2.9% YoY following a 2.4% increase in Nov. The rate accelerated for the first time since May. By contrast, core inflation, which excludes prices of energy, food, and alcohol and tobacco, softened to 3.4% from 3.6%. The rate came in line with preliminary estimate published on January 5. (RTT)

UK: Inflation picks up on tobacco duty hike. CPI rose 4.0% on a yearly basis, slightly faster than Nov's 3.9% increase. The rate was forecast to edge down to 3.8%. The inflation rate accelerated for the first time since Feb 2023. That said, the annual rate in Dec 2023 was the second lowest since Sept 2021. MoM, the CPI gained 0.4%, offsetting the 0.2% decrease a month ago. Prices were expected to climb 0.2%. Core inflation that excludes energy, food, alcohol and tobacco held steady at 5.1% in Dec. Alcohol and tobacco prices provided the largest upward contribution to inflation. (RTT)

China: GDP growth misses expectations. China's economic growth missed expectations in the fourth quarter but the pace of whole year expansion met the government target despite the property crisis, weak global demand and overburdened government debt. GDP registered 5.2% annual growth in the fourth quarter. The growth was bigger than the 4.9% expansion registered in the third quarter, but missed economists' forecast of 5.3%. The acceleration in the fourth quarter growth largely reflects the low base of comparison as the pandemic disrupted economic activity in the fourth 4Q2022. (RTT)

Singapore: Has SGD7.778bn trade surplus. Singapore posted a merchandise trade surplus of SGD7.778bn in Dec. That's up from the SGD6.153bn surplus in Nov. Non-oil domestic exports were down 2.8% on month versus forecasts for a decline of 1.5% after adding 0.3% in the previous month. On a yearly basis, NODX sank 1.5% - shy of forecasts for a gain of 3.3% after adding 1.0% a month earlier. (RTT)

Markets

IJM (Outperform, TP: RM2.46): Alstom and IJM Corp-led JV to complete aerotrain replacement project. MAHB has entered into an agreement with Alstom and the IJMC-Pestech joint venture (JV) to steer the aerotrain replacement project back on track. (The Edge)

Comment: IJM’s effective stake of 78% in this project would render RM137m (+5%) to the Group’s construction orderbook amounting to RM3bn. Cumulative YTD new wins make up 70% of our FY24 job replenishment assumption of RM4.3bn. Assuming a high single digit margins, we estimate that the earnings impact from this job is inconsequential to the Group during the contracted project tenure between FY24-25. We deem this development neutral for both IJM and its associate, Pestech since contract value awarded is much smaller compared to the terminated contract value though mitigated by the earnings derived out of this project and the ultimate objective to deliver the project to MAHB. We reiterate our forecasts and Outperform call on IJM with an unchanged TP of RM2.46, pegged at 15x PE.

Favelle Favco: Bags five contracts worth RM79.4m. Construction crane manufacturer Favelle Favco has secured five contracts, for the supply of cranes to machinery replacements, worth a combined RM79.4m. The contracts, which are expected to be delivered by mid- to end of 2024, were awarded to its subsidiaries Favelle Favco Cranes (M) SB, Favelle Favco Cranes Pty Ltd and Sedia Teguh SB between Nov 30, 2023 and Jan 17, 2024. (The Edge)

TDM: Expands healthcare network, invests RM29.1m for two new hospitals. Plantation and healthcare outfit TDM Bhd, a subsidiary of the Terengganu state government, has invested RM29.1m to build two hospitals this year. Its executive director, Najman Kamaruddin said the group’s healthcare sector contributes more than 50% to the overall profits and the two new hospitals are expected to increase the profits considerably. (StarBiz)

Techna-X: To acquire 51% stake in IT firm Netsec. Techna-X is acquiring a 51% stake in information technology (IT) firm Netsec SB in a bid to capture growth in Southeast Asia’s cybersecurity space. The exercise will see both entities combining their expertise in digital ecosystems and energy storage with Netsec’s in cybersecurity solutions. (StarBiz)

Rexit: Gets new substantial shareholders, makes takeover offer at 85 sen per share. Rexit has received an unconditional mandatory general offer (MGO) from its new major shareholders. The MGO was triggered after Datuk Seow Gim Shen, Metaco Asset Holdings SB and Bemas Holdings SB emerged in Rexit with a 53.27% stake collectively via a direct business transaction. (StarBIz)

Advancecon: Secures RM21m subcontract from CCCECRL.Advancecon Holdings has secured RM21.2m in subcontract work from China Communications Construction (ECRL) SB (CCCECRL). The group’s 51%-owned indirect unit Spring Energy SB accepted the subcontract from CCC-ECRL for the construction and completion of subgrade works, Section 8 from CH518+388.00 to CH519+000.00. (The Edge)

MARKET UPDATE

The FBM KLCI might open flat today after US stocks followed their European counterparts to a lower close yesterday and US Treasury yields resumed their uphill climb as robust economic data chilled bets that the Federal Reserve could begin reducing its policy rate as early as March. All three major US indices finished the session lower, with interest rate-sensitive momentum stocks weighing heaviest on the tech-heavy Nasdaq. The Dow Jones Industrial Average fell 94.45 points, or 0.25%, to 37,266.67, the S&P 500 lost 26.77 points, or 0.56%, to 4,739.21 and the Nasdaq Composite dropped 88.73 points, or 0.59%, to 14,855.62. European shares ended sharply lower, sliding 1.1 % as hawkish commentary from European Central Bank (ECB) officials dampened rate cut hopes and underwhelming economic data from China curbed investor risk appetite. The pan-European STOXX 600 index lost 1.13% and MSCI's gauge of stocks across the globe shed 0.88%.

Back home, Bursa Malaysia ended lower on Wednesday in tandem with its regional peers, jittered by uncertainties over the US interest rates path as well as the health of China’s economy after the release of its 2023 gross domestic product. At the closing bell, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 2.66 points to 1,491.21 from Tuesday's close of 1,493.87. Emerging market stocks lost 2.13 %. MSCI's broadest index of Asia-Pacific shares outside Japan closed 2.24 % lower, while Japan's Nikkei lost 0.40%.

Source: PublicInvest Research - 18 Jan 2024