Economy

US: Service sector growth picks up in Jan. The U.S. services sector growth picked up in Jan as new orders increased and employment rebounded, but suppliers appeared to fall behind, resulting in a measure of input prices rising to an 11-month high. The Institute for Supply Management (ISM) said that its nonmanufacturing PMI increased to 53.4 last month from 50.5 in Dec. A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy. Economists polled by Reuters had forecast the index rising to 52.0. A measure of new orders received by services businesses rose to 55.0 last month from 52.8 in Dec. There was a jump in export order growth. (Reuters)

US: Strong economy means Fed has time to study data before rate cuts. A resilient economy and a possibly higher neutral rate of interest means the U.S. Federal Reserve can take time, with less risk to an ongoing economic recovery, before deciding to reduce the benchmark interest rate, Minneapolis Federal Reserve president Neel Kashkari wrote. Inflation is making "rapid progress" towards the Fed's 2% target due to improvements in the supply of labor, goods and services, Kashkari said. While there may be some signs of economic weakness, he added, the overall story right now is one of continued growth and low unemployment -- not of an economy stressed by the impact of a high Fed policy rate. (Reuters)

EU: Euro zone economy showing some signs of recovery - PMI. The euro zone economy showed tentative signs of recovery at the start of the year, according to a survey which showed rising inflationary pressures, bolstering the ECB’s case for keeping interest rates at record highs. HCOB's composite PMI for the bloc, compiled by S&P Global and seen as a good guide of overall economic health, rose to 47.9 in Jan from Dec's 47.6, matching a preliminary estimate. That was its best reading since July but remained below the 50mark separating growth from contraction. The survey also indicated both input and output costs rose faster last month and while an index measuring demand did rise, it was still firmly below breakeven. The output prices index rose to an eight-month high of 54.2 from 53.8. (Reuters)

EU: German exports disappoint in Dec on weak global demand. German exports fell more than expected in Dec due to weak global demand, data from the federal statistics office showed, underlining concerns about the health of Europe's biggest economy that may be slipping back into recession. Exports fell by 4.6% in Dec compared with the previous month. The result compared with a forecast 2.0% decrease in a Reuters poll. Exports to EU countries fell by 5.5% compared with the previous month, while exports to countries outside the EU declined by 3.5%, the office said. Imports fell by 6.7% from November, the federal statistics office reported, versus analysts' expectations for a 1.5% decline. (Reuters)

China: Jan services activity expands at slower pace - Caixin PMI. China's services activity expanded at a slightly slower pace in Jan as new orders fell, a private-sector survey showed, suggesting a soft start for the economy amid tepid demand and a property slump. The Caixin/S&P Global services PMI edged down to 52.7 from 52.9 in Dec, but remained above the 50-mark that separates expansion from contraction for the 13th consecutive month. The figure comes after official data last week showed factory activity contracted again, offering a snapshot of the state of the economy at the start of the year. China's economy is struggling to regain momentum, facing multiple challenges including persistent deflationary pressures, a prolonged housing downturn and mounting local government debt. (Reuters)

Japan: Jan service activity surges on strong demand, weak yen. Japan's Jan service activity expanded at the strongest pace since September, a business survey showed on Monday, supported by robust demand and the weak yen, while international demand jumped for the first time in five months. The service sector, which accounts for around 70% of the country's GDP, has been a bright spot for the economy, helping offset some of the drag on manufacturers from weak global demand. The final au Jibun Bank Service PMI rose to 53.1 in Jan from 51.5 in Dec, marking the 17th consecutive month of growth, according to index publisher S&P Global Intelligence. (Reuters)

Indonesia: 2023 GDP growth slows to 5.1% on falling commodity prices. Indonesia's annual economic growth fell slightly but remained solid at 5.05% last year, as falling commodity prices hit exports and tight monetary policy dampened demand. The 2023 GDP growth rate, released by Statistics Indonesia, was close to the government's latest outlook of 5% and slightly below the 5.3% recorded in 2022, when economic activity was boosted by record exports amid a global commodity boom. Last year, prices of Indonesia's main commodities like palm oil, coal and nickel dropped, while demand from major trade partners also softened amid weakening global growth. (Reuters)

Thailand: PM says negative inflation a sign of weak economy as central bank seen holding rates. Thai Prime Minister Srettha Thavisin said four consecutive months of negative inflation were a sign of economic weakness and called for fiscal and monetary policy coordination, raising pressure on the central bank to ease monetary policy. Thailand's headline CPI opens new tab fell 1.11% in Jan from a year earlier, data showed, versus a forecast drop of 0.82% in a Reuters poll. The decline in Jan was the fourth in as many months and was driven by government energy subsidies, lower food prices, and last year's high base, the commerce ministry said. "It's a sign of economic weakness," Srettha said, adding fiscal and monetary policy must go together, otherwise "it would be difficult to solve the problem". (Reuters)

Markets

Chin Hin: To raise stake in Signature to above 33%, launch MGO for remaining shares. Chin Hin Group, which owned a 28.72% stake in Signature International as at Jan 16, is proposing to buy an additional 4.77% stake from Teoh Hai Hin and Por Tong Eng for RM25.5m cash or 84 sen per share. With its total stake rising to 33.49% upon completion of the acquisition, Chin Hin will be obliged to extend a conditional MGO for the remaining shares in the kitchen cabinet manufacturer at 84 sen a share — two sen lower against Monday's closing of 86 sen. (The Edge)

YNH: ALX Asset can’t raise enough fund to buy 163 Retail Park. YNH Property explained that ALX Asset was not able to raise enough funds for the purchase of the former’s retail asset — 163 Retail Park. Consequently, YNH had to terminate the RM270.5m sale on Jan 26, about 14 months after YNH had sealed the deal. It also decided not to pursue the proposed RM152m disposal of AEON Seri Manjung in Perak to ALX Asset Bhd in view of the situation. (The Edge)

Swift Haulage: Thai logistics group JWD to emerge as Swift Haulage's substantial shareholder. Swift Haulage’s substantial shareholder Persada Bina SB, which currently holds 309.6m shares or a 35.16% stake in the company, is selling an 11.16% stake or 98.3m shares in the company to Singapore-based logistics company JWD Asian Holding Pte Ltd for RM61.9m or 63 sen apiece cash. The proposed disposal is expected to be completed on Feb 22. (The Edge)

Rohas: Unit sets up JV with Sediabena builders for Bukit Chagar construction project. Rohas Tecnic has set up a JV company, Rohas Sediabena Builders Consortium SB with Sediabena Builders to fulfil the role of contractor for the provision of work related to Package 8: Construction and Completion of Bukit Chagar Station’s Façade for the Rapid Transit System Link Johor Bahru – Singapore project. The JV agreement was entered on Feb 2, 2024, Rohas Tecnic said. The project will be located in Bukit Chagar, Johor Bahru, and the construction work is planned to commence in the first half of 2024 and will take approximately 15 months to complete. "The total contract sum for the project is RM199.8m and is expected to be completed by May 31, 2025," it added. (Bernama)

Titijaya: Buys 97 medium cost flats from Bank Negara for RM44.5m. Titijaya Land has entered into 97 separate sale and purchase agreements with Bank Negara for the proposed acquisition of five-storey, medium-cost flats in Subang Jaya, Selangor for RM44.5m. In a filing with Bursa Malaysia, Titijaya said it is acquiring 97 units of two-bedroomed flats to be redeveloped into mixed commercial properties. “The proposed acquisition is poised to yield a synergistic effect with the adjacent property, First Subang SS15 Courtyard. (StarBiz)

Vestland: Bags RM279m job for service apartments in PJ. Vestland has bagged a RM278.8m contract from Sg Besi Construction SB to undertake design and building works for two blocks — 30 and 44 storeys each — of service apartments and related facilities in Ara Damansara, Petaling Jaya. Construction works will commence effective immediately, with completion on Aug 4, 2026. (The Edge)

MARKET UPDATE

The FBM KLCI might open lower today after Wall Street's main indices closed lower yesterday after Federal Reserve Chair Jerome Powell pushed back firmly against speculation that rate cuts would be imminent, while investors assessed a mixed bag of US earnings reports. Fresh data from the Institute for Supply Management showed the US services sector's growth picked up in January, with a measure of input prices rising to an 11-month high. The Dow Jones Industrial Average fell 274.30 points, or 0.71%, to 38,380.12, the S&P 500 lost 15.80 points, or 0.32%, to 4,942.81 and the Nasdaq Composite lost 31.28 points, or 0.20%, to 15,597.68. MSCI's broadest index of world shares fell 0.36%. The panEuropean STOXX 600 index ended 0.1% lower.

Back home, Bursa Malaysia finished lower on Monday following a strong US employment report that eliminated hopes of an interest rate cut. At the closing bell, FBM KLCI eased 5.24 points to end at an intraday low of 1,511.34 from last Friday's (Feb 2) close of 1,516.58. Small-cap stocks in the region slumped as investor sentiment remained at rock-bottom on a lack of policy support and broad stimulus for China. The S&P China CSI 1000 small cap stock index fell more than 6%, closing at a three-year low. China's bluechip index CSI 300 closed up about 0.7% after dropping 2% earlier in the session and touching a five-year low last week. Hong Kong's Hang Seng Index finished down about 0.2%.

Source: PublicInvest Research - 6 Feb 2024