Economy

• US: Slower inflation set to fuel Fed cut optimism. The pulse of US inflation likely continued to slow at the start of the year, helping to feed expectations that the Fed will find interest-rate cuts more palatable in the coming months. The core CPI, a measure that excludes food and fuel for a better picture of underlying inflation, is seen increasing 3.7% in Jan from a year earlier. That would mark the smallest YoY advance since April 2021. The overall CPI probably rose less than 3% for the first time in nearly two years. (Bloomberg)

• US: Jan deficit drops sharply as receipts grow, tax refunds fall. The US federal budget deficit fell sharply in Jan to USD22bn as receipts hit a record for that month, partly because tax refunds fell after the IRS cleared a backlog of pandemic-delayed tax returns. The deficit last month was USD17bn, or 43%, less than the USD39bn deficit in Jan 2023. Outlays for the month grew 3% to USD499bn, while receipts jumped 7% to USD477bn. This Jan’s comparison with a year ago was also significantly helped by the USD36bn bailout of a Teamsters union pension fund in Jan 2023, as no similar large one-time outlays were recorded this year. (Reuters)

• EU: Wage growth to peak early in 2024, path further ahead unclear. Euro zone wage growth is likely to peak early this year but the path further ahead remains uncertain. The ECB has singled out wages as the single most important variable in determining whether it can start cutting interest rate and call time in fight against high inflation. Growth in compensation was seen hitting a peak at around 5% early this year. But the jury was still out on whether and how quickly pay rises would fall back towards the 3% level that the ECB considers compatible with its 2% inflation goal. (Reuters)

• EU: German commercial property prices post biggest-ever drop. German commercial property prices fell 12.1% in the final three months of 2023 compared with a year earlier in their biggestever drop, as the nation's struggling property industry suffers its worst crisis in decades. For the full year, commercial real estate prices dropped 10.2%, accelerating their decline after small drops of less than 1% in 2022 and 2021. For years, property in Europe and particularly Germany boomed as interest rates fell, turbocharging demand. But a sudden jump in rates and building costs tipped some developers into insolvency as bank financing dried up and deals froze. Germany is so far Europe's hardest hit in a rout that has also struck China and the United States. (Reuters)

• India: Retail inflation eases to 3-month low but no rate cuts expected yet. India's retail inflation rate touched a three-month low of 5.10% in Jan as prices of some food items rose more slowly, although the central bank is expected to wait before cutting rates as inflation remains above its target rate. Annual retail inflation, eased in Jan from 5.7% in Dec. RBI left interest rates unchanged, signalling that cuts may be some time away as it focuses on getting inflation to 4% on a sustainable basis. Food inflation, which accounts for nearly half of the overall consumer price basket, rose 8.3% in Jan, compared with a 9.5% rise in Dec. (Reuters)

• India: Dec industrial output up 3.8% on year. India's industrial output rose at a faster-than-expected pace of 3.8% YoY in Dec, on the back of a pick-up in manufacturing activity. For Dec, economists had estimated growth of 2.4%. In Nov, too, it rose 2.4%. Manufacturing output in Dec rose 3.9% YoY, against 3.6% in the same month in the previous year. Consumer goods, both durable and non-durable have registered positive growth rates which are good signs. During the month, consumer durables grew 4.8%, while consumer non-durables grew at 2.1%. Electricity generation in Dec was up 1.2%, slower than 10.4% growth in the corresponding month a year earlier. (Reuters)

• Australia: Central bank warns on inflation, market pushes out rate cuts. Australia's top central banker warned there was still some way to go to meet the midpoint of the inflation target range of 2-3%, reiterating that the bank has not ruled out another rise in interest rates. The threat of another rate hike has led UBS and Capital Economics to push out the likely timing for a first rate cut, although economists do not expect the RBA to deliver on its tightening bias. Australia's inflation challenge is not over, despite encouraging signs of moderation. The central bank left interest rates unchanged. The change of a move in May has declined to 20%, down from 50%. And Sept is the most likely month for the first rate cut. (Reuters)

Markets

• LGMS: To Launch Subscription-Based Model Aimed at SMEs. LGMS Bhd is introducing a subscription-based solution aimed at small and medium-sized enterprises (SMEs), which represents a new revenue model for the company. Executive chairman Fong Choong Fook said the launch of its StarSentry solution has been set for the second quarter of 2024. “This innovative solution is designed to enable SMEs to enhance their cybersecurity measures simply and effectively. (Bernama)

• Revenue Group: NSS IT solution empower KTMB's open payment system. Revenue Group and NSS IT Solution SB is poised to reinforce the significance of technology-driven partnerships in revolutionising transit payments via Keretapi Tanah Melayu (KTMB) open payment system. Transport Minister Anthony Loke launched the KTMB open payment system, which enables passengers to make payments using credit cards, debit cards, ewallets and the KTMB Mobile application (KITS) at automated control gates, which is now available at 80 stations in the Klang Valley and northern region. (The Star)

• Reneuco: Independent review finds transactions are supported by relevant documentation, confirmed by respective parties. Reneuco Bhd, whose latest annual report saw a disclaimer of opinion by its external auditor, said its special independent review (SIR) found that the sales transactions and costs with identified customers and suppliers “were sufficiently supported” by relevant documentation. (The Edge)

• Zecon: Secures RM852m banking facilities from Bank Pembangunan. Zecon has secured Tawarruq Asset Financing Facilities totalling RM851.9m from Bank Pembangunan Malaysia. Zecon Medicare SB (ZMSB) accepted a banking facility of RM616.9m, with RM482m designated for settling an existing structured Islamic term financing facility provided by MBSB Bank to ZMSB. The remaining RM134.94m will be allocated for payment to contractors for escalation costs incurred in the children’s specialist hospital project, as well as for working capital. (The Edge)

• Tuju Setia: Appoints new CEO, COO. Tuju Setia has promoted its COO Tee Huei Tsyr as its new CEO and Seon Yen Kong as its new COO. Tee, who has been with the group since 2011, has more than 22 years of experience in project and construction management. He currently assists the Tuju Setia MD Wee Eng Kong in managing the construction division and is involved in assisting the business development of the group. (The Malaysian Reserve)

• Tex Cycle: Subscribes RM10m Chin Hin perpetual MTN notes. Tex Cycle Technology (M) has subscribed for RM10.0m in nominal value of the perpetual medium-term note (MTN) issued by Chin Hin Group. In an filing, it said the perpetual MTN was offering a higher return of 7.5% per annum and provide a steady and predictable income stream for the company as they pay regular interest payments until the redemption of the MTN. Tex Cycle said it has been actively involved in the investment in unit trust, including money market fund and bond, which offered an average return of 2.51% to 7.09% per annum in the past years. (The Malaysian Reserve)

Market Update

• The Dow Jones Industrial Average rose to a new high as investors awaited fresh inflation and earnings data. The index advanced 125.69 points or 0.3% but the S&P 500 inched lower by 0.1%. Meanwhile, the Nasdaq Composite slid 0.3%. Salesforce dragged the Dow lower, with the cloud-based software stock sliding 1.4%. Shares of Hershey slipped less than 1% following a downgrade to underweight from Morgan Stanley on the back of softer demand. European markets kicked off the new trading week higher, as investors continued to monitor corporate earnings and the interest rate outlook. Food delivery firm Just Eat was the top performer, up 8.8% after Deutsche Bank raised its target price on the stock. Siemens Energy was up 5.7% on its own ratings upgrades from several analysts. It comes after the renewables firm posted a swing to profit and higher orders. The German DAX and France’s CAC were up 0.7% and 0.6% respectively. Asia markets were mixed to start a holiday-shortened week for most markets. Many major stock markets in Asia-Pacific were closed including China, Hong Kong, Taiwan, South Korea, Singapore and Malaysia.

Source: PublicInvest Research - 13 Feb 2024