Economy

• US: Consumer prices rise 0.3% in Jan, slightly more than expected. Consumer prices in the US increased by slightly more than expected in the month of Jan. CPI rose by 0.3% in Jan after inching up by 0.2% in Dec. Economists had expected consumer prices to edge up by 0.2%. The slightly bigger than expected monthly increase in consumer prices was partly due to a continued advance by shelter costs, which climbed by 0.6% in Jan after rising by 0.4% in Dec. Food prices also rose by 0.4% during the month amid higher prices for both food at home and food away from home, while energy prices slid by 0.9% amid a steep drop in gasoline prices. (RTT)

• US: Rising rents push inflation higher; rate cuts still expected in 2024. US consumer prices rose more than expected in Jan amid a surge in the cost of rental housing, but the pick-up in inflation did not change expectations the Fed will start cutting interest rates in the first half of this year. The increase in prices was the largest in four months and occurred against the backdrop of labour market strength and economic resilience. Jan is typically a strong month for inflation readings as businesses push through prices increases at the start of the year. (Reuters)

• EU: Germany to lower 2024 economic growth forecast. Germany's federal government will significantly reduce its forecast for growth in the German economy to just 0.2%. Factors contributing toward the depressed figure, down from Oct's forecast of 1.3%, included low growth in the global economy and a German constitutional court ruling that blew a hole in the country's budget. The gloomy prospects for Germany's economy in 2024 come after the country's GDP shrank by 0.3% in 2023 under the pressure of high inflation, rising interest rates and a weak global economy. (Reuters)

• UK: Unemployment rate falls in 4Q. The UK jobless rate declined in the 4Q. The ILO unemployment rate fell to 3.8% in 4Q from 3.9% in the prior period. The claimant count increased 14,100 on month to 1.6m in Jan. The estimated number of vacancies declined 26,000 sequentially to 932,000 in three months to Jan. At the same time, payroll employees for Jan grew 48,000 on the month to 30.4m. (RTT)

• UK: Wage growth slows again but BoE likely to remain on alert. British pay grew at the weakest pace in more than a year at the end of 2023 but the slowdown was probably not significant enough to spur the BoE into quicker action towards cutting interest rates. Sterling strengthened against the US dollar and the euro and investors slightly scaled back their bets on BoE rate cuts in 2024. Wages excluding bonuses grew by 6.2% in the last three months of 2023 compared with the same period a year earlier. That was down from 6.7% in the three months to Nov and represented the slowest increase since the three months to Oct 2022. (Reuters)
• Australia: Business conditions weaken in Jan. Australia's business conditions weakened in Jan and confidence remained weak despite a marginal improvement. The business conditions index dropped 2 points to 6 in Jan. All three components namely trading, profitability and employment conditions weakened from the previous month. The gradual easing in business conditions continued in Jan and the index moved just below its long-run average. The easing in conditions in Jan was led by a pullback in the services sectors though conditions in retail also remain weak. The business confidence index gained 1 point to 1 from 0 in Dec. The improvement was largely driven by manufacturing and construction, partly offset by falls in wholesale and retail confidence. (RTT)
• Japan: GDP set to confirm slip to fourth-largest economy last year. Japan’s latest growth figures are set to confirm it slipped to fourth-largest economy in the world last year, a development that reflects the impact of its feeble currency and ageing demographics. While the economy is seen returning to annualised growth of 1.2% in 4Q after a bruising contraction in the summer, figures for the calendar year are almost certain to show the value of output falling behind Germany’s in dollar terms. India’s economy, meanwhile, is poised to overtake both in the next few years. (Bloomberg)
• Japan: Machine tool orders plunge 14.1%. Japan's machine tool orders declined for the thirteenth straight month in Jan, largely due to weak domestic demand. Machine tool orders fell 14.1% YoY in Jan, which was faster than the 9.6% decline in the previous month. Domestic demand was 29.7% lower in Jan compared to last year, and foreign orders contracted by 6.2%. On a monthly basis, machine tool orders fell 12.8% in Jan, reversing a 9.7% growth in Dec. (RTT)

Markets

• Dayang Enterprise (Outperform, RM2.50): Gets contract extensions for supply of three work boats to Petronas Carigali. Dayang Enterprise Holdings said its wholly owned DESB Marine Services SB has secured contract extensions for the supply of three accommodation work boats to Petronas Carigali SB The Dayang Zamrud vessel’s contract extension spans 279 days from the commencement date on 27 Oct 2023. Meanwhile, the extensions for the Dayang Pertama and Dayang Berlian vessels began on 10 Oct and 25 Oct respectively, with durations of 296 days and 281 days. (The Edge)
  
  Comment: The original contracts were awarded in 1Q and 2Q 2023. In addition of three vessels in the news, we expect Dayang Opal and Dayang Ruby would also secure contract extension from Petronas Carigali. We are positive with the contract extensions as it indicates the offshore support vessel (OSV) market remains tight. Maintain Outperform and TP RM2.50
• Westports: Considers new investors for expansion. Westports Holdings, is considering external strategic investors to help fund a RM39.6bn expansion that will see capacity nearly double in coming decades. “We would be open to it if it’s someone who can come and add value to us,” executive chairman Datuk Ruben Emir Gnanalingam said. “We have not ruled anything out.” The company is also looking at a dividend reinvestment plan and borrowing to help fund the expansion of the facility in Klang, he said in an interview at the site. Westports’ expansion, which kicks off with the first of eight new container terminals becoming operational in 2027, echoes similarly ambitious plans from neighbours across the Malacca Strait, one of the world’s busiest sea routes. (The Star)
• Awantec: Seals RM294m deal as Redtone tech partner. AwanBiru Technology (Awantec) has entered into a service agreement with RedtoneEngineering & Network Services Sdn Bhd valued at RM 294.3m. In an exchange filing, Awantech said its wholly owned subsidiary Awan Biru System SB has entered into the agreement with Redtone for just under five years until 30 Nov 2028. Awantec’s subsidiary will be responsible for providing Cloud computing solutions and services which include products such as Google Workspace Enterprise and Google Cloud platform for the government’s unified communication and collaboration project, managed by Redtone known as, MyGovUC3.0. (The Malaysian Reserve)

• Ireka Corp: Sued by RHB Bank over RM6.53m payment default. Ireka Corp said RHB Bank has filed a lawsuit against the company, claiming RM6.53m over an alleged default in a revolving credit facility. In a filing with Bursa Malaysia, Ireka said the bank had granted the revolving credit facility of RM6.5m in 2015 and 2017 to Ireka's subsidiary Ireka Engineering & Construction SB (IEC), which has been under liquidation since March 2023. In June 2023, Ireka entered into a settlement agreement with RHB Bank to pay off all monies owed by IEC under the banking facility. (The Edge)

• Kitacon: Wins RM65.4m property job from Worldwide. Kumpulan Kitacon secured a RM65.43m job from Selangor state government’s Worldwide Holdings Bhd to build 182 units of landed residences. The group said in a filing with Bursa Malaysia yesterday that its unit, Kitacon SB, has accepted a letter of award from Worldwide to undertake a proposed development in Selangor Cyber Valley, Dengkil, Selangor. (The Star)

MARKET UPDATE

US stocks sank after the worse-than-expected inflation datadampened hopes of interest rates cut in May. Chip stocks such asMicron Technology, Advanced Micro Devices and Broadcomdropped between 2-5%. Shares of Coca-Cola gained 1% as thecompany beat expectations for fourth quarter revenue. A LaborDepartment report showed US consumer prices rose more thanexpected in January amid rise in the costs of shelter andhealthcare. The Dow Jones Industrial Average lost 524.63 pointsor 1.4%, its worst session since March 2023 on a percentage basis.The S&P 500 slid 1.4% while the Nasdaq Composite fell 1.8%.European markets were also lower as investors assessed incomingcorporate earnings reports as well as US inflation data. The UK’sFTSE 100, German’s DAX and France’s CAC lost 0.8%, 0.9% and0.8% respectively. Asian shares mostly rose on Tuesday, asinvestors watched for the latest indicators on US inflation.Australia’s S&P/ASX 200 edged up nearly 0.1%, South Korea’sKospi jumped 1.2% while trading was closed in China, Hong Kongand Taiwan for the Lunar New Year holiday.

Back home, FBM KLCI added 19.09 points or 1.3% to close at 1,531.37. AwanBiru Technology has inked a RM294.3m service agreement with REDtone Digital Bhd to provide cloud computing solutions and services, which include products such as Google Workspace Enterprise and Google Cloud Platform, for the government’s unified communication and collaboration project, MyGovUC 3.0. REDtone secured the MyGovUC 3.0 contract worth RM398.1m last week from the Malaysian Administrative Modernisation and Management Planning Unit to provide unified communications solutions.

Source: PublicInvest Research - 14 Feb 2024