HEADLINES

Economy

• US: Import, export prices unexpectedly increase in Jan. Unexpected increases in US import and export prices in the month of Jan. Import prices climbed by 0.8% in Jan after falling by a revised 0.7% in Dec. Economists had expected import prices to come in unchanged, matching the flat reading originally reported for the previous month. Import prices rose for the first time since Sept 2023 and saw the largest monthly advance since surging by 2.9% in March 2022. (RTT)

• US: Retail sales tumbled 0.8% in Jan, much more than expected. Consumer spending fell sharply in Jan, presenting a potential early danger sign for the economy. Advance retail sales declined 0.8% for the month following a downwardly revised 0.4% gain in Dec. A decrease had been expected, economists were looking for a drop of 0.3%, in part to make up for seasonal distortions that probably boosted Dec’s number. However, the pullback was considerably more than anticipated. Even excluding autos, sales dropped 0.6%, well below the estimate for a 0.2% gain. (CNBC)

• EU: Eurozone trade surplus declines on weak exports. The euro area trade surplus declined to a three-month low in Dec on falling exports. The trade surplus fell to a seasonally adjusted EUR13.0bn from EUR15.1bn in the previous month. The decline was driven by the 0.8% monthly fall in exports as imports remained unchanged from the previous month. On an unadjusted basis, the trade balance posted a surplus of EUR16.8bn in contrast to a deficit of EUR8.5bn in the same period last year. For Dec, the expected surplus was EUR21.5bn. (RTT)

• EU: Spain inflation unrevised at 3.4%. Spain's consumer price inflation increased as initially estimated in Jan. Consumer price inflation rose to 3.4% from 3.1% in the previous month. Housing costs grew 1.5% annually in Jan compared to a 5.9% decline in Dec. This was largely attributed to a 9.6% surge in electricity costs. Prices of food and non-alcoholic beverages alone increased, notably by 7.4% from last year. Underlying inflation moderated for the sixth successive month in Jan. The core inflation was 3.6%, down from 3.8% in Dec. (RTT)

• UK: Economy falls into recession. Britain's economy fell into a recession in the second half of 2023. GDP contracted by 0.3% in the three months to Dec, having shrunk by 0.1% between July and Sept. 4Q contraction was deeper than all economists' estimates, which had pointed to a 0.1% decline. GBP weakened against USD and EUR. Investors added to their bets on the BoE cutting interest rates this year and businesses called for more help from the government. (Reuters)

• Japan: Industrial output rebounds 1.4%, less than estimated. Japan's industrial production expanded less than initially estimated at the end of the year. Industrial production climbed 1.4% on a monthly basis, in contrast to the 0.9% decrease a month ago. In the initial estimate, the rebound was 1.8%. Further, the latest rate of growth was the quickest since June 2023, when output had risen 2.4%. Shipments grew 2.2% from the previous month, while inventories and inventory ratio declined 1.2% and 2.9%, respectively. (RTT)

• Japan: Unexpectedly slips into recession. Japan unexpectedly slipped into a recession at the end of last year, losing its title as the world's third-biggest economy to Germany and raising doubts about when the central bank would begin to exit its decade-long ultra-loose monetary policy. Analysts are warning of another contraction in the current quarter as weak demand in China, sluggish consumption, all point to a challenging path to an economic recovery. Japan's GDP fell an annualised 0.4% in the Oct-Dec period after a 3.3% slump in the previous quarter. (Reuters)

• South Korea: Export prices jump 3.2% on month in Jan. Export prices in South Korea advanced 3.2% on month in Jan, after slipping 0.1% in Dec. Individually, agricultural, forestry and marine export prices rose 0.4% on month and manufacturing products climbed 3.2%. Import prices were up 2.2% on month after dropping 1.7% in Dec. Individually, import prices for raw materials gained 3.5% on month, while intermediate goods were up 1.6%, capital goods rose 1.2% and consumer goods added 1.8%. (RTT)

• Australia: Unemployment hits 2-year high as jobs growth sputters. Australian employment was surprisingly weak in Jan, while the jobless rate climbed to a two-year high in another sign the labour market was loosening in the face of a slowing economy and subdued consumer demand. Net employment rose just 500 in Jan from Dec, when it dived 62,800. Market forecasts had been for an increase of around 30,000, though the series has been very volatile in recent months. Full-time employment added 11,100 in Jan, after sliding the month before. The jobless rate rose to 4.1%, topping forecasts of 4.0% and the highest since Jan 2022. The participation rate held at 66.8%, while hours worked fell a sharp 2.5%. (Reuters)

Markets

• Uzma (Outperform, TP:RM1.40): Gets contract continuation from Petronas Carigali. Uzma Bhd’s wholly owned subsidiary Uzma Engineering SB has accepted a term contract from Petronas Carigali SB for portable water injection module (PWIM) works for the Sepat platform. Uzma said the contract comprises “upgrading and modification of the existing PWIM unit, decommissioning of PWIM, reinstatement of company facilities at Sepat A Well Head Platform to the original condition as well as a marine spread for demobilisation”. The contract is a continuation of the previous award which expired on 11 Jan 2024 and is set to become effective on 12 Jan 2024 the company said. (Bernama)
  
  Comment: The first PWIM contract for Sepat platform was awarded in Jun 2020. The contract extension is required after Petronas Carigali conducted assessment on the well to remain producing oil for the next 2 years. We are positive about the developments as this validates Uzma’s specialization in brownfield especially on well services and production enhancement. We maintain our recommendation on Uzma with Outperform call and TP RM1.40.
   
• GFM Services: Acquires rest and service area project firm for RM23m. GFM Services is acquiring the entire stake in Era Gema Bina SB for RM23 million to expand into the highway rest and service area (RSA) business. Era Gema has been awarded the rights by the Malaysian Highway Authority (Lembaga Lebuhraya Malaysia, LLM) to undertake the proposed development of an RSA on a 1.74 hectares (ha) land located at Sungai Muda, Penang. The acquisition comes with plans for GFM to position as the facility manager of the premise upon completion by 2027. (The Edge)
   
• Sunway: Sunway unit, Hoi Hup win Singapore land tender. Sunway Bhd’s subsidiary Sunway Developments Pte Ltd (SDPL) and Hoi Hup Realty Pte Ltd have bagged a tender for two hectares at Plantation Close in Tengah, Singapore, for a condominium project worth RM1.5bn. Sunway said the land parcel was awarded by the Housing and Development Board of Singapore for a 99-year lease term executive condominium housing development. “Hoi Hup and SDPL will incorporate a joint venture, in which Hoi Hup and SDPL will have an equity interest in the proportion of 65:35 at a later date, to undertake the development of the land,” it said in a filing. (Bernama)

• F&N: Leases land in Cambodia to set up dairy product manufacturing facility. Fraser & Neave Holdings (F&N) is leasing a parcel of industrial land in Cambodia for 50 years for USD3.86m (RM18.5m) to set up a manufacturing facility for dairy products. F&N said the group has entered into an agreement with Suvannaphum Investment Co Ltd to lease the land measuring 32,200 sqm in the Suvannaphum Special Economic Zone. In a filing with Bursa Malaysia on Thursday, F&N said the manufacturing facility will produce sweetened beverage creamer in cans and pouches. (The Edge)

• GIIB Holdings: Returns to the black on land disposal proceeds. GIIB Holdings Bhd has returned to the black, with a net profit of RM2.3m for the second quarter ended 31 Dec 2023 (2Q24), compared to a net loss of RM11.99m a year ago. The earnings bump was mainly due to revenue recognised on a land disposal of RM14m in the current quarter, the company said in a filing. (New Straits Times)

MARKET UPDATE

• The FBM KLCI might open higher today after global stock indices advanced, Treasury yields declined and the dollar weakened against the Japanese yen yesterday after a larger-than-expected drop in US retail sales in January prompted a slight repositioning of expectations for interest rate cuts. The US Commerce Department report showed retail sales dropped 0.8% last month, the biggest fall since February 2023. However, winter storms were seen as possible factors affecting the data, with economists noting that a fairly healthy labour market remains supportive for consumer spending. A separate report showed initial jobless claims fell 8,000 to a seasonally adjusted 212,000 for the week ended February 10, slightly below the 220,000 estimate. The Dow Jones Industrial Average rose 348.85 points, or 0.91%, to 38,773.12, the S&P 500 gained 29.11 points, or 0.58%, to 5,029.73 and the Nasdaq Composite gained 47.03 points, or 0.30%, to 15,906.17. MSCI’s gauge of stocks across the globe rose 5.85 points, or 0.79%, to 750.80. The STOXX 600 index gained 0.68%.
  
  Back home, shares on Bursa Malaysia closed broadly higher on Thursday, with buying momentum seen in the broader market, although the FBM KLCI ended 0.06% lower. At the closing bell, the benchmark FBM KLCI lost 0.95 of a point to 1,528.38 from Wednesday's close of 1,529.33. Earlier yesterday, Japan’s Nikkei rallied to its highest level in 34 years after adding 1.21%, and the stock index now sits just 800 points below its all-time high in 1989 that marked the peak of Japan’s so called “bubble economy.” Elsewhere, the Hang Seng index tacked on 0.41% and the Shanghai Composite index rose 1.28%.

Source: PublicInvest Research - 16 Feb 2024