HEADLINES

Economy

US: Corporate debt euphoria could stall as Fed tightens liquidity. Seemingly endless demand for US top-rated corporate debt has created unease among some investors who think a selloff could be on the cards if liquidity conditions worsen later this year. Expectations of a benign outcome for the US economy despite high interest rates have fuelled a search for yields and supported demand for credit. So far this year investment-grade rated companies have raised record amounts of debt while credit spreads, or the premium companies pay over US Treasuries for issuing bonds, are at their tightest in years. (Reuters)

US: Powell to face pressure on rates from democrats, bank rules from republicans. Jerome Powell faces heightened pressure this week from Democrats who want interest-rate cuts to keep the economy humming in an election year and Republicans who want him to scrap a plan to boost bank capital. The Fed chair heads to Capitol Hill for his semiannual testimony before Congress, two years after the central bank began its aggressive battle against surging inflation. With the economy powering along and inflation inching toward the Fed’s sweet spot, Powell will make the case for why officials are in no rush to lower rates. Meanwhile, some Democrats who’ve tried to avoid bullying the Fed are growing impatient. (Bloomberg)

EU: Swiss National Bank posts loss in 2023. The Swiss National Bank reported net loss in 2023 due to higher interest rates but the loss was considerably below the 2022 loss, data showed. The bank posted a net loss of CHF3.2bn in 2023 compared to a loss of CHF132.5bn in 2022. The profit on foreign currency positions was CHF4.0bn and a valuation gain of CHF1.7bn was recorded on gold holdings. The loss on Swiss franc positions totaled CHF8.5bn, reflecting higher interest payments of deposits. For the second year in a row, the SNB would not make a payout to the government and regional cantons. (RTT)

EU: German plant & machinery orders decline 10% in Jan. German manufacturers continued to receive fewer orders for plant and machinery in Jan compared to a year ago, the mechanical engineering industry body. New orders for plant and machinery decreased 10.0% YoY at the start of the year. Domestic orders fell 11.0% YoY, and foreign demand shrank 9.0%. Demand from euro area countries declined 19.0%, and orders from non-euro countries decreased 5.0%. (RTT)

EU: Spain unemployment declines in Feb. Spain's unemployment declined notably in Feb, data released by the labor ministry showed. Unemployment decreased by 7,452 from Jan to the 2.76m, which was the lowest since 2008 for the month of Feb. Compared to the same period last year, unemployment declined 150,607. By economic sectors, data showed that unemployment in services fell 8,548 and by 2,433 in construction. In industry, unemployment slid 1,865 and by 315 people in agriculture. Unemployment among young people aged below 25 years increased by 6,601 or 3.28% from the previous month. (RTT)

UK: ECB’s Goldilocks inflation vision tested by data drip feed. The ECB’s hope that euro-zone wages rise just enough to fuel economic expansion, without reigniting inflation, will be put to the test by a slow drip of data releases that will determine when interest rates can safely be lowered. While new quarterly projections to be unveiled at this week’s policy meeting will reveal a slightly softer outlook for prices, the focus of officials is squarely on salaries, which are still advancing at more than double the 2% inflation target. (Bloomberg)

China: Expected to target GDP growth of around 5% in 2024. China is expected to set its annual growth rate for 2024 at around 5% when the national legislature meets this week, a fairly ambitious target for a government grappling with severe economic challenges. Almost all of the 27 economists surveyed by Bloomberg about the upcoming annual National People’s Congress session expect Beijing to announce a growth target similar to 2023’s, albeit one that will be harder to reach given a higher base of comparison. Economists polled in a separate, broader survey expect the economy to grow about 4.6% in 2024. (Bloomberg)

South Korea: Manufacturing sector fades in Feb. The manufacturing sector in South Korea continued to expand in Feb, albeit at a slower pace, the latest survey from S&P Global revealed with a manufacturing PMI score of 50.7. That's down from 51.2 in Jan, although it remains above the boom-or-bust line of 50 that separates expansion from contraction. Manufacturers signaled a second successive monthly increase in production volumes. The rate of growth eased from that seen in Jan and was only marginal. Higher output volumes were frequently linked to rising new orders and the mass production of new products. Order book volumes rose for the second time in as many months in Feb. (RTT)

Markets

Deleum: Eyes regional growth with USD7m acquisition. Deleum is seeking to acquire a 70% stake in valves company OSA Industries Indonesia (OSAII) for USD7m (RM33.1m) to fortify its power and machinery business in Indonesia. The acquisition by wholly owned Deleum Services SB represents 70% of OSAII’s total valuation of USD10m, subject to due diligence and finalisation of definitive agreements. Deleum has entered the heads of agreement (HOA) with five parties, including OSAII and its shareholders Ong Siow Aik and OSA Industries Pte Ltd, to undertake due diligence on the acquisition target. (The Edge)

Iskandar Waterfront: Unveils RM4bn 10-year plan for JB developments. Iskandar Waterfront City has revealed a comprehensive 10-year development roadmap, featuring three major projects in Johor Bahru, collectively valued at RM4.3bn. The extensive plan encompasses the RM3.5bn Tebrau Bay waterfront township, the RM500m mixed-use development Danga Rivera, and the RM330m mixed-use project Danga Heights. In the initial five years, the first phase of these projects, covering a combined 63 acres, is projected to yield a total gross development value of RM1.8bn. (The Malaysian Reserve)

Ge-Shen: Buys 40% in Local Assembly after LTKM scraps RTO with the EMS firm. Ge-Shen Corp plans to buy a 40% stake in electronics manufacturing services (EMS) firm Local Assembly SB for RM48m cash, to be partly-funded via proceeds from a private placement. Ge-Shen has inked an agreement with Local Assembly’s co-founders Chai Voon Sun, Gurmakh Singh Ajmer Singh and Wee Thian Song for the stake buy. Its investment into Local Assembly marks its move to diversify into EMS. (The Edge)

HCK Capital: Expands land portfolio with RM34m acquisition. HCK Capital Group has finalised the acquisition of a 19,243- square-meter land parcel in Bukit Raja, Selangor, from Ecofirst Worldwide SB for RM34m.The move is positioned as a strategic initiative to bolster the group’s land assets and enhance prospective development gains. HCK anticipates this purchase to play a pivotal role in augmenting its landbanks and optimising future development profits. The company pledges to closely monitor its investment in the acquired land, deploying effective measures, including prudent management and efficient operating procedures, to navigate potential challenges. (The Malaysian Reserve)

SMRT: Secures ATM infrastructure job in Philippines. The project will take place over three years for each of the sites to be designated by Pito AxM, commencing from the installation date of each site. The installation of all the designated sites shall be done in the year 2024. There is no fixed contract sum as NTSI will bill according to the work done. During the tenure of the Project, NTSI shall fully manage the network infrastructure at all the ATM sites to be installed with relevant specifications stipulated as Priority (Wireless) Support.

Masteel: Appoints JCorp president as chairman. Malaysia Steel Works Kl (Masteel) has appointed Datuk Syed Mohamed Syed Ibrahim as its chairman of the board, effective 1 March 2024.The integrated steel manufacturer said Syed, who is currently serving as president and chief executive of Johor Corporation and chairman of JLand Group, positions him as an ideal leader to guide Masteel in its next phase of growth. (StarBiz)

MARKET UPDATE

The FBM KLCI might open weaker today after Wall Street stocks closed lower yesterday, backing away from record highs, while US Treasury yields ticked higher as investors looked ahead to key jobs data and Federal Reserve Chair Jerome Powell’s congressional testimony later in the week. After European stocks backed off from record highs, the major US equity indices followed suit, failing to eke out further gains following Friday’s record-setting rally. The Dow Jones Industrial Average fell 97.55 points, or 0.25%, to 38,989.83, the S&P 500 lost 6.13 points, or 0.12%, to 5,130.95 and the Nasdaq Composite dropped 67.43 points, or 0.41%, to 16,207.51. European shares settled just south of all-time highs as investors digested recent gains and looked ahead to the European Central Bank’s monetary policy meeting on Thursday. The panEuropean STOXX 600 index lost 0.03%, and MSCI’s gauge of stocks across the globe shed 0.01%.

Back home, Bursa Malaysia pared earlier gains to close marginally higher on Monday as selling emerged in late trading while most regional markets also eked out narrow gains. At the closing bell, the FBM KLCI rose 1.25 points to close at 1,539.27 from last Friday's (March 1) close of 1,538.02. Emerging market stocks rose 0.51 %. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.57% higher, while Japan’s Nikkei rose 0.50%.

Source: PublicInvest Research - 5 Mar 2024