HEADLINES

Economy

US: Single-family housing starts, permits near two-year highs. U.S. single-family homebuilding rebounded sharply in Feb, hitting the highest level in nearly two years, boosted by mild temperatures and a persistent shortage of previously owned houses on the market. Single-family housing starts, which account for the bulk of homebuilding, surged 11.6% to a seasonally adjusted annual rate of 1.129m units last month. That was the highest level since April 2022. Overall housing starts increased 10.7% to a rate of 1.521m units in February. Economists polled by Reuters had forecast starts would rebound to a rate 1.425m units. Single-family building permits rose 1.0% to a rate of 1.031m units in Feb, the highest level since May 2022. Multi-family building permits rose 2.4% to a rate of 429,000 units. Building permits as a whole climbed 1.9% to a rate of 1.518m units. (Reuters)

EU: ECB's Kazaks 'comfortable' with market bets on three rate cuts this year. ECB policymaker Martins Kazaks said he was "comfortable" with investor bets on three interest rate cuts by the central bank by the end of the year. Many ECB policymakers have expressed support for a first reduction in borrowing costs from their current record highs, most likely in June, with the debate now focused on how many more cuts would follow. Money markets are pencilling in three cuts by Dec with some chance of a fourth, which would lower the 4% rate the ECB pays on bank deposits to 3.25% or 3.0%. Kazaks, who in the past resisted speculation about imminent rate reduction, told Reuters this time market pricing was in line with the ECB's own economic projections, which see inflation closing in on its 2% target by end of the year. (Reuters)

China: Seen leaving benchmark lending rates unchanged in March. China is widely expected to leave benchmark lending rates unchanged, a Reuters survey showed, as the central bank kept a key policy rate steady last week at a time when the broad economy is starting to show some signs of improvement. The loan prime rate (LPR) normally charged to banks' best clients is calculated each month after 20 designated commercial banks submit proposed rates to the People's Bank of China (PBOC). In a survey of 27 market watchers conducted this week, all respondents expected both the one-year and the five-year LPRs would stay unchanged. Most new and outstanding loans are based on the one-year LPR, which stands at 3.45%. (Reuters)

Japan: BOJ scraps radical policy, makes first rate hike in 17 years. The Bank of Japan (BOJ) ended eight years of negative interest rates and other remnants of its unorthodox policy, making a historic shift away from its focus on reflating growth with decades of massive monetary stimulus. While the move was Japan's first interest rate hike in 17 years, it still keeps rates stuck around zero as a fragile economic recovery forces the central bank to go slow on further rises in borrowing costs. The BOJ ditched a policy put in place since 2016 by former Governor Haruhiko Kuroda that applied a 0.1% charge on some excess reserves financial institutions parked with the central bank. The BOJ set the overnight call rate as its new policy rate and decided to guide it in a range of 0-0.1% partly by paying 0.1% interest to deposits at the central bank. (Reuters)

Japan: BOJ cuts maximum limit of JGB purchase amount after major policy shift. The Bank of Japan (BOJ) will scale back the maximum limit of its purchases of Japanese government bonds, after ending its radical stimulus policies of negative interest rates and yield curve control (YCC). The BOJ has been an aggressive bond buyer to defend its ultra-low rate policy. That has pushed its ownership to more than half the market, putting a squeeze on liquidity and impairing market function. The bank said it will continue its JGB purchases at broadly the same amount as before. However, it also made cuts to the stated maximum limit of bond purchase amounts. The changes will apply to all bond maturities and for the April-June period. For 5-10 year, JGBs, the BOJ will purchase up to JPY550bn, from JPY900bn previously. For 3-5 year bonds, it will purchase up to JPY500bn, compared with JPY750bn previously. (Reuters)

Australia: Central bank holds rates, waters down tightening bias. The Reserve Bank of Australia (RBA) kept rates at a 12-year high of 4.35% for a third straight meeting, and said it was not ruling anything in or out on policy. Markets had wagered heavily on a steady outcome given inflation has held at two-year lows and economic growth slowed to a crawl. That compared with the previous phrasing that "a further increase in interest rates cannot be ruled out". Governor Michelle Bullock declined to say whether policy has shifted to neutral at her post meeting briefing, saying risks are "finely balanced", and pushed back immediate rate cuts. (Reuters)

Taiwan: Central bank chief says inflation will be above 2% this year, but lower than 2023. Taiwan's CPI and core CPI will be above 2% this year due to higher food prices and possible electricity price increases, but will still be lower than last year, the island's central bank chief. "Even though electricity prices will rise this year, we estimate that both CPI and core CPI will gradually ease," central bank Governor Yang Chin-Long told parliament.Taiwan's CPI and core CPI rose 2.49% and 2.61% respectively in 2023, he added.” Yang's comments came after he said last week the central bank would probably not cut interest rates before June, as it may be necessary to raise the 2024 inflation forecast because of rising consumer prices. Taiwan's central bank is expected to hold its policy interest rate steady this week and to stay the course until early next year as it navigates ongoing concerns over inflation, according to economists in a Reuters poll. (Reuters)

Markets

Uzma (Outperform, TP:RM1.70): Bags contract extension to provide hydraulic worker unit at offshore Thailand. Uzma obtained a two-year contract extension from Medco Energi Thailand (Bualuang) Ltd for the provision of hydraulic worker unit (HWU) services and associated equipment service required for workover and well services activities at offshore Thailand. The extension, set to take effect on Wednesday, will remain valid till 19 March 2026. (The Edge)

Comments: Although there is no value being disclosed as the work order to be issued is based on call-out, we are positive on this development as it evidences the demand for Uzma’s HWU services remains solid. We also expect Uzma to benefit from the accelerated domestic capital expenditure from PETRONAS Activity Outlook. We reckon that Uzma potentially to secure another major HWU services for plug and abandonment activities contract given its position as one of the largest HWU local service providers. Maintain Outperform call and TP RM1.70

YTL Power: Set to deploy and manage Nvidia’s AI supercomputer in Johor. YTL Power International has set up YTL AI Cloud, a specialised provider of massive-scale graphics processing unit (GPU)-based accelerated computing, to deploy and manage one of the world’s most advanced supercomputers on Nvidia Grace Blackwell-powered DGX Cloud, an artificial intelligence (AI) supercomputer for accelerating the development of generative AI. (The Edge)

EITA Resources: Gets RM48m substation establishment job from TNB. EITA Resources’ 60%-owned subsidiary, TransSystem Continental SB (TSC), has received a letter of acceptance from Tenaga Nasional for the establishment of a transmission substation in Ayer Puteh, Perak, worth RM47.96m. EITA said TSC’s scope of works for the contract includes supply, erect, test and commissioning of a new 132 kilovolt conventional outdoor transmission substation. (StarBiz)

FGV: Gets sixth extension to comply with public shareholding spread requirement. FGV Holdings said it has been granted a further six-month extension until Sept 2 by Bursa Securities to comply with the public shareholding spread requirement. This marks the sixth time the plantation group has received an extension from the regulator to comply with the requirement. (The Edge)

Asdion: To buy 51% stake in Indoexpress. Asdion has proposed to acquire a 51% stake in PT Indoexpress Logistics (Indoexpress) for RM6m. Asdion said its 99% owned sub-subsidiary, PT Trans Infra Nusantara (PTTIN) has entered into a conditional share sale agreement (CSSA) with PTGDS for the acquisition of 51,600 ordinary shares, or 51% stake in Indoexpress. Upon completion of the acquisition, Indoexpress shall become a 51% owned subsubsidiary of Asdion. (StarBiz)

Bonia: To acquire 30% stake in ITSH for RM7.5m. Bonia Corp is proposing to subscribe to 6.2m shares, or a 30% stake in IT SEA Holdings SB (ITSH) for RM7.5m. Bonia said the proposed subscription, if materialised, will complement and increase Bonia’s range of product offerings to provide a wider assortment of products. This, the company said, will allow it to cater for the constant change and demands of the consumers in the fashion retail industry. (StarBiz)

MARKET UPDATE

The FBM KLCI might open higher today after US stocks rose Tuesday as the Federal Reserve kicked off its two-day policy meeting. Traders also kept an eye on Nvidia following key announcements from the tech giant. The Dow Jones Industrial Average gained 320.33 points, or 0.83%, to close at 39,110.76. The 30-stock benchmark registered its best day since Feb. 22. The S&P 500 gained 0.56% to close at 5,178.51 for a fresh record. Meanwhile, the Nasdaq Composite advanced 0.39% to end at 16,166.79. The central bank is expected to keep rates unchanged Wednesday. European shares were fairly muted, with the STOXX 600 and euro zone bond yields little changed.

Back home, Bursa Malaysia ended trading at an intraday low and snapped its three-day winning streak on Tuesday, following the lacklustre performance seen across the region. At the closing bell, the FBM KLCI fell 8.68 points to 1,544.96 from Monday’s close of 1,553.64. The benchmark index opened 2.05 points easier at 1,551.59 and reached its intraday high of 1,552.1 during the midmorning session. MSCI's world share index was little changed, and hovered near all-time highs. The day's big news was in Japan, where the BOJ heralded a new era as it shifted away from years of ultra-easy monetary policy. It also abandoned bond yield curve control and dropped purchases of riskier assets, including exchange-traded funds. Japan's Nikkei was choppy after the decision but closed 0.66% higher, buoyed by the weaker yen, while Japanese government bond yields fell.

Source: PublicInvest Research - 20 Mar 2024