HEADLINES

Economy

US: Fed policymakers stick to three-rate-cut view in '24, but barely. US central bankers still anticipate cutting interest rates three times this year, according to the median of new economic projections published, but overall have become more hawkish than three months ago when they last published forecasts. Nine of the Fed's 19 policymakers see three quarter-point rate cuts this year, and nine see two or less. Only one penciled in more cuts than the median, compared with five in Dec. The new projections suggest policymakers are more inclined to keep rates higher for longer to make sure inflation does not stall out above their 2% goal, or flare up again. By the end of 2025, policymakers anticipate a policy rate of 3.9%, according to the median of their projections, implying an additional ¾ ppts cuts next year. In Dec, the median policymaker wrote down an end-2025 rate of 3.6%. (Reuters)

US: Fed's Powell says balance sheet drawdown taper coming soon. The Federal Reserve is nearing a decision on slowing the pace of its balance sheet run-off, central bank Chair Jerome Powell said, a tapering move that may allow it to shed more bonds than it once expected. Powell's remarks, the most explicit so far about plans to slow a process that has seen about USD1.4tr of bonds roll off the Fed's balance sheet, was seen by several Wall Street analysts as a signal that a tapering plan will be unveiled as early as the Fed's next meeting on April 30-May 1. Powell was addressing the central bank's ongoing efforts to reduce the size of its holdings, commonly referred to as quantitative tightening, or QT. The Fed is seeking to reduce the size of its holdings in a way that will ensure the financial system has enough liquidity for the Fed to retain firm control over the federal funds rate, its chief tool to influence the economy’s momentum, and to allow for normal levels of volatility in money market rates. (Reuters)

EU: Future German budgets to be stretched by aging population - German Finance Minister. The costs of an aging population will put pressure on future German budgets and action is needed now to rein in public spending, Germany's finance minister Christian Lindner. The German ministry of finance submitted a report on the sustainability of public finances, due once during the government's term in office, calling for a normalisation of public spending after years of higher expenses due to the pandemic and the energy crisis. The report shows the consequences of the aging of the population on public finances. Under unfavourable conditions, age-related expenditure could climb from 27.3% of GDP in 2022 to 36.1% in 2070. Under a more positive scenario, that figure could be 30.8%. (Reuters)

UK: Easing inflation keeps BoE on track for rate cuts later in 2024. British inflation slowed in Feb, keeping the BoE on track to start cutting interest rates in the months ahead and offering some better economic news to Prime Minister Rishi Sunak before an election expected later this year. Consumer prices rose by 3.4% in annual terms after a 4.0% increase in Jan, the weakest rate of inflation since Sep 2021. A Reuters poll of economists - and the BoE's own forecast published last month - had pointed to an annual rate of 3.5%. Food and prices at eateries were the biggest downward drags, offset by motor fuels. Core inflation, which excludes energy, food and tobacco prices, also slowed, dropping to 4.5% from 5.1% in January. The Reuters poll had pointed to a reading of 4.6%. (Reuters)

Japan: BOJ's next rate hike in spotlight as investors eye July or Oct. After the Bank of Japan decided to end negative interest rates on Tuesday, the market's attention is turning to whether the bank will implement more rate hikes before the end of the year. With the yen weakening sharply following the BOJ announcement, some expect the central bank will be forced to act sooner rather than later. Typically, higher interest rates at home would strengthen a currency. But BOJ Gov. Kazuo Ueda on Tuesday said the bank would maintain an accommodative policy and "proceed slowly" on raising rates. Market players responded to what they saw as a dovish signal by selling yen. (Nikkei Asia)

Japan: Reuters Tankan indicates business confidence in economy is improving. Confidence at big Japanese companies rebounded to a three-month high in March, and the service-sector mood rose to a seven-month high, a Reuters poll showed, in a sign business are growing more optimistic for a recovery in the economy. The monthly Reuters Tankan survey, which serves as a key indicator for the BOJ’s quarterly tankan survey, due on April 1, comes days after the central bank ditched years of unconventional easing in a shift towards normalising policy. The headline manufacturers' sentiment index stood at plus 10 in March, versus minus 1 in the previous month, reflecting gains in the auto industry, oil refining and chemicals. As for manufacturers, the Reuters Tankan sentiment index was 2 points lower than three months ago, likely indicating a slight deterioration in the BOJ tankan's manufacturing sector. (Reuters)

China: Shenzhen sees trade swell, with ‘impressive’ volumes to the US amid tech war. China’s southern tech hub saw a big rise in exports during the first two months of the year, buoyed by electric-vehicle demand and an influx of deals with countries included in the Belt and Road Initiative. The value of goods shipped from the city during the two-month period reached RMB441.4 bn (USD61.3 bn), which marked a YoY increase of 53.1%. Meanwhile, the value of imports rose by 31.9%, to RMB233.7 bn. The combined total value of foreign trade, at just over RMB675 bn, was up 45% from a year prior in the home base of US-sanctioned telecoms leader Huawei Technologies, tech giant Tencent, electric-vehicle firm BYD and drone maker DJI. (South China Morning Post)

Markets

FM Global Logistics: Buys two more plots of land in Setia Alaman Industrial Park for RM37.7m. FM Global Logistics Holdings is buying two more plots of freehold land totalling 5.7 acres in the Setia Alaman Industrial Park, Klang, from property developer Petaling Garden SB for RM37.7m, cash, or RM153 per sq ft. The latest acquisition comes shortly after the international freight services provider's announcement in Jan that it was buying 5.7 acres of land in the same industrial park from Petaling Garden, also at RM153 per sq ft, for RM37.9m. (The Edge)

Master Tec: Gets UMA query less than two months after listing. Newly-listed Master Tec Group’s recent sharp rise in its share price has attracted scrutiny from Bursa Malaysia, which issued an unusual market activity (UMA) query to the Melakabased electricity cable maker. Investors were advised to take note of Master Tec’s reply to the UMA query. Master Tec was listed on ACE Market less than two months ago on 29 Jan this year, with an IPO price of 39 sen. (The Edge)

Kelington: In Terengganu govt land deal. Kelington Group, via its 90.7% owned subsidiary, Ace Gases SB, has entered into an agreement with Terengganu State Economic Development Corp to lease a parcel of land measuring 130,678.86 sq ft in Kerteh, Terengganu. Under the agreement, the group will lease the parcel of land for an initial term of 30 years, with a further 30-year extension option, starting from 1 Feb 2024 to 31 Jan 2084. The parcel of land is conveniently located adjacent to the group’s liquid carbon dioxide manufacturing plant. (StarBiz)

Guan Chong: Hunts for beans amid supply panic. Guan Chong, one of the world’s biggest cocoa processors, is scouting for beans worldwide as bad weather and disease pummeling crops in top West African growers send prices to a record. It is looking to procure cocoa from countries such as Ecuador, Peru and Indonesia due to worries that some sellers in heavyweights like Ivory Coast and Ghana may default on supply contracts. The world is heading for a third year of supply deficit because of poor harvests in major growers. (StarBiz)

SCGM: Eyes acquisition of Eramas Global to revamp cash company status. SCGM has initiated an agreement to acquire the entire equity interest in Eramas Global Group SB. The move will serve as part of its regularisation plan aimed at addressing SCGM’s status as a cash company. The purchase consideration is yet to be determined, with SCGM considering settlements through cash payments or the issuance of new ordinary shares at an issue price of 61.5 sen per share. (The Malaysian Reserve)

DNeX: Extends license, expand North Sea ops. Dagang NeXchange (DNeX) and Hibiscus Petroleum announced the extension of License P2451, held by its subsidiary Ping Petroleum UK PLC, for a further 30 months until 30 Sept 2026. The extension, subject to achieving an approved field development plan and production consent by the given deadline, expands DNeX’s operations in the North Sea. Ping Petroleum holds a 42.5% stake in the license. (The Malaysian Reserve)

MARKET UPDATE

The FBM KLCI might open higher today after Wall Street stocks cheered the Federal Reserve’s policy announcement Wednesday, lifting key indices to records after the central bank confirmed it still expects interest rate cuts in the coming months. All three major indices finished at records, with the Nasdaq leading the group with a 1.3% gain to 16,369.41. The Dow Jones Industrial Average jumped 1.0% to 39,512.13, while the broad-based S&P 500 climbed 0.9% to 5,224.62. The Fed as expected opted to keep interest rates unchanged for a fifth consecutive meeting. The central bank stayed the course in its forecast for three rate cuts in 2024, despite recent inflation data that topped estimates. London's FTSE 100 closed flat on Wednesday with caution looming ahead of the US Federal Reserve's policy decision, while softer domestic inflation data cemented bets of interest rate cuts this year from the Bank of England. The globally-focussed FTSE 100 held its ground at 7,737.38 points with traders gearing up for the Fed's monetary policy decision at 1800 GMT and remarks on the timing of interest rate cuts.

Back home, Bursa Malaysia continued its downtrend to close lower for the second consecutive day as the markets anxiously awaited the US Federal Open Market Committee (FOMC) decision later in the night. The FBM KLCI also remained in consolidation mode due to a correction following the recent prolonged rally. At the closing bell, the KLCI fell 9.17 points to 1,535.79 from Tuesday’s close of 1,544.96. Elsewhere, Chinese shares also rose slightly. The Shanghai Composite index gained 0.5%, while Hong Kong's Hang Seng index crept 0.1% higher.

Source: PublicInvest Research - 21 Mar 2024