PublicInvest Research

PublicInvest Research Headlines - 17 Apr 2024

PublicInvest
Publish date: Wed, 17 Apr 2024, 10:21 AM
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An official blog in I3investor to publish research reports provided by PublicInvest Research team.

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HEADLINES

Economy

US: Homebuilding retreats. Single-family housing starts, which account for the bulk of homebuilding, dropped 12.4% to a seasonally adjusted annual rate of 1.022m units last month. Data for February was revised higher to show single-family starts rebounding to a rate of 1.167m units instead of the previously reported 1.129m units. Starts for housing projects with five units or more plunged 20.8% to a rate of 290,000 units, the lowest level since April 2020. Overall housing starts plummeted 14.7%, the biggest drop since April 2020, to a rate of 1.321m units in March. Economists polled by Reuters had forecast starts would fall to a rate 1.487m units. (Reuters)

US: Manufacturing output increases in March; Feb data revised higher. Manufacturing output rose 0.5% last month after an upwardly revised 1.2% rebound in the prior month, the Federal Reserve said. Factory output was previously reported to have rebounded 0.8% in Feb. Economists polled by Reuters had forecast factory output rising 0.3%. Production at factories increased 0.8% YoY in March. It edged down at a 0.1% annualized rate in the first quarter after contracting at a 0.9% pace in the OctDec quarter. Manufacturing accounts for 10.4% of the economy. A survey from the Institute for Supply Management early this month showed manufacturing grew for the first time in 1.5 years in March. (Reuters)

EU: ECB policymakers stick with June rate cut plan. ECB policymakers continued to make the case for an interest rate cut in June as inflation remains on course to ease back to 2% by next year, even if the path for prices still proves bumpy. The ECB held rates at a record high last week but opened the door wide open to a June rate cut, batting back doubts about its resolve after market expectations retreated on unexpectedly high US inflation figures. "Barring major shocks and surprises, we should decide a first rate cut in early June, followed by others in a pragmatic and agile gradualism," French central bank chief Francois Villeroy de Galhau said in New York. ECB President Christine Lagarde echoed that message, arguing that inflation is easing much as the ECB had expected and fresh turbulence in the Middle East has so far had little impact on commodity prices. (Reuters)

UK: Jobs market cools again but worries remain for BoE. Regular wages excluding bonuses - which BoE is watching as it considers when to start cutting interest rates - grew by 6.0% compared with the same period a year earlier, only slightly weaker than a 6.1% rise in the Nov-to-Jan period. A Reuters poll of economists had forecast a sharper slowdown to 5.8%. The unemployment rate rose by more than expected to 4.2% from 3.9%, also suggesting a loss of momentum in the jobs market, but the Office for National Statistics (ONS) said it was still overhauling its survey which produces that figure and it was subject to volatility. Growth in total pay, which includes more volatile bonus payments, was unchanged at 5.6%. The Reuters poll had pointed to a slight slowdown to 5.5%. (Reuters)

China: Economy grew faster than expected in the March quarter. The world's second-largest economy grew 5.3% in JanMar from the year earlier, official data showed, comfortably above a 4.6% analysts' forecast in a Reuters poll and up from the 5.2% expansion in the previous quarter. On a quarterly basis growth picked up to 1.6% from 1.4% in the previous three months. Analysts have described as ambitious the growth target Beijing aims to accomplish with help of fiscal and monetary stimulus measures, noting last year's growth rate of 5.2% was likely flattered by a rebound from a COVID-hit 2022. That bounce, however, fizzled away under the weight of the property downturn, rising local debt and weak consumer spending. Beijing turned to the tried and tested spending on infrastructure and high-tech manufacturing to lift the economy. That however, raised concerns about public finances, prompting Fitch to cut its outlook on China's sovereign credit rating to negative last week. (Reuters)

China: New home prices decline at fastest pace since 2015. New home prices in March dropped 2.2% from a year earlier, marking the biggest decline since August 2015, and worse than a 1.4% fall in Feb, according to Reuters calculations based on National Bureau of Statistics (NBS) data. Prices fell 0.3% MoM, matching Feb's drop. Chinese authorities have been ramping up measures to prop up the troubled sector, including relaxing home purchase curbs, supporting urban village renovation, and pushing banks to quicken new loan approvals to cash-strapped developers. Analysts say many of these policies are piecemeal in nature or have only limited short-term impact, which in turn is keeping home buying sentiment in check and curbing a broader full-blown recovery. Declines in home prices worsened YoY in tier-one, tiertwo and tier-three cities. (Reuters)

South Korea: No rush for Bank of Korea to cut interest rates, says departing board member. The Bank of Korea (BOK) should not rush to lower interest rates as price stability remains the top policy priority for the central bank over slowing domestic demand, a departing board member said. "There is no need to lower interest rates in a rush because economic growth is projected to be above the potential growth rate, while there are several uncertainties and financial markets have been under accommodative conditions for a few months," Cho Yoon-je told a press conference. Cho said it was also important to bring inflation down to the central bank's target level of 2% as soon as possible to reduce the accumulated burden in recent years of high inflation. (Reuters)

Markets

Apex Healthcare (Neutral, TP: RM2.87): Commits to boosting R&D investment to 5% of annual manufacturing revenue. Apex Healthcare has pledged to allocate 5% of its total manufacturing revenue towards research and development (R&D) of new products. In 2023, the company invested RM8.5m in R&D, marking an 18% increase from the previous year, representing 3.2% of its manufacturing revenue. The group emphasised the goal to capitalise on patent cliffs by swiftly introducing generic options for expiring or off-patent molecules, aiming for revenue growth in the generic drugs market. (The Edge)

MyEG: Signs teaming agreement with HeiTech. MyEG Services and Heitech Padu, both linked to businessman Wong Thean Soon or T.S. Wong, have joined hands to “explore services” in the Malaysian information technology (IT) industry. The technology companies signed a teaming agreement to form an interim collaboration, slightly over a month after Wong emerged as a major shareholder in HeiTech. A key component of the collaboration will be “system integration of information and technology solution for identified projects to potential customers”, according to filings with the stock exchange made by both companies. (StarBiz)

Globetronics: In final talks with two potential customers for advanced packaging. Globetronics Technology is in advanced discussions with two potential clients interested in utilising advanced packaging technology. The group anticipates initiating memory and automotive product transfers with these clients, with some activities expected to commence in the second half of FY2024. Additionally, the company is eyeing a significant opportunity with the potential transfer of products from an optoelectronics company consolidating its production from Malaysia and China. (The Edge)

Comfort Gloves: Units go to court over RM99m additional tax demand. Two subsidiaries of Comfort Gloves — Comfort Rubber Gloves Industries SB (CRGI) and Gallant Quality SB (GQ) — have commenced legal action against the Inland Revenue Board (IRB) over an additional tax demand of RM99.3m. This demand stems from the IRB’s adjustment of the tax basis period, following Comfort Gloves’ change in its financial year end to Dec 31, 2021, despite prior approvals. (The Edge)

Jentayu: Aims to sign PPA by mid-year. Jentayu Sustainables is hoping to ink its power purchase agreement (PPA) with the Energy Commission of Sabah by the middle of the year. Chief executive officer Baevinraj Thiagarajah said the company was on track to execute the PPA for its 170MW run-of-river hydropower plant in Sipitang worth RM2.8bn. Dubbed project Oriole, it has seen expenditure of RM73.67m on preliminary works, including consultation with the federal and Sabah governments. (StarBiz)

GDEX: To diversify into IT services and solutions. GDEX is proposing to undertake a diversification of its existing principal activities to include information technology (IT) services and solutions. The company said it had primarily relied on its core express delivery business, which consistently accounted for over 85% of total revenue for the three years up to FY23. “The group’s recent loss-making position was mainly attributed to the express delivery business being impacted by high competition from foreign courier companies.” (StarBiz)

MARKET UPDATE

The FBM KLCI might open weaker today after Wall Street stocks ended lower in choppy trading yesterday as Treasury yields climbed, with investors weighing the likely path of interest rates in a resilient US economy with persistent inflation. Federal Reserve Chair Jerome Powell said on Tuesday recent inflation data has not given policymakers enough confidence to ease credit soon, noting that the US central bank may need to keep rates higher for longer than previously thought. The Dow Jones Industrial Average rose 63.86 points, or 0.17%, to 37,798.97, the S&P 500 lost 10.41 points, or 0.21%, to 5,051.41 and the Nasdaq Composite lost 19.77 points, or 0.12%, to 15,865.25. Meanwhile, Europe's main stock index notched its biggest one-day drop in over nine months on Tuesday, with miners and banks leading losses, as investors steered clear of risky assets owing to heightened tensions in the Middle East. The Pan-European STOXX 600 closed 1.6% down, touching its lowest level since March 7, in a broader market decline. Higher euro zone bond yields also pressured equities.

Back home, Bursa Malaysia ended lower for the second consecutive day on Tuesday, tracking the weak global sentiment due to the Middle East conflict. At the closing, the FBM KLCI fell 7.53 points, or 0.49%, to 1,535 from Monday's close of 1,542.53. Asian shares skidded Tuesday following a slump on Wall Street after higher yields in the U.S. bond market cranked up pressure on stocks. The Shanghai Composite index lost 1.65% even though the Chinese government reported that the economy grew at a fasterthan-forecast annual rate of 5.3% in the first quarter of the year. In quarterly terms it expanded at a 1.6% pace. The Hang Seng in Hong Kong lost 2.1%. Tokyo’s Nikkei 225 fell 1.9% as the dollar continued to gain against the Japanese yen, hitting fresh 34-year highs.

Source: PublicInvest Research - 17 Apr 2024

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