HEADLINES

Economy

US: GDP growth slowed to a 1.6% rate in 1Q, well below expectations. US economic growth was much weaker than expected to start the year, and prices rose at a faster pace, the Commerce Department reported. GDP, a broad measure of goods and services produced in the Jan-through-March period, increased at a 1.6% annualized pace when adjusted for seasonality and inflation, according to the department’s Bureau of Economic Analysis. Economists had been looking for an increase of 2.4% following a 3.4% gain in 4Q of 2023 and 4.9% in the previous period. (CNBC)

US: Weekly jobless claims unexpectedly fall. The number of Americans filing new claims for unemployment benefits unexpectedly fell, pointing to still tight labour market conditions. Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 207,000. Claims have been bouncing around in a 194,000-225,000 range this year. Companies are hoarding workers after experiencing difficulties finding labour during and after the COVID-19 pandemic, and are enjoying higher profit gains because of strong pricing power. Low layoffs are keeping wage growth elevated, sustaining consumer spending, which accounts for more than two-thirds of economic activity. (Reuters)

US: Pending home sales surge 3.4% in March, much more than expected. According to a report released by the National Association of Realtors, pending home sales in the US surged by much more than expected in the month of March. Its pending home sales index spiked by 3.4% to 78.2 in March after jumping by 1.6% to 75.6 in Feb. Economists had expected pending home sales to rise by just 0.3%. A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. March's pending home sales index, at 78.2, marks the best performance in a year, but it still remains in a fairly narrow range over the last 12 months without a measurable breakout. (RTT)

EU: German consumer sentiment to hit two-year high in May. Consumer confidence is set to rise again in May to hit a two-year high as households turned more optimistic about future income, adding to the list of positive indicators that suggests the biggest euro area economy is likely to undergo a very shallow recession. The forward-looking consumer sentiment index rose to -24.2 in May from a revised value of -27.3 in April. The reading was expected to rise modestly to -25.9. The score hit a two-year high but it remained at an extremely low level. (RTT)

EU: French manufacturing sentiment weakens in April. The Manufacturing confidence in France weakened in April largely due to the worsening order books. The manufacturing confidence index fell more-than-expected to 100 in April from upwardly revised 103 in March. The reading was seen at 102. The balances of opinion associated with the level of the order books, both overall and foreign clearly retreated in April. The overall order book balance slid to -19 from -13 and the foreign order book balance posted -11, the lowest since Sept 2023 and down from -5 in March. Personal production expectations over the coming three months weakened in April but remained above its average. (RTT)

UK: Retail sales slide in April, early Easter may be partly to blame. British retailers suffered their worst April for sales since 2020, when the country was in its first COVID-19 lockdown, although the timing of the Easter holidays could be to blame. The Confederation of British Industry's (CBI) monthly retail sales gauge, which measures volumes versus a year ago, fell to -44 from +2 in March. Orders placed with suppliers also dried up. (Reuters)

UK: Consumer sentiment returns to two-year high. British consumer sentiment returned to a two-year high this month as households took a more positive view of the economy and their own finances. The GfK consumer confidence index rose to -19 in April from -21 in March, matching Jan's reading which was the highest since Jan 2022, just before Russia's full-scale invasion of Ukraine triggered a surge in energy costs and other bills. Economists had forecast a slightly smaller rise to -20. A year ago, the index stood at -30. These improvements reflect the impact on household budgets of lower inflation and the anticipation of further tax cuts. (Reuters)

Japan: Inflation climbs 1.8% on year in April. Consumer prices in the Tokyo region of Japan were up 1.8% on year in April, according to the Ministry of Internal Affairs and Communications. That was beneath estimates for an annual gain of 2.6%, which would have been unchanged from the March reading. Core CPI, which excludes the volatile costs of food prices, advanced 1.6% on year, also well shy of forecasts for an increase of 2.2% and slowing from 2.4% in the previous month. (RTT)

South Korea: 1Q GDP growth smashes estimates, but outlook's uncertain. The South Korean economy grew at the fastest pace in more than two years in 1Q beating all estimates with a pick-up in domestic consumption and robust exports, but the market questioned if the recovery was sustainable. GDP for the Jan-March quarter was 1.3% higher than the preceding three months on a seasonally adjusted basis, the sharpest expansion since 4Q of 2021, data from the Bank of Korea showed. That comes after an expansion of 0.6% in the prior quarter and compares with a median forecast of 0.6% in a survey of economists. Growth in domestic demand was the main factor underpinning the strongerthan-expected GDP, referring to a 0.8% gain in private consumption after a 0.2% increase three months earlier. (Reuters)

Hong Kong: Trade gap widens in March. Hong Kong's foreign trade deficit increased in March from a year ago as imports rose faster than exports, according to data from the Census and Statistics Department. The trade deficit widened to HKD45bn in March from HKD40.6bn in the same month last year. In Feb, the trade shortfall was HKD41.6bn. The visible trade deficit of HKD45bn was equivalent to 10.5% of the value of imports. The annual increase in exports was 4.7% in March, reversing a 0.8% fall in Feb. Total exports to Asia as a whole grew by 8.1%. Within this, shipments to Vietnam advanced the most, by 41.6%. (RTT)

Markets

Capital A: To dispose of 100% stake in Airasia Aviation group, AirAsia for RM6.8bn. Capital A has entered into a conditional share sale and purchase agreement with AirAsia Group SB (AAG) to dispose of its 100% equity interest in AirAsia Aviation Group Ltd (AAAGL) and AirAsia Bhd (AAB) for RM6.8bn. The group entered into conditional share sale and purchase agreement with AAG to dispose of AAAGL for RM3bn and AAB disposal for RM3.8bn. AAAGL and AAB are wholly-owned subsidiaries of Capital A. Pursuant to AirAsia X Bhd’s (AAX) proposed internal reorganisation, AAG will assume the listing status of AAX prior to the completion of the proposed disposals. (Bernama)

Pos Malaysia: Confident of delivering improved results. Pos Malaysia is cautiously optimistic about delivering improved results by banking on its foundation for future growth and ongoing transformation. Chairman Tan Sri Syed Faisal Albar Syed Ali Rethza Albar said the national courier service provider planned to optimise resources, mitigate risks associated with the declining trend of mail volume, monetise assets, and recycle capital to support growth and transformation. (The Star)

OCK Group: To raise RM500m from sukuk issuance. OCK Group Bhd has proposed to undertake the issuance of up to RM500m of Islamic commercial papers programme based on the Shariah principle of Wakalah Bi Al-Istithmar. The sukuk will have a tenure of seven years from the date of the first issuance. The drawdown is expected to be in tranches and each tranche will have a tenure of up to 12 months. Proceeds from the sukuk will be used to restructure existing short-term financing and to finance general working capital. (New Straits Times)

Ecobuilt: To sell of Kuala Lumpur office premises for RM1.3m. Ecobuilt Holdings has agreed to dispose a freehold commercial office premises in Kuala Lumpur to Novelplus SB for RM1.3m. Novelplus is involved in online social reading and writing platforms. Ecobuilt said the sale proceeds will be used for repayment of payables and general working capital, with an estimated gain on disposal of RM31,000. The disposal aligns with Ecobuilt’s focus on core business and asset optimisation, providing surplus cash flow and reducing gearing levels.. (The Malaysian Reserve)

TAS Offshore’s 3Q net profit up nine-fold, shares surge to eight-year high. TAS Offshore Bhd’s net profit has leapt by ninefold YoY for the financial quarter ended 29 Feb 2024 (3QFY2024) due to more vessels delivered. Its net profit has surged by 826.9% YoY to RM6.06m from RM654,000 a year earlier, while its revenue has jumped 522.6% YoY to RM34.55m from RM5.55m a year earlier. The company has declared an interim dividend of one sen per share for the financial year ending 31 May, 2024 (FY2024), payable on June 18. (The Edge)

ViTrox: 1Q’s net profit nearly halved, extending declining profits to five quarters. ViTrox Corp saw its net profit nearly halved for the financial quarter ended 31 March, 2024 (1QFY2024), primarily due to unfavourable product mix and higher research and development (R&D) expenditures to support the introduction of new products. Net profit fell 47.8% YoY to RM17.23m from RM33m, while revenue declined 10.3% to RM119.61m from RM133.33m, due to softer demand for its automated board inspection. Earnings per share fell to 1.82 sen from 3.49 sen for the quarter under review. (The Edge)

MARKET UPDATE

The FBM KLCI might open lower today after worries about a potentially toxic cocktail combining stubbornly high inflation with a flagging economy dragged US stocks lower on Thursday. A sharp drop for Facebook’s parent company, one of Wall Street’s most influential stocks, also hurt the market. The S&P 500 fell 0.5% and sliced some of the gain off what had been a big winning week. It looked to be heading for a much worse loss in the morning, when it tumbled as much as 1.6%. The Dow Jones Industrial Average dropped 375 points, or 1%, after earlier falling 700 points. The Nasdaq composite sank 0.6%. Meta Platforms, the company behind Facebook and Instagram, dropped 10.6% even though it reported better profit for the latest quarter than analysts expected. Investors focused instead on the big investments in artificial intelligence Meta pledged to make. AI has created a frenzy on Wall Street, but Meta is increasing its spending when it also gave a forecasted range for upcoming revenue whose midpoint fell below analysts’ expectations. In stock markets abroad, Japan’s Nikkei 225 slid 2.2% as investors wait to hear whether the Bank of Japan will make moves to prop up the tumbling value of the yen. Indices were mixed elsewhere in Asia and Europe. Back home, the FBM KLCI lost 2.23 points or 0.14% to 1,569.25.

Source: PublicInvest Research - 26 Apr 2024