HEADLINES

Economy

US: Fed gets some good news on inflation progress. Federal Reserve policymakers waiting to see renewed progress on inflation before reducing borrowing costs got some encouraging data inflation eased a bit in April. The 3.4% rise in the CPI from a year earlier, and the 0.3% increase from March, shows the Fed still has some distance to go before it achieves its 2% target for inflation. Core CPI, which strips out energy and food prices and is seen as a better gauge of underlying price pressures, rose 3.6%, its slowest in three years. Analysts crunching the numbers said the CPI data suggests the Fed's preferred inflation gauge, the personal consumption expenditures price index, likely also eased in April. (Reuters)

US: Retail sales unexpectedly flat in April. US retail sales were unexpectedly flat in April as higher gasoline prices pulled spending away from other goods, indicating that consumer spending was losing momentum. The unchanged reading in retail sales last month followed a slightly downwardly revised 0.6% increase in March, the Commerce Department's Census Bureau said. Retail sales were previously reported to have risen 0.7% in March. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, gaining 0.4% in April. Sales rose 3.0% YoY in April. (Reuters)

EU: Economy, employment expands by 0.3% in first quarter. The euro zone economy grew by 0.3% in the first quarter of the year, suggesting a slow recovery is now underway after six straight quarters of stagnant or negative growth, Eurostat said confirming a preliminary estimate. In the previous quarter, however, growth was confirmed at minus 0.1%, indicating that the bloc was in recession, as many economists had long predicted. The economy shrank by 0.1% in both the third and fourth quarters, meeting the traditional definition of a recession of two consecutive quarters of negative growth. (Reuters)

China: Central bank leaves key policy rate unchanged. China's central bank left a key policy rate unchanged when rolling over maturing medium-term lending facility (MLF) loans in line with market expectations. The steady MLF rate shows the central bank's focus on keeping currency stability, analysts say, even as an unexpected credit contraction in April added to the case for more policy stimulus to prop up the world's second-largest economy. The MLF loan operation also comes days ahead of the finance ministry's scheduled sales of the first batch of CNY1 tr in ultra longterm special treasury bonds. (Reuters)

Japan: Visitors exceed 3m for 2nd straight month, tourism agency says. The number of foreign visitors for business and leisure was 3.04 m last month, edging down from the monthly record of 3.08 m achieved in March, data from the Japan National Tourism Organization (JNTO) showed. Arrivals in April were up 56% from the prior year and 4% higher than in 2019, before the COVID-19 pandemic. Visitors from France, Italy, and the Middle East rose to record levels in April for any single month. (Reuters)

India: April merchandise trade deficit widens on lower exports. India's merchandise trade deficit in April was wider than expected, hurt by lower exports and a surge in gold imports, government data showed. India's April merchandise trade deficit stood at USD19.1 bn, according to a Reuters calculation, higher than economists' expectation of USD17.23 bn, according to a Reuters poll. In March it was USD15.6 bn. India's merchandise exports in April stood at USD34.99 bn, while imports were USD54.09 bn, government data showed. In March, merchandise exports were USD41.68 bn, while imports stood at USD57.28 bn. (Reuters)

Indonesia: Records USD3.56 bn trade surplus in April, above forecast. Indonesia posted a slightly bigger-than-expected trade surplus in April of USD3.56 bn, as the country saw smaller-thanestimated imports, statistics bureau data showed. A Reuters poll of economists had expected a surplus of USD3.30 bn. The March surplus was upwardly revised to USD4.58 bn. The economy has been reporting a merchandise trade surplus every month in the past four years, but the surplus has been narrowing recently amid weaker exports. (Reuters)

Markets

Axiata (Underperform, TP: RM2.00): Sign agreement to explore merger of Indonesian units. Axiata Group said it had signed a non-binding agreement with conglomerate Sinar Mas to explore combining their Indonesian units. The proposed merger between Axiata’s XL and Sinar Mas’ Smartfren “is at an early stage of evaluation”, Axiata said. (The Edge)

Comments: The Memorandum of Understanding is pertaining to a proposed merger between XL Axiata and Sinar Mas’ Smartfren. Both parties intend to remain as joint controlling shareholders of the merged co. However, there is no certainty that the on-going discussion will result in any binding agreement. Based on 2022 statistics, XL Axiata is the 3rd largest telco (by mobile subscription) in Indonesia with a 12% market share followed by Smartfren, which has a market share of about 5%. A proposed merger should solidify XL Axiata’s position but we believe it is unlikely to unseat the 2nd largest player, Indosat Ooredoo Hutchison’s 29% market share. Telkom Indonesia is the largest player with a lion share of 63%. We do not expect this proposed merger to have any material earnings impact on the group.

MAHB: Confirms getting privatisation offer from consortium led by Khazanah, EPF at RM11 per share. Malaysia Airports Holdings or MAHB confirmed that it has received a takeover offer from a consortium led by its major shareholder Khazanah Nasional and the EPF, in a deal worth over RM12bn. The other parties in the consortium that is planning to take MAHB private are New Yorkbased Global Infrastructure Partners and Abu Dhabi Investment Authority. The airport operator said the consortium — dubbed as Gateway Development Alliance SB — is offering RM11 per share to acquire all the remaining 1.12bn MAHB shares not already held by them, representing about 58.78% stake in the company. (The Edge)

Mitrajaya: Gets RM174m hospital job. Mitrajaya Holdings has accepted a letter of award from Avisena Healthcare SB for the development of a hospital block comprising 11 floors in Shah Alam, Selangor, for RM174.3m. Mitrajaya said the contract is for 36 months from the date for possession of the site on May 23, 2024 and is expected to complete by May 21, 2027. (StarBiz)

Eupe Corp: Buys RM69m plot in KL for residential high-rise. Eupe Corp is acquiring a 2.46-acre (one-hectare) freehold land here for RM69.2m, on which it will develop a high-rise residential project. The group said its indirect wholly owned subsidiary Eupe Bangsar SB had inked a sale and purchase agreement with MCL Land (Pantai View) SB for the proposed acquisition. The group expects the proposed high-rise residential development on the land to contribute positively to its future revenue stream and profitability. (The Edge)

KNM: External auditor issues disclaimer of opinion on financial statements. KNM Group said its external auditor KPMG PLT had expressed a disclaimer of opinion on the group's audited financial statements for the 18-month period ended Dec 31, 2023, due to insufficient audit evidence. KPMG highlighted that there were material uncertainties that may cast significant doubt on KNM's ability to continue as a going concern, the group said. (The Edge)

MARKET UPDATE

Key benchmarks in the US closed at record-highs overnight as the widely-followed consumer price index for April only gained 0.3% from the prior month, below market expectations of 0.4%. Consumer prices grew 3.4% from a year ago. Investors also took cheer from the upbeat momentum from the earnings reporting season which have been relatively healthy, coupled with favorable overall outlooks. On the day, the Dow Jones Industrial Average rose 0.9% as the S&P 500 gained 1.2% to break above the 5,300- pt level for the first time. The Nasdaq Composite closed 1.4% higher meanwhile. European markets also ended the day higher as investors assessed the cooler-than-expected US inflation numbers. Most sectors ended the day in positive territory, with utilities stocks leading the gains, up 1.7% while oil and gas stocks fell 0.9%. Performance of banking stocks varied across the continent – shares of Dutch bank ABN Amro fell 6% despite reporting a 29% increase in first-quarter net profits while Germany’s Commerzbank also reported a better-than-expected 29% increase in first-quarter net profit, sending its shares up 5%. Germany’s DAX led gainers among the major markets, up 0.8%. UK’s FTSE 100 and France’s CAC 40 both gained 0.2%. Asian markets were mixed earlier in the day, failing to hold on to positive momentum from previous day’s gains on Wall Street, though likely to continue on its upward path today following the overnight performance of global peers. Investors also kept a keen eye on Australia’s annual Budget with measures aimed at easing cost of living, building more homes, and strengthening its healthcare system, among other things. Markets in South Korea and Hong Kong were shut for a public holiday. China’s Shanghai Composite Index fell 0.8% as Japan’s Nikkei 225 edged 0.1% higher.

Source: PublicInvest Research - 16 May 2024