HEADLINES

Economy

US: Fed officials urge patience on timing of initial rate cut. Federal Reserve policymakers said that the US central bank should wait several more months to ensure that inflation really is back on track to its 2% target, before cutting interest rates. "In the absence of a significant weakening in the labour market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy," Fed governor Christopher Waller told the Peterson Institute for International Economics in Washington. (Reuters)

US: Crude oil inventories unexpectedly increase by 1.8m barrels. A report released by the Energy Information Administration showed an unexpected rebound in US crude oil inventories. The EIA said crude oil inventories rose by 1.8m barrels last week after falling by 2.5m barrels in the previous week. Economists had expected crude oil inventories to slump by 3.1m barrels. Despite the monthly increase, US crude oil inventories remain about 3% below the five-year average for this time of year at 458.8m barrels. (RTT)

US: Home sales post second straight monthly drop; house prices accelerate. US existing home sales unexpectedly fell in April as higher mortgage rates and house prices weighed on demand, dealing another setback to the housing market. Though the report from the National Association of Realtors showed inventory increasing last month to a 2.5 year high entry-level homes remained scarce, accounting for the second straight monthly decline in sales. The housing market has taken a step back after residential investment grew at its fastest pace in more than three years in 1Q. (Reuters)

EU: German home prices to fall 2% in 2024, supply to lag demand. German home prices will see a far shallower decline this year than in 2023 as borrowing costs are expected to fall, according to analysts who said the supply of affordable homes would remain short of demand. Hit by the worst real estate crisis in decades, average home prices in Germany have dropped nearly 13% from their peaks in 2Q 2022 and declined over 8% last year, the biggest annual fall since official data were first published in 2000. (Reuters)

UK: Inflation pressure stays hot, dashing hopes for June rate cut. Inflation in Britain eased less than expected and a key core measure of prices barely dropped, prompting investors to pull bets on a BOE rate cut next month which could have boosted embattled Prime Minister Rishi Sunak before an election. The CPI rose by 2.3% in the 12 months to April, down sharply from March's 3.2% increase and its lowest since July 2021, the Office for National Statistics said. (Reuters)

India: Demand momentum rising, rural spending picking pace. Aggregate demand momentum in India is rising, with the overall non-food spending being pushed up by green shoots in rural spending recovery, the RBI said. "Recent indicators are pointing to a quickening of the momentum of aggregate demand. In the personal consumption space, Nielsen IQ data indicate that a welcome pivot is underway that will boost this category of spending," the RBI said. Rural demand for fast moving consumer goods (FMCG) has outpaced urban markets for the first time in at least two years. (Reuters)

South Korea: Business confidence strengthens in May. Business sentiment in South Korea improved slightly in May to the highest level in 1.5 years, and the outlook brightened further, the latest survey from the Bank of Korea showed. The Business Survey Index on business conditions in the manufacturing sector rose to 74 in May from 73 in April. Further, this was the highest score since November 2022. The survey showed that the outlook strengthened for the second straight month, with the index rising to 76 from 74. Manufacturers reported a rise in both export-oriented and domestic demands. (RTT)

Indonesia: Central bank holds key rate. Indonesia's central bank left its benchmark interest rate unchanged after a surprise rate hike last month. The Board of Governors of Bank Indonesia, governed by Perry Warjiyo, decided to maintain the seven-day reverse repo rate to 6.25%. The current rate is the highest since 2016, when the bank made the seven-day reverse repo as its main policy rate. Last month, the bank unexpectedly lifted the interest rate by a quarterpoint. The bank has raised the rate by cumulative 275bps since Aug 2022. (RTT)

New Zealand: Keeps key interest rate unchanged. New Zealand's central bank left its benchmark rate unchanged for the seventh straight. The Monetary Policy Committee of the Reserve Bank of New Zealand, led by Governor Adrian Orr, decided to hold the Official Cash Rate at 5.5%. The MPC observed that inflation is likely to return to within the 1 to 3% target range by the end of 2024. The welcome decline in inflation in part reflects lower inflation for goods and services imported into New Zealand. (RTT)

Markets

Petronas Dagangan: Posts 1Q net profit of RM226m. Petronas Dagangan’s net profit for the first quarter ended 31 March, 2024 (1Q24) declined to RM226.04m from RM301.84m a year ago. However, its revenue expanded to RM9.39bn from RM8.65bn previously, attributed to a 7% sales volume growth and a 2% increase in average selling prices from its retail, commercial and convenience segments. The company said the better revenue was also driven by the continuous impact of promotional campaigns, growth in the fleet and transportation sectors and the tourismdriven rebound in passenger traffic. (Bernama)

Pos Malaysia: To shed non-core shipping unit for RM123m. POS Malaysia plans to streamline operations and focus on core business areas by divesting its subsidiary PNSL for approximately RM123.21m, transferring its entire equity interest of 49m shares in PNSL through Pos Logistics to SWA Shipping. The disposal consideration, subject to adjustment on completion, will be entirely settled in cash. (The Malaysian Reserve)

Magma: Plans to raise RM100m via redeemable convertible note issuance. Magma Group (formerly known as Impiana Hotels, plans to undertake an issuance of redeemable convertible notes (RCNs) to raise up to RM100m to repay borrowings and fund working capital. According to a bourse filing, the notes, which will mature in 36 months with 2% interest per annum payable quarterly, will be privately placed to Advance Opportunities Fund VCC (AOF VCC) and Advance Opportunities Fund 1 (AOF 1). Of the maximum proceeds to be raised from the note issuance, RM48m is earmarked for the repayment of the hospitality group’s bank borrowings and RM43.69m for working capital. (The Edge)

Bank Islam: Net profit rises to RM129m in 1Q. Bank Islam Malaysia Bhd expects improved earnings growth as it expands its financing volume, while net interest margin (NIM) is forecast to stabilise. “Central to the bank’s strategy is the meticulous management of NIM, focusing on rebalancing the funding composition,” said group CEO Datuk Mohd Muazzam Mohamed. In the first quarter ended 31 March, 2024 (1Q24), Bank Islam posted a net profit of RM129.17m, up from RM118.09m in the yearago quarter on revenue of RM1.14bn against RM1.1bn in the comparative quarter. (The Star)

Advancecon: Bags RM25m contract for Tiara Residences infra work. Advancecon Holdings Bhd, a specialist in earthworks and civil engineering, has been awarded a RM25.4m contract by Sime Darby Property Bhd for main infrastructure works at Tiara Residences in Shah Alam. The contract, secured by Advancecon Infra Sdn Bhd, is scheduled to be completed within 18 months starting from June 2024. This contract marks an expansion of Advancecon’s partnership with Sime Darby Property, reflecting the client’s confidence in Advancecon’s capabilities . (The Star)

Jentayu's 3Q net loss widens to RM9.25m on lower revenue. Jentayu Sustainables Bhd widened its net loss to RM9.25m in the third quarter ended 31 March, 2024 (3QFY24) from a net loss of RM6.82m in the same period last year due to lower revenue. Its revenue dropped to RM5.0m from RM5.84m in the same period last year due to the decline of revenue generated from the healthcare division of RM1.50m compared to the preceding year in the same corresponding period. (New Straits Times)

MARKET UPDATE

The FBM KLCI might open lower today after US stock indices retreated from their records Wednesday as concerns about high interest rates weighed on the market. The S&P 500 fell 14.40 points, or 0.3%, to 5,307.01, a day after setting its latest all-time high. The Dow Jones Industrial Average sank 201.95, or 0.5%, to 39,671.04, and the Nasdaq composite slipped 31.08, or 0.2%, to 16,801.54 after setting its latest record. Indices had been close to flat early in the day, but they slunk lower after the Federal Reserve released the minutes of its last policy meeting. Discouragingly for markets, the minutes showed Fed officials suggesting it “would likely take longer than previously thought” to get inflation fully under control following disappointingly high readings at the start of the year. In stock markets abroad, indices were modestly lower across much of Europe and Asia. London’s FTSE 100 sank 0.5% after the UK Office for National Statistics announced a stronger-thanexpected inflation reading that hurt hopes for a rate cut in June. Tokyo’s Nikkei 225 fell 0.8% after Japan reported its trade deficit rose last month.

Source: PublicInvest Research - 23 May 2024