HEADLINES

Economy

US: Factory activity slips for a second month in May, ISM says. US manufacturing activity slowed for a second straight month in May as new goods orders dropped by the most in nearly two years, but a measure of input inflation fell back from the highest since mid- 2022, a monthly survey showed. The Institute for Supply Management's manufacturing purchasing managers index for May fell to 48.7 from 49.2 in April. It was both the second straight decline and the second month below the 50 level that separates growth from contraction. Economists polled by Reuters had a median estimate for 49.6. The factory sector has been under pressure for well over a year, with ISM's measure of output in contraction now for 18 of the past 19 months, as high interest rates resulting from Federal Reserve (Fed) monetary policy tightening curbed demand for goods. (Reuters)

US: Key engines of US consumer spending are losing steam all at once. The main drivers behind the remarkably resilient American consumer are losing steam at the same time, suggesting a recent pullback in household demand may be more than just a one-off. Real disposable incomes have risen only modestly over the past year. The saving rate now stands at a 16-month low as households have mostly exhausted the extra pile of cash they squirreled away during the pandemic. In turn, many Americans are increasingly relying on credit cards and other sources of financing to support their spending. These factors help explain why real spending — which excludes the impact from inflation — fell in April, with consumers shelling out less on cars, restaurants and recreational activities. With the job market also cooling, companies like Best Buy Co have noticed a change in recent months as shoppers switch to cheaper brands. (Bloomberg)

EU: Eurozone manufacturing activity posts slower contraction. Downturn in the euro area manufacturing activity softened in May as production moved closer to stabilization and orders fell at a slower pace amid the rising business sentiment, final HCOB survey results from S&P Global showed. The manufacturing Purchasing Managers' Index rose to 47.3 in May from 45.7 in April. The flash estimate was 47.4. Although the reading was below the neutral 50.0 mark, it was the highest since March 2023, indicating the slowest deterioration of the manufacturing sector for over a year. There was a near stabilization of production in May. Factory output dropped at the slowest pace in just over a year and new orders posted the slowest decrease in two years. Backlogs of work continued to fall as subdued demand conditions led factories to use outstanding orders as a means to support output. The rate of depletion was the weakest since August 2022. (RTT)

UK: Manufacturing sector returns to growth. The UK manufacturing sector returned to growth in May as production grew the most in more than two years on improved order intakes, final survey data released by S&P Global revealed. The manufacturing Purchasing Managers' Index advanced to 51.2 in May from 49.1 in April. This was the highest reading since July 2022 but a tick below the initial estimate of 51.3. The headline PMI registered above the threshold 50.0 mark in two out of the past three months. Manufacturing output climbed at the quickest pace since April 2022. Output growth was supported by improved intakes of new work, stronger market conditions and efforts to complete existing contracts. The upturn was centered on the domestic market as new export orders decreased for the twenty-eight month in a row. In line with the recovery in current market conditions, business sentiment improved in May. (RTT)

China: Manufacturing logs fastest growth in nearly 2 years. China's manufacturing sector logged the fastest growth in nearly two years in May as production growth accelerated amid rising new orders, survey results from S&P Global showed. The Caixin manufacturing Purchasing Managers' Index rose more-thanexpected to 51.7 in May from 51.4 in the previous month. The reading was seen at 51.6. The manufacturing sector expanded for the seventh straight month and also marked the strongest expansion in 23 months. Output grew the most since June 2022, with firms in the consumer segment posting sharp output growth. Stronger demand from domestic and foreign markets helped to boost new orders. (RTT)

Japan: May factory activity expands for first time in a year, PMI shows. Japan's factory activity expanded for the first time in a year in May, a private-sector survey showed, but overall growth was modest and demand was still subdued while a weak yen raised the cost of imported items for some producers. The final au Jibun Bank Japan manufacturing purchasing managers' index (PMI) rose to 50.4 last month from 49.6 in April, having last climbed above the 50.0 threshold — which separates growth from contraction in activity — in May 2023. The index was little changed from 50.5 reported in the flash PMI. The key output and new orders subindexes remained in contraction but both improved close to the no change level and fell at their slowest pace in a year, suggesting that conditions are starting to look up. (Reuters)

Indonesia: Inflation eases to 2.84%. Indonesia's consumer price inflation eased more-than-expected in May amid a slowdown in food costs, data from the statistics bureau showed. The consumer price index climbed 2.84% YoY in May, slower than the 3.0% increase in April. The expected rate was 2.94%. Further, the inflation rate has remained within the central bank's target range of 1.5-3.5%. Meanwhile, core inflation rose to an eight-month high of 1.93% in May from 1.82% a month ago. Economists had forecast a growth rate of 1.88%. The annual price growth in food items softened to 6.18% from 7.04%. (RTT)

Markets

MMAG: Former directors of MMAG’s air cargo unit charged with dishonest misappropriation of property. Two former directors of MMAG Holdings 95%-owned air cargo logistics unit, M Jets International SB (MJets), have been charged with dishonest misappropriation of property. MMAG notified the bourse of the matter after receiving a letter from the Malaysian Anti-Corruption Commission on Gunasekar Mariappan and Philip Phang Kin Ming being charged at the Shah Alam Sessions Court. (The Edge)

AME Elite: Buys more land in Johor for industrial cluster development. AME Elite Consortium is buying three parcels of freehold land, measuring 37.5 acres, in Kulai, Johor for RM106.17m to develop an industrial cluster. The acquisition was made through its wholly owned subsidiary Golden Symphony SB, which entered into a sale and purchase agreement with Dahlia Utama SB, the owner of the palm oil estate, according to its filing with Bursa Malaysia. (The Edge)

Feytech: Buys land for RM20m for expansion. Feytech Holdings’ (FHB) wholly-owned subsidiary, Feytech SB has proposed to acquire a 9.76 acres freehold industrial land in Perak for RM19.98m. In a filing with Bursa Malaysia, FHB said Feytech entered into a sale and purchase agreement with Proton City Development Corporation SB for the proposed acquisition. The company and its subsidiaries are principally involved in the manufacturing and sale of automotive seats and automotive covers, serving major automotive manufacturers globally. The purpose of the proposed acquisition is to establish a new manufacturing facility. (StarBiz)

Serba Dinamik: To appeal against Bursa's delisting move. Serba Dinamik Holdings says it will appeal a decision by Bursa Malaysia to delist the company on June 5 for not submitting its regularisation plan. The company will be submitting an appeal to Bursa against the decision to de-list the securities of the company. Bursa recently dismissed the company's appeal for a further extension of time of six months to submit its regularisation plan to relevant authorities for approval. (BTimes)

Hektar Reit: KYSM acquisition to be completed by June. Hektar Real Estate Investment Trust (Hektar Reit) expects to complete the acquisition of Kolej Yayasan Saad Melaka (KYSM) by June this year. Hektar Reit said upon completion, it will be able to recognise the lease income from KYSM at RM8m per year with a 2.5% increment annually. The structure is a quadruple net lease so the lease from KYS is net income to Hektar Reit. The trust added that ⁠as per its dividend payout policy, at least 90% of its total net income will then be distributed to unit holders. (BTimes)

Dutch Lady: RM540m factory set to begin operation. Dutch Lady Milk Industries’ (DLMI) state-of-the-art RM540m manufacturing facility here is set to be fully operational by July, says its managing director Ramjeet Kaur Virik. The plant, located on a 13.2ha site at the Bandar Enstek halal hub and which is thrice the size of its present facility in Petaling Jaya, will also double the existing production capacity once it is fully commissioned. Three lines were already fully operational at the new plant and the remaining ones would be commissioned next month. (StarBiz)

MARKET UPDATE

Thee FBM KLCI might open flat today after US stocks drifted to a mixed finish Monday following the latest signal showing the U.S. economy is slowing. The S&P 500 edged up by 5.89 points, or 0.1%, to 5,283.40, even though the majority of stocks within the index fell. The Dow Jones Industrial Average dropped 115.29, or 0.3%, to 38,571.03, and the Nasdaq composite rose 93.65, or 0.6%, to 16,828.67. Treasury yields also slid in the bond market after a report showed U.S. manufacturing shrank in May for the 18th time in 19 months, according to the Institute for Supply Management. Manufacturing has been hit particularly hard by high interest rates meant to get high inflation under control. In stock markets abroad, India’s Sensex jumped 3.4% after the country’s 6- week-long national election came to an end with most exit polls projecting that Prime Minister Narendra Modi will extend his decade in power with a third consecutive term. Elsewhere in the world, stock indices were higher across much of Europe and Asia, though Shanghai and London were exceptions. In the region, Hong Kong’s Hang Seng index jumped 1.79% and the Shanghai Composite index gave away 0.27%.

Source: PublicInvest Research - 4 Jun 2024