HEADLINES

Economy

US: Leaves rates unchanged, sees only one 2024 cut despite inflation progress. The Federal Reserve held interest rates steady and pushed out the start of rate cuts to perhaps as late as Dec policymakers sketched out their view of an economy that remains virtually unchanged across its major dimensions for years to come. With growth and unemployment lodged at levels better than the US central bank considers sustainable in the long run, Fed Chair Jerome Powell said policymakers were content to leave rates where they are until the economy sends a clear signal that something else is needed - through either a more convincing decline in price pressures or a jump in the unemployment rate. So far, Powell noted in a press conference after the end of a two-day policy meeting, inflation had fallen without a major blow to the economy, and he said there was no reason to think that can't go on. (Reuters)

US: inflation falls to 3.3% in May in boost to markets. US inflation fell to 3.3% in May, raising expectations of early interest rate cuts and delivering a boost to the stock market and President Joe Biden. The data, issued hours before Federal Reserve officials outlined their plans for rate cuts this year, was marginally below economists’ expectations. The 3.3% rise in the headline consumer price index compared with a Reuters survey that expected the rate to remain at 3.4%. Core CPI, which strips out changes for food and energy prices, hit 3.4%, below expectations of 3.5%. The Bureau of Labor Statistics data also showed month-on-month headline inflation was zero, while the core figure edged up just 0.2%. Biden is seeking to convince voters of his economic record in the run-up to the November election. (Financial Times)

EU: Germany's May inflation rises to 2.8% on higher services prices. German inflation rose in May due to higher services prices, the federal statistics office said, confirming preliminary data. German consumer prices, harmonised to compare with other EU countries, rose 2.8% in May from a year earlier. They had risen 2.4% YoY in April. "The inflation rate is slightly up again, mainly due to the continued increase in service prices," said Ruth Brand, president of the statistics office. Prices of services were 3.9% higher in May than in the same month a year earlier, following an increase of 3.4% in the previous month. (Reuters)

UK: BoE to cut rates in August, at least one more expected this year. The BoE will start cutting interest rates in August, according to all but two of 65 economists polled by Reuters, and most of them expect at least one more reduction this year despite persistently high pay and services inflation. One of the first central banks to start raising rates following the worst of the COVID pandemic, the BoE lifted Bank Rate by 515 bps between Dec 2021 and August 2023 to a 16-year high of 5.25% to tackle soaring price pressures in the economy. Overall inflation eased to 2.3% in April, close to the central bank's 2.0% target, from a peak of 11.1% in Oct 2022. A hot job market has started slowing and official statistics showed the economy stalled in April, partly due to exceptionally rainy weather. However, wage and services inflation, both watched closely by the BoE, are still around 6%. (Reuters)

China: Inflation steady, maintains pressure for more stimulus. China's consumer inflation held steady in May while producer price declines eased, but the underlying trend suggests Beijing would need to do more to prop up feeble domestic demand and an uneven economic recovery. Weak consumption in China has kept a lid on consumer prices since 2023 despite many rounds of support measures as confidence remains low amid a protracted property sector crisis. Economists say a further round of stronger and coordinated fiscal and monetary stimulus steps are required to sustainably drive up demand. The CPI rose 0.3% in May from a year earlier, matching a gain in April, data from the National Bureau of Statistics (NBS) showed, below a 0.4% increase forecast in a Reuters poll. (Reuters)

India: May retail inflation eases slightly to 4.75%. India's retail inflation rate eased slightly in May, partly helped by fall in fuel prices although food prices remained elevated, government data showed. Annual retail inflation in May was 4.75%, down from 4.83% in April and lower than 4.89% forecast by 50 economists polled by Reuters. Food inflation, which accounts for nearly half of the overall consumer price basket, rose 8.69% year-on-year in May, compared with an 8.70% rise in the previous month. Food prices have been accelerating at more than 8% year-on-year since Nov 2023. Core inflation, which strips out food and energy prices, was lower at 3.12% in May, according to two economists, as compared with 3.23% in April. The Indian government does not release core inflation figures. (Reuters)

Singapore: Economists expect monetary policy to remain unchanged in 2024, survey shows. Most economists are expecting Singapore's monetary policy to remain unchanged at the July and Oct reviews, according to a survey by the central bank, as they expect core inflation to be sticky at 3% for the year. Annual core inflation came in at 3.1% in April, matching the rate in March. The median forecast of 20 economists surveyed by the MAS is for the economy to grow 2.4% this year, unchanged from the previous survey in March. The survey was conducted in end-May, after the government released first-quarter GDP results that posted the fastest growth in 18 months. The 2.7% YoY growth in Q1 was slightly above respondents' forecast of 2.6% in the previous survey. This time round, respondents expect the economy in Q1 to grow 2.7% YoY. The trade ministry and MAS said in May it expects the core rate to gradually moderate before a more discernable step down in the fourth quarter. Both core and headline inflation were expected to average between 2.5% and 3.5% this year. (Reuters)

Markets

MAHB: Fulfils one of four pre-conditions for privatisation deal. Malaysia Airports Holdings or MAHB, said it was notified that one of the four pre-conditions for the RM10.8bn proposal to privatise the airports operator has been fulfilled. MAHB said the joint offerors in the takeover offer informed the group that the General Authority for Competition of Saudi Arabia (GAC) has issued a certificate, confirming that the deal does not require notification to the competition authority. Accordingly, MAHB said this pre-condition related to GAC has been fulfilled. The GAC certificate is one of the four pre-conditions required for the privatisation deal. (The Edge)

BHIC: Secures RM1.1bn contract for navy submarine service support. Boustead Heavy Industries Corp said it has secured a RM1.1bn contract from the Ministry of Defence to provide in-service support 2 performance for the Royal Malaysian Navy’s prime minister class submarines. A formal contract between the government and BHIC's wholly owned subsidiary, BHIC Submarine Engineering Services SB, will be executed at a later date. (The Edge)

Ecoscience: Secures RM61.8m contract for palm oil plant construction. Ecoscience International has secured a RM61.8m contract for the construction of a crude palm oil (CPO) pretreatment plant and a plant, machinery, and equipment (PME) plant in Port Dickson. Its wholly owned subsidiary Ecoscience Manufacturing & Engineering Sdn Bhd has accepted a letter of award from Oiltek Sdn Bhd to undertake the engineering, procurement, construction, and commissioning of civil and structural works for a CPO pretreatment plant and a PME plant, along with auxiliary buildings at the Port Dickson refiner. (The Edge)

Iqzan Holding: Secures project worth RM143m. Iqzan Holding has secured a construction project worth approximately RM143m via its subsidiary, Kacon Construction SB (KCSB). The company said that the project entails the construction of a 24-storey office building in Jalan Tun HS Lee, Kuala Lumpur. "The project is expected to positively contribute to the earnings of the Iqzan group for financial years (FY) 2025, FY2026, and FY2027,” it said. The company also highlighted various risk factors which could affect the project, including the availability of skilled manpower and materials, fluctuations in material prices, and changes in political, economic and regulatory conditions. (Bernama)

YNH: Appoints UHY as "special independent reviewer". YNH Property has appointed UHY as a special independent reviewer to independently assess “certain joint ventures and turnkey contracts” entered into by its subsidiary, Kar Sin Bhd. The independent assessment was initiated following the qualified opinion issued by YNH’s former statutory auditor, Baker Tilly Monteiro Heng PLT, over a RM1.1bn sum the group paid to JV parties or landowners for property development work. (StarBiz)

IPO: Johor Plantation's Main Market IPO to raise RM735m, RM345.2m to go to JCorp. Johor Plantations Group’s IPO on the Main Market of Bursa Malaysia is expected to raise a total of RM735m, of which approximately RM345.2m will be raised via an offer for sale of 411m existing shares held by its sole shareholder Kulim (Malaysia) Bhd. Kulim, a wholly-owned subsidiary of Johor Corp (JCorp), will retain a 65% stake in JPG upon listing on July 9, while the IPO would offer investors up to 35% of JPG's enlarged share capital. (The Edge)

MARKET UPDATE

The FBM KLCI might add a few points at opening after US stocks closed mostly higher after the May consumer price index was unchanged and the Federal Reserve signalled only one rate cut this year. The Dow Jones Industrial Average, S&P 500 and Nasdaq weakened in the final hour in the stock market overnight. The Dow closed 0.1% lower after a whippy afternoon and ended just below its 50-day moving average. The S&P 500 trimmed its gains to a 0.9% increase while the Nasdaq composite ended the day 1.5% higher. The Nasdaq and S&P closed at record highs. The smallcap Russell 2000 outperformed with a 1.6% jump but closed near the session's lows. In stock markets elsewhere, European indices rallied following the release of the encouraging US inflation data. In Asia, where markets closed before the data came out, indices were mixed. Japan’s Nikkei 225 index lost 0.7% as investors wait for the Bank of Japan’s latest announcement on interest rates due Friday. Bursa Malaysia ended marginally lower yesterday on cautious sentiment with the bellwether index slid 2.54 points to its intraday low of 1,608.95 compared with 1,611,49 at Tuesday’s close.

Source: PublicInvest Research - 13 Jun 2024