HEADLINES

Economy

US: Retail sales report showcases consumer, economic resilience. US retail sales were unchanged in June as a drop in receipts at auto dealerships was offset by broad strength elsewhere, a display of consumer resilience that bolstered economic growth prospects for 2Q. The better-than-expected report from the Commerce Department also showed sales in May were higher than initially estimated. It did not change expectations that the Fed could start cutting interest rates in Sept amid cooling inflation and helped to assuage fears of a sharp slowdown in the economy. (Reuters)

US: Import prices flat in June. US import prices were unchanged in June as lower prices for energy products offset a rebound in the cost of food, the Bureau of Labor Statistics said. The flat reading in import prices followed a 0.2% drop in May. Economists had expected import prices, which exclude tariffs, to dip 0.1%. In the 12 months through June, import prices increased 1.6%. That followed a 1.4% advance in May. Moderate import prices supported views that inflation was on a downward path and could provide the Fed room to cut interest rates in Sept. (Reuters)

EU: Trade surplus falls to 4-month low. The euro area trade surplus declined to a four-month low in May on weak exports, official data showed. The trade balance posted a surplus of EUR13.9bn in May compared to a surplus of EUR14.2bn in April, Eurostat reported. This was the lowest surplus since Jan. Nonetheless, in the same period last year, the trade balance was in EUR0.4bn deficit. Exports logged a decrease of 0.5% annually, in contrast to the sharp 13.5% increase in April. At the same time, imports declined 6.4%, reversing a 1.8% rise in the previous month. (RTT)

EU: Italy trade surplus grows in May. Italy's foreign trade surplus increased in May from a year ago as imports fell faster than exports, data from the statistical office Istat showed. The trade surplus rose to EUR6.4bn from EUR4.8bn in the corresponding month last year. In April, there was also a surplus of EUR 4.8bn. Exports fell 1.7% annually in May after a 10.8% sharp rebound in the previous month. Outgoing flows to EU countries declined by 3.9%, while those to non-EU countries rose by 0.9%. (RTT)

EU: German economic sentiment falls for first time in a year. German economic confidence declined for the first time in a year in July amid weak exports, political uncertainty and the lack of clarity about the future monetary policy, survey data showed. The economic sentiment index fell sharply to a four-month low of 41.8 in July from 47.5 in the previous month. The score was forecast to drop moderately to 41.2. By contrast, current situation improved slightly in July. The corresponding index rose to -68.9 from -73.8 in June. The reading was seen at -74.3. (RTT)

China: Economy falters, raises pressure for more stimulus. China's economy grew much slower than expected in 2Q as a protracted property downturn and job insecurity knocked the wind out of a fragile recovery, keeping alive expectations Beijing will need to unleash even more stimulus. The world's second-largest economy grew 4.7% in April-June, official data showed, its slowest since 1Q of 2023 and missing a 5.1% forecast in a Reuters poll. It also slowed from the previous quarter's 5.3% expansion. (Reuters)

Japan: Mixed business sentiment highlights patchy economic outlook. Japanese manufacturers became more confident about business conditions in July whereas those in the service sector cooled, reflecting a patchy economic outlook. Investors are seeking clues on when the BOJ may raise interest rates, after doing so in March for the first time since 2007 and then deciding last month to reduce its bond-buying. The central bank will scrutinise its own tankan, or short-term outlook, as well as other data for signs of a sustained rate of inflation and strong household consumption backed by wage hikes.

Japan: Tertiary activity index unexpectedly falls 0.4%. Japan's tertiary activity index declined unexpectedly in May after rebounding in the previous month, according to data from the Ministry of Economy, Trade, and Industry. The seasonally adjusted tertiary activity index dropped 0.4% MoM in May, reversing a 2.2% strong rise in April. Meanwhile, economists had expected a 0.1% increase. Among the individual components, transport and postal activities, living and amusement-related services, finance and insurance, business-related services, information and communications, and real estate decreased in May. (RTT)

India: Wholesale price inflation rises to 3.4%, highest in 16 months. India's wholesale price inflation accelerated further in June to the highest level in nearly 1.5 years amid increases in prices in a wide range of categories, provisional data from the Ministry of Commerce and Industry revealed. The wholesale price index rose 3.4% YoY in June, faster than the 2.6% increase in May. Economists had expected inflation to accelerate to 3.5%. Further, the rate of inflation was the highest since Feb 2023, when prices had risen 3.9%. (RTT)

Markets

Maxis (Neutral, TP:RM3.90): Mulling U Mobile buyout, Bloomberg reports. Maxis is considering buying out U Mobile SB to help it expand in the Asian country, according to people with knowledge of the matter. Kuala Lumpur-listed Maxis has expressed interest in U Mobile and talks are at an early stage, the people said, asking not to be identified discussing private information. Malaysian businessman Tan Sri Vincent Tan Chee Yioun and Temasek Holdings Pte Ltd-backed Singapore Technologies Telemedia Pte Ltd are among U Mobile’s major shareholders. Pricing could be a hurdle to a potential buyout, with U Mobile’s owners seeking a valuation of more than RM10bn, according to the people. (The Edge / Bloomberg)

Comment: We understand that the discussion is still preliminary and there is no guarantee that a deal will be reached. In a message reply to Bloomberg News, Tan Sri Vincent Tan, major shareholder of U Mobile, said U Mobile was rejecting the buyout offer and planning to file for an initial public offering at the end of July. U Mobile has been considering a public offer since 2021. We believe Maxis could be exploring opportunity to grow its domestic mobile market but acquiring U Mobile could strain its cashflow, increase gearing and perhaps lead to earnings dilution as U Mobile’s owners are seeking a valuation of more than RM10bn. We reckon Maxis will be focusing on securing and rolling out the second 5G network for now.

Vestland: To acquire properties worth RM25m. Vestland Bhd has entered into several sale and purchase agreements (SPAs) with Sg Besi Construction SB and Armani KPF2 Development SB for the acquisition of 16 properties, totalling RM25m. The group said the deals were done through its wholly-owned subsidiary, Vestland Resources SB. Vestland inked 10 SPAs with Sg Besi Construction to acquire 10 office suites located at Shah Alam, Selangor for RM7m. (The Star)

Capital A: ADE sees boom in aircraft repairs amid new plane shortages. The global aircraft repair industry will see more growth in the next six years as airlines keep flying their jets longer because of a shortage of new planes, said Mahesh Kumar, the CEO of aviation services firm Asia Digital Engineering (ADE). New deliveries have dropped sharply in recent months amid supply chain disruptions and rising labour costs, driving carriers to retain aircraft MRO services for longer to keep older planes in the air, Mahesh said. ADE, a unit of Capital A, which also operates budget airline AirAsia, has seen rapid growth since it began operations in September 2020 at the height of the Covid-19 pandemic. (The Edge)

Success Transformer: Declares special dividend of 1.5 sen/share. Success Transformer Corp Bhd has declared a singletier special dividend of 1.5 sen per ordinary share for the financial year ending 30 June, 2025. The entitlement and payment dates of the special dividend have been fixed on Aug 1 and Aug 21, respectively. (The Star)

IPO: Kucingko oversubscribed by 99.02 times. The public issue of Kucingko Bhd’s IPO of 25m shares made available for the public has been oversubscribed 99.02 times. In a statement, the Malaysian Issuing House SB said a total of 21,929 applications for 2.5bn issue shares were received from the public. (The Star)

MARKET UPDATE

The FBM KLCI might open higher today after US stocks rallied to records, again, on Tuesday. What made this time more jubilant was how many companies joined the party. The S&P 500 climbed 0.6% to set an all-time high for the 38th time this year. Unlike other record-setting days, Tuesday’s came after a widespread rally where nearly nine out of every 10 stocks in the S&P 500 rose, instead of just the handful of influential Big Tech stocks that have been behind most of this year’s returns. The Dow Jones Industrial Average leaped 742 points, or 1.8%, to lead the market a day after setting its own record. The Nasdaq composite lagged with a gain of 0.2%, as the stars dimmed for some of the year’s biggest winners. In stock markets elsewhere, indices were lower across much of Europe. Asian indices were mixed, with the 1.6% drop for Hong Kong’s Hang Seng a big mover. Back home, Bursa Malaysia ended lower today on profit-taking after the key index hit a threeyear high yesterday and in line with most key regional market performance. At the closing bell, the FBM KLCI eased 3.86 points, or 0.24%, to 1,625.96 from yesterday’s close of 1,629.82. Japan’s Nikkei 225 gained 0.20% while Singapore’s Straits Times Index declined 0.34%.

Source: PublicInvest Research - 17 Jul 2024