HEADLINES

Economy

US: Federal Reserve leaves rates unchanged, acknowledges further progress on inflation. The Federal Reserve announced its widely expected monetary policy decision to leave interest rates unchanged. Citing its goals of maximum employment and inflation at the rate of 2% over the longer run, the Fed said it decided to maintain the target range for the federal funds rate at 5.25 to 5.50%. The Fed acknowledged "some further progress" toward its inflation objective but reiterated officials need "greater confidence" inflation is moving sustainably toward 2% before cutting rates. (RTT)

US: Labour costs rise less than expected in 2Q on easing of inflation. A broad gauge of US labour cost growth closely watched by the Fed cooled in the 2Q by more than forecast, supporting a trend of gradually easing inflationary pressures. The employment cost index, which measures wages and benefits, increased 0.9% in the April-to-June period, after rising by the most in a year at the start of 2024, according to Bureau of Labor Statistics figures out. The median estimate in a Bloomberg survey of economists called for a 1% rise. The figures corroborate recent data that show the labour market is moderating towards its pre-pandemic trend. Other measures also point to cooling wage growth, as well as a slower pace of hiring and rising unemployment. (Bloomberg)

EU: Unexpected rise in Eurozone inflation casts doubt over ECB Sept rate cut. Euro area inflation rose unexpectedly in July and services price growth continued to remain high, adding uncertainty over the likelihood of a Sept interest rate cut by the ECB. The harmonized index of consumer prices advanced 2.6% YoY in July, faster than the 2.5% increase in June, flash data from Eurostat showed. The headline figure was expected to remain

unchanged at June's rate of 2.5%. Core inflation that strips out prices of energy, food, alcohol and tobacco, held steady at 2.9%, while it was forecast to slow to 2.8%. On a monthly basis, consumer prices remained flat in July, data showed. All components of the HICP increased from the previous year. Services cost increased the most in July, up by 4.0% but slightly weaker than June's 4.1%. (RTT)

China: Consumer woes mount as weak spending slams global brands. President Xi Jinping’s government is facing growing pressure to address China’s consumer spending downswing, as it becomes one of the biggest threats to global economic growth. A key gauge of Chinese services activity that covers the retail industry was on the brink of contraction for the first time since last year in data released. That was part of a disappointing snapshot of the economy offered in purchasing manager indexes for July, which revealed stubborn deflationary pressure even outside industries such as manufacturing. With consumption contributing less than half of growth to China’s USD17trn (RM78.3trn) economy in the second quarter for the first time since late 2022, the prospect of a prolonged slump is resonating worldwide. (Bloomberg)

China: Weak factory PMI exposes pain points in export juggernaut. China's manufacturing activity slipped to a five-month nadir in July as factories grappled with falling new orders and low prices, an official survey showed, pointing to a grinding second half for the world's production powerhouse. The National Bureau of Statistics (NBS) purchasing managers' index (PMI) contracted for a third month, easing to 49.4 from 49.5 in June, below the 50-mark separating growth from contraction, but just ahead of a median forecast of 49.3 in a Reuters poll. Sentiment remains gloomy among manufacturers as domestic demand is increasingly under siege and external pressures from trade tensions loom large for China's USD18.6trn (RM85.7trn) economy, which grew more slowly than expected in the second quarter. (Reuters)

Japan: Bank of Japan raises interest rates, outlines bond taper plan. The Bank of Japan (BOJ) raised interest rates and unveiled a detailed quantitative tightening plan, taking another landmark step towards phasing out a decade of massive stimulus. The decision, which defied dominant market expectations for the BOJ to stand pat on rates, takes its short-term policy rate to levels unseen since 2008. At the two-day meeting ending, the BOJ's board decided to raise the overnight call rate target to 0.25% from 0%-0.1% in a 7-2 vote. It also decided on a quantitative tightening (QT) plan that would roughly halve monthly bond buying to JPY3trn (RM90.6bn), from the current JPY6trn, as of Jan-March 2026. (Reuters)

Taiwan: Economy expands more than expected in 2Q, riding on AI boom. Taiwan’s economy grew more than expected in the 2Q24, riding global demand for artificial intelligence-related (AI) technologies. GDP grew 5.09% on-year, according to a statement from the statistics bureau in Taipei. That was stronger than the 4.8% increase economists forecast in a Bloomberg survey. Capital formation rose 15.3% YoY as companies increased investment in equipment, construction and intellectual property. GDP was expected to increase by 3.91% this year, the bureau said, compared to an earlier forecast of 3.94%. (Bloomberg)

Markets

CelcomDigi (Neutral, TP: RM4.30): Submits proposal for second 5G network, says willing to go solo. CelcomDigi today said it has submitted its proposal to deploy the country's second 5G network, either on its own or in partnership with others. The Malaysian Communications and Multimedia Commission (MCMC) issued the 5G Application Information Package (AIP) on July 1, 2024 with the guidelines, evaluation criteria, pricing and timeline for the tender of the 5G spectrum. The telcos will likely be assessed based on a range of factors including coverage, infrastructure sharing, technical and financial considerations, that should be in their business plans. (BTimes)

RHB: Appoints Mohamed Rastam Shahrom as group CFO. RHB Banking Group has appointed Mohmed Rastam Shahrom as its group CFO, effective Aug 1, 2024. Mohamed Rastam, 53, was formerly group CFO and acting group CEO of Malaysia Airports Holdings (MAHB). MAHB had earlier announced Mohamed Rastam’s resignation from both positions. Meanwhile, the banking group also named Phuah Shok Cheng as its new regional CFO and head of capital strategy, Kevin Vijendren Davies as the managing director and CEO of RHB Investment Bank, and Tan Boon Ching as its group chief internal auditor. (StarBiz)

Yong Tai: In RM160m hotel sale. Yong Tai (YTB) is proposing to dispose of a five-star hotel known as “Courtyard by Marriott Melaka” in Melaka to Southern Envoy SB for RM160m. The proposed disposal will allow the group to repay existing bank borrowings and payment of outstanding progress claims to the hotel contractor, thus improving its gearing level. (StarBiz)

Avillion: External auditor again casts doubt over Avillion’s ability to continue as a going concern. Avillion’s external auditor has flagged material uncertainty that would affect the hotel-andtravel company’s ability to continue as a going concern. Messrs Baker Tilly Monteiro Heng PLT drew attention to a net loss of RM5.55m at the group level, and RM6.81m at the company level for the financial year ended March 31, 2024 (FY2024), even as Avillion’s hospitality and travel businesses operate at full capacity. (The Edge)

Bintai Kinden: Receives nod for restructuring of banking facilities. Bintai Kinden Corp, which has two months left to submit its regularisation plan, said approval has been received for the restructuring and rescheduling of the banking facilities of a wholly owned subsidiary, Kejuruteraan Bintai Kindenko SB. The restructing approved by Malayan Banking involves converting outstanding contract overdraft/trade bills into a term loan facility. It also includes reinstating an overdraft facility of RM6.9m and a bank guarantee facility of RM10m, said the mechanical and electrical engineering services provider. (The Edge)

Infomina: Gets RM34.7m JPN contract. Infomina has won a RM34.71m contract from the Home Affairs Ministry for the provision of technology application and infrastructure operations, maintenance and support services to the National Registration Department (JPN). The service is to provide key support to JPN’s core application, JPN Business Utama ICT Aplikasi. This includes data and storage management, workload automation, report and spool management as well as holistic database analysis and management over three years, starting Aug 1, 2024 until July 31, 2027. (StarBiz)

MARKET UPDATE

The FBM KLCI might open higher today after big technology stocks bounced back Wednesday and drove a rally for US indices, as Wall Street grew even more convinced long-sought cuts to interest rates will be arriving soon. The S&P 500 jumped 1.6% for its best day since February. The Dow Jones Industrial Average rose 99 points, or 0.2%, and the Nasdaq composite soared 2.6%. The widespread gains came as Treasury yields eased in the bond market after the Federal Reserve gave the clearest indication yet that it could begin lowering interest rates in September. Fed Chair Jerome Powell said policy makers are “getting closer to the point” of comfort about inflation where they could cut rates for the first time since COVID- 19 crashed the economy. In stock markets elsewhere, Japan’s Nikkei 225 rose 1.5% after the Bank of Japan raised its benchmark interest rate. Indices rallied 2.1% in Shanghai and 2% in Hong Kong after official data showed China’s July manufacturing activity contracted again, fueling expectations that Beijing will need to roll out more stimulus to counter a slowdown for the world’s secondlargest economy. Stock indices also rose across Europe. Back home, Bursa Malaysia bounced back from Tuesday’s losses to end higher today in sync with the upbeat performance in the regional markets. At the closing bell, the FBM KLCI rose 13.63 points or 0.85% to 1,625.57 from yesterday's close of 1,611.94.

Source: PublicInvest Research - 1 Aug 2024