HEADLINES

Economy

US: Service sector rebounds in July; employment also recovers. US services sector activity rebounded from a four-year low in July amid a bounce back in new orders and the first increase in employment in six months. The Institute for Supply Management (ISM) said on Monday that its nonmanufacturing purchasing managers (PMI) index increased to 51.4 last month from 48.8 in June, which was the lowest level since May 2020. A PMI reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of the economy. The ISM views readings above 49 over time as generally indicating an expansion of the overall economy. Economists polled by Reuters had forecast the services PMI rising to 51.0. (Reuters)

US: Fed policymakers signal rate cuts ahead, but not recession. US central bank policymakers pushed back against the notion that weaker-than-expected July jobs data means the economy is in recessionary freefall, but also warned that the Federal Reserve will need to cut rates to avoid such an outcome. Many of the latest job report's details leave "a little more room for confidence that we're slowing but not falling off a cliff," San Francisco Fed President Mary Daly said. "Our minds are quite open to adjusting the policy rate in coming meetings," she said. When and by how much will depend on incoming economic data, of which there is a lot before the Fed's next meeting in midSeptember, she said, adding, "it's extremely important that we not let (the job market) slow so much that it tips itself into a downturn." (Reuters)

EU: Upturn in German services activity loses momentum in July, PMI shows. Growth in Germany's services sector slowed for the second consecutive month in July, a survey showed, in a further sign that Europe's biggest economy is losing steam. The HCOB final services Purchasing Managers' Index eased to 52.5 in July from 53.1 in June, although it was slightly above a preliminary flash estimate of 52.0 and above the 50.0 mark that separates growth from contraction for the fifth straight month. The loss of momentum in the services sector contributed to the first decrease in employment so far this year, the survey showed. (Reuters)

UK: Growth picks up among UK services firms after election result, PMI shows. British services companies reported an influx of new orders and the biggest rise in employment for over a year during July as optimism rose on the back of Prime Minister Keir Starmer's election victory, a survey showed. The S&P Global UK Services Purchasing Managers Index rose in July to 52.5 from 52.1 in June and revised up slightly from a preliminary estimate of 52.4. The survey added to signs of an upturn in business sentiment since the July 4 election which delivered a landslide victory for Starmer's Labour Party. A gauge of new business rose to its highest level since May last year while the future activity index struck a fivemonth high - something that survey compiler S&P Global linked to the election outcome and expectations for lower interest rates. The BoE cut interest rates last week for the first time since March 2020, to 5.0% from a 16-year high of 5.25%. (Reuters)

Japan: BOJ made hawkish tilt, debated inflation risk in June, minutes show. At least two of the BOJ's nine board members called for an early interest rate increase at a policy meeting in June, minutes showed, underlining the central bank's hawkish tilt that provides scope for further hikes ahead. "Members agreed that the yen's recent falls were among factors that push up inflation, and must warrant close attention in guiding monetary policy," the minutes showed. The discussions underscore how yen moves and concerns over an inflation overshoot were key factors discussed at the BOJ's June meeting, and led to its decision in July to raise interest rates to levels unseen in 15 years. With the Japanese currency having sharply reversed course to hit a 7-month high on Monday, markets are focusing on BOJ Deputy Governor Shinichi Uchida's speech for clues on the pace of future rate hikes. (Reuters)

Japan: July service activity rebounds after dip, PMI shows. Japan's service-sector activity returned to growth in July thanks to solid domestic demand, a survey showed, but slow overseas orders and unabated cost pressures continue to squeeze businesses. The final au Jibun Bank Service purchasing managers' index (PMI) rose to 53.7 last month, from 49.4 in June, which was the first contractionary reading in 21-months. While the index was back above the 50 line that separates expansion from contraction, it edged down from the flash reading of 53.9. "The near-term outlook for the service sector appears robust, as the level of outstanding business - a bellwether for upcoming work - returned to growth territory," said Usamah Bhatti, economist at index publisher S&P Global Market Intelligence. (Reuters)

China: Services activity expands further, but external demand slows, Caixin PMI shows. Growth in China's services activity accelerated in July helped by new orders, although momentum in overseas demand eased to its slowest pace in 11 months, a private-sector survey showed. The Caixin/S&P Global services purchasing managers' index (PMI) rose to 52.1 from 51.2 in June, pointing to expansion for the 19th straight month. The index covers mostly private and export-oriented companies and the 50-mark separates expansion from contraction on a monthly basis. In contrast, the official services PMI showed the sector stalling in July from growth in June, with retail sales, capital market services and real estate service industries all shrinking. The economy grew much more slowly than expected in the second quarter and faces deflationary pressures and a protracted property slump, with retail sales growth in June grinding to its weakest pace since early 2023. (Reuters)

Markets

Berjaya Food: Gets rights to operate Starbucks in three Nordic countries. Berjaya Food said its international arm has secured the rights to operate Starbucks stores in Iceland, Denmark and Finland. The expansion by Berjaya Food International, or BFI, marks the first entry of a Malaysian public-listed food-and-beverage company into Nordic markets. BFI will focus on local hiring and sourcing while lending its culinary and operational expertise. (The Edge)

Talam Transform: To dispose of Sepang land to IJM as part of debt settlement. Talam Transform said it plans to dispose of a 27.72-acre piece of land in Sepang to a unit of IJM Corp as partial debt repayment. Its wholly owned subsidiary Talam Leisure Development SB has agreed to sell the land to Ever Mark (M) SB, a wholly owned subsidiary of IJM Properties SB. IJM Properties is a wholly owned unit of IJM Corp. The deal involves the setting off of RM66m of indebtedness, and a RM18m interest waiver on the debt owed by Talam Transform to IJM Properties. (The Edge)

Sasbadi: Gets contracts from MoE totalling RM11.7m. Sasbadi Holdings has accepted two letters of acceptance from the Education Ministry (MoE) totalling RM11.7m to supply reprinted textbooks. Sasbadi said its wholly-owned subsidiary, Sasbadi SB (SSB), had accepted a letter of acceptance from the MoE worth RM6.9m to supply reprinted textbooks to schools under the MoE from Year 2024 - Package 15. Additionally, Sasbadi said its indirectly-owned subsidiary, The Malaya Press SB (TMP), had accepted a letter of acceptance from the MoE to supply reprinted textbooks to schools under the MoE from Year 2024 - Package 18, worth RM4.8m. “The contracts are for the period from Aug 5, 2024 to Aug 4, 2026. (StarBiz)

Jati Tinggi: Bags RM33.8m EPCC sub-contract from Gamuda unit. Jati Tinggi Group secured an engineering, procurement, construction, and commissioning (EPCC) sub-contract worth RM33.8m from Gamuda’s wholly owned subsidiary Gamuda Engineering SB. Jati Tinggi said the sub-contract was awarded to its unit Jati Tinggi Holding SB, to provide horizontal directional drilling work in Gombak, Selangor. (The Edge)

Handal: Sued by MD-linked firm over alleged unpaid payments. Handal Energy said a firm in which its group MD Sunildeep Singh Dhaliwal is a substantial shareholder is suing the offshore crane services provider over an alleged unpaid payment. The firm, Seaoffshore Shared SB, is claiming from Handal a purported outstanding sum of RM9.6m as at June 30, 2024, and another sum of RM170,369 that was invoiced in July 2024. Seaoffshore's claim against Handal is for payment for purported management services rendered. (The Edge)

Notion VTec: 3Q net profit surges 11-fold. Notion VTEC anticipates a moderate pace in the fourth quarter following three consecutive quarters of robust growth in the financial year ending Sept 30, 2024 (FY24). “This period of stabilised earnings will position us well as we prepare for further expansion in the next financial year. “The board and management are confident that FY24 will set a new benchmark for both revenue and profits, marking a record year for the group,” the precision component producer said in a filing with Bursa Malaysia. Notion VTec’s net profit surged to RM20.1m in the third quarter ended June 30 compared with RM1.8m in the same quarter last year. (StarBiz)

MARKET UPDATE

The FBM KLCI might open lower today after a scary Monday that started with a plunge abroad reminiscent of 1987 ’s crash swept around the world and pummeled Wall Street with more steep losses, as fears worsened about a slowing US economy. The S&P 500 dropped 3% for its worst day in nearly two years. The Dow Jones Industrial Average reeled by 1,033 points, or 2.6%, while the Nasdaq composite slid 3.4% as Apple, Nvidia and other Big Tech companies that used to be the stars of the stock market continued to wilt. The drops were the latest in a global sell-off that began last week. Japan’s Nikkei 225 helped begin Monday by plunging 12.4% for its worst day since the Black Monday crash of 1987. Treasury yields also pared their losses Monday after a report said growth for US services businesses was a touch stronger than expected. Growth was led by arts, entertainment and recreation businesses, along with accommodations and food services, according to the Institute for Supply Management. MSCI's gauge of stocks across the globe fell 25.58 points, or 3.25%, to 761.63 for its biggest oneday percentage drop since September 2022. Europe's STOXX 600 index earlier finished down 2.17%. Back home, a bloodbath across regional stock markets dragged Bursa Malaysia to close lower on Monday, led by technology stocks, primarily due to fears of a recession in the US. At the closing bell, the FBM KLCI fell 74.57 points or 4.62% to 1,536.48 from Friday's close of 1,611.05.

Source: PublicInvest Research - 6 Aug 2024