HEADLINES Economy

US: Producer prices pick up slightly after downward revisions. US producer prices picked up only slightly in August after the previous month’s numbers were revised lower, and categories that feed into the Federal Reserve’s preferred inflation gauge were muted. The producer price index (PPI) for final demand increased 0.2% from a month earlier following a flat reading in July, according to a Bureau of Labor Statistics report. The median forecast in a Bloomberg survey of economists called for a 0.1% gain. Compared with a year ago, the PPI rose 1.7% — the least since early in 2024. (Bloomberg)

US: Weekly jobless claims rise moderately. The number of Americans filing new applications for unemployment benefits increased marginally last week, pointing to a still-low level of layoffs even as the labour market slows. Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 230,000 for the week ended Sept 7, the Labor Department said. Economists polled by Reuters had forecast 230,000 claims for the latest week. Last week's data included the Labor Day holiday. Claims tend to be volatile around public holidays. (Reuters)

EU: ECB cuts interest rates as growth dwindles. The ECB cut interest rates again as inflation slows and economic growth in the euro zone falters, but gave few clues to its next step, even as investors bet on steady policy easing in the months ahead. The ECB lowered its deposit rate by 25 bps to 3.50%, following up on a similar cut in June as inflation is now within striking distance of its 2% target and the domestic economy is skirting a recession. (Reuters)

UK: Fiscal watchdog warns of soaring debt over coming decades. British public debt is likely to soar to triple its current level over the next 50 years if future governments do not take action, due to pressures from an ageing population, climate change and geopolitical risks, a watchdog said. The Office for Budget Responsibility (OBR) said debt was on course to rise from nearly 100% of annual gross domestic product (GDP) now to 274% of GDP by the mid 2070s, and could top 300% of GDP due to other risks — similar to the forecast it gave last year. (Reuters)

Japan: Aug wholesale inflation slows, takes pressure off BOJ. Japan’s annual wholesale inflation slowed in Aug, as the yen’s rebound weighed on import costs, data showed, taking some pressure off the central bank to address upward price risks with near-term interest rate hikes. The corporate goods price index (CGPI), which measures the price companies charge each other for their goods and services, rose 2.5% in Aug from a year earlier, BoJ data showed, slowing from a 3.0% gain in July. It fell short of market forecasts for a 2.8% increase. (Reuters)

Thailand: New PM outlines policies to parliament as consumer mood drops. Thai Prime Minister Paetongtarn Shinawatra outlined her government's policy agenda to parliament, headlined by plans to give away THB450bn (USD13.4bn or RM58.1bn) in handouts to jumpstart Southeast Asia's second-largest economy. Political newcomer Paetongtarn's cabinet was sworn in this month, after parliament elected her Thailand's youngest premier following the shock removal of predecessor Srettha Thavisin by a court decision. (Bloomberg)

Markets

CCK (Neutral, TP: RM1.60): Creador acquires 40% equity in CCK’s Indonesian unit with RM163.1m investment. Private equity firm Creador SB has signed an agreement with CCK Consolidated for a RM163.1m investment to acquire a 40% stake in the poultry company's Indonesian unit, PT Adilmart Tbk. This is slightly lower than the initial investment proposed by Creador of RM170.3m, when the deal was announced back in May. (The Edge)

Comment: We note that the total consideration of RM163.1m is lower than the initial amount proposed by Creador of RM170.3m. The acquisition will be completed into 3 tranches, where the first tranche will involve Creador acquiring 26.5% stake in Adilmart for RM88.1m. The remaining RM75m will be completed via share subcriptions. The proposed disposal will enable CCK to raise cash proceeds of RM88.1m which may be utilised for debt repayments, working capital or to fund any potential business opportunities in the future. We also do not discount the possibility of a special dividend. While we are positive on Creador’s acquisition given Creador’s expertise in the consumer sector, we opine that the run up in share price has already captured this potential growth. Therefore, we maintain Neutral on CCK.

Ecobuilt: Gets RM190m construction contract. Ecobuilt Holdings wholly-owned subsidiary, Rexallent Construction SB has secured a RM190m construction contract. Ecobuilt announced that Rexallent accepted the letter of award from Arkitek Kdi SB, appointing it as the contractor for the execution, performance, construction, completion, and maintenance of the main building work. The contract is expected to be completed within 36 months from 9 Sept 2024, to 8 Sept 2027. (The Star)

Binastra: 2Q profit soars 171% to RM22.86m. BINASTRA Corp Bhd reported a 171.4% increase in net profit the second quarter ended July 31, 2024 (2Q25), reaching RM22.86m due to a 157.5% revenue surge to RM230.9m, driven by heightened construction activities and the start of five new projects. For the first half of FY2025, net profit surged nearly threefold to RM40.96m. (The Malaysia Reserve)

ITMAX: Wins 15-year Johor contract. ITMax System Bhd’s subsidiary, Southmax SB, has been appointed by the Tangkak District Council (MDT) as the smart parking operator, managing 5,113 street parking bays that are currently gazetted by MDT in the Tangkak district. ITMAX said the contract, effective from 1 Sept 2024 is for a duration of 15 years. Similar to ITMAX’s other smart parking contracts, it will operate under a revenue-sharing model, with Southmax receiving 70% of the revenue generated from parking collections and parking compounds in the MDT area. (The Star)

Green Packet: Four investors withdraw from RM19.15m private placement. Green Packet said that four of the six investors expected to subscribe to its private placement of over 598m shares have withdrawn from the exercise. The four subscribers — Dr Prem Kumar, Roberto Guiati, Chan Yok Peng and Ler Pei Fen — who were collectively supposed to subscribe to 490m shares, have mutually agreed to terminate their subscription agreements, as detailed in separate letters dated 12 Sept 2024, Green Packet said. (The Edge)

MARKET UPDATE

US markets ended the higher even as investors continued to wait on the Federal Reserve’s policy meeting on September 17-18 where it is widely expected to lower interest rates by 0.25%. Recent economic data reflecting a moderation in inflation continues to lift traders’ spirits while supporting the case for a rate cut. Growth in the consumer price index in August came in at 2.5% on annualized basis, the lowest level since February 2021. The Dow Jones Industrial Average and S&P 500 gained 0.6% and 0.8% as the Nasdaq Composite closed 1.0% higher. European markets closed higher meanwhile, in positive reaction to the European Central Bank’s (ECB) move to further ease monetary policy by cutting another 0.25% off its benchmark rates. Already its second reduction this year, the ECB continues to say it is not “precommitting” to a future path for rates. Germany’s DAX led gainers amongst major markets, higher by 1.0% on the day. France’s CAC 40 and UK’s FTSE 100 rose 0.5% and 0.6% respectively. Asian markets were mostly higher earlier in the day, tracking the previous day’s gains on Wall Street fueled by a tech rally. Japan’s Nikkei 225 and Taiwan’s TWSE were notable gainers on the day with jumps of 3.4% and 3.0% respectively. The Hang Seng Index rose 0.8%. The Shanghai Composite Index and FBM KLCI slipped 0.2% and 0.1% however.

Source: PublicInvest Research - 13 Sept 2024