Market Review

The FBM KLCI rebounded by 2.5% to 1574.4, recovering nearly half of the previous session's losses as regional markets saw a relief rally on Tuesday. Among the index constituents, the top-performing stocks include PCHEM (+5.1%), KLK (+4.5%), SDG (+4.4%), PETDAG (+4.4%) and TM (+4.2%). Sectors that bounce back the most include Construction (+4.8%), Property (+4.6%), and Technology (+3.9%). Overall, the broader market breadth returned back to positive, with 1,078 gainers against 308 losers.

Economics

Malaysia: Services Producer Price Index up 0.7% in 2Q2024

Malaysia’s Services Producer Price Index (SPPI) grew marginally by 0.7% to 115.7 points in the second quarter of 2024 (2Q2024), compared to a 1.0% increase in 1Q2024, said the Department of Statistics Malaysia (DOSM). Chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the arts, entertainment and recreation index rose 7.7% in 2Q2024, compared to 7.5% in 1Q2024, which was contributed by the other amusement and recreation activities (2.3%). “The index of accommodation and food and beverage service activities continued to increase by 2.4% (1Q2024: 2.5%), attributed to beverage service activities (3.6%) and restaurants and mobile food service activities (2.6%), following an incline in food prices,” he said in a statement. (The Edge)

Malaysia: National Unity Ministry needs RM290m for five initiatives from Budget 2025

The Ministry of National Unity (KPN) has proposed five budget initiatives totaling RM290m for Budget 2025 to the Ministry of Finance (MOF), said Minister Datuk Aaron Ago Dagang on Tuesday. The initiatives focus on unity, national integration and harmony; community wellbeing; digitalisation and technology; heritage preservation and conservation; and unity infrastructure improvements. Key elements include empowering community roles such as the Kawasan Rukun Tetangga (KRT) and voluntary patrol schemes, digitalizing national heritage, and improving ministry premises. These initiatives aim to achieve a National Unity Index of 0.7% by 2025, as outlined in the 12th Malaysia Plan (12MP). Prime Minister Datuk Seri Anwar Ibrahim is set to table the budget on October 18. (The Star)

Australia: Central bank rules out near-term rate cut on inflation risks

Australia's central bank unexpectedly held interest rates steady at a 12-year high, defying market expectations of a potential rate cut on Tuesday. In a hawkish stance, the Reserve Bank of Australia (RBA) emphasized the need for persistent monetary tightening to curb core inflation, which remains stubbornly above the target range. While acknowledging a recent cooling in inflation, the RBA expressed concerns about its persistence and signaled that further rate hikes could be on the table if necessary. The decision sent shockwaves through financial markets, driving up the Australian dollar and bond yields as investors revised their expectations for future monetary policy. The RBA's determination to bring inflation back within its target band suggests a prolonged period of high interest rates for the Australian economy. (Reuters)

Philippine: CPI quickens in July, rate cut 'little less likely'

The Philippine central bank could hold off easing interest rates next week after annual inflation in July accelerated to a "worse-than-expected" level, its governor said on Tuesday. Annual inflation rose 4.4% in July on elevated food and utility costs, government statistics data showed, breaching the 4.1% forecast and higher than June's 3.7% print. Inflation averaged 3.7% in the first seven months, near the top end of the central bank's 2.0% to 4.0% target this year. The representatives told reporters on Tuesday that a rate cut in August would be "a little bit less likely, since inflation is elevated". "It's still worse than expected, but not that bad," Remolona said. Monetary authorities will meet on Aug 15 to review its policy rate, which had been kept steady at 6.5% at the last six meetings. (Reuters)

Indonesia: Keeps growth above 5% as Prabowo’s stimulus looms

Indonesia's economy grew 5.05% year-on-year in the April-June period, exceeding forecasts despite slower government spending, the government statistics office said on Tuesday. Sequentially, GDP rose 3.79%, rebounding from a prior contraction. This marks the third consecutive quarter of above 5% growth, highlighting the resilience of Southeast Asia’s largest economy. However, sluggish government consumption shifts focus to incoming President-elect Prabowo Subianto's stimulus program, which aims for an ambitious 8% GDP growth. The upcoming 2025 budget is expected to support his priorities and stimulate economic growth. Meanwhile, stable household spending and accelerating investment growth contributed to the positive economic performance. (Bloomberg)

Companies

Chin Hin: Enter data centre market with RM51.5m acquisitions

Chin Hin Group Bhd has acquired substantial stakes in two data centre specialist firms, Critical System Specialist Sdn Bhd and CSS Engineering and Construction Sdn Bhd, for RM51.5m. The acquisitions, involving 65% shares in each company, were made through a conditional share sale agreement with Liew Choon Fui, Teng Bee Ling, and Ho John Chan. These firms specialise in data centre engineering and construction solutions. Chin Hin anticipates that the acquisitions will expand its service offerings, increase revenue, and generate additional income streams. Synergistic benefits include cross-selling, economies of scale, and enhanced market positioning with a profit guarantee of RM12.4m for 2023 and 2024. Managing Director Chiau Haw Choon highlighted the acquisitions' potential to capitalise on the booming data centre sector and CSS’ strong RM388m order book. (The Star)

AWC: Gets sub-contract job worth RM10.2m

AWC Bhd has accepted a letter of award from CBTech (M) Sdn Bhd worth RM10.2m for sub-contract works for a multi-block serviced apartment development in Kuala Lumpur for UEM Land Bhd. In a filing with Bursa Malaysia, AWC said the contract will entail the supply, delivery, installation, testing, commissioning, service and maintenance of cold water and sanitary plumbing system, rainwater down pipe services and installation of sanitary fittings and accessories. “The sub-contract works shall commence from June 18, 2024 and be completed by Aug 31, 2027.” In a separate announcement, AWC said it had entered into a memorandum of understanding (MoU) with Beijing Energy Envision Linking Smart (Beijing) Technology Co Ltd, Southwest Branch and Zhizi Automotive Technology Co Ltd, aimed at exploring opportunities in the importation, production, and sales of new energy heavy trucks and construction machinery in Malaysia. (The Star)

Keyfield: Bags AHTS supply contract from Carigali-PTTEPI

Keyfield International Bhd has accepted a letter of award from Carigali-PTTEPI Operating Company Sdn Bhd (CPOC) for the provision of an 80-tonne Bollard Pull anchor handling tug supply (AHTS) vessel for CPOC’s offshore activities. In a filing with Bursa Malaysia, Keyfield said the contract, which will commence in September 2024, is for a firm charter period of two years with a one-year extension at CPOC’s option. “The contract for the primary charter period is valued at approximately US$10m (RM44.3m), while the extension period is valued at approximately US$5m (RM22.2m),” Keyfield said it will provide one AHTS with crew and on-board services perform agreed scope of works to meet CPOC’s requirement. (The Star)

JTGB: Gets RM33.8m horizontal directional drilling job from Gamuda

Jati Tinggi Group Bhd (JTGB) has accepted a letter of award (LOA) from Gamuda Engineering Sdn Bhd worth RM33.8m to perform engineering, procurement, construction and commissioning of horizontal directional drilling works for incoming power supply in Gombak, Selangor. In a filing with Bursa Malaysia, JTGB said the contract shall commence on Aug 1, 2024 and for a contract period of 198 days. “The substantial completion date shall be Feb 15, 2025.” (The Star)

Cape EMS: Plummets to new low; CEO sells more shares

Cape EMS Bhd, an electronics manufacturing services firm, suffered a dramatic 28.3% plunge in its share price on Tuesday, reaching an all-time low. This steep decline coincided with the sale of 15.22m shares by the company's CEO, Christina Tee Kim Chin. Despite the selling pressure and plummeting stock price, Tee maintains optimism about the company's financial health, citing strong profit margins and projected revenue growth driven by the green energy and data center sectors. However, the stock has experienced a significant 42.5% drop in the past two weeks, raising investor concerns and prompting increased market activity.

Source: Mercury Securities Research - 7 Aug 2024