Market Review

The FBM KLCI cooled off by -0.1% to 1,590.38 by following two days of gains as investors remained cautious amid mixed regional market performance. Among the index constituents, the top-performing stocks include AXIATA (+2.6%), SIME (+1.2%), PETD (+1.0%), and PCHEM (+0.9%). All sectors ended slightly in the red with minimal losses, except Telecommunication (+0.5%), Transportation (+0.4%) and Consumer (+0.3%). Overall, the broader market breadth turned negative with 444 gainers against 652 losers.

Economics

US: The Fed cuts rates by half a percentage point, cites 'greater confidence' on inflation

The Federal Reserve cut interest rates by half of a percentage point on Wednesday, kicking off what is expected to be a steady easing of monetary policy with a larger-than-usual reduction in borrowing costs that followed growing unease about the health of the job market. Policymakers see the Fed's benchmark rate falling by another half of a percentage point by the end of this year, another full percentage point in 2025, and by a final half of a percentage point in 2026 to end in a 2.75%-3.00% range.

The endpoint reflects a slight upgrade, from 2.8% to 2.9%, in the longer-run federal funds rate, considered a "neutral" stance that neither encourages nor discourages economic activity. It is currently about half a percentage point above that, and the new economic projections now show the annual rate of increase in the personal consumption expenditures price index falling to 2.3% by the end of this year and down to 2.1% by the end of 2025.The unemployment rate is seen ending this year at 4.4%, higher than the current 4.2%, and remaining there through 2025. Economic growth is seen at 2.1% through 2024 and 2% next year, the same as in the last round of projections issued in June. (Reuters)

US: Weekly jobless claims drop to four-month low

The number of Americans filing new applications for unemployment benefits dropped to a four-month low last week, pointing to solid job growth in September and offering confirmation that the economy continued to expand in the third quarter. Initial claims for state unemployment benefits dropped 12,000 last week to a seasonally adjusted 219,000 for the week ended Sept. 14, the Labor Department said on Thursday. Unadjusted claims increased by 6,436 to 184,845 last week, amid notable rises in California, Texas and New York, which more than offset a decrease of 2,055 in Massachusetts. (Reuters)

Indonesia: Issues new palm oil levies rule to boost competitiveness

Under the new rules, which take effect on Saturday, levies for crude palm oil exports will be set at a 7.5% rate of the reference price set periodically by the government. The more refined palm oil products will be charged lower levy rates, at between 3% and 6% of the reference rates, the document showed. Indonesia currently imposes a levy of between US$55 and US$240 per metric tonne for crude palm oil exports, depending on a set of price brackets for the monthly reference price. "Certainly this will make Indonesian origin more competitive especially in October. Malaysian origin need to get lower in order to compete," said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari. (Reuters)

Malaysia: Emphasis on AI to be sustained in 13th Malaysia Plan — deputy minister

Deputy Minister of Economy Datuk Hanifah Hajar Taib said that the 13MP will focus on expanding the AI ecosystem through investments in research and innovation, broaden its application in key sectors, such as public services, smart agriculture and industrial automation; as well as strengthen public-private sector collaboration. “This reflects the continuity and development of the initiatives in the 12MP. The objective is to position Malaysia as a global leader in AI technology through strategic investments and deeper collaborations,” he said during the opening of the 11th Malaysian Statistics Conference (MyStats) 2024, themed Data and Artificial Intelligence: Empowering the Future, at Sasana Kijang, Bank Negara Malaysia on Thursday. (The Edge)

Malaysia: MOF to allocate adequate funds for tourism sector ahead of ASEAN chairmanship, VMY 2026

The Ministry of Finance (MOF) will allocate adequate funds to the tourism sector in preparation for Malaysia's role as ASEAN Chair in 2025 and the Visit Malaysia Year 2026. Finance Minister II, Senator Datuk Seri Amir Hamzah Azizan said Malaysia has a significant opportunity to enhance global awareness of its tourism sector through its ASEAN chairmanship. He added that while discussions on the tourism sector were held in Terengganu, MOF would incorporate insights from the engagement session to enhance tourism nationwide in next year’s budget. (Bernama)

Companies

Pharmaniaga: New insulin, vaccine plant to raise FY2026 gross margin to 30%-35%

Pharmaniaga Bhd’s newly launched biopharmaceutical plant is expected to lift its gross profit margin to about 30% to 35% for the financial year ending Dec 31, 2026 (FY2026). The plant, located in Puchong and operated by Pharmaniaga Life Sciences Bhd, has an annual production capacity of up to 30m doses of human insulin. It will also produce other essential biopharmaceuticals, including vaccines and biosimilars. “For (human) insulin alone, we are looking for RM100m per annum and we are also looking over about RM300m per annum for vaccines. This is in terms of revenue,” Pharmaniaga managing director Zulkifli Jafar told reporters on Thursday. (The Edge)

Bina Darulaman: KPMG's resignation part of routine governance practice

Bina Darulaman Bhd said the resignation of its external auditor KPMG four months after its reappointment “is part of a routine governance practice” following the extension of its tenure. In a statement, BDB said the transition “will not affect BDB’s financial integrity” as KPMG has not audited BDB’s financial reports for the financial year ending Dec 31, 2024 (FY2024). KPMG had served as the external auditor of the Kedah state-linked company for ten years from FY2014 to FY2023, the statement said. BDB has shortlisted BDO PLT as its new auditor, pending the completion of the official documentation to finalise the appointment and align with strategic objectives. (The Edge)

Pharmaniaga: Eyes Bursa approval for regularisation plan by next month

At a press conference following the launch of Pharmaniaga’s new biopharmaceutical plant, Zulkifli said the regularisation plan is crucial to lift the company out of its Practice Note 17 (PN17) status. Pharmaniaga submitted its regularisation plan, which sought to raise RM654.6m in equity and reduce accumulated loss by RM180m via capital reduction, back in February. It had been hopeful of securing the necessary approvals by July. The regularisation plan involves a proposed renounceable rights issue with warrants to raise up to RM354.6m, and a proposed private placement for potentially another RM300m. Pharmaniaga is seeking strategic partners within the pharmaceutical sector, Zulkifli reportedly said in an earlier interview. The regularisation plan was still pending Bursa's consideration as of Sept 2, according to a filing by Pharmaniaga. (The Edge)

Ancom Nylex: Acquires 70% stake in specialty chemical player Colorex for RM14m, cash

Ancom Nylex Bhd is acquiring a 70% stake in Colorex Sdn Bhd for RM14m cash. In a filing with Bursa Malaysia on Thursday, Ancom Nylex said its wholly-owned subsidiary Nylex Holdings Sdn Bhd has entered into a share sale agreement with Colorex's shareholders and directors Loke Teak Thong and Lim Tiak Cheong for the acquisition of 1.4m shares in the company. The proposed acquisition comes with a profit guarantee by Loke and Lim that Colorex shall achieve a profit after tax (PAT) of no less than RM2.5m for two consecutive years. "The vendors (Loke and Lim) further agree to compensate the purchaser (Nylex Holdings) for any shortfall in the profit guarantee, with such compensation to be adjusted proportionally based on the purchaser’s shareholdings in Colorex post completion," Ancom Nylex said. (The Edge)

Source: Mercury Securities Research - 20 Sep 2024