Market Review

The FBM KLCI closed flattish at 1,645.7 yesterday, as investors paused to digest the details of Budget 2025. Among the index constituents, the top gainers were PDAG (+2.2%), PCHEM (+1.1%) and PETGAS (+0.9%), while the top decliners were led by YTL (-3.0%), YTLPOWR (- 2.6%) and NESTLE (-1.6%). For sector-wise, the positive performance was led by Health Care (+0.9%), Energy (+0.8%) and Technology (+0.7%), while the negative performance was led by Property (-1.3%), Utilities (-1.0%) and Plantation (-0.4%). Overall, the broader market breadth turned negative, with 645 losers outweighing 395 gainers.

Economics

EU: ECB’s Simkus says it’s clear rates will be lowered further

European Central Bank (ECB) Governing Council member Gediminas Simkus said borrowing costs will be reduced further should the downtrend in inflation persist, though he wouldn’t predict the outcome of officials’ next meeting. “The direction is clear — less restrictive monetary policy,” the Lithuanian central bank chief said on Monday. “I can’t yet tell what the decision will be in December. But the direction is clear — down.” Investors agree. They are betting on a spate of interest-rate cuts at the next few meetings with inflation already below the 2% target and the 20-nation eurozone economy barely growing. A December move is very likely, according to people familiar with the matter. (Bloomberg)

China: Cuts key lending rates to support growth

China cut benchmark lending rates as anticipated at the monthly fixing on Monday, following reductions to other policy rates last month as part of a package of stimulus measures to revive the economy. The one- year loan prime rate (LPR) was lowered by 25 basis points to 3.1% from 3.4%, while the five-year LPR was cut by the same margin to 3.6% from 3.9% previously. People's Bank of China (PBOC) Governor Pan Gongsheng told a financial forum last week lending rates will decrease by 20 to 25 basis points on Oct. 21. The PBOC announced cuts to banks' reserve requirement ratio by 50 basis points and the benchmark seven-day reverse repo rate by 20 basis points on Sept. 24, kicking off the most aggressive stimulus since the pandemic that include measures to support the ailing property sector and boost consumption. (Reuters)

EU: Banks under investor pressure to keep earnings growth alive

Europe's biggest banks are healthier than at any point since the 2008-09 financial crisis, but investors want reassurance that they can trust their longer-term earnings power as interest rates fall. Bank share prices have broadly delivered a double-digit rise this year, driven by stock buyback programmes made possible by years of capital accumulation, restructuring, cost cuts and supportive central bank policy, which boosted their profits. Deutsche Bank, Lloyds and Barclays will kick off third-quarter earnings reporting this week, while UBS and HSBC will be among those reporting next week. The numbers are expected to show continued profitability, with robust investment banking activity offsetting squeezes on margins and weak demand for loans among consumers and businesses. But investors want more. Besides looking for evidence of asset quality resilience, they are seeking sharper strategy, lower costs and the potential to outperform in a low-growth global economy. (Bloomberg)

US: Fed’s Logan repeats call to lower rates gradually amid risks

Lorie Logan, President of the Federal Reserve Bank of Dallas, emphasised the need for a gradual reduction of interest rates to balance inflation and labour market risks amid ongoing economic uncertainty. Following a recent half-percentage-point cut, she noted that stronger-than-expected hiring could lead to a smaller quarter-point cut at the upcoming Fed meeting. Logan discussed the ample liquidity in the market and suggested that the Fed's overnight reverse repurchase facility might need adjustments if market dynamics change. She also highlighted the importance of banks being prepared to use the Fed's emergency liquidity tools and mentioned potential future considerations for central clearing in repo facilities. (Bloomberg)

Companies

DNeX: Appoints Faizal Sham Abu Mansor as group CEO

Dagang Nexchange Bhd has appointed Faizal Sham Abu Mansor as its group chief executive officer effective Nov 1, succeeding executive chairman Tan Sri Syed Zainal Abidin Syed Mohamed Tahir Jamalullail in leading the company's management team. Syed Zainal Abidin, 62, will continue to lead the management team until Dec 31, after which he will be redesignated as non-executive chairman. (The Edge)

EP Manufacturing: Proposes diversification into vehicles assembly business

EP Manufacturing Bhd has proposed to diversify its existing principal activities to include the assembly of vehicles as it aims to strengthen its existing automotive business. In a filing with Bursa Malaysia, the group said it is constantly exploring new business opportunities within the broader automotive business industry to provide additional revenue streams and recurring profit. This diversification would allow the company to expand its participation in the wider automotive industry upstream supply chain. (The Star)

AWC: Bags housekeeping services job in JB Sentral

AWC Bhd has secured an RM30.5m contract for housekeeping services at the JB Sentral building in Johor Bahru, awarded by KCJ Engineering Sdn Bhd. This contract extends AWC's order book to over RM700m and marks the first facilities division win since January, with the company optimistic about future growth. (The Edge)

PUC: Subsidiary bags RM10m CRM project

PUC Bhd's subsidiary, Presto Technology, secured an RM10m contract from Green Growth Asia Foundation (GGAF) to develop a CRM system for GGAF’s donation and fundraising activities. The project aims to streamline GGAF's fundraising efforts and enhance donor engagement, supporting its mission for environmental sustainability. This initiative aligns with PUC’s commitment to ESG principles, using technology to drive social and environmental impact. (The Star)

MYEG, Heitech Padu: Affirm collaboration in current and future e-government projects

MyEG Services Bhd and HeiTech Padu Bhd have commenced a partnership to collaborate on current and future e-government projects in Malaysia, following a teaming agreement signed in April. This comes shortly after HeiTech won an RM892.2m contract for the National Integrated Immigration System (NIISe) project, adding to other major wins, including two contracts from the Road Transport Department (JPJ) for digital system revamps and maintenance services. MyEG, which owns a 14.99% stake in HeiTech, also secured a two-year extension for its immigration-related services contract. Both companies aim to enhance digital transformation and public sector efficiency through their collaboration. (The Edge)

Yinson: FPSO Maria Quitéria achieves first oil

Yinson Holdings Bhd announced that its FPSO Maria Quitéria achieved first oil on Oct 15, 2024, marking the start of a 22.5-year firm charter with Petrobras. This is Yinson Production’s second vessel delivered to Petrobras, following FPSO Anna Nery in May 2023. The Maria Quitéria has a production capacity of 100,000 barrels per day and a storage capacity of one million barrels, enhancing Yinson’s long-term partnership with Petrobras. Yinson’s total order book exceeds US$22bn, with FPSO Atlanta awaiting commissioning and another vessel, FPSO Agogo, expected by 2026. (The Edge)

Source: Mercury Securities Research - 22 Oct 2024