Market Review

Yesterday, the decline in shares of banking heavyweights exerted downward pressure on Bursa Malaysia, pushing the index below the key 1,600 level and closed at 1,597.5 (-0.4%). For index constituents, the negative performance was led by MRDIY (-2.2%), GENM (-1.9%) and TM (-1.7%). Among the sectors, Technology (-1.6%) led the decline, driven by profit-taking activities among investors, particularly following the recent rally and the absence of strong catalysts. Thus, the overall broader market breadth turned bearish, with 604 losers outweighing 415 gainers.

Economics

US: Fed's favoured inflation gauge picks up, backs cautious approach

The Federal Reserve's (Fed) preferred measure of underlying inflation accelerated in October from a year ago, helping explain policymakers' more cautious approach to lowering interest rates. Core personal consumption expenditures price index, which strips out volatile food and energy items, increased 2.8% from October last year and 0.3% from a month earlier. A good part of that acceleration was due to the impact of higher stock prices on the calculation. Inflation-adjusted consumer spending edged up 0.1% after an upwardly revised 0.5% gain in September, consistent with uneven demand over the course of the year. On a three-month annualized basis - a metric economists say paints a more accurate picture of the trajectory of inflation - the core PCE price gauge advanced 2.8%. (Bloomberg)

Asia: Bonds to trail EM peers if Trump enacts milder tariffs

Emerging Asian bonds are turning more expensive, making them less attractive than their global peers if Donald Trump's tariff policies turn out to be milder than feared. The yield spreads of South Korea, the Philippines, India, China, Malaysia, and Indonesia are all trading one standard deviation below their average of the last 12 months, according to Bloomberg-compiled data. That shows higher valuation than other emerging markets (EMs) such as Colombia and Mexico. A more favourable trade outcome and easing Treasury yields would be positive for EM currencies, fostering a more conducive environment for cheaper bonds to attract foreign inflows and drive local yields lower. (Bloomberg)

Japan: Cabinet to approve US$92bn extra budget

Japan will lean heavily on extra tax revenue in a ¥13.9tn (US$92bn or RM406.9bn) additional budget to finance Prime Minister Shigeru Ishiba's stimulus package, according to people familiar with the matter. The extra budget will partly be funded by ¥3.8tn in higher-than-expected tax receipts and unused funds from the previous year, limiting the need for additional bond issuance to ¥6.7tn, according to the people. The budget, which is slightly larger than last year's, may spark questions about the necessity of such extensive spending given recent relatively solid economic growth. Before unveiling the package, Ishiba had indicated he will deliver an extra budget that's larger than last year's, in an apparent attempt to bolster his popularity ahead of the general election. This year's additional budget marginally exceeds former prime minister Fumio Kishida's ¥13.2tn plan last year, suggesting Ishiba is trying to spend the minimum amount needed to keep his campaign promise. (Bloomberg)

Japan: BOJ rate hike won't derail budgets, DPP official indicates

Motohisa Furukawa, a senior member of Japan's opposition Democratic Party for the People (DPP), stated that the Bank of Japan (BOJ) is unlikely to make abrupt policy changes that would disrupt budget discussions despite some economists expecting a rate hike next month. Furukawa downplayed the potential impact of a rapid rate increase on public borrowing costs, emphasising that a rate hike could negatively affect the economy, households, and government finances. The DPP is pushing for an increase in Japan's tax-free income ceiling to boost disposable income, although the Finance Ministry warns this could create a significant gap in tax receipts. The party is open to issuing more debt to support short-term economic growth, aiming to reverse the long-term trend of deflation and stagnant wages. (Bloomberg)

South Korea: Girds for Trump tariff impact with surprise rate cut

The Bank of Korea (BOK) unexpectedly cut its interest rate by 0.25 percentage points to 3% to support the economy amid growing uncertainties, including the impact of global trade and the policies of the incoming U.S. administration under Donald Trump. The BOK lowered its 2025 growth forecast to 1.9%, citing risks to economic growth, particularly from cooling exports and inflationary pressures. The surprise rate cut led to initial movements in the bond market, stocks, and the currency, with the won weakening against the dollar. While some BOK members opposed the cut, the bank signalled potential further reductions in the near future to bolster economic stability. (Bloomberg)

Companies

Farm Fresh: Declares dividend of one sen as 2Q earnings double

Farm Fresh Bhd's net profit more than doubled in the second quarter ended Sept 30, 2024 (2QFY2025), as contributions from Inside Scoop, Sin Wah and profitable Australian operations were boosted by decreased dairy raw material costs. Net profit rose 105% to RM26.2m or 1.40 sen per share, from RM12.8m or 0.68 sen per share a year ago. Farm Fresh declared an interim dividend of one sen per share, with an ex-date of Dec 12, payable on Dec 27. Quarterly earnings, however, were partially offset by higher fair value losses on biological assets and an unrealised foreign exchange (forex) loss due to unfavourable forex translation on bank balances denominated in foreign currencies, particularly US dollars. (The Edge)

Yinson: Gets US$59m financing for Matarani solar project in Peru

Yinson Holdings Bhd's renewables business unit has secured a US$59m (RM262.5m) senior secured green financing facility for the Matarani solar project in Peru from IDB Invest and Natixis Corporate and Investment Banking (Natixis CIB). Yinson Renewables chief financial officer Vegard Urnes said the financing marks a significant milestone for the company in Latin America. (Bernama)

TNB: 3Q profit up 85% on RM1.12bn forex gain

Tenaga Nasional Bhd (TNB) reported an 85% increase in net profit to RM1.58bn for its third quarter of FY2024, driven by significant foreign exchange (forex) gains, compared to RM856.2m in the same quarter last year. Quarterly revenue rose 6.6% to RM14.35bn, supported by a 4.9% increase in electricity sales. Operating expenses grew 11% to RM15.18bn, and TNB booked a forex gain of RM1.12bn, up from just RM4.6m in 3QFY2023. For the nine months ending September 2024, net profit surged 71.3% to RM3.74bn, with a forex gain of RM1.07bn, and TNB expects stable performance for the full year. (The Edge)

HLFG: 1Q net profit rises 14% as banking, insurance arms report gains

Hong Leong Financial Group Bhd (HLFG) reported a 14% increase in net profit for the first quarter of FY2025, reaching RM847.7m, driven by strong performance in its banking and insurance sectors. Hong Leong Bank's net profit rose 5.8% to RM1.1bn, boosted by higher net interest income and non-interest income, while HLA Holdings saw a significant 142.3% growth in pre-tax profit due to higher investment income and insurance results. Quarterly revenue rose 20% year-on-year to RM1.9bn. However, Hong Leong Capital's pre-tax profit declined by 20.5% due to delays in deals and lower investment returns. (The Edge)

HLB: Earnings up 6% in 1Q, driven by higher net interest income

Hong Leong Bank Bhd (HLB) reported a 5.8% year-on-year increase in net profit for Q1 FY2025, reaching RM1.1bn, driven by strong growth in net interest income (NII) and non-interest income (NOII). NII rose 10.5% to RM1.2bn, while NOII surged 32%, supported by higher fee income and improved foreign exchange gains. The bank's loan and financing portfolio grew by 6.9%, and it maintained a solid gross impaired loan ratio of 0.54%, with no dividend declared for the quarter. (The Edge)

GENM: 3Q profit highest in nearly six years on forex gains

Genting Malaysia Bhd's third-quarter net profit for the period ended Sept 30, 2024, surged over threefold to RM569.2m, driven by RM601.8m in unrealised foreign exchange gains on US-dollar denominated borrowings. This result marked its highest quarterly profit since 2018, despite a slight revenue increase of 1.45% to RM2.8bn, supported by growth in its UK and Egypt leisure businesses. For the first nine months of 2024, net profit grew to RM709.2m, with revenue rising 9.6% to RM8.2bn, as the company remains cautiously optimistic about the leisure and hospitality sector's recovery. (The Edge)

IHH: Reports 43% jump in core profit on higher patient volumes

IHH Healthcare Bhd's core net profit for the third quarter of 2024 rose 43% year-on-year to RM528m, driven by higher patient volumes and more complex cases, though its overall net profit was largely unchanged at RM534m. Revenue for the quarter declined 3% to RM5.6bn, impacted by adjustments related to inflation and the Turkish lira under accounting standard MFRS 129. For the first nine months of 2024, net profit fell 13.4% to RM1.9bn, but revenue rose 13.1% to RM17.7bn, with strong growth in core net profit, revenue, and EBITDA when excluding the effects of MFRS 129. The group continues to expand through acquisitions, including Island Hospital in Penang and properties in France, and expects significant synergies from these moves. (The Edge)

EcoWorld: Issues RM300m sukuk wakalah

Eco World Capital Bhd, a subsidiary of Eco World Development Group Bhd, has issued a RM300m sukuk wakalah in two tranches: RM100m with a three-year tenure and RM200m with a seven-year tenure. The proceeds will be used for working capital, capital expenditure, land acquisitions, shariah-compliant investments, refinancing existing debt, and other corporate purposes. (The Edge)

Genting: 3Q net profit more than halves on higher write-off

Genting Bhd reported a 57% drop in its third-quarter net profit for FY2024, falling to RM223.8m, primarily due to higher property, plant, and equipment (PPE) write-off of RM207.3m and lower earnings from its leisure, hospitality, and power segments. Revenue declined 11.2% year-on-year to RM6.54bn, with Resorts World Sentosa and Resorts World Genting seeing reduced earnings, while its power division and plantation business also faced setbacks. However, the group's investments segment performed well, driven by foreign exchange gains, and Genting remains optimistic about international tourism and its regional gaming market recovery. (The Edge)

PPB: 3Q profit falls 44% on lower Wilmar contribution

PPB Group Bhd's net profit for the third quarter of FY2024 dropped 44.1% to RM208.1m, primarily due to lower contributions from its associate Wilmar International and a 97% decline in profit from its core business segments. Quarterly revenue fell 7.5% to RM1.4bn, impacted by the divestment of its Indonesian flour operations and reduced profits across its grains, agribusiness, consumer products, and film exhibition segments. For the nine-month period, net profit dropped 10.4%, and while the group faces challenges in its grain and agribusiness segment, it remains focused on expanding its consumer products and improving property performance. (The Edge)

Source: Mercury Securities Research - 29 Nov 2024