Economy

US: Manufacturing unexpectedly accelerates amid US growth signs. Signs of better US growth are cropping up, including in manufacturing, which has been a laggard of the economy. Activity at factories unexpectedly expanded at a faster pace in May, helped by an increase in orders. (Bloomberg)

EU: Greece said to approach accord for bailout tranche payment. Greece is close to an accord with creditor institutions on measures needed to get its next bailout tranche, two people familiar with the negotiations said, as the government submitted amendments to parliament Wednesday to bring legislation in line with what euro-area nations requested. (Bloomberg)

China: Surprise wage jump shows government supporting consumers. China’s wage growth accelerated last year, defying the slowest economic expansion in a quarter century, as the government pushed ahead with its strategy of boosting incomes and consumption to cut reliance on fading heavy industries. (Bloomberg)

Japan: Debt burden is quietly falling by the most in the world. Japan for years has been renowned for having the world’s largest government debt load. No longer. That’s if you consider how the effective public borrowing burden is plunging - by one estimate as much as the equivalent of 15 percentage points of GDP a year, putting it on track toward a more manageable level. (Bloomberg)

India: Still silent on Rajan’s future as speculation intensifies. India’s government stayed mum on the fate of central bank Governor Raghuram Rajan as speculation over his future mounts. The rupee reversed gains and bonds declined after a local-language newspaper reported that Rajan doesn’t want an extension of his term even though Prime Minister Narendra Modi wants him to stay on. (Bloomberg)

Indonesia: Fails to win full investment grade as S&P holds rank. Indonesia’s long wait to win full investment grade rank just got longer after S&P Global Ratings maintained its junk status because of weak fiscal performance. S&P affirmed the country’s BB+ rating, while leaving the door open for a future upgrade by maintaining a positive outlook. (Bloomberg)

Markets

WZ Satu, Silk Holdings: Buys SILK Highway for RM368m. Silk Holdings (SHB) has signed a heads of agreement to dispose its entire equity interest in tolled highway concessionaire Sistem Lingkaran-Lebuhraya Kajang SB (SILK) to bauxite mining and construction firm WZ SB for RM368m. SHB said the disposal consideration would be settled by RM239.3m in cash and RM128.8m via 125m new 50-sen shares in WZ Satu at an issue price of RM1.03 each. The 125m new shares, based on the current number of WZ Satu shares issued (333.89m), would give SHB about 27% equity interest WZ Satu. (StarBiz)

Scomi Engineering: Secures over RM500m more jobs for Brazil monorail. Scomi Engineering has secured additional works for the Line 17 – Gold Sao Paulo monorail project in Brazil worth RM504.6m, increasing its total contract value to RM601.8m. The project is targeted for completion in the 1Q of 2018. The Line 17 – Gold alignment spans 8.8km and it will feature automatic train operation (driverless) technology. When completed, the monorail trains can transport 36,000 passengers per hour per direction and reach speeds of up to 80km per hour. (StarBiz)

Matrix: Launches apartments in Melbourne. Property developer Matrix Concepts Holdings (MCHB) has made its maiden venture abroad with the launch of the M.Carnegie boutique low-rise apartments in Melbourne. MCHB group MD Datuk Lee Tian Hock said 52 apartments would be built on 1,865 sq m in the suburb of Carnegie, located some 15km from the Melbourne central business district. “The entire project will have a GDV of RM100m,” he said. Work on the project would begin in Sept and scheduled for completion in Nov next year. (StarBiz)

Ekovest: To fund DUKE Phase-3 with RM3.6bn sukuk. Ekovest which was awarded the concession for the construction and management of the DUKE Phase-3 expressway, is planning a RM3.6bn sukuk to partially fund the project cost. Malaysian Rating Corporation (MARC) said it has assigned a rating of AA-IS with a stable outlook on toll concessionaire Lebuhraya DUKE Fasa 3 SB, a unit of Ekovest. “The proceeds from the sukuk will part fund the estimated RM5.1bn project cost, the remaining funding will come from a RM560m interest-free government reimbursable interest assistance (RIA) and RM850m equity,” it said. (SunBiz)

Ranhill: Eyes power plant projects in Myanmar, Sabah. Ranhill Holdings is eyeing a gas-fired power plant project in Myanmar and submitted a proposal to build a new power plant in Sabah. Its president and CEO Tan Sri Hamdan Mohamad said the Myanmar government is calling for expressions of interest for a 400MW gas-fired power plant. (SunBiz)

Ahmad Zaki: Bids for RM2.5-3bn jobs. Construction player Ahmad Zaki Resources (AZRB) is bidding for RM2.5bn to RM3bn worth of infrastructure projects locally. MD Datuk Wan Zakariah Wan Muda said the projects include the tender to build two major expressways in Greater Klang Valley, namely the Sungai Besi-Ulu Klang Elevated Expressway (SUKE) and the Damansara-Shah Alam Elevated Expressway (DASH). (SunBiz)

MARKET UPDATE

US markets clawed back early losses to close the day relatively unchanged following news reports of the country’s manufacturing activity having expanded at a faster pace in May than initially anticipated. Manufacturers are also starting to see a pickup in prices, with an index of prices paid jumping to the highest level since mid-2011. Investors will now look toward payrolls data due out this Friday to postulate the US Federal Reserve’s (FED) next move with regard it its rate hike plans. Incidentally, the FED’s Beige Book (released yesterday) assessment of conditions showed the economy expanding at a modest pace across most of the country since mid-April and causing the labor market to tighten as employers added more jobs and nudged wages higher. For the day, the Dow Jones Industrial Average inched 0.01% higher while the S&P 500 gained 0.1%.

European markets fell however as manufacturing data on the continent showed negligible growth in May, a stark reminder that global economic conditions continue to be challenging despite the seeming strength in the US economy. All eyes are now squarely on the European Central Bank as officials meet today at its scheduled policy meeting. Spain and Italy were the big losers in Europe again, its benchmarks down a respective 1.3% and 1.2%, the latter weighed by its banks on account of a report saying they may be asked to inject more money into the country’s resolution fund. Elsewhere, the FTSE 100, CAC 40 and DAX fell 0.6%, 0.7% and 0.6% respectively.

Asian equities started off the month on a cautious note as investors continue to fret over the health of China’s economy. Manufacturing numbers released overnight point to some stabilization, though also painting a picture of prolonged weakness. The Shanghai Composite Index slipped 0.1%. Australia’s 1Q16 GDP beat estimates, which in turn dampened the prospects of interest rate cuts anytime soon, consequently dragging the benchmark S&P/ASX 200 1.0% lower. Japan’s decision to delay a sale tax hike by two and a half years sent the Yen higher which in turn lowered the Nikkei 225 and Topix by 1.6% and 1.3% respectively. The Hang Seng and SET indices were down 0.3% and 0.6%. The FBM KLCI (+0.03%) and Straits Times index (-0.02%) were largely unchanged for the day.

WZ Satu has entered into an agreement to acquire the Kajang Traffic Dispersal Ring Road from SILK Holdings for RM368m, to be satisfied by RM239.3m in cash and 125m WZ Satu shares valued at RM1.30 apiece. WZ Satu will eventually divest a portion of its holdings to identified co-investors as it only plans to be a major shareholder of the highway. Alam Maritim has secured a 4-month RM28.3m subcontract from Petronas for works related to its Floating LNG-1 project. Scomi Engineering and its consortium members have received an additional RM500m contract for the construction of Sao Paolo’s monorail system. Scientex reported a 71% surge in its 9MFY16 net profit to RM186.7m on overall improvements in its manufacturing and property businesses meanwhile.

Source: PublicInvest Research - 2 Jun 2016