Economy

US: Three Fed governors tell US senator there is room to reduce balance sheet. The three newest Federal Reserve governors, including Vice Chair Philip Jefferson, have told a US senator it's unclear how much further the central bank's balance sheet wind-down process will run, but said it is likely the process faces no imminent end. "The size of our balance sheet ultimately will depend on the public's demand for our liabilities, particularly currency and reserves and we cannot specify in advance what that demand will be, hence we are not targeting any particular dollar value for our balance sheet," Jefferson wrote to US Senator Rick Scott. (Reuters)

US: Labour market loosening as weekly jobless claims hit three-month high. The number of Americans filing new claims for unemployment benefits increased to a three-month high last week, suggesting that the labour market was gradually cooling in another boost to the Fed's fight against inflation. The weekly jobless claims report from the Labour Department also showed unemployment rolls expanding to levels last seen two years ago. The labour market is slowing as higher interest rates curb demand, consistent with slowing economic activity. (Reuters)

US: Fed's Cook says economic risks two-sided, 'soft landing' possible. The US central bank must steer between the risk of doing too little and taking the fight against inflation too far, Fed Governor Lisa Cook said, a task made particularly delicate because other global central banks have also tightened monetary policy quickly over the past couple of years. "I believe that a 'soft landing' is possible, with continued disinflation and a strong labour market, but it is not assured," Cook said. (Reuters)

US: Homebuilder confidence unexpectedly slumps to 11- month low in Nov. With mortgage rates approaching 8% earlier this month, the National Association of Home Builders released a report unexpectedly showing a continued deterioration in US homebuilder confidence in the month of Nov. The NAHB/Wells Fargo Housing Market Index slumped to 34 in Nov from 40 in Oct, while economists had expected the index to come in unchanged. (RTT)

US: Mortgage rates fall for a third week, Freddie Mac. US mortgage rates fell for the third-straight week this week to the lowest since late Sept, signalling falling yields in the Treasury market that largely determine home borrowing costs may be boosting housing market affordability. The average rate on 30-year fixed-rate mortgages dipped to 7.44% from 7.50% the week before, according to a Freddie Mac survey released. The softening comes after rates reached a 23-year high of 7.79% three weeks ago. (Reuters)

EU: Italy trade balance swings to surplus. Italy's foreign trade balance turned to a surplus in Sept from a deficit in the previous year as imports fell faster than exports, data from the statistical office Istat showed. The trade balance for Sept came in at a surplus of EUR2.34bn versus a deficit of EUR6.69bn in the corresponding month last year. In Aug, there was a surplus of EUR1.95bn. Exports fell 6.6% annually in Sept after a 2.2% rebound in Aug. (RTT)

EU: Dutch jobless rate falls slightly to 3.6%. The Netherlands' unemployment rate decreased slightly in Oct, data from the Central Bureau of Statistics showed. The seasonally adjusted ILO jobless rate dropped to 3.6% in Oct from 3.7% in Sept. In the corresponding month last year, the jobless rate was 3.7%. There were 361,000 unemployed people in Oct, down from 371,000 a month ago. The youth unemployment rate, which applies to the 15-25 age group, declined to 8.4% in Oct from 8.8% in Sept. (RTT)

UK: BOE’s Greene says UK rates need to stay higher for longer. BOE policy maker Megan Greene said borrowing costs will need to remain higher for longer to control inflation and that markets haven’t yet absorbed the message that the natural rate of interest and unemployment has risen since the pandemic. Greene said recent data showing a drop in inflation to 4.6% and weakening in wage growth was “good news.” But she remains worried about evidence emerging in the services component of the CPI that inflation will persist. Wage growth was still “incredibly high,” she added. (Bloomberg)

China: Xi pledges ‘heart-warming’ steps to attract foreign capital. Chinese President Xi Jinping pledged to make it easier for foreigners to do business in China in highly anticipated remarks delivered to a major summit, as corporate confidence wanes in the planet’s second-largest economy. The Chinese leader vowed his nation would create a “world-class business environment” and improve mechanisms for protecting the rights of international investors, in a written speech published Thursday at a CEO forum being held in California. (Bloomberg)

Hong Kong: Jobless rate rises to 2.9%. Hong Kong's unemployment rate increased slightly in the Aug-Oct period, labour force statistics from the Census and Statistics Department showed. The seasonally adjusted unemployment rate came in at 2.9% in the Aug-Oct period, up from a stable rate of 2.8% in the July-Sept period. The data showed that the underemployment rate remained unchanged at 1.0%. On an unadjusted basis, the unemployment rate held steady at 3.0%. (RTT)

Australia: Adds 55K jobs in Oct. The jobless rate in Australia came in at a seasonally adjusted 3.7% in Oct, the Australian Bureau of Statistics said. That was in line with expectations and up from 3.6% in Sept. The Australian economy added 55,000 jobs last month, blowing away forecasts for an increase of 20,000 jobs following the addition of 6,700 jobs in the previous month. The participation rate improved to 67.0%, beating forecasts for 66.7%, which would have been unchanged from Sept. (RTT)

Philippine: Central Bank keeps rate unchanged. The Bangko Sentral ng Pilipinas kept its policy rates untouched after an off-cycle rate hike in Oct and hinted at more tightening if required to steer inflation towards a target-consistent path. The Monetary Board, led by Governor Eli Remolona, maintained the target reverse repurchase rate at 6.50%. Accordingly, the interest rates on the overnight deposit and lending facilities were retained at 6.0% and 7.0%, respectively. (RTT)

Markets

Apex Equity (Neutral, TP: RM1.20): To dispose of Menara Apex for RM55m. The proposed disposal to private higher education provider New Era Edu SB is on an 'as-is-where-is', 'lock stock and barrel' and willing buyer willing seller basis. (StarBiz)

Comment: The proposed disposal of land is expected to result in a gain of RM39m, allowing the group to unlock and monetise its investment in non-core assets. Although the proceeds from the sales of land will be utilized for working capital funding, we do not rule out the possibility of a special dividend to be declared in the future. Our core earnings forecasts remain unchanged as the gain on disposal will be treated as non-operating/non-recurring gain. Maintain Neutral on Apex Equity.

Sime Darby (Outperform, TP: RM2.41): Gets nod to acquire UMW. Sime Darby has received shareholders’ nod to acquire Permodalan Nasional’s (PNB) 61.2% stake in UMW Holdings. The conglomerate, subsequently, will be launching a mandatory general offer to acquire the remaining shares to gain full ownership of UMW. On Aug 24, 2023, Sime Darby had entered into a conditional share purchase agreement to acquire PNB’s 61.2% stake in UMW for RM3.57b to scale up its presence in the automotive sector. (StarBiz)

HSS Engineers: Tenders for RM442m worth of jobs. HSS Engineers is tendering for RM442m worth of projects across multiple sectors including highways, public transport, ports and water infrastructure. The group will be looking towards the government’s RM11.8bn allocation for flood mitigation projects as it seeks to boost its order book, which stood at RM1.5bn as at Sep 30, 2023. (StarBiz)

Salutica: Accuses Apple of patent infringement, files lawsuit in Singapore. Salutica, which is involved in a legal suit with Apple's unit in Malaysia for alleged patent infringement against Apple South Asia Pte Ltd. Salutica is seeking, among others, a declaration that its patent is valid and has been infringed by Apple South Asia, and an injunction to restrain the Apple firm from making, disposing, using, importing or keeping products that infringe the patent. (The Edge)

Pecca: Wants to form new partnership with EV related companies. Pecca Group is open to forming partnerships with EVrelated business entities. The group is aggressively looking to diversify into the EV-related industry. The group has established two new legal entities to support the importation of EV cars and the distribution and dealership of EV cars. (BTimes)

Siab: Proposes private placement, rights issue, acquisition of Taghill. Siab Holdings has proposed a private placement, a rights issue with warrants, and the acquisition of 100% of Taghill Projects SB. The private placement would involve 100m new ordinary shares representing 20.42% of the existing issued shares to independent investors to be identified, and at an issue price to be determined later. (The Edge)

MAG Holdings: Calls off proposed investment in Indonesian shrimp farm. MAG Holdings has called of its proposal to take up a 50% stake in an Indonesian shrimp farm via a SGD6.1m (RM22m) investment. The group had entered into a term sheet with LIM Shrimp Organization Ltd (LSOL) for the proposed investment in Lim Shrimp Aquapolis Pte Ltd (LSA). (The Edge)

MARKET UPDATE

The FBM KLCI might open flat today after the S&P 500 and the Nasdaq managed to eke out tiny gains on Thursday while the Dow Industrial Average ended slightly lower with pressure from tech and retail bellwethers Cisco and Walmart after disappointing forecast. The Dow Jones Industrial Average dropped 0.13% while the S&P 500 and the Nasdaq Composite ended up 0.12% and 0.07% respectively. Across the Atlantic, European markets finished mixed with the DAX gained 0.24% and the FTSE 100 lost 1.0%. The CAC 40 lost 0.57%. The Pan-European STOXX 600 index lost 0.72% from a one-month high.

Back home, shares on Bursa Malaysia retreated at the close on Thursday on profit taking after Wednesday’s gains and as China’s property woes weighed on regional sentiment, with investors also cautious ahead of Malaysia's third quarter results on Friday. At the closing bell, the FBM KLCI fell 2.16 points to 1,464.68 from Wednesday’s closing of 1,466.84. Regional stocks fell on Thursday, pausing the heavy gains made this week, as fresh Chinese data showed prolonged weakness in the property sector and dented some of the recent optimism about a recovery in the world's second-largest economy. Chinese stocks showed some disappointment at the first meeting in years between U.S. President Joe Biden and Chinese President Xi Jinping, with Shanghai's bluechip CSI300 index closing down 1% and Hong Kong's Hang Seng index ending 1.3% lower.

Source: PublicInvest Research - 17 Nov 2023