Economy

US: Existing home sales slump to more than 13-year low, prices accelerate. US existing home sales dropped to the lowest level in more than 13 years in Oct as the highest mortgage rates in two decades and a dearth of houses drove buyers from the market. The median house price last month was the highest for any Oct. Barring a rebound in Nov and Dec, home resales this year are on track for their worst performance since 1992. Existing home sales tumbled 4.1% last month to a seasonally adjusted annual rate of 3.8m units, the lowest level since August 2010 when the sales were declining following the expiration of a government tax credit for homebuyers. (Reuters)

US: Treasuries climb to erase 2023 losses as Fed cut bets blossom. This year’s wild ride for the world’s deepest debt market may conclude with a happy ending as Treasuries soar this month to erase losses of as much as 3.3% in 2023. The Bloomberg US Treasury Index rose 0.2% and is now back about where it ended 2022. Investors who anticipated that 2023 would be the “year of the bond” were instead hit by waves of turmoil as a resilient US economy prompted the Fed to extend its steepest tightening cycle for a generation. (Bloomberg)

US: Job’s not done on bringing inflation down. US economic data points to an economy that’s expanding while price growth is slowing, but the progress isn’t sufficient for the Fed to declare victory on inflation. The economy is still growing – unemployment is still 3.9%, inflation does seem to be settling. US central bankers held the benchmark policy rate steady for a second time earlier this month to gather more information on the economy before their final meeting of the year. Inflation is cooling but is still too high with the consumer price index, minus food and energy, rising 4% in Oct from a year earlier. While the Fed targets a different measure of price growth, the goal is 2%. (The Star)

EU: Property slump could last years in threat to lenders. The euro zone's sinking commercial property sector could struggle for years, the ECB said, posing a threat to the banks and investors which financed it. Commercial property prices have been hit by economic weakness and high interest rates over the last year, challenging the sector's profitability and business model. The sector is not big enough to create a systemic risk for lenders, but could increase shocks across the financial system and greatly impact the financial firms, from investment funds to insurance firms, collectively known as shadow banks. (Reuters)

EU: German budget crisis deepens with freeze on new spending in 2023. Germany’s budget crisis deepened when the Finance Ministry imposed an emergency spending freeze in response to last week’s ruling by the country’s top court. The Finance Ministry in Berlin froze virtually all new spending authorisations for this year as it tries to identify the broader and longer-term implications, according to government officials, who asked not to be identified in line with briefing rules. (Bloomberg)

EU: ECB rates to stay unchanged for next few quarters. The ECB’s interest rates have reached a plateau where they will likely remain for the next few quarters, dismissing rate cut talk as premature. The ECB broke a streak of 10 consecutive hikes last month by holding rates steady, prompting investors to turn their attention to when rate cuts could come. The ECB aims to steer euro zone inflation towards its 2% target by 2025. (Reuters)

UK: Retail sales slide again in Oct in new blow for economy. British retail sales volumes fell unexpectedly in Oct as consumer finances remain stretched, a new warning sign for the economy. Retail sales volumes dropped 0.3% MoM, following a revised 1.1% decline in Sept that was worse than first estimated. Economists polled by Reuters had forecast that sales volumes would rise by 0.3% on the month in Oct. Overall the figures fitted with the darkening outlook for Britain's economy, with economic growth stagnant and strong price pressures fading only slowly. (Reuters)

China: Guides banks to cap early 2024 loans, shift some forward. China’s central bank has encouraged lenders to cap the amount of new loans they issue in early 2024 and shift some forward to this year as authorities try to smooth the credit cycle. The PBOC last week guided lenders to make sure the value of new loans they extend in Jan-to-March does not exceed the quarterly average issued over the past five years, asking not to be identified discussing a private matter. The guidance from the PBOC implies a limit in 1Q of CNY7.9trn (RM5.1trn) in loans, a quarter less than the amount in the first three months of 2023. (Bloomberg)

Australia: Central bank chief warns of inflation challenge for next few years. The head of Australia's central bank said that inflation will remain a crucial challenge over the next one- to two years, in comments made two weeks after policymakers raised interest rates to a 12-year high earlier, to tame high prices. RBA said there was a perception that inflation was all driven by supply but there was also an underlying demand component to it. (Reuters)

Japan: Inflation comeback prompts investors to tear up old playbooks. Global inflationary forces are finally seeping into Japan's economy after decades of falling prices, forcing investors to radically rethink their Japan bets as the BoJ considers a major policy shift. International investors, who have long favoured stocks benefiting from Japan's ageing population or a weakening yen, are tearing up their playbooks to focus on expected higher interest rates, more generous dividends and a revival in consumer spending. The policy switch has been slow in coming but could herald an entirely new way of investing in Japan if a predicted longterm inflation rate of 2% in 2024 really happens. (Reuters)

Markets

TNB (Outperform, TP: RM11.50): mGATS transformation on track for launch in 1Q24. Tenaga Nasional (TNB) is on track to rebrand and transform the Malaysia Green Attribute Trading System (mGATS) into the country’s leading digital marketplace for Renewable Energy Certificates (mREC), with the rebranded mGATS set to launch in the 1QFY24. The Ministry of Natural Resources, Environment, and Climate Change and TNB’s unit, TNBX SB, collaborated to upgrade mGATS, responding to the surging demand for green electricity, particularly from multinational corporations and organisations. (StarBiz)

Mestron: Gets nod to transfer listing. Mestron Holdings (MHB) has received approval from the Securities Commission (SC) for the transfer of its shares and warrants from the ACE Market to the Main Market of Bursa Malaysia. The approval, granted via a letter dated Nov 20, allowed it to expand its investor base to include those who are interested in investing in Main Market companies. The transfer would open new avenues of growth and investment opportunities for MHB. (StarBiz)

DC Healthcare: Acquires I Bella for RM70m, announces bonus issue. DC Healthcare Holdings has proposed to acquire the entire 100% stake in I Bella SB for RM70m as part of the group's strategy to enhance its service offerings and market presence. The acquisition comes with a profit guarantee for the financial years ending March 31, 2024, and 2025, with the vendors of I Bella assuring a minimum profit after tax (PAT) of RM5.2m and RM6.2m, respectively, the aesthetic medical services provider said in a statement. (StarBiz)

AAX: PN17 status to be uplifted on Wed, 3Q net profit drops 78%. AirAsia X (AAX) said its PN17 status will be uplifted on Wed after Bursa Securities allowed its appeal on the matter. This comes after the medium-haul low-cost carrier reported a net profit of RM5.56m for the third quarter ended Sept 30, 2023 (3QFY23), down 77.83% compared with RM25.09m posted for the same period last year due to higher aircraft fuel expenses and maintenance and overhaul costs. (The Edge)

Kinergy Advancement: Posts highest quarterly profit since listing, boosted by sustainable energy solutions. Kinergy Advancement (KAB)’s net profit jumped 19-fold to RM20.36m for the third quarter ended Sept 30, 2023 (3QFY23), its highest quarterly profit since listing in 2017, against RM1.05m in the previous year’s corresponding quarter. Boosted by the strong sustainable energy solutions (SES) business, operating profit also increased more than 90-fold to RM21.32m from RM219,000 while revenue more than tripled to RM12.88m from RM3.63m, due to higher tariffs, contributions from new projects and a gain from the acquisition of a mini-hydropower plant PT Inpola Mitra Elektrindo. (The Edge)

Privasia: Continues profitable streak in 3QFY23 on satellitebased network services boost. Privasia Technology extended its turnaround performance with a net profit of RM2.36m in the nine months ended Sept 30, 2023 (9MFY23), from losses of RM2.66m in the previous corresponding period (9MFY22), amid a strong jump in contribution from its satellite-based network services (SAT) segment. The SAT segment, which provides solutions such as internet, broadband applications, and satellite IP (internet protocol) virtual private network (VPN), saw top-line contribution rise 16 times to RM56m on progress billings of new projects. (The Edge)

MARKET UPDATE

The FBM KLCI might open lower today after US stocks dipped on Tuesday and gold touched a two-week high while minutes from the Federal Reserve's most recent meeting showed the central bank is "in a position to proceed carefully." All three major US stock indices ended slightly lower, with the tech-laden Nasdaq down the most ahead of Nvidia's results after the closing bell. The chipmaker forecast fourth-quarter revenue above estimates. Its shares were last slightly lower in extended trading. The S&P 500 and the Nasdaq both snapped five-day winning streaks. The Dow Jones Industrial Average fell 62.75 points, or 0.18%, to 35,088.29, the S&P 500 lost 9.19 points, or 0.20%, to 4,538.19 and the Nasdaq Composite dropped 84.55 points, or 0.59%, to 14,199.98. European shares also closed slightly lower as banking stocks weighed ahead of the Fed minutes release. The pan-European STOXX 600 index lost 0.09%.

Back home, Bursa Malaysia snapped three consecutive days of losses to end at its intraday high on Tuesday, as bargain-hunting activities emerged following the recent sell-off. At the closing bell, the FBM KLCI rose 6.48 points to 1,463.4 from Monday’s closing of 1,456.92. Japan’s Nikkei share average ended marginally lower on Tuesday, as the Yen’s rebound against the dollar prompted a sell-off in automakers’ stocks. The Nikkei inched down 0.1% to 33,354.14 after opening up 0.2% and trading marginally higher during the session. The broader Topix slipped 0.2% to 2,367.79. In Chinese equities, the blue-chip CSI 300 Index edged up 0.1%, while the Shanghai Composite Index was largely flat, trimming early gains.

Source: PublicInvest Research - 22 Nov 2023