Economy

US: Service sector picks up in Nov. The US services sector picked up in Nov amid an increase in business activity, although new orders remained flat and a gauge of input inflation dipped as the lagged effects of higher interest rates start to have a greater impact. The Institute for Supply Management (ISM) said that its non-manufacturing PMI rose to 52.7 in Nov from 51.8, which was a 5-month low. While the economy continued to flourish over the summer, economists expect demand to weaken this quarter, particularly for services, as consumers shift more of their spending back to goods. That would be welcomed by the US central bank in its battle to bring inflation back to its 2% target rate given the stickiness of service sector inflation. (Reuters)

US: Job openings hit more than 2-1/2-year low as labour market cools. US job openings fell to more than a 2-1/2-year low in Oct, the strongest sign yet that higher interest rates were dampening demand for workers, and boosting financial markets expectations the Federal Reserve's monetary policy tightening cycle was over. The Labour Department's Job Openings and Labour Turnover Survey, or JOLTS report also showed that there were 1.34 vacancies for every unemployed person in Oct, the lowest since Aug 2021 and down from 1.47 in Sep. Fewer workers are resigning, which over time could help ease wage inflation. The larger-than-expected decline in unfilled jobs followed data last week showing inflation subsiding in Oct. The run of inflation-friendly reports has led financial markets to anticipate a rate cut as early as next March. (Reuters)

EU: Hawk Schnabel takes rate hike off table. The ECB can take further interest rate hikes off the table given a "remarkable" fall in inflation and policymakers should not guide for rates to remain steady through mid-2024, ECB board member Isabel Schnabel told Reuters. The comments mark a dovish shift for Schnabel, seen as the most influential voice in the conservative camp of policymakers, and drove up rate cut expectations as investors now expect the ECB to reverse the steepest increase in interest rates in the bank's quarter century history. Schnabel, who had insisted just a month ago that rate hikes must remain an option because the "last mile" of the inflation fight may be the toughest, said she had shifted stance after three unexpectedly benign inflation readings in a row. (Reuters)

EU: German services sector downturn eases in Nov. Business activity in the German services sector declined in November although at a slower rate than the previous month, a survey showed. The HCOB final services PMI rose to 49.6 in Nov from 48.2 in Oct, hovering slightly below the 50 level that signals growth in activity. The survey showed the first rise in service sector employment in three months, although the increase was marginal. In a sign of the challenges ahead, service providers' expectations clouded over slightly on the previous month, as high energy costs, market uncertainty and weakness in the broader economy continued to weigh on the sector. The composite PMI index, which comprises services and manufacturing, remained in contraction territory despite increasing in Nov to 47.8 from 45.9 in Oct. (Reuters)

UK: Dominant services sector rebounds, cost burdens persist. Activity in Britain's services sector grew in Nov after three months of declines, a survey showed, but companies reported an uptick in prices charged, a potential concern for the BoE ahead of its interest rates decision next week. When it was published last month, the stronger-than-expected preliminary reading caused bond market investors to push back when the BoE is likely to cut interest rates for the first time. The final gauge of the services sector production was the strongest since July when it stood at 51.5. Respondents also noted the fastest increase in prices charged since July, although the rate of inflation remained much softer than seen in the first half of the year. (Reuters)

UK: Retailers see weak sales growth in Nov despite Black Friday deals. British retail sales growth remained sluggish in Nov despite Black Friday deals, as the ongoing cost-of-living squeeze prompted shoppers to rein in spending on non-essential items, the British Retail Consortium said. The subdued data and a warning on the outlook from small fashion retailer Quiz added to concerns over discretionary spending in the key trading weeks to Christmas. The BRC said spending increased 2.7% in annual terms last month, well below the 4.2% rise a year ago, and similar to the 2.5% increase in Oct. The BRC data is not adjusted for inflation, so Nov sales growth represents a fall in the volume of goods purchased. (Reuters)

China: Nov services activity accelerates on boost from new orders. China's services activity expanded at a quicker pace in Nov, a private-sector survey showed, as the upturn in new businesses were the best seen for three months amid reports of firmer market conditions. The findings present a mixed picture of the vast services sector as an official survey last week showed the sector unexpectedly contracted for the first time since Dec last year, prompting calls for more stimulus measures. The Caixin/S&P Global services PMI rose to a three-month high of 51.5 in Nov from Oct's 50.4, but it remained softer than the long-run series average. (Reuters)

Australia: Central bank holds rates steady until at least Feb. Australia's central bank held interest rates steady on Dec 5 as expected, buying it more time to assess the state of the economy and decide whether to tighten further next year even as the U.S. and Europe are seen as almost certain to ease. Wrapping up its Dec policy meeting, the RBA kept rates at a 12-year high of 4.35%, adding economic data received since Nov - when it hiked by a quarter-point - had been broadly in line with expectations. (Reuters)

Markets

DRB-Hicom (Outperform, TP: RM2.10): Proton records 12,296 vehicle sales in Nov. Proton Holdings’ vehicle sales in Nov came in at 12,296 units, which brought YTD sales to 141,900 units. Proton has already surpassed the sales volume of the entire previous year, reaching 141,900 units compared to last year's 141,432 units. A commendable 12% growth YoY brings the market share to a steady 19.7%. (StarBiz)

EcoFirst: Awards RM389m superstructure works contract to China State Construction Engineering. EcoFirst Consolidated (EcoFirst) has awarded a RM389m contract to China State Construction Engineering (M) SB for the superstructure works of serviced apartment KL48 in Chan Sow Lin, Sungai Besi. (The Edge)

Kinergy Advancement: Wins RM31m electrical works contract for Mah Sing project. Kinergy Advancement Bhd (KAB) has won a RM31.0m contract to undertake electrical works for Mah Sing Group’s multistorey M Nova residential development in Kepong, Kuala Lumpur. (StarBiz)

Haily: Bags RM64m construction contract in Johor Bahru. Haily Group has secured a RM64m construction contract from Meridin East SB, a wholly-owned subsidiary of Mah Sing Group. This contract, which is among Haily's largest to date and the fifth major job clinched by the group this year, brings the total contract value of its ongoing projects to RM697.51m. (StarBiz)

AirAsia X: To lease aircraft from Asia Aviation Capital for RM30.54m. AirAsia X (AAX) has inked a lease agreement with Asia Aviation Capital Ltd (AACL) for the lease of an aircraft bearing MSN1596 for one year, with an estimated value of RM30.5m, inclusive of lease rental and maintenance reserves. (StarBiz)

Advancecon: Bags RM35.6m earthworks contract from Sime Darby Property. Advancecon Holdings has secured a RM35.6m contract from Sime Darby Property (Bukit Raja) SB for earthworks and auxiliary works at its township project in Bandar Bukit Raja Stage 3 in Klang, Selangor. (StarBiz)

Carlsberg Malaysia: To manufacture Japan’s Sapporo beer for sale in Malaysia, Singapore. Carlsberg Brewery Malaysia said it has entered into a deal with Japan’s Sapporo Breweries Ltd to produce the Sapporo Premium Beer for distribution in Malaysia and Singapore. (The Edge)

KLK: Secures RM500m sustainability-linked loan from Maybank. Kuala Lumpur Kepong Bhd (KLK) secured its first sustainability-linked loan (SLL) of RM500 million for the group’s general working capital requirements from Maybank, marking a significant milestone for both groups in pursuit of their sustainable development practices. (The Edge)

IPO: KJTS signs underwriting agreement with HLIB for ACE Market listing. Building support services provider KJTS Group has inked an underwriting agreement with Hong Leong Investment Bank (HLIB) for its upcoming IPO on the ACE Market of Bursa Malaysia. (The Edge)

MARKET UPDATE

The FBM KLCI might open lower today after softening economic data and recent comments from Federal Reserve officials, including Chair Jerome Powell, have heightened expectations that the US central bank has ended its interest rate hiking cycle and will begin to cut rates as soon as March. In addition, expectations have grown that the European Central Bank (ECB) could cut rates in the first quarter of 2024. On Wall Street, the Dow Jones Industrial Average closed down 79.88 points, or 0.22%, to 36,124.56, the S&P 500 lost 2.60 points, or 0.06%, to 4,567.19 and the Nasdaq Composite gained 44.42 points, or 0.31%, to 14,229.91. Other data indicated the US services sector picked up steam in November as business activity increased, although new orders were flat and a gauge of input inflation slipped. European shares closed higher, and Germany’s DAX climbed 0.8% to close at a fresh record, buoyed by strong gains in Allianz and Daimler Truck Holding, with the STOXX 600 index up 0.4%.

Back home, Bursa Malaysia's barometer index ended slightly lower on Tuesday, paring most of its earlier losses, thanks to a rebound in telecommunications, consumer products and services as well as banking stocks. At the closing bell, the FBM KLCI had fallen 1.56 points to 1,449.46, from Monday's close at 1,451.02. Meanwhile, Asian markets reportedly fell across the board, as investors assessed a slew of economic data across the region. In Japan, the Nikkei 225 fell 1.37%, China’s SSE Composite dipped 1.67%, while Hong Kong’s Hang Seng Index tumbled 1.91%.

Source: PublicInvest Research - 6 Dec 2023