Economy

US: Trade deficit widens in Oct on weak exports. The US trade deficit widened more than expected in October as exports declined, likely positioning trade to be a drag on economic growth in the fourth quarter. The trade deficit increased 5.1% to USD64.3bn, said the Commerce Department's Census Bureau. Data for Sept was revised to show the trade gap rising to USD61.2 bn instead of USD61.5 bn as previously reported. (Reuters)

US: Fed to hold rates until at least July; first cut not start of stimulus wave. The US Fed will hold interest rates until at least July, later than earlier thought, according to a slim majority of economists in a Reuters poll who said the first cut would be to adjust the real rate of interest, not the start of stimulus. All but five of 102 economists in the Dec. 1-6 Reuters poll said the Fed was done hiking in this cycle, even though Chair Jerome Powell said last week policymakers were "prepared to tighten policy further if it becomes appropriate to do so". (Reuters)

US: 3Q unit labor costs point to slowing inflation. US unit labor costs were much weaker than initially thought in the 3Q amid robust worker productivity, providing a boost to the Fed's fight against inflation. Unit labor costs, the price of labor per single unit of output, fell at a 1.2% annualized rate in the third quarter, the Labor Department's Bureau of Labor Statistics (BLS) said, revised down from the previously reported 0.8% pace of decline. That was the first drop since the 4QFY22. (Reuters)

EU: German industrial orders fall unexpectedly in Oct. German industrial orders fell unexpectedly in Oct, declining by 3.7% on the previous month on a seasonally and calendar-adjusted basis, the federal statistics office said. A Reuters poll of analysts had pointed to a rise of 0.2%, following a revised 0.7% increase in Sept. Excluding large-scale orders, manufacturers saw a 0.7% rise in new orders in Oct, according to the data. The drop in incoming orders over the Aug-to-Oct period, a less volatile comparison, was even sharper at 4.6% compared with the prior three-month period. (Reuters)

China: Exports slump seen slowing as pockets of demand emerge. Declines in China's exports likely slowed in Nov, amid mixed signs factories in the world's second-largest economy may be finding their footing after a bruising slump in demand. Outbound shipments from China are expected to show a 1.1% drop in Nov from a year earlier, following a 6.4% fall in Oct and continuing the trend of narrowing declines for the fourth straight month, according to the median forecast of 28 economists polled. (Reuters)

Japan: Manufacturers' mood jumps, second straight month of gains. Sentiment at big Japanese manufacturers surged, improving for a second straight month as the auto sector continued to recover from last year's semiconductor shortage and supply chain woes, a monthly Reuters Tankan survey found. The sentiment index for manufacturers stood at plus 12 in Dec compared with plus 6 the previous month, according to the survey which was conducted 21 Nov-1 Dec. "As chip shortages eased, car production grew. But on the other hand, the worsening state of China's economy and sluggish sales of Japanese vehicles in the Chinese market remain sources of concern," a manager at a textile manufacturer wrote in the comment section of the survey. (Reuters)

Australia: Economy slows to a crawl, consumer spending surprisingly weak. Australia's economy barely grew in the third quarter as exports flagged and households, reeling from a surge in mortgage payments, were reluctant to spend, suggesting rate hikes were working to restrain demand. Marking an eighth straight quarter of growth, albeit its slowest in a year, real GDP inched 0.2% higher in July-Sept from the previous quarter. That was short of forecasts of 0.4% and a result that bolsters the case for the RBA to no longer need to tighten. (Reuters)

Markets

Sime Darby (Neutral, TP: RM2.41): To make takeover offer for remaining stake in UMW Holdings. Sime Darby will issue an unconditional mandatory takeover offer to acquire the remaining 38.82% stake it does not own in UMW Holdings for a cash price of RM5.00 per share. This follows the group’s conditional share purchase agreement with PNB on Aug 24, 2023, to acquire 714.8m shares or a 61.18% stake in UMW, making Sime Darby the largest shareholder in the automotive group. (The Edge)

Tropicana Corp: Sells W KL hotel for RM270m. Tropicana Corp signed a SPA with IOI PFCC Hotel SB (IOI PFCC) and Flora Development SB for the disposal of the W Kuala Lumpur hotel and its assets (W KL) for RM270m. The proceeds would be utilised to fully repay the existing bank borrowings of W KL, as well as partially repay existing bank borrowings of Tropicana Group, which would improve the gearing of Tropicana Group. (StarBiz)

MyEG: Inks deal with PDC to develop RM108m foreign workers' village. MyEG Services has signed a 30-year lease agreement with Penang Development Corp (PDC) to develop a foreign workers' village project worth RM108m. The lease agreement, valued at RM20.4m, grants MyEG Lodging the rights to build and operate the workers' village and related facilities on an 8.39-acre (3.40-hectare) land parcel in Batu Kawan Industrial Park 3, Seberang Perai Selatan, Penang. (The Edge)

Comintel: Proposes 1-for-10 rights issue, private placement to raise up to RM90m. Comintel Corp, which completed its regularisation plan last year, has proposed a rights issue exercise followed by a private placement to raise approximately RM90m for acquisition of construction equipment and working capital purposes. (The Edge)

Hiap Teck: To spend RM53.2m under steel-making JV’s cash call. Hiap Teck Ventures will fork out RM53.2m under its steel manufacturing JV’s RM195m rights issue, which is to fund the JV’s capital expenditure, in particular a hot rolling mill. Hiap Teck will subscribe to 54.6m new shares in Eastern Steel SB (ESSB) at 97.5 sen apiece under the JV’s rights issue of 200m shares. (The Edge)

HEB: Plans to raise up to RM52m. HSS Engineering (HEB) expects to raise gross proceeds of up to RM52.0m from a proposed private placement. The proposed private placement of up to 49.6m shares in the company, represented up to 10% of the total issued and paid-up share capital based on the indicative issue price of RM1.04 per placement share. (StarBiz)

HeiTech Padu: Bags RM37m contract from MoH. Heitech Padu has secured a contract worth RM37.0m from the Health Ministry (MoH). The contract was to supply, deliver, install, build, configure, integrate, migrate, test and commission the use of HIS@KKM hardware, software and systems at Sultan Ismail Hospital, Johor. (StarBiz)

MPI: Unit to halt leadframe manufacturing by Jan 2024. MPI wholly owned subsidiary, Dynacraft Industries SB (DCI), will cease its manufacturing of leadframes operations effective end of Jan 2024. This decision is made after a careful business strategy review. The cessation of DCI manufacturing operations will not have any material impact on the net assets and earnings per share of MPI Group for the FYE June 30, 2024. (Starbiz)

MARKET UPDATE

The FBM KLCI might open lower today after US stocks ended down on Wednesday, pulled lower by megacaps and energy shares as signs of a cooling jobs market reinforced expectations that the Federal Reserve could start cutting interest rates early next year. The ADP National Employment report showed private payrolls increased by 103,000 jobs in November, below economists' expectation of 130,000. That provided fresh evidence of labour market weakness, a day after news of a drop in October job openings. The S&P 500 declined 0.39% to end at 4,549.34 points. The Nasdaq Composite Index fell 0.58% to 14,146.71, while the Dow Jones Industrial Average slid 0.19% to 36,054.43. European stocks closed higher as investors largely think interest rates have peaked, with Germany's benchmark DAX index hitting a fresh record. The pan-European STOXX 600 index gained 0.52% and MSCI's gauge of stocks across the globe lost 0.10% and was on pace for its longest streak of declines since late October.

Back home, Bursa Malaysia ended on a lower note on Wednesday amid muted trading throughout most of the session. At the closing bell, the FBM KLCI lost 3.64 points to 1,445.82 from Tuesday’s close of 1,449.46. China stocks opened down with the CSI 300 Index touching its lowest level since Feb 2019, before recouping earlier losses. It closed up 0.2%, with the Shanghai Composite Index down by 0.1%. The CSI 300 Index has tumbled about 12% so far this year and is set to record one of the worst performer in the region. The Hang Seng Index, meanwhile, rebounded and closed up 0.8%, with tech shares leading gains.

Source: PublicInvest Research - 7 Dec 2023