Economy

US: Fitch sees high fiscal deficits ahead of elections. Credit rating agency Fitch said it expects US fiscal deficits to remain high this year, and that fiscal policy and governance implications of the US presidential elections will be key issues for the country's sovereign rating. Fitch last year downgraded the U.S. government's top credit rating to AA+ from AAA, citing fiscal deterioration and repeated down-the-wire debt ceiling negotiations. A major nearterm shift to deficit reduction measures is unlikely because of political polarization. (Reuters)

US: Wholesale inventories unrevised in Nov. US wholesale inventories fell for a second straight month in Nov, suggesting that a slow pace of inventory accumulation could undercut economic growth in the fourth quarter. The Commerce Department's Census Bureau said that wholesale inventories slipped 0.2% as estimated last month. Stocks at wholesalers dropped 0.3% in Oct. Economists polled by Reuters had expected that inventories would be unrevised. Inventories are a key part of gross domestic product. They declined 3.0% on a YoY basis in Nov. (Reuters)

EU: Euro zone economy bottoming out, but outlook weak, ECB policymakers say. The euro zone may have been in recession last quarter and prospects in the near term remain weak, ECB policymakers said as they reaffirmed the bank's policy stance. Euro zone growth has been hovering on either size of zero for most of 2023 and only a mild pick up is seen this year, helping to cool inflation, which has overshot the ECB's target for years and forced policymakers to raise interest rates to record highs last year. (Reuters)

EU: German wholesalers sound alarm as sentiment 'on the floor. German wholesalers expect their revenues to fall 2% in nominal terms this year, continuing a downward trajectory after a 3.75% decline last year, the BGA lobby group said, saying sentiment in Europe's biggest economy was "on the floor". In real terms, the association of wholesalers and exporters expects a 1% decline for this year following a 4.25% contraction in 2023. Its survey of members showed that sentiment had deteriorated by 8.2 points to 69.4 points in the last year, hit by geopolitics and the challenges of digitalisation and decarbonisation. (Reuters)

Japan: Labour cash earnings rise 0.2%, less than forecast. Total labour cash earnings continued to increase in Nov, though at a slower-than-expected rate, a report from the Ministry of Health, Labor, and Welfare showed. Total earnings rose 0.2% YoY in Nov, versus 1.5% growth in Oct. Meanwhile, economists had expected a stable increase of 1.5%. Among industries, finance and insurance activities showed the highest rise in total cash earnings, by 5.8%. This was followed by a 5.2% gain in information and communications. Contractual gross earnings grew at a steady pace of 1.2%, while special cash earnings fell sharply by 13.2%. (RTT)

Australia: Inflation slows to 4.3% in Nov, core down sharply. Australian consumer price inflation dropped to a near two-year low in Nov and core inflation also slowed sharply, a soft result that reinforced market expectations interest rates would not need to rise any further. Data from the Australian Bureau of Statistics showed its monthly consumer price index (CPI) rose at an annual pace of 4.3% in Nov, down from 4.9% in Oct and under market forecasts of 4.4%. A closely watched measure of core inflation, the trimmed mean, rose an annual 4.6%, down sharply from 5.3% in Nov. The CPI excluding volatile items and holiday travel slowed to 4.8%, from 5.1%. (Reuters)

New Zealand: Building consents tumble 10.6% In Nov. The total number of building permits issued in New Zealand was down a seasonally adjusted 10.6% on month in Nov, Statistics New Zealand said - coming in at 2,958. Individually, permits were issued for 1,462 stand-alone houses; 1,255 townhouses, flats, and units; 123 apartments; and 118 retirement village units. In the year ended Nov 2023, the actual number of new dwellings consented was 38,209, down 24% on year. (RTT)

Thailand: PM pressures central bank to cut rates to boost economy. A rift between the Thai government and central bank is growing as Prime Minister Srettha Thavisin pressures the Bank of Thailand governor to cut key interest rates to boost economic growth. This development has raised concerns that the Srettha government is intervening in monetary policy, which is the job of the central bank that has a remit to remain independent of political influence. Thailand saw consumer inflation peaking at 7.86% YoY in Aug 2022. (Nikkei Asia)

Markets

Genting Malaysia (Outperform, TP: RM3.00): To inject USD100m more into Empire Resorts. Genting Malaysia announced that it will inject another USD100m (RM464.2m), through an indirect wholly owned unit, into Empire Resorts Inc, in which it has already put in about USD624.4m to date. (The Edge)

Comment: GENM would have invested a total of up to USD724m in Empire Resorts (Empire). Empire is currently 49% owned by GENM with the remaining 51% held by its controlling shareholder Kien Huat Realty. However, GENM’s effective shareholding will increase to about 90% in FY2030, upon the full conversion of all the preferred stock that it had purchase into common stock. For 9MFY23, GENM has incurred a total share of associate losses of RM170m. It was stated that the equity injection will enable Empire to reduce borrowing and fund for working capital requirement. All in all, we are not positive of GENM’s continuous injection of capital into Empire and believe that it will remain a loss-making unit in the near term.

Nestcon: Wins RM108m job from Exsim. Nestcon has accepted a letter of award worth RM108m from Exsim Avenue SB to undertake construction works for a 37-storey mixed commercial development. The contract involves construction and completion of earthworks, piling works, main building works and infrastructure works, adding that the mixed commercial development comprises retail shops, strata offices (220 units), service apartments (126 units), carparks and other relevant facilities. (StarBiz)

Ivory Properties: Proceeds with RM40m Penang land deal with Chin Hin. Ivory Properties Group signed an agreement to proceed with its disposal of a 1.22-acre (0.49-hectare) freehold land in George Town, Penang to Chin Hin Group Property for RM40m. The plot forms part of the Penang Times Square development and will be used to develop a multi-storey residential project. (The Edge)

Lagenda Properties: Enters RM85m development rights agreement for Johor land development. Lagenda Properties’ subsidiary, Opti Vega SB (OVSB), has entered into a development rights agreement with Intact Corporate Approach SB (ICA) to undertake the development of a land in Mukim Ulu Sungai Selangor, Johor, measuring approximately 112.024 acres. The total cash consideration for the DRA is RM85.4m. (The Malaysian Reserve)

Hextar Capital: Completes Transgrid acquisition in diversification into power EPCC business. Hextar Capital has completed the acquisition of 49% stake in power industry engineering, procurement, construction and commissioning (EPCC) outfit Transgrid Ventures SB in a cash and share deal. The acquisition marks the diversification of the group to include the power generation and transmission business. The acquisition is priced at up to RM98m, with up to RM49m and up to 62.9m HexCap shares representing 14.1% of HexCap’s enlarged share capital. (The Edge)

FGV: Reimburses RM72m to migrant workers. FGV Holdings has reimbursed RM72.2m in recruitment fees to 19,673 workers, including former migrant workers, to-date. The group is fully committed to the principle of no recruitment fee for workers, as it implements initiatives and measures to strengthen its labour practices. The reimbursements amounting to RM72.2m were made in March, June and Sept 2023, respectively. (StarBiz)

MARKET UPDATE

The FBM KLCI might open higher today after global stock indices rose and US 10-year Treasury yields edged up yesterday as investors looked ahead to a US consumer price report for possible clues on when the Federal Reserve could begin cutting interest rates. The Dow Jones Industrial Average rose 170.57 points, or 0.45%, to 37,695.73, the S&P 500 gained 26.95 points, or 0.57%, to 4,783.45 and the Nasdaq Composite added 111.94 points, or 0.75%, to 14,969.65. The pan-European STOXX 600 index lost 0.18% and MSCI's gauge of stocks across the globe gained 0.37%. Back home, Bursa Malaysia reversed its gains on Tuesday to end lower on Wednesday, in sync with the downbeat regional market performances, weighed down by cautious sentiments ahead of the release of the US consumer price index data on Thursday. At the closing bell, the FBM KLCI slid 11.97 points to 1,486.86 from Tuesday's close of 1,498.83.

Source: PublicInvest Research - 11 Jan 2024