Economy

US: Activity decelerating into early 2024. Key high-frequency activity indicators lost momentum toward the end of 2023 and into early-2024, despite improved sentiment and easing financial conditions. The economy is finding support from isolated pockets of strength across consumer demand and the industrial sector. It’s possible that what we saw in 4Q represents the trough of a mild and quick slowdown, rather than the beginning of a continuing downturn. Among the most useful indicators for forecasting economic activity – growth in bank loans contracted in each week of Dec and the first week of Jan. (Bloomberg)

US: New York factory index slumps to lowest level since May 2020. New York state factory activity deteriorated sharply at the start of 2024 on declining orders and shipments, consistent with persistent struggles for manufacturers across the US. The Federal Reserve Bank of New York’s general business conditions index decreased 29.2 pts in Jan to minus 43.7. A reading below zero indicates contraction, and the figure was well below the lowest forecast in a Bloomberg survey of economists. New orders slumped more than 38 pts to minus 49.4, the weakest since April 2020, while shipments dropped by the most since Aug. (Bloomberg)

EU: Italy inflation eases as estimated to 0.6%, lowest in nearly 3 years. Italy's CPI eased further in Dec to the lowest level in nearly three years. The CPI rose 0.6% YoY in Dec, slightly slower than the 0.7% gain in the previous month. That was in line with the flash data published on Jan 5. Further, this was the weakest inflation since Feb 2021, when prices had risen the same 0.6%. The slowdown in inflation was mainly due to energy prices. Prices for regulated energy products plunged by 41.6%, and those of nonregulated products tumbled by 21.1%. (RTT)

EU: German economic confidence unexpectedly improves. German economic sentiment logged an unexpected improvement to reach a near one-year high in Jan as market experts expect interest rate cuts in the first half of the year. The ZEW Indicator of Economic Sentiment rose to 15.2 in Jan from 12.8 in Dec. The reading was forecast to fall to 12.0. The latest score was the highest since Feb 2023. However, the current situation index dropped to - 77.3 from -77.1 a month ago. The score was expected to come in at -77.0. More than half of the survey respondents assume that the ECB will reduce interest rates in the first half of 2024. There are even more pronounced shifts in US interest rate expectations. More than two-thirds forecast interest rate cuts by the US Federal Reserve in the next six months. (RTT)

UK: Softening wage growth boosts rate cut hopes. The UK wage growth softened in the three months to Nov suggesting that the upward inflationary pressures are cooling, and bolsters the case for interest rate cuts by the BoE. Average earnings including bonuses increased at a slower pace of 6.5% in the three months to Nov after a 7.2% gain in the preceding period. Excluding bonuses, earnings grew 6.6%, matching expectations, but was slower than the 7.2% rise in the three months to Oct. The jobless rate came in at 4.2% in the three months to Nov, unchanged from three months to Oct. The decision will depend on a broader range of indicators of price pressures, such as CPI inflation and services CPI inflation. (RTT)

UK: Insolvencies jump 14% in 2023 after interest rates surge. The number of UK companies going bust jumped 14% in 2023 as firms collapsed under the weight of higher borrowing costs and weaker economic growth. Retail, construction and hospitality firms helped to drive total company insolvencies up to 25,159 in 2023, according to the government’s Insolvency Service. There was a 2% year-on-year increase in Dec, which is typically a low month for insolvencies. The figures show growing strains on companies after a lull in the pandemic period when protection measures were in place. It reflects higher borrowing costs and a stagnating economy, with the number of firms failing almost 50% higher last year than in 2019. (Bloomberg)

China: GDP grew around 5.2% in 2023, Premier Li says at Davos. Li — who was the highest-ranked official the nation has sent to Davos since President Xi Jinping attended in 2017 — underscored the efforts China has taken to inspire confidence in its economy and government. His comments came a day before the country is set to report its official 2023 GDP growth figure. China’s 2023 growth goal was deemed conservative by many economists at the time of its announcement. But persistent deflationary pressures and the prolonged property slump proved major challenges through 2023. While Li said the country did not use “massive stimulus” to hit the target, authorities did roll out some support in the form of interest rate cuts and fiscal aid. (Bloomberg)

Australia: Consumer sentiment weakens on higher cost of living, interest rates. The Westpac-Melbourne Institute Consumer Sentiment Index dropped to 81.0 in Jan from 82.1 in Dec. The subindexes of the consumer sentiment suggested that a moderate boost from the less threatening interest rate outlook was more than offset by a further deterioration in family finances and rising concerns about the medium to longer term prospects of the economy. Household finances compared to a year ago dropped 7.6% to 63.0. The measure reflecting the view on the economic outlook in next 5 years slid 6.1% to 89.1. (RTT)

Markets

Kerjaya Prospek (Neutral, TP: RM1.52): Secures RM111.76m building job in Setapak. Kerjaya Prospek Group has accepted a letter of award from Kerjaya Property SB for building works in Setapak, Kuala Lumpur. The contract entails the building works of a 52-storey service apartment, which comprises 42 storeys of service apartments, a one-storey basement, an eight-storey elevated carpark and a one-storey facilities floor. (StarBiz)

Comments: The building job, which is its fourth tender win this year, is estimated to increase KPGB’s current unbilled orderbook to RM4.7bn. We expect this job would make up 1-2% per annum on average to the Group’s earnings in FY24-27, assuming high single digit margins. We are leaving our forecasts unchanged as this makes up part of our FY24 orderbook replenishment assumption of RM1.5bn. Cumulative YTD new wins marked about 25% of our FY24 orderbook replenishment assumption. All told, we reiterate our Neutral call with an unchanged SOTP-based TP of RM1.52, pegged at 11x PER.

Chin Hin: Buys lands in Melaka totalling RM41.9m. Chin Hin Group Property has entered into sale and purchase agreements with MDS Developments Management SB, Aim Development Worldwide SB and Aim Holdings Worldwide SB to acquire six parcels of land in Melaka totalling RM41.9m. The proposed acquisitions are in line with the overall strategy of the group to source for new landbank and expand its property development segment. (StarBiz)

SCIB: Wins RM97.7m EPCC contract. Sarawak Consolidated Industries (SCIB) has secured a RM97.7m EPCC contract from Landasan Kapital (M) SB. The contract involves comprehensive construction responsibilities for the University Malaysia Kelantan’s new student residence at Kampus Bachok. (StarBiz)

MN Holdings: Seeks to raise up to RM37m via private placement for working capital. MN Holdings is looking to raise between RM20.7m and RM37.2m through a private placement of 73.6m shares or 10% of its enlarged issued share capital at an issue price to be fixed at a later date. The gross proceeds to be raised from the proposed corporate exercise will be used for working capital requirements. (The Edge)

BLDP: Buys two properties in Bintulu, Sarawak totalling RM24m. BLD Plantation (BLDP) is acquiring two properties in Bintulu Sarawak from Syarikat Sebangun SB totalling RM24m. The proposed acquisitions at Kemena Land District, Bintulu is suitable for the group’s future plan for expansion of its business activities. (StarBiz)

Ageson: Appoints independent auditor to look into allegation of suspicious transactions. Ageson has appointed Virdos Lima Consultancy (M) SB (VL Consultancy) to look into audit issues and matters raised by its external auditor Messrs Jamal, Amin & Partners and their basis for expressing a disclaimer of opinion on the company’s audited financial statements for the 18-month FPE Dec 31, 2022 (FPE2022). (The Edge)

MARKET UPDATE

The FBM KLCI might open flat today after US stocks retreated yesterday while the dollar gathered strength amid warnings that markets might have gotten ahead of themselves with respect to the timing and extent of central bank policy cuts. The Dow Jones Industrial Average fell 231.86 points, or 0.62%, to 37,361.12, the S&P 500 lost 17.85 points, or 0.37%, to 4,765.98 and the Nasdaq Composite dropped 28.41 points, or 0.19%, to 14,944.35. European shares also pulled back due to waning optimism over rate-cut expectations following comments by European Central Bank officials. Investors are also closely watching the World Economic Forum in Davos, which entered its second day. The panEuropean STOXX 600 index lost 0.24 % and MSCI’s gauge of stocks across the globe shed 0.75%.

Back home, Bursa Malaysia ended lower on Tuesday on profit taking in tandem with its regional peers, a retracement after closing above the 1,500 psychological barrier on Tuesday. At the closing bell, the FBM KLCI fell 7.24 points to 1,493.87 from Monday's close of 1,501.11. The KLCI opened 0.72 of a point easier at 1,500.39 and moved between 1,492.4 and 1,503.73 during the trading session. Emerging market stocks lost 1.66%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.78% lower, while Japan’s Nikkei lost 0.79%.

Source: PublicInvest Research - 17 Jan 2024