Economy

US: Weekly jobless claims stay low despite high-profile layoff announcements. The number of Americans filing new claims for unemployment benefits fell slightly more than expected last week, pointing to underlying labor market strength despite a recent surge in announced layoffs, mostly in the technology industry. Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 218,000 for the week ended 3 Feb. The decline reversed the bulk of the prior week's increase, which had lifted claims to just over a two-month high. Economists polled by Reuters had forecast 220,000 claims for the latest week. (Reuters)

EU: ECB needs more inflation evidence before easing. The ECB still needs more evidence that inflation is heading back to its 2% target before it can cut interest rates, even if there is growing confidence that price pressures are easing, two key policymakers said. "The incoming data suggest that the process of disinflation in the near term in fact may run faster than previously expected," ECB chief economist Philip Lane. While this may be seen as a positive, faster disinflation will lead to higher real income growth and this could then add to inflationary pressures in 2025 and beyond, complicating the outlook, he said. (Reuters)

UK: BoE's Mann fears Red Sea hostilities could boost UK inflation. BoE rate-setter Catherine Mann said that supply chain disruption from hostilities in the Red Sea could quickly feed into companies' pricing decisions, exacerbating Britain's inflation problem. Mann said her decision last week to vote to raise interest rates to 5.5% from 5.25% was "not easy". Most Monetary Policy Committee members voted to leave rates on hold, and one voted for a cut. But she added that the prospect of rising real incomes, tightness in the labour market, and the fact financial conditions in Britain had in her view loosened by too much explained her vote to raise interest rates by a quarter of a percentage point. (Reuters)

China: Central bank to keep policy support for economy. China's central bank said it would keep policy flexible and precise to boost domestic demand, while maintaining price stability, amid signs of a patchy economic recovery and rising deflationary risks. In its quarterly policy implementation report, PBOC said the authorities face some difficulties and challenges in promoting an economic recovery amid global uncertainties. "Prudent monetary policy should be flexible, moderate, precise and effective... and keep the scale of social financing and the money supply in line with the expected goals of economic growth and price levels," the bank said. The central bank will "strengthen policy coordination and cooperation, effectively support promoting consumption, stabilising investment, expanding domestic demand, and maintaining prices at a reasonable level", it said. (Reuters)

China: Consumer prices suffer biggest fall since 2009 as deflation risks stalk economy. China's consumer prices fell at their steepest pace in more than 14 years in January while producer prices also dropped, ramping up pressure on policymakers to do more to revive an economy low on confidence and facing deflationary risks. The CPI fell 0.8% in January from a year earlier, after a 0.3% drop in Dec, data from the National Bureau of Statistics (NBS) showed. The CPI rose 0.3% MoM from a 0.1% uptick the previous month. Economists polled by Reuters had forecast a 0.5% fall year-on-year and a 0.4% gain MoM. The annual CPI decline in Jan was the biggest since Sep 2009, mainly led by a sharp drop in food prices, but analysts warn the overall deflationary impulse in the economy risks becoming entrenched in consumer behaviour. (Reuters)

Japan: BOJ rules out rapid rate hikes, signals ending risky asset buying. The BoJ will likely end its risky asset purchases but avoid raising interest rates rapidly when scaling back monetary support, Deputy Governor Shinichi Uchida said in the strongest hint to date that an end to its massive stimulus was nearing. Servicesector prices are rising as more companies hike wages and pass on rising labour costs, Uchida said, signalling his growing conviction that conditions for phasing out stimulus were falling into place. Ending negative interest rates, a move markets expect to happen either in March or April, would be equivalent to hiking shortterm interest rates by 0.1% percentage point, he said. (Reuters)

Thailand: Central bank ready to cut rates if private consumption falls sharply. The BOT is ready to cut rates if consumption falls sharply, a senior official said a day after it kept monetary policy unchanged amid pressure from the government to ease. "If we look at the numbers and private consumption falls sharply and there is a clear change - that is an important factor in considering key rates," BOT Senior Director Sakkapop Panyanukul told. Cutting rates would have a long-term negative impact and would only have limited benefits to debtors, he said. (Reuters)

Markets

CIMB (Outperform: TP: RM6.70): Completes acquisition of KAF Equities, rebrands stockbroking arm as CIMB Securities. CIMB Group Holdings has completed the acquisition of KAF Equities SB via CIMB Investment Bank, and the entity will be rebranded as CIMB Securities SB. (The Edge)

Comment: Pursuant to the sale of the remaining 25% of its stockbroking to CGS late last year. the completion of this previously-disclosed acquisition confirms its re-entry with a wellestablished franchise which will readily complement the Group's wholesale banking business. We are positive over this transaction and see the Group reaping synergistic benefits. Our Outperform call is retained with an unchanged RM6.70 TP.

Spritzer (Neutral, TP: RM2.08): Inks JV agreement to develop housing project in Perak. Spritzer entered a JV agreement to develop a residential housing project in Perak's Larut Matang district, where the group is based. Spritzer said the JV with construction firm KNP Development SB presents a good opportunity for the group to establish a foothold in the property development industry. Under the deal, Spritzer will bear the cost and expenses to build houses on a 5.78-acre (2.34-hectare) piece of land provided by KNP. The estimated cost was not mentioned in the filing. (The Edge)

Comment: Assuming a GDV of RM60m (double storey terrace house), we estimate a potential 4% impact to Spritzer’s FY25F net profit. However, we leave our earnings estimate unchanged at this juncture, given the scarce information from the announcement. We are neutral on its maiden foray into property development and reserve comment given the yet-unproven track record, though we reckon financial resources may have been better put into more complementary ventures. All told, we maintain our Neutral call and TP of RM2.08 on Spritzer.

NationGate: Acquires Hesechan Industries for RM25m cash. Nationgate Holdings has proposed to acquire 100% equity interest in Hesechan Industries SB for RM25m cash. NationGate said it entered into a share sale agreement with Heap Seong Chan Company SB (HSCSB) to acquire the entire 2m ordinary shares in Hesechan. Upon completion of the acquisition, Hesechan will become a wholly-owned subsidiary of NationGate. (StarBiz)

Dataprep: Unit inks 30-year concession for Bandung passive telco infra project, sees RM95m investment over three years. Dataprep Holdings’ Indonesian unit PT Jaringan Pintar Bersama (JPB) inked an agreement with PT Bandung Infra Investama (Perseroda) Tbk for a 30-year concession to develop and maintain passive telecommunication infrastructure in Bandung, Indonesia. JPB’s parent PT Dataprep Teknologi Indonesia Tbk is the lead consortium member to construct and maintain the infrastructure. The estimated investment for the next three years of the development period is IDR313bn (around RM95.4m). (The Edge)

Industronics: Ventures into halal F&B, convenience store business in Hong Kong. Industronics is venturing into the halal F&B and halal convenience store business in Hong Kong. It acquired a dormant company in Hong Kong owned by Datuk Chu Boon Tiong, for HKD1 (61 sen), to undertake the new business. The company has been renamed as Halal Group Ltd. (The Edge)

MARKET UPDATE

US markets ended little changed overnight, with earnings reports continuing to drive market direction for now. Sustainability of the current rally is being called to question however with investor interest focused on mega-cap technology stocks and 2023’s top performers. The Dow Jones Industrial Average inched 0.1% higher with the S&P 500 gaining less than a point. The Nasdaq Composite edged up 0.3%. European markets wavered amid mixed earnings reports and forward guidance. Shares of Maersk slumped 15% after saying it would suspend share buybacks and guided for “high uncertainty” in its 2024 earnings outlook amid Red Sea disruptions, for instance. UK’s FTSE 100 fell 0.4%. Germany’s DAX and France’s CAC 40 rose 0.3% and 0.7%. Japan’s Nikkei 225 recorded a notable 2.1% gain to hit a 34-year high and lead Asian markets after a report suggested the country’s central bank would not aggressively tighten its monetary policy. China’s CPI for January fell 0.8% YoY meanwhile. The Shanghai Composite Index rose 1.3% though the Hang Seng Index saw the reverse, down 1.3%. Shares of Alibaba fell 6.4% after it missed analysts’ expectations for revenue in the December quarter.

Source: PublicInvest Research - 9 Feb 2024