HEADLINES

Economy

US: Labor market stays resilient; housing regresses on higher mortgage rates. Initial claims for state unemployment benefits were unchanged at a seasonally adjusted 212,000 for the week ended 13 April, the Labor Department said. Economists polled by Reuters had forecast 215,000 claims in the latest week. Claims have been bouncing around in a 194,000-225,000 range this year. Unadjusted claims declined 6,756 to 208,509 last week. Filings in California jumped by 3,063. The average rate on the popular 30- year fixed-rate mortgage has drifted above 7%, data from mortgage finance agency Freddie Mac showed, combining with higher house prices to depress home sales. A separate report from the National Association of Realtors showed existing home sales fell 4.3% in March to a seasonally adjusted annual rate of 4.19m units. Home resales, which account for a large portion of US housing sales, declined 3.7% on a YoY basis in March. (Reuters)

US: Fed to cut rates in Sep and maybe once more this year - Reuters poll. The US Federal Reserve will wait until Sep to cut its key interest rate, according to a majority of 100 economists polled by Reuters, with half saying there will be only two cuts this year and only about a third forecasting more. That change in the outlook - from a June start and two or more additional cuts in a poll published a month ago - follows evidence of persistent strength in the US labor market and a series of stronger-than-expected inflation data. Just over half of economists surveyed, 54 of 100, predicted the first decrease in the federal funds rate to happen in Sep, pushing that rate to the 5.00%-5.25% range. Twenty-six forecast a July cut and only four said it would happen in June. Last month a two-thirds majority, 72 of 108, expected the first rate cut in June. (Reuters)

EU: ECB clear on June rate cut but views diverge on July. The ECB made it clear that an interest rate cut is coming in June but policymakers continued to differ on moves thereafter or how low interest rates can go before once again starting to stimulate the economy. The ECB put a June rate cut on the table last week and has spent the past week reinforcing that guidance, despite rising oil prices, a weaker euro and bets that its biggest peer, the US Federal Reserve, would delay its own rate cuts. (Reuters)

UK: Wage growth and services inflation too high for rate cut, BoE's Greene says. Britain's latest wage growth and services price inflation data is too high for the Bank of England to consider cutting interest rates, BoE policymaker Megan Greene said. "The numbers that we're seeing in terms of wage growth and services inflation just aren't consistent with a sustainable 2% (consumer price) inflation target," she said. Last week Greene wrote that interest rate cuts in Britain remained "a way off" because of persistent inflation pressure, and that she expected the BoE to cut interest rates by less than the US Federal Reserve would this year. Financial markets currently price in a first quarter-point BoE rate cut for August or Sep and see a roughly 50% chance of a second quarter-point move before the end of 2024. (Reuters)

China: PBOC warns against 'one-sided' pursuit of credit expansion. China's central bank cautioned against a "one-sided" pursuit of credit expansion after data showed a slowdown in bank lending, vowing to prioritise the quality of credit over size and move to revitalise existing loans. New bank lending in China rose less than expected in March from the previous month, while broad credit growth hit a record low, boosting the case for the central bank to roll out more stimulus steps to help achieve an ambitious growth target. The central bank will channel more funds into technology innovation, green manufacturing and small firms, the Communist party committee of the PBOC said. The central bank will guide financial institutions to maintain balanced credit allocation and boost stability and sustainability of loan growth, it said. (Reuters)

Japan: BOJ's Ueda signals possible rate hike if weak yen boosts inflation. BOJ Governor Kazuo Ueda said the central bank may raise interest rates again if the yen's declines significantly push up inflation, highlighting the impact currency moves may have on the timing of the next policy shift. The BOJ will scrutinize how the yen's declines so far this year could affect the economy and prices and take the findings into account in producing fresh quarterly growth and inflation forecasts due at next week's policy meeting, Ueda said. Ueda's remarks heighten the chance the BOJ will revise up its price forecasts next week and project inflation, as measured by an index stripping away the impact of fresh food and fuel, to stay around its 2% target through early 2027. (Reuters)

Australia: March employment disappoints, jobless rate ticks up. Australian employment fell in March after an enormous gain the month before while the jobless rate resumed its uptrend, a sign that the relatively tight labour market was still on track to loosen, albeit at a slower pace. Figures from the Australian Bureau of Statistics showed net employment dropped 6,600 in March from Feb, when it rose a revised 117,600. Market forecasts had been for a small gain of 10,000 after a blockbuster Feb. Full-time employment rose 27,900 in March. The jobless rate climbed slightly to 3.8% from 3.7% the previous month, although that was under a forecast of 3.9%. Analysts say the March data provides a clearer read on the current labour market conditions as the influence of large seasonalled statistical changes smoothen out. (Reuters)

Markets

Axiata (Underperform, TP: RM2.00): Sri Lankan subsidiary to buy 100% of Airtel Lanka via share swap. Dialog Axiata PLC, Axiata Group and Bharti Airtel Limited, signed a Definitive Agreement to combine their operations in Sri Lanka. (Bursa Malaysia)

Comment: Dialog Axiata, an 82.3%-owned subsidiary of Axiata, announced its proposed acquisition of Bahrti Airtel’s telco operations in Sri Lanka. Under the agreement, Dialog Axiata (Dialog) will acquire a 100% stake in Airtel Lanka by issuing Bharti Airtel a 10.4% stake in Dialog Axiata. This consolidation will enable the merged entity to benefit from cost synergies though sharing of infrastructure, economies of scale and savings on capital expenditure. Currently, Dialog is the largest telco in Sri Lanka followed by Airtel, which has about 15% of market share. Dialog has a 57% share of Sri Lanka’s mobile market. Based on FY23 normalised net profit, Dialog contribution to Axiata was about 20%. Given Airtel’s relatively small market presence, the proposed merger is not expected to have any material financial effect on the group, estimated at <5% of FY24F.

Awantec: Faces trading suspension from April 26 after failing to submit regularization plan. AwanBiru Technologysaid trading in its shares will be suspended from April 26, after the group failed to submit its regularisation plan to the regulators for approval within the stipulated timeframe that ended on April 13. Awantec said the group faces the risk of being delisted if no appeal is submitted within five market days from the date of notification of delisting. (The Edge)

Pansar: Secures RM269.1m utility contract. Pansar has received a letter of award from Lembaga Air Sibu, Sarawak, for the upgrading of a water treatment plant in Salim, Sibu worth RM269.1m via open tender. Pansar said the scope of work includes civil, structural, mechanical and electrical works for the construction, completion and commissioning and all the required works for the upgrading of the Salim water treatment plant from 150 megaliters per day (mld) to 300 mld. (StarBiz)

HeiTech Padu: Farhash no more HeiTech’s substantial shareholder. Datuk Farhash Wafa Salvador has ceased to be a substantial stakeholder of Heitech Padu. The technology services provider said this followed the cessation of his deemed interest by virtue of the change in shareholdings in Mfivesouthsea SB, the holding company of Rosetta Partners SB pursuant to Section 8(4) of the Companies Act 2016. (StarBiz)

UMediC: Bursa approves UMediC’s transfer to Main Market. Bursa Malaysia Securities Bhd has approved the transfer of UMediC Group’s listing status from the ACE Market to the Main Market, under the 'health care' sector. The transfer will take effect immediately two market days upon the announcement to Bursa Securities on the transfer date via Bursa Link. (The Edge)

Kimlun: Wins RM150m deal from Astaka. Astaka Holdings Ltd has awarded a RM150m construction contract to Kimlun SB, a subsidiary of Kimlun Corp. Kimlun will assume the role of main contractor for the RM254m GDV project, Aliva. Aliva will have 499 units with built-ups ranging from 595 sq ft to 1,075 sq ft and is positioned to target the premium market segment in Mount Austin. (StarBiz)

MARKET UPDATE

The FBM KLCI might open flat today after US stocks vacillated on Thursday, swinging from red to green and back as investors contended with the push-pull of a strong economy and restrictive Federal Reserve policy. All three major US stock indices wavered throughout the session, with weakness in the chip sector weighing the Nasdaq down the most. Economic data released on Thursday painted a mixed picture, with low jobless claims and solid factory data versus weaker-than-expected home sales and leading economic index readings. The Dow Jones Industrial Average rose 22.07 points, or 0.06%, to 37,775.38, the S&P 500 lost 11.09 points, or 0.22%, to 5,011.12 and the Nasdaq Composite dropped 81.87 points, or 0.52%, to 15,601.50. European stocks ended higher as upbeat results lifted the benchmark index, offsetting uncertainties surrounding geopolitical tensions and the timing of central bank rate cuts. The Pan-European STOXX 600 index rose 0.24%.

Back home, Bursa Malaysia continued its upbeat momentum to end higher for the second straight day on Thursday, due to an improvement in sentiment and a resurgence in bargain-hunting following the recent downturn. At the closing bell, the FBM KLCI rose 4.34 points, or 0.28%, to 1,544.76 from Wednesday's close of 1,540.42. Emerging market stocks rose 0.46%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.57% higher, while Japan's Nikkei rose 0.31%.

Source: PublicInvest Research - 19 Apr 2024