HEADLINES

Economy

US: Fed to cut rates in September, say nearly two-thirds of economists. The US Federal Reserve will cut its key interest rate twice this year, starting in September, according to a stronger majority of economists polled by Reuters who broadly raised their inflation forecasts for a second consecutive month. Nearly twothirds of economists surveyed, 70 of 108, predicted the first reduction in the fed funds rate in Sept, to a 5.00%-5.25% range. (Reuters)

EU: Macron won't rule out allowing sale of French banks to European rivals. French President Emmanuel Macron believes Europe's banking sector needs greater consolidation, even if that means a major French bank being bought by a European rival, he said in a TV interview with Bloomberg. Macron has long been pushing for a European capital markets union, arguing the current fragmentation of the region's banking sector is a drag on the bloc's growth. Asked if, for example, he would be willing to countenance the sale of France's Societe Generale, to Spain's Santander, Macron said: "Dealing as Europeans means you need consolidation as Europeans." Macron said he would not be happy if French oil company were to move its primary listing to the United States but noted there were only rumours so far. (Reuters)

UK: Employers plan 4% pay rises in coming year, survey shows. British employers expect to raise wages by 4% over the coming 12 months, a similar rate to three months ago, according to an industry survey that suggested businesses were less willing to take on higher labour costs. The Chartered Institute of Personnel and Development said expected median pay settlements in the private sector for the coming 12 months was unchanged at 4%, while expectations in the public sector remained at 3%. British consumer price inflation slowed to 3.2% in March and the Bank of England expects it to have eased further to around 2% in April after a reduction in regulated energy prices. (Reuters)

China: To kick off RMB 1tr stimulus bond issues this week. China's finance ministry plans to start raising RMB 1tr (USD138 billion) in long-awaited, long-term special treasury bonds this week to raise funds it will use to stimulate key sectors of its flagging economy. The finance ministry confirmed what four sources had told Reuters earlier that the RMB 1tr (USD138 billion) of special government bonds would have tenors of 20 to 50 years and issuance will begin on May 17. The sources who have direct knowledge of the plans said RMB 300bn worth of 20-year bonds, RMB600bn worth of 30-year bonds and RMB100bn worth of 50- year bonds would be issued. (Reuters)

Japan: On track to normalise monetary policy, says ruling party heavyweight. Japan is seeing conditions fall in place for the central bank to normalise monetary policy, ruling party heavyweight Katsunobu Kato told Reuters, underscoring growing political support for further interest rate hikes. But Kato said the Bank of Japan (BOJ) must keep a close eye on economic conditions and coordinate carefully with the government in working out when to raise rates. (Reuters)

India: Retail inflation eases slightly in April, surge in food prices continues. India's retail inflation rate eased slightly in April, partly due to lower fuel prices, although food prices remained elevated. Annual retail inflation in April was 4.83%, down from 4.85% in March. Economists polled by Reuters had forecast April retail inflation at 4.80%. Food inflation, which accounts for nearly half of the overall consumer price basket, rose 8.70% in April, compared with a 8.52% rise in the previous month. Food inflation has been accelerating at more than 8% YoY since Nov 2023. The inflation rate for cereals was 8.63%, compared with 8.37% in the previous month and pulses rose 16.84%, compared with 17.71% in March. Vegetable prices rose 27.8% in the month of April. The inflation rate for cereals was 8.63%, compared with 8.37% in the previous month and pulses rose 16.84%, compared with 17.71% in March. Vegetable prices rose 27.8% in the month of April. (Reuters)

Markets

TM (Neutral, TP: RM6.20): Says contracts awarded by Home Ministry not material to group. Telekom Malaysia said that it had signed deals with the Home Ministry relating to two contracts worth RM120.5m, at the recent Defence Services Asia (DSA) Exhibition and Conference 2024 and National Security (Natsec) Asia 2024. TM said the contracts were awarded to its wholly owned unit TM Technology Services Sdn Bhd. (The Edge)

Aurelius: To invest RM450m in new manufacturing hub in Kulim. Aurelius Technologies said it plans to invest RM450m over the next five years to build a new manufacturing hub on an industrial land spanning 571,908 sq ft in the Kulim Hi-Tech Park, Kedah. Aurelius said its wholly owned subsidiary BCM Electronics Corp SB held a ground-breaking ceremony to mark the commencement of the new hub's construction. (The Edge)

AME Elite: Units to dispose of i-TechValley land for RM209.8m. AME Elite Consortium has agreed to dispose of 11 plots of industrial land in the i-TechValley in Phase 3 of the southern industrial and logistics clusters (SILC) in Iskander Puteri, Johor, to Digital Hyperspace Malaysia SB for a combined RM209.8m cash. The disposal consideration of the land, measuring a total of 34.91 acres, works out to a price tag of RM138 psf. AME Elite said the gross cash proceeds will be utilised to partially fund the its ongoing development of i-TechValley at Phase 3 of SILC while boosting its working capital position. (StarBiz)

PTT Synergy: Gets construction jobs from Sime Darby Property totalling RM169.9m. PTT Synergy Group Bhd (PTTS) has received two letters of awards (LoA) from Sime Darby Property totalling RM169.9m for construction jobs in Selangor. PTTS said it PTTSB had accepted a LoA from Sime Darby Property (Lagong) SB in respect of proposed construction and completion of earthworks and ancillary works for Stage 1 (Section 1 and Section 2) at Lagong Mas, Gombak, Selangor, worth RM96.61m. In a separate filing, PTTS said PTTSB had accepted a LoA from Sime Darby Property (Bukit Raja) SB in respect of the proposed construction and completion of earthworks and ancillary works for Bandar Bukit Raja Stage 3, Klang, Selangor, worth RM73.2m. (StarBiz)

Mulpha: Australian unit secures AUD100m cash advance facility to refinance borrowings, working capital. Mulpha International said its indirect wholly owned Australian subsidiary Mulpha Norwest Pty Ltd had accepted a cash advance facility of AUD100m (equivalent to approximately RM313.1m) from National Australia Bank Ltd to refinance borrowings and for working capital. The cash advance comprises a revolving facility of AUD90m and a bank guarantee facility of AUD10m. Mulpha Norwest's principal activity is property development. (The Edge)

GuocoLand: 3Q net profit falls 66%, warns about property oversupply. GuocoLand (Malaysia) saw its net profit tumble 66.3% for 3QFY2024, due to lower revenue from its property development division. Nonetheless, this was partially offset by a better performance of the hospitality division, thanks to higher occupancy and better average room rates. It posted a net profit of RM2.9m for the quarter under review, from RM8.7m a year earlier, on the back of a 20.8% decline in revenue to RM88.97m from RM112.36m. (The Edge)

MARKET UPDATE

Global markets started off the week mixed as investors waited on a key inflation report in the US which could frame expectations on interest rate direction. The Dow Jones Industrial Average slipped 0.2% while the Nasdaq Composite inched 0.3% higher as the broad-based S&P 500 ended the day largely unchanged (-0.02%). A report from the New York Federal Reserve showed that consumers’ expectations for inflation over the short and long term grew in April, putting pressure on the major averages and weighed on stocks. Investors in Europe were similarly indecisive while waiting on the US inflation data. Construction and materials stocks led losses, down 0.9%, while auto stocks gained 1.4%. Marketwise, UK’s FTSE 100 and Germany’s DAX both fell 0.2% while France’s CAC 40 fell 0.1%. Benchmarks in Italy and Spain gained 0.5% and 0.4% respectively, however. Over in Asia, markets were also mixed as investors assessed China’s stronger-than-expected April inflation data, with the consumer price index climbing 0.3% YoY, beating estimates of a 0.2% rise. The Hang Seng Index jumped 0.8% higher though the Shanghai Composite Index and Nikkei 225 fell 0.2% and 0.1%.

Source: PublicInvest Research - 14 May 2024