HEADLINES

Economy

US: Retail sales tepid in May. US retail sales barely rose in May and data for the prior month was revised considerably lower, suggesting that economic activity remained lackluster in 2Q. The smaller-than-expected increase in retail sales reported by the Commerce Department, however, likely exaggerates the slowdown in consumer spending. Part of the decline in sales was because of lower gasoline prices, which weighed on receipts at service stations. Nonetheless, inflation and higher interest rates are testing the resilience of consumers, with households generally prioritizing essentials and cutting back on discretionary spending. (Reuters)

US: Industrial production jumps much more than expected in May. Industrial production in the US increased by much more than expected in the month of May, the Fed revealed. The Fed said industrial production jumped by 0.9% in May after coming in unchanged in April. Economists had expected industrial production to rise by 0.3%. The much stronger than expected growth partly reflected a rebound by manufacturing output, which advanced by 0.9% in May after falling by 0.4% in April. Utilities output also shot up by 1.6% in May after spiking by 4.1% in April. (RTT)

US: Fed officials steer cautiously toward potential rate cuts. Fed officials, are looking for further confirmation that inflation is cooling and for any warning signs from a still-strong labour market as they steer cautiously toward what most expect to be an interest rate cut or two by the end of this year. Outlining a litany of reasons for optimism that inflation is back on track to the US central bank's 2% goal after stalling earlier this year, Fed Governor Adriana Kugler said she believes monetary policy is "sufficiently restrictive" to ease price pressures without causing a significant deterioration in the job market. (Reuters)

EU: Inflation rises as estimated. Eurozone inflation accelerated in May, as initially estimated, largely driven by services cost. The harmonized index of consumer prices rose 2.6% on a yearly basis, following the 2.4% rise in April, Eurostat reported. The rate came in line with the estimate published on 31 May and it has moved away from the ECB's 2% target. (RTT)

EU: German economic sentiment rises slightly in June. German economic confidence improved only marginally in June, survey data from the ZEW economic research institute showed. The ZEW Indicator of Economic Sentiment rose slightly to 47.5 in June from 47.1 in the previous month. The reading remained below forecast of 50.0. Assessment of current situation deteriorated in June with the index falling to -73.8 from -72.3 last month. "Both the sentiment and the situation indicators stagnate," ZEW President Achim Wambach said. (RTT)

China: Property measures give sales a boost, but only in big cities. China's latest property support measures have boosted transactions in its biggest cities, but activity in smaller localities is struggling to get off the ground, pointing to more pain ahead for most of the country's real estate market. On 17 May, China cut minimum mortgage rates and downpayments and instructed municipalities to buy unsold apartments to turn them into social housing, sparking dozens of announcements from cities easing policies under the new guidelines. (Reuters)

Australia: Central bank holds cash rate at 4.35%. Australia's central bank held interest rates steady as expected, while reiterating that it was not ruling out further increases if needed to control inflation. The Reserve Bank of Australia (RBA) kept rates at a 12-year high of 4.35%, where they have been since a hike in Nov last year. (Reuters)

Singapore: Posted SGD4.6bn trade surplus in May. Singapore posted a trade surplus of SGD4.6 bn in May, the Department of Statistics said. That was roughly in line with expectations following the downwardly revised SGD4.5bn surplus in April. Non-oil domestic exports were down 0.1% on month, missing forecasts for an increase of 1.7% following the downwardly revised 7.3% gain in the previous month (originally 7.6%). (RTT)

Markets

UEM Sunrise (Underperform, TP: RM0.70): Sells remaining 40% stake in Johor unit to KLK for RM386.2m cash. UEM Sunrise (UEMS) has disposed of its remaining 40% stake in a joint venture, Aura Muhibah Sdn Bhd (AMSB), to Kuala Lumpur Kepong as the latter exercised its call option. The sales proceeds of RM386.2m would be utilised to pare down UEM Sunrise's outstanding debt upon maturity by the year end, which will in turn reduce the group’s gross gearing from 0.61x to 0.55x.UEMS is expected to recognise a net disposal gain of RM32m.(The Edge)

Comments: The marks UEMS exit from the JV with KLK that was earlier earmarked for a mixed development worth RM6bn almost 10 years ago. We make no changes to our earnings pending completion of the deal. Valuations are still rich in our view and hence, we maintain our Underperform call and fair value of 70sen, pegged at c.0.5x to book value.

MAHB: KLIA aerotrain project to be completed by Jan 31, 2025, ahead of schedule. The Aerotrain Replacement Project at Kuala Lumpur International Airport (KLIA) is slated to be completed by 31 Jan, 2025, ahead of the project’s original planned completion date, said Malaysia Airports Holdings (MAHB). The airport operator said that this expedited timeline, finalised through a contract signed on June 14, 2024, between Malaysia Airports (Sepang) SB (MA Sepang) and a joint venture consisting of IJM Construction SB and Pestech Technology Sdn Bhd (IJMC-Pestech JV). (Bernama)

Berjaya Corp: Explores NEV venture with China’s Skywell. Berjaya Corp (BCorp) is mulling a venture into the new energy vehicle (NEV) market, following a strategic partnership with China’s Skywell New Energy Automobile Group Co Ltd. Skywell is known for its production of low carbon emission vehicles, including electric buses, vans and trucks. Separately, BCorp has also forged a partnership with Skyworth Group Co Ltd, another leading Chinese enterprise specialising in smart home appliances and technology. Both Skyworth and Skywell were founded and majority controlled by Stephen Wong. (The Star)

BM Greentech: To takeover solar firm Plus Xnergy for RM110m. BM Greentech (BMG) has signed a term sheet with the shareholders of solar firm Plus Xnergy Holding SB (PXH) to acquire the company for RM110m, to be paid with new shares in BMG. BMG signed the agreement with Ko Chuan Zhen, Leong Beng Yew, Oh Siang Hwa, Oh Zhi Kang, Poh Tyng Huei, Smiling Planet SB (SPSB) and Tenaga Wan Foong Sdn Bhd (vendors). (New Straits Times)

Plytec: Bags RM26m contract for serviced apartments project. Plytec Holding has clinched a RM26.3m contract from Setiakon Builders Sdn Bhd (SBSB) through its subsidiary Plytech Formwork System Industries SB (PFWSI). The contract entails supplying temporary works equipment for a construction project featuring three blocks of serviced apartments. (The Malaysian Reserves)

Sunview: Bags solar power plant project worth RM79.5m in Bulgaria. Sunview Group has landed a contract worth EUR15.6m (RM79.5 m) for the engineering, procurement, construction and commissioning (EPCC) of a solar power plant in Bulgaria. It said its indirect wholly-owned subsidiary Sunview Builders Pte Ltd entered into an agreement with OKOP Solar EOOD, a Bulgarian company principally involved in the generation and sale of electricity from renewable resources. (The Edge)

MARKET UPDATE

The FBM KLCI might open higher today after the staggering run for Nvidia’s stock carried it to the market’s mountaintop Tuesday, as it became the most valuable company on Wall Street. Stock indices, meanwhile, ticked to more records following the latest signal that the US economy’s growth may be slowing without cratering. The S&P 500 added 0.3% to set an all-time high for the 31st time this year. The Nasdaq composite edged up by less than 0.1% to set its own record, while the Dow Jones Industrial Average added 56 points, or 0.1%. Underneath that calm market surface, Nvidia was the star again. It rose again, this time up 3.5%. It was the strongest force pushing the S&P 500 upward, again. And it lifted its total market value further above $3trn, again. A survey of global fund managers by Bank of America showed they’re the most optimistic about stocks since the autumn of 2021, with relatively little hiding out in cash and allocations heavy to stocks. The downside of Tuesday’s weaker-than-expected data is that it could be a warning signal that the main engine of the US economy, spending by households, is cracking. Alongside May’s numbers, the US government also revised down figures for retail sales in prior months. In stock markets elsewhere, indices continued to recover in Europe following last week’s rout. Surprise victories by far-right parties in elections had raised worries about the potential for mounting debt loads at the French government in particular. France’s CAC 40 rose 0.8% for a second straight gain. Back home, Bursa Malaysia reversed earlier gains at the close today, weighed down by late selling in selected blue chips, mainly the utilities and banking stocks. At the closing bell, the FBM KLCI eased 0.07% or 1.19 points to 1,606.13 from last Friday’s close of 1,607.32. In the region, Japan’s Nikkei 225 rose 1%. Heavyweight Toyota Motor climbed after its shareholders rejected a proposal to force Akio Toyoda, grandson of the automaker’s founder, to leave his post as chairman of the board.

Source: PublicInvest Research - 19 Jun 2024