HEADLINES

Economy

Global: Factory activity has mixed performance in June, PMIs show. Manufacturing activity in Europe suffered a setback last month but Asian factories enjoyed solid momentum, offering policymakers some hope the region can weather the hit from soft Chinese demand, surveys showed. The downturn in Europe was widespread, with Italy the only big player not to see a fall in its Purchasing Managers' Index (PMI) despite manufacturers largely cutting prices. HCOB's final euro zone manufacturing PMI, compiled by S&P Global, fell to 45.8 in June from May's 47.3. (Reuters)

US: Manufacturing index unexpectedly indicates slightly faster contraction in June. Manufacturing activity in the US unexpectedly contracted at a slightly faster rate in the month of June, according to a report released by the Institute for Supply Management. The ISM said its manufacturing PMI edged down to 48.5 in June from 48.7 in May, with a reading below 50 indicating contraction. Economists had expected the index to inch up to 49.1.

The unexpected dip by the headline index came amid a downturn in production, as the production index fell to 48.5 in June from 50.2 in May. The employment index also slid to 49.3 in June from 51.1 in May, indicating a downturn in employment in the manufacturing sector. (RTT)

EU: German inflation slows as optimism in economic rebound wanes. German inflation slowed after two months of accelerating as the country’s economic recovery showed signs of stalling. Consumer prices rose 2.5% from a year earlier in June — down from 2.8% in May and in line with a Bloomberg survey of analysts. Energy costs continued to decline, while goods eased and services, under particular scrutiny now, were unchanged at 3.9%. Separate reports showed inflation also moderated last month in France and Spain. While picking up a touch in Italy, it remained below 1%. A gauge for the 20-nation eurozone will come on Tuesday, with analysts and a Bloomberg Economic Nowcast both predicting a slowdown to 2.5% from 2.6%. (Bloomberg)

UK: House prices grow again in June, says Nationwide. UK house prices increased for a second month in June, in signs the market is stabilising after last year’s dip, according to one of the top mortgage lenders. Nationwide Building Society said its measure of prices rose 0.2% in June after an 0.4% gain the month before. Economists had expected no change. Prices are now 1.5% above a year ago, with interest rates at a 16-year high contributing to affordability concerns for people who need a mortgage. Nationwide said it’s seen an increase in the portion of cash buyers in the market. (Bloomberg)

China: Manufacturing sector continues to expand. China's manufacturing sector continued to expand in June as production growth accelerated the most in two years underpinned by rising new orders, survey data from S&P Global showed. The Caixin manufacturing Purchasing Managers' Index rose to 51.8 in June from 51.7 in the previous month. A score above 50.0 indicates expansion. This was the eighth consecutive monthly improvement and also marked the fastest since May 2021. However, the official survey showed that China's manufacturing sector contracted for the second straight time in June. (RTT)

China: Central bank to borrow bonds from market under new policy plan. China's central bank said it would borrow treasury bonds from some primary dealers soon, outlining the specifics of a plan analysts say is aimed at putting a floor under plunging domestic interest rates. The People's Bank of China said it would borrow the bonds in open market operations in the near future, setting the stage for possible treasury bond selling, a new tool that will help the central bank control credit flow and market yields. (Reuters)

Japan: Consumer confidence rises slightly in June. Japan's consumer sentiment increased for the first time in three months in June, though marginally, survey data from the Cabinet Office showed. The seasonally adjusted consumer confidence index rose to 36.4 in June from 36.2 in May. Economists had forecast the index to rise to 36.5. The latest survey was conducted on June 15 among 8,400 households. The indicator for income growth improved by 0.7 points to 40.6, and that for willingness to buy durable consumer goods also rose by 0.6 points to 29.6. On the other hand, the index reflecting households' overall livelihood dropped marginally to 33.8 from 33.9, and the index for employment declined by 0.3 points to 41.7. (RTT)

Markets

Telekom Malaysia (Neutral, TP: RM6.40): Awarded RM1.25bn contract to undertake new emergency call system for 12 years. Telekom Malaysia said it has been awarded a RM1.25bn contract to undertake a new emergency call system, which will be a continuation of the existing Malaysia Emergency Response Services 999 (MERS999) system. (The Edge)

Comment: This is a continuation of an existing contract, Malaysia Emergency Response Services 999 (MER999), where all emergency numbers were integrated with a single number 999 for the Malaysian public to call in the event of emergencies. This is to create a unified database emergency services and the replacement of MER999 with NG999 is intended to enhance the efficiency and response time. NG999 will be for a period of 12 years (2024 – 2036) valued at RM1.25bn. We make no changes to our earnings estimates as this contract would have already been accounted for in our projection for TM One’s earnings.

Vitrox: To build research facility in Penang. Vitrox Corp (VCB) was awarded a RM45.99m contract in a related party transaction to build a block of a five-storey training and industrial research centre, also known as the Vitrox Institute of Technology (VIT) in Penang. The construction is planned on the 21.03-acre parcel of land that was acquired in June 2021. (StarBiz)

Nova Pharma: Gets National Institute of Biotechnology contract. Nova Pharma Solutions has accepted a letter of acceptance from the National Institutes of Biotechnology Malaysia (NIBM) to undertake equipment procurement and facility upgrade for NBIM’s national vaccine production development and enhancement programme. The project will take place at the Malaysia Genome and Vaccine Institute, which is located within NIBM's premises in Kajang, Selangor. (StarBiz)

Kinergy Advancement: Collaborates with JCorp to provide sustainable energy solutions for data centres. Kinergy Advancement has partnered with JCorp to undertake and develop sustainable energy solutions projects with a specific focus on energy-efficient initiatives for data centres. The project encompassing energy-efficient measures, renewable energy solutions, clean energy initiatives, and engineering construction across various energy-related facilities, was secured by Kinergy Advancement’s wholly-owned subsidiary. (TheEdge)

Southern Score: Gets RM315m residential hi-rise development contract. Southern Score Builders (SSBB) has received a letter of award from Smart Advance Resources SB to serve as the turnkey contractor for the proposed development of three residential apartment blocks in Setapak, Kuala Lumpur, worth RM315m. The proposed development will also consist of one facility floor and swimming pool, eight floors of podium car park, a guard house and a 11 kilovolt Tenaga Nasional main switch station. (SunBiz)

Country Heights: Working to return Mines Waterfront Business Park to solvent status. Country Heights is working closely with the Malaysian Department of Insolvency to resolve the winding-up of its indirect wholly-owned subsidiary Mines Waterfront Business Park SB and return it to solvent status. (The Edge)

MARKET UPDATE

The FBM KLCI might open flat today after US stocks drifted to a mixed finish Monday, and yields jumped in the bond market as elections continue to drive swings in financial markets worldwide. The S&P 500 rose 0.3% to kick off a shortened, four-day week that includes the Fourth of July holiday. The Dow Jones Industrial Average edged up by 50 points, or 0.1%, and the Nasdaq composite gained 0.8%. Some of the world’s strongest action was across the Atlantic, where the CAC 40 index in Paris jumped as much as 2.8% before settling to a gain of 1.1%. Results from France suggested a far-right political party may not win a decisive majority in the country’s legislative elections. That bolstered hopes for potential gridlock in the French government, which would prevent a worst-case scenario where a far-right with a clear majority could push policies that would greatly increase the French government’s debt.

Back home, Bursa Malaysia closed trading on the first day of the second half of the year firmer in line with the improving performance of regional peers with buying mainly in the financial service stocks. At the closing bell, the FBM KLCI rose 0.51% or 8.11 points to 1,598.20 from Friday’s close of 1,590.09. In stock markets elsewhere, Japan’s Nikkei 225 added 0.1% after a quarterly survey by the Bank of Japan called the “tankan” showed a modest improvement in confidence among the country’s largest manufacturers. Stocks in Shanghai rose 0.9% following mixed economic data.

Source: PublicInvest Research - 2 Jul 2024