HEADLINES

Economy

US: Sharp slowdown in job growth boosts unemployment rate to 4.3%. The US unemployment rate jumped to near a three-year high of 4.3% in July amid a significant slowdown in hiring, heightening fears the labor market was deteriorating and potentially making the economy vulnerable to a recession. The increase in the unemployment rate from 4.1% in June marked the fourth straight monthly increase, the Labor Department reported. Its rise from a five-decade low of 3.4% in April 2023 to now the highest level since September 2021 all but guarantees a September interest rate cut from the Federal Reserve, with economists calling for a 50bps reduction in borrowing costs. They argue that the U.S. central bank is most likely behind the curve in easing monetary policy. (Reuters)

US: Fed rate cuts loom large as job market slows sharply. US central bankers may be having second thoughts about their decision earlier this week to hold borrowing costs steady, after a government report on Friday showed the job market slowed sharply last month. Employers added just 114,000 jobs in July, the US Labor Department reported. The data prompted traders to pile into bets that the Fed will deliver a half-percentage-point rate cut at its Sept. 17-18 meeting, and drive borrowing costs down further from there, with the policy rate expected to end 2024 in the 4.00%-4.25% range. Before the release of Friday's employment report, rate futures had been priced for quarter-percentage-point rate cuts starting in Sep. (Reuters)

EU: Italy has no plans for new tax on company profits, sources say. Italy has no plans to introduce new windfall taxes on company profits, government sources said on Friday, denying press reports. Some Italian newspapers reported this week that the government was discussing new taxes on banks, insurers, energy companies and luxury goods firms. Rumours began to spread after Economy Minister Giancarlo Giorgetti last month hinted at possible measures on the insurance sector, urging companies that have reported healthy profits to reflect on a recent rise in insurance premiums. Political sources said, however, that Giorgetti would be in favour of cooperation agreements with banks and insurers to reinvest some of their profits in initiatives aimed at helping consumers. A year ago Italy's conservative government sparked a major sell-off in banking shares by announcing a surprise 40% windfall tax on bank profits driven by higher interest rates. (Reuters)

UK: BoE rate cut adds to sense of turnaround in sluggish economy. The BoE's first interest rate cut in more than four years will help to foster a cautious sense of optimism about Britain's longstruggling economy, but the scale of the growth challenge facing the new government remains huge. The BoE lowered its benchmark rate to 5.0% on Thursday, from a 16-year high of 5.25%, offering a bit more relief to households and businesses. The lowering of Bank Rate from its 16-year high and the signs of economic recovery after a shallow recession in 2023 are helpful for new Prime Minister Keir Starmer, who has made economic growth - chiefly via reforms to boost the country's weak productivity growth - the top priority of his government. BoE Chief Economist Huw Pill, who voted to keep rates on hold, welcomed the improved outlook for the economy, even if it still represented a historically tepid pace of growth at around 1% a year between 2024 and 2026. (Reuters)

Japan: Warns of weak yen impact on households in government white paper. A weak yen is hurting Japanese households' sentiment and could erode their purchasing power, the government said in a report on Friday, underscoring its concern over the negative economic impact of the currency's fall. A renewed rise in inflation expectations since mid-2023 has soured households' mood, partly because the public reacted to media reports about rising food prices and the boost to import costs from a weak yen, it said. "A weak yen risks eroding consumers' purchasing power" by pushing up inflation more than wage growth, the paper said. After languishing at 38-lows below USDJPY160 for much of July, the yen staged a sharp rally in the days leading up to and after the BoJ’s decision on Wednesday to raise interest rates. (Reuters)

South Korea: Inflation ticks up in July after three months of weakening. South Korea's consumer inflation ticked up in July on supply-side pressures after weakening for three straight months, official data showed on Friday, coming in slightly higher than market expectations. The CPI in July rose 2.6% from the same month a year earlier, after hitting an 11-month low of 2.4% in June, while economists in a Reuters survey had expected a gain of 2.5%. The consumer price rise was in line with the finance minister's comments last week that inflation might temporarily pick up due to abnormal weather conditions and base effects before stabilising from August. The CPI rose 0.3% on a monthly basis, after falling 0.2% the previous month, according to Statistics Korea. That was the fastest rise in five months and a little higher than economists' expectations for a median 0.25% increase. (Reuters)

Australia: RBA to hold rates steady in August; first cut seen in early 2025, Reuters poll finds. The Reserve Bank of Australia will hold interest rates on Tuesday at near a 13-year high and wait until the first quarter of 2025 before reducing them, according to economists polled by Reuters, as price pressures remain elevated. Inflation unexpectedly rose to a six-month high of 4.0% in May from 3.6% previously, triggering a flurry of speculation in markets that the RBA would raise rates. But after inflation dipped to 3.8% last month, along with weaker-than-expected price pressures across the second quarter, that pricing was wiped out. Still, with inflation well above the central bank's 2%-3% target range, the RBA will hold the official cash rate at 4.35% this year, according to the July 31-Aug. 1 Reuters poll. All but one of 33 economists surveyed expected the central bank to leave rates unchanged on Aug. 6. The median forecast and majority view put rates on hold through the end of this year, unchanged from the previous poll. (Reuters)

Markets

Ecobuilt: To be suspended from Aug 9 following High Court approval of winding-up petition. Trading of the shares in Ecobuilt Holdings will be suspended Aug 9, after the High Court approved a winding-up petition against the company. Earlier, Ecobuilt was served a winding-up petition by S-Form System Formwork (M) SB on April 24, concerning a claim of RM670,596. The court approved the petition on July 24 and concurrently dismissed Ecobuilt's application to stay the winding-up proceedings. (The Edge)

Binastra: Wins RM160m office construction job in Damansara Perdana. Binastra Corp wholly-owned Binastra Builders SB has bagged a RM160m contract to demolish and build an office complex in Damansara Perdana from Dynamicz SB. The contract covers demolition and construction of main building works comprising four floors of offices (560 units), as well as two basement levels. The job is expected to be completed by July 30, 2026. (The Edge)

Paragon: Unit to dispose of land in Johor for RM99m. Paragon Globe Bhd’s wholly-owned subsidiary, Paragon Business Hub SB (PBHSB), has entered into a conditional sale and purchase agreement with Bridge Data Centres Malaysia VI SB (BDCVI) for the proposed disposal of 7.98 hectare land in Johor Bahru, Johor, for RM98.98m. The disposal is expected to be completed by the third quarter of 2025, the company said. (Bernama)

Awantec: To supply Google Workspace Enterprise Starter licence to Sabah Net for RM9.97m. AwanBiru Technology, a cloud-based service provider, is supplying Google Workspace Enterprise Starter licence to Sabah Net SB (SNSB) for RM9.97m. Its wholly-owned subsidiary Awantec Systems SB has inked a service agreement with SNSB for subscription of said licence. The agreement is for a five-year period from Aug 1, 2024 to July 31, 2029. (The Edge)

Straits Energy Resources: To exit port operation and management business after four years. Straits Energy Resources plans to exit the port operation and management business by disposing of its entire 51% equity interest in Megah Port Management SB (MPM), the concessionaire of Labuan Liberty Port, to LPM Holdings SB for RM5m, cash. By divesting its stake in MPM, the group can concentrate on fewer operating entities, and improve its overall operational efficiency and effectiveness. (The Edge)

Perak Transit: To raise RM1.5bn via sukuk. Perak Transit plans to raise RM1.5bn via a perpetual Sukuk Wakalah programme to fund its capital expenditure (capex) and working capital. It said the capex will be used for the construction of the integrated bus transport terminal cum commercial complex known as Terminal Seri Iskandar in Bandar Seri Iskandar, Perak, subject to a margin of advance of 70%. (The Edge)

YBS: Plans RM25.6m private placement to fund lithium-ion battery project with Nasdaq-listed Enovix. YBS International plans to raise up to RM25.6m through a private placement with over half of the proceeds allocated to fund the lithium-ion battery manufacturing project it is undertaking in partnership with US advanced silicon battery producer Enovix Corp. It intends to issue up to 10% of its enlarged share base, or 30.5m shares, to thirdparty investors who will be identified later. (The Edge)

MARKET UPDATE

The FBM KLCI might open lower as US stocks tumbled Friday on worries the US economy could be cracking under the weight of high interest rates meant to whip inflation. The S&P 500 sank 1.8% for its first back-to-back losses of at least 1% since April. The Dow Jones Industrial Average dropped 610 points, or 1.5%, and the Nasdaq composite fell 2.4% as a sell-off for stocks whipped all the way around the world back to Wall Street. A report showing hiring by US employers slowed last month by much more than economists expected sent fear through markets, with both stocks and bond yields dropping sharply. It followed a batch of weakerthan-expected reports on the economy from a day earlier, including a worsening for US manufacturing activity, which has been one of the areas hurt most by high rates. In stock markets elsewhere, Japan’s Nikkei 225 dropped 5.8%. It’s been struggling since the Bank of Japan raised its benchmark interest rate on Wednesday. The hike pushed up the value of the Japanese yen against the US dollar, which could hurt profits for exporters and deflate a boom in tourism. Chinese stocks fell as investors registered disappointment with the government’s latest efforts to spur growth through various piecemeal measures, instead of hoped-for infusions of broader stimulus, while stock indices dropped by more than 1% across much of Europe. Risk-off moves across major markets after disappointing US manufacturing economic data sparked broad selloffs in the Malaysian stock market on Friday. By the closing bell, more than 1,300 stocks on Bursa Malaysia fell and only 155 rose. The benchmark FBM KLCI lost 13.2 points or 0.81% to 1,611.05 with 24 out of 30 component stocks in the red.

Source: PublicInvest Research - 5 Aug 2024