HEADLINES

Economy

US: Industrial production unexpectedly drops on mining, utilities. US industrial production unexpectedly declined for a third month in Nov on weaker utility output and mining. The 0.1% decrease in production at factories, mines and utilities followed a downwardly revised 0.4% drop a month earlier, Federal Reserve data showed. The median estimate of Bloomberg survey of economists was a 0.3% increase. Manufacturing output rose a disappointing 0.2% after a downwardly revised 0.7% slide a month earlier. Despite resolution of a machinists' strike at Boeing Co, aerospace equipment output declined, largely due to a decrease in aircraft parts production, the Fed said. Output at utilities fell by the most in four months, while mining posted the largest decline since May. Manufacturing, which accounts for three-fourths of total industrial production, has struggled this year as many companies limited capital spending amid high borrowing costs. (Bloomberg)

US: Retail sales beat expectations in Nov. US retail sales increased in more than expected in Nov amid an acceleration in motor vehicle purchases, consistent with strong underlying momentum in the economy as the year winds down. Retail sales jumped 0.7% last month after an upwardly revised 0.5% gain in Oct, the Commerce Department's Census Bureau said. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, advancing 0.5% after a previously reported 0.4% rise in Oct. Estimates ranged from a 0.1% dip to a 1.0% jump. Labour market resilience, characterised by historically low layoffs and strong wage growth, is underpinning consumer spending and keeping the economic expansion on track. (Reuters)

EU: ECB raises bank capital requirements citing heightened risks. The ECB slightly raised capital requirements for the region's lenders, saying geopolitical risks had increased despite bumper profits. Overall, banks face a minimum bar of 11.3% for high-quality capital next year, up from 11.2% in 2024, the ECB said in a statement in Frankfurt. The watchdog increased its portion of those buffers after "changes in the risk profile of selected banks." European banks have benefitted from higher interest rates over the past two and a half years, fuelling payouts to shareholders. Yet the ECB has warned that they face numerous risks, from geopolitical tensions to climate change. (Bloomberg)

EU: German investor confidence highest in 4 months in Dec - ZEW. Economic sentiment in Germany unexpectedly rebounded in Dec to its highest level in four months as financial market experts turned optimistic on the announcement of snap elections in Feb next year and the prospect of more interest rate cuts from the European Central Bank, results of a survey by the think tank ZEW showed. The ZEW Indicator of Economic Sentiment for Germany improved surged to 15.7 points from 7.4 in Nov. Economists had expected the reading to fall to 6.8. The latest reading was the highest since August when the score was 19.2. The current conditions sub-index fell to -93.1 from -91.4 in the previous month. Economists had forecast a score of -92.6. (RTT)

UK: Wage growth suggests gradual interest rate cuts. The UK wage growth accelerated more than expected in the three months to Oct supporting a case for more gradual interest rate reductions next year as pay increases could revive inflationary pressures. Excluding bonus, annual growth in average earnings came in at 5.2% compared to 4.9% in the three months to Sept, the Office for National Statistics said. Economists had forecast an increase of 5.0%. Earnings including bonus also grew 5.2%, which was faster than the forecast of 4.6%. The unemployment rate held steady at 4.3% during the Aug to Oct period. The rate came in line with expectations. Payroll employees increased 24,000 in Oct from Sept. Further, data showed that vacancies decreased on the quarter for the 29th consecutive period. The estimated number of vacancies fell 31,000 on the quarter to 818,000 in Sept to Nov. (RTT)

China: Plans record budget deficit of 4% of GDP in 2025. Chinese leaders agreed last week to raise the budget deficit to 4% of GDP next year, its highest on record, while maintaining an economic growth target of around 5%, two sources with knowledge of the matter said. The new deficit plan compares with an initial target of 3% of GDP for 2024, and is in line with a "more proactive" fiscal policy outlined by leading officials after December's Politburo meeting and last week's Central Economic Work Conference (CEWC), where the targets were agreed but not officially announced. The additional one percentage point of GDP in spending amounts to about CNY1.3trn (USD179.4bn or RM799.4bn). More stimulus will be funded through issuing off-budget special bonds, said the two sources, who requested anonymity as they were not authorised to speak to the media. (Reuters)

India: Plans up to 25% temporary tax to curb cheap Chinese steel imports. India is likely to impose a "safeguard duty" or temporary tax of up to 25% on steel imports, industry and government sources said, to help to curb cheap imports from top producer China. The proposal gained broad support at a meeting chaired by commerce minister Piyush Goyal after small industries dropped initial opposition once they received assurances that they would not be hit by higher steel prices. "It seems the safeguard duty will be imposed after an investigation, likely completed within a month," said an industry official who attended the meeting. (Reuters)

Markets

PUC: Revises Alevate Solutions acquisition with RM12.5m profit guarantee. PUC has announced a revised proposed acquisition of Alevate Solutions for RM100.0m, to be settled via the issuance of 800.0m new ordinary shares at 12.5 sen each. Alevate Solutions, a digital marketing consultancy established in 2016, specialises in helping small and medium enterprises (SMEs) enhance their marketing effectiveness and operational efficiency, particularly in the food and beverage (F&B) and retail sectors. The acquisition aims to strengthen PUC's digital marketing capabilities and expand its reach into the SME segment. (The Malaysian Reserve)

Scanwolf: Wins RM6mil construction job. Scanwolf Corp has secured a contract worth RM6.0m from Golden Rainbow View for the provision of supply, delivery, construction, and completion of sales gallery work, excluding interior design. The company said the construction works are expected to be completed within six months from the date of approval of the building plan from the authorities. The group said the project involves the construction of a two-storey sales gallery located at Jalan Dewan Sultan Sulaiman, Kuala Lumpur. (The Star)

KNM: Borsig group secures EUR60.0m multi-currency facility to continue operations. KNM Group said its German-based subsidiaries in the Borsig Group have secured a new credit facility of EUR60.0m (RM280.4m), enabling them to continue operations as usual. KNM said wholly owned Borsig GmbH and Deutsche KNM GmbH, along with other companies within the Borsig Group, have signed the facility agreement with lender Landesbank Baden-W

rttemberg and other participating financial institutions. This follows the expiration of a previous facility with IKB Deutsche Industriebank AG, which expired on Monday. KNM had announced in May 2022 its intention to sell its entire stake in Borsig to GPR Siebzigste Verwaltungsgesellschaft mbH for EUR220.8m. (The Edge)

Scientex Packaging: 1Q profit down 62% as forex loss offsets higher exports. Scientex Packaging (Ayer Keroh) reported a 62.4% decline in net profit for the 1Q ended 31 Oct 2024 (1QFY2025) to RM2.9m, compared to RM7.7m in the same period last year, dragged by foreign exchange losses. This was despite a 3.6% increase in revenue to RM179.3m from RM173.0m a year ago, lifted by higher export sales, said the group, whose markets include Australia, Thailand, Singapore, the Philippines, and Myanmar. Export sales contributed RM86.8m, or 48.4% of total revenue, while domestic sales made up the remaining RM92.5m, or 51.6%. (The Edge)

PT Resources: 2Q records lowest quarterly top and bottom line. Frozen seafood supplier PT Resources Holdings reported a sharply lower net profit for its 2Q ended 31 Oct 2024 (2QFY2025) due to local sales and higher administrative expenses. The net profit for the period came in at RM1.7m, compared with RM18.7m a year earlier, the company said in a stock exchange filing. EPS fell to 0.3 sen from 3.5. sen. Administrative expenses rose 50.9% YoY to RM12.2m from RM8.1m, as the company booked a RM1.9m unrealised foreign exchange loss against a RM4.2m gain previously. Quarterly revenue dropped 18% to RM91.6m from RM111.2m in 2QFY2024, attributed to a change in product mix demanded by local customers, which led to the sale of lower-margin products. (The Edge)

MARKET UPDATE

The KLCI might open lower today after US stock indices pulled back on Tuesday to trim some of their stellar gains for the year. The S&P 500 slipped 0.4%, though it's still near its all-time high set earlier this month. The Dow Jones Industrial Average dropped 267 points, or 0.6%, and the Nasdaq composite gave back 0.3% from its record set the day before. The S&P 500 is on track for one of its best years since the millennium, up nearly 27%, because the US economy has remained remarkably resilient, hopes are high that President-elect Donald Trump's policies will boost growth but not inflation too badly and the Federal Reserve has begun to make things easier by cutting interest rates from a two-decade high. The Fed is widely expected to announce the third cut of the year to its main interest rate on Wednesday, and officials are also scheduled to unveil projections about where they see rates heading in upcoming years. Expectations for coming cuts have been on the downswing, though, as inflation looks like it could stubbornly stick above the Fed's 2% target after slowing sharply from its peak above 9%. A report on Tuesday showed sales at US retailers strengthened by more last month than economists expected. That could be an indication of an economy that doesn't need much more help from easier interest rates. While lower rates can goose the economy, they can also give inflation more fuel. In stock markets elsewhere, London's FTSE 100 fell 0.8% ahead of an announcement on interest rates by the Bank of England on Thursday. Japan's central bank will also meet on interest rates later this week, and Tokyo's Nikkei 225 slipped 0.2%. Unlike others around the world, the Bank of Japan is raising rates after keeping its policy rate below zero for years. Back home, the KLCI lost 9.52 points or 0.59% to 1597.33.

Source: PublicInvest Research - 18 Dec 2024