Market Review

Yesterday, the FBMKLCI closed rather flattish with a slight decline to 1,624.3 (-0.1%). This was mainly dragged by selling pressure in selective index constituents which include SUNWAY (-3.3%), PETDAG (-2.8%) and GENTING (-1.9%), despite overall good performance in regional markets. Sectors that underperformed include Construction (-0.6%), Industrial Products & Services (-0.5%), and Property (-0.5%). Overall, the broader market breadth remained bearish with 654 losers against 442 gainers.

Economics

US: Fed on course for September rate cut as risks to job market grow

The Federal Open Market Committee held the federal funds rate in a range of 5.25% to 5.5% on Wednesday. Federal Reserve Chair Jerome Powell signalled central bank officials are on course to cut interest rates in September unless inflation progress stalls, citing risks of further labour-market weakening. Powell framed the labour market as solid but slowing. Hiring has moderated, and the unemployment rate has ticked up to 4.1%, which is the highest since 2021 but still a historically low level. Layoffs remain modest. But he said it doesn’t need to soften more for the Fed to reach its 2% inflation goal. (Bloomberg)

UK: Bank of England cuts rates from 16-year high

The Bank of England (BoE) cut interest rates from a 16-year high on Thursday after a narrow vote in favour from policymakers divided over whether inflation pressures had eased sufficiently. British consumer price inflation returned to the BoE's 2% target in May and stayed there in June, down from a 41-year high of 11.1% struck in October 2022. (Reuters)

Malaysia: Malaysia-UAE Comprehensive Economic Partnership Agreement on track for year-end enforcement

Malaysia’s first free trade agreement (FTA) with the United Arab Emirates (UAE), a member of the Gulf Cooperation Council (GCC), is expected to be signed in two months, said Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz. “From today, it takes two months for agencies to do the legal scrubbing,” he told Bernama after the Economic & Public Finance Conference organised by the National Institute of Public Administration on Thursday. (Bernama)

US: Manufacturing activity contracts by most in eight months

In July, U.S. manufacturing activity declined sharply, with the Institute for Supply Management's index falling to 46.8, indicating significant contraction. Production and orders fell notably, leading to the largest employment cutback in four years. This trend contrasts with Federal Reserve data, which showed an increase in manufacturing output. However, manufacturers are effectively managing inventory levels, and prices for materials slightly increased. (Bloomberg)

US: Initial jobless claims rise to one-year high as hiring slows

Initial U.S. unemployment claims rose to 249,000 for the week ending July 27, the highest in nearly a year, signaling a potential slowdown in the labour market. Continuing claims also increased to 1.88m, the highest since November 2021. Despite these trends, Federal Reserve Chair Jerome Powell noted that the job market remains historically strong, though job growth has moderated. Meanwhile, productivity improved more than expected in the second quarter, helping to moderate labour costs, while summer job cuts and hiring plans have generally been low. (Reuters)

China: Private factory gauge dips for first time in nine months

In July, China's manufacturing activity unexpectedly contracted for the first time in nine months, with the Caixin PMI falling to 49.8 from 51.8 in June. This decline reflects weaker export momentum and a slowdown in new orders, contrasting with other Asian economies that saw manufacturing growth. The downturn has led to concerns about China's economic outlook, particularly given ongoing issues with domestic demand and a sluggish housing market. In response, Chinese policymakers are expected to focus on boosting consumer spending and may implement further monetary easing to support the economy. (Bloomberg)

Companies

Capital A: Submits EGM circular to Bursa for proposed disposals; eyes completion by December 2024

Capital A Bhd has submitted its extraordinary general meeting (EGM) circular to Bursa Malaysia for the proposed disposals of its entire equity interest in AirAsia Aviation Group Ltd (AAAGL) and AirAsia to AirAsia X Bhd (AAX). The group aims to complete the proposed disposals by December this year, heralding a new era for the new aviation group under AAX, as well as Capital A group’s aviation services and digital businesses. The group said this pivotal move is a major step to bring Capital A closer to (finalisation of) its efforts to regularise its financial position and is part of Capital A’s strategic plan to streamline its operations, as well as to concentrate on specialised areas supplementary to the aviation business. (Bernama)

Pekat: To acquire 60%-stake in Apex Power for RM96m

Pekat Group Bhd’s subsidiary, Pekat Teknologi Sdn Bhd (PTSB), plans to acquire a 60%-stake in Apex Power Industry Sdn Bhd for RM96m in cash. This acquisition is aimed at expanding Pekat’s presence in the power distribution equipment sector. The deal, involving a share purchase from Apex Power’s sole shareholder, includes a profit guarantee of RM48m over specified years. (Bernama)

Astro: High Court grants interim stay against IRB on its RM734m claim of additional tax on Astro

The High Court here has on Thursday granted an interim stay application applied by Astro Malaysia Holdings Bhd against the Inland Revenue Board’s (IRB) imposition of RM734.9m additional tax against the pay television company’s two subsidiaries for the years 2018 to 2023. The temporary stay was granted to maintain the status quo until the hearing for leave of Astro’s judicial review, which has now been fixed on Nov 20. (The Edge)

MN Holdings: Bags RM86m substation job from TNB

MN Holdings Bhd said it has secured a RM86m contract from Tenaga Nasional Bhd to develop a gas- insulated substation in Pahang. With this job win, MN Holdings’ outstanding order book has increased to a total value of RM654.5m, the group said. (The Edge)

Mitrajaya: Bags RM37.9m construction job in KL

Mitrajaya Holdings Bhd has clinched a contract worth RM37.9m for the construction of a four-storey building with one level of sub-basement car park in Kuala Lumpur. The contract is slated for completion within 21 months from the commencement date of October 30, 2024. (The Edge)

Source: Mercury Securities Research - 2 Aug 2024