Sideway Consolidation Pending Catalysts

While blue chips slipped into profit-taking consolidation mode last week, strong situational plays on construction, property and technology lower liners highlighted robust trading activity on the broader market. The technology sector outperformed on positive news flow over recent data centre deals, while investors stayed calm after the US Federal Reserve held interest rates steady and shifted its guidance to only one rate cut this year and a more aggressive four rate cuts in 2025. The market traded sideways to lower ahead of the long weekend break due to the religious Hari Raya Haji holiday.

Week-on-week, the local blue-chip benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) receded 10.54 points or 0.65 percent, to 1,607.32, as gains in YTL Power (+25sen), TM (+22sen) and Mr. DIY (+6sen) were overshadowed by falls on Sime Darby (-22sen), Petronas Dagangan (-66sen), Genting Malaysia (-9sen), IOI Corp (- 13sen) and KLK (-66sen). Average daily traded volume last week surged to 6.41 billion shares as compared to 4.95 billion shares the previous week, while average daily traded value improved to RM4.39 billion, against the RM3.97 billion average the previous week, as trading activity picked up significantly in lower liners and small caps from situational plays on the construction, property and technology sectors.

This week we foresee the benchmark index to trade sideways with downside bias as investors continue their search for new catalysts that could push the index higher. Nonetheless, rotational plays on the construction, property and technology sectors could sustain, apart from the automotive and transportation players, as they could be the prime beneficiaries of the China Premier Li Qiang visit to Malaysia from today until Thursday. There is a very high possibility for this visit to revive talks on the KL-Singapore High Speed Rail that can link Southeast Asia’s two important economies with China via a rail network that passes through Thailand and the Greater Mekong area. which could be extended to include Indonesia as well at a very later stage. This could ignite some interest in property players like SIMEPROP (TP: RM1.57), UEMS (Not Rated), MATRIX (Not Rated), etc. apart from construction companies like GAMUDA (TP: RM6.18), IJM (TP: RM2.78), WCT (TP: RM0.56), YTL (Not Rated), etc.

The visit can also solidify Zhejiang Geely Holding’s planned investment of USD10bn in Tanjung Malim. Recall that Geely has plans to turn it into the region’s largest auto city, in line with the Malaysian government’s aspiration for Tanjung Malim in Perak to become Malaysia’s Automotive High Tech Vally (AHTV). Geely and its local partner DRB-Hicom are involved in the development of AHTV, which serves to become Malaysia’s future hub for Next Generation Vehicle. According to the Muallim District Local Plan 2035, there are 22 strategies and 130 actions identified for implementation in three main sub-districts, namely Hulu Bernam Timur, Hulu Bernam Barat and Slim to achieve the aspiration. Progress in these initiatives provide plenty of opportunities for companies involved infrastructure, public amenities and property development, as housing needs expected to hit 33,000 units by 2035 to cater for 158,000 people versus current 70,000. PGF (TP: RM2.76), one of top buy picks, has plans to develop a self-sustaining integrated township with an estimated gross development value of RM3bn adjacent to the AHTV. Apart from DRB (Not Rated), other landowners in the vicinity or nearby locations like MJPERAK (Not Rated), L&G (Not Rated), TALAMT (Not Rated) and BJCORP (Not Rated) could benefit as well.

Chinese investors can also make use of Malaysia to diversify their manufacturing base, especially for those involved in the Electrical and Electronics (E&E) segment, as companies worldwide pursue “China Plus One” strategy to broaden their supply chain amid worsened trade tensions and restrictions between China and the US. Europe has also joined the fray to safeguard the bloc against flooding supplies from China, which have undermined the survival of local companies. Buy MPI (TP: RM41.10) and INARI (TP:RM4.30). DNEX (Not Rated) can also be in focus due to its readily available wafer fabrication capacity and existing tie-ups with high-tech Chinese companies to bid for smart city projects in Saudi Arabia.

Economic data wise, Malaysia’s trade data, which is due this Thursday, could be in focus given China’s still weak domestic demand as shown in its imports, consumer price index, producer price index, etc. for May despite stronger exports, which could be driven by stocking up activities in the US ahead of higher tariff beginning 1 August and Europe. China released its industrial production and retails sales data for May yesterday which painted a mixed picture. The industrial output grew 5.6% YoY, slower than April’s 6.7% YoY and forecast 6.0% YoY. Retail sales grew 3.7% YoY, faster than April’s 2.3% YoY and forecast 3.0%, due to holiday sales. In the US, its retail sales, industrial production, initial jobless claim and housing data for May this week could provide a glimpse of its current economic conditions. The outcomes can dictate equity market direction as they have bearing on the widely expected interest rate cut in September.

Corporate

Genting Bhd is still looking at opportunities to list in the US, with the intention of unlocking shareholder value. Its president and chief operating officer Datuk Seri Tan Kong Han told investors at Genting’s annual general meeting that pursuing the listing plan would depend on finding the right time, but this remains an opportunity of interest, according to industry magazine Inside Asian Gaming, which cited a report in Sin Chew Daily. Genting’s US operations include the USD5bn (RM23.6bn) Resorts World Las Vegas, plus Resorts World New York City, Resorts World Catskills and Resorts World Hudson Valley via subsidiary Genting Malaysia Bhd. Tan also confirmed the group’s interest in exploring integrated resort developments in emerging jurisdictions, such as Thailand and the United Arab Emirates. (The Edge)

Genting Malaysia Bhd said a fire broke out at 4.30pm on Friday (14 June) at SkyAvenue, Resorts World Genting, the integrated resort in Genting Highlands. The rest of the resort was unaffected. Evacuation procedures were promptly executed to ensure the safety of the public, according to Genting Malaysia. There were no reports of casualties. (The Edge)

Hibiscus Petroleum Bhd (Not Rated) is venturing into Brunei with the acquisition of gas-producing assets in that country. Its unit Simpor Hibiscus Sdn Bhd has entered into a conditional share purchase agreement (SPA) with TotalEnergies Holdings International BV to acquire a 100% interest in TotalEnergies EP (Brunei) BV (TotalEnergies Brunei) for USD259.4mn (about RM1.2bn) cash. The acquisition is for TotalEnergies Brunei’s 37.5% operated interest in the Block B Maharajalela Jamalulalam field, a gas asset located offshore Brunei. The exercise will bring the gas production share of the group’s portfolio to almost 50%, in line with the group’s energy transition strategy of acquiring gas-weighted assets in stable regulatory jurisdictions. (Bursa Malaysia/The Edge)

TDM Bhd's (Not Rated) subsidiary, PT Rafi Kamajaya Abadi (PTRKA) has filed for a judicial review against the decision of Indonesia's supreme court for PTRKA to compensate Indonesia and rehabilitate a 2,650 hectare area in West Kalimantan province after a fire incident in 2019. (Bursa Malaysia/NST Online)

Destini Bhd (Not Rated) said its indirect subsidiary has been served with a winding-up petition for purportedly failing to pay RM18.6mn owed to the tax authority. The Inland Revenue Board is seeking for Destini Shipbuilding and Engineering Sdn Bhd to be wound up and that the Official Receiver of Malaysia be appointed as the official liquidator. The unit, however, is not a major subsidiary, Destini noted. Destini Shipbuilding is seeking legal advice. Case management for review has been fixed for 9 July and hearing date has been set for 12 Sept this year. (Bursa Malaysia/The Edge)

Electronic circuit board maker GUH Holdings Bhd (Not Rated) and Chinese battery manufacturer Shenzhen Xixin Electronic Technology Co Ltd, have mutually agreed to terminate a plan to develop a lithium battery assembly plant in Malaysia. The group came to the decision after further assessment of the current local market demand for lithium battery products. No battery assembly plant has been established, no equipment has been purchased, and no shares in the joint venture have been transferred to Xixin pursuant to the cooperation agreement. The termination does not have any financial impact on the company.

(Bursa Malaysia/NST Online)

Trive Property Group Bhd (Not Rated) has proposed a bonus issue of warrants on the basis of 2 warrants for every 5 existing shares, to reward its shareholders and strengthen its financial position and capital base. Up to 505.5mn warrants may be issued under exercise. The warrants, with a tenure of 5 years, will be issued at no cost to the entitled shareholders. The exercise price will be determined later. Assuming full exercise of the warrants, Trive Property is expected to raise gross proceeds of up to RM25.3mn based on an illustrative price of 5 sen for each warrant. (Bursa Malaysia/The Edge)

PIE Industrial Bhd (Not Rated), whose share price rose 18% on Friday, said it is not aware of any corporate development, rumour or report that may have triggered the jump in a reply to the unusual market activity (UMA) query by Bursa Malaysia Securities. (Bursa Malaysia/The Edge)

Oriental Kopi Holdings Bhd (Not Listed), which operates a cafe chain and sells packaged food, has filed for an initial public offering (IPO) on the ACE Market to raise funds to add the number of outlets, set up new kitchens and stores. Separately, Oriental Kopi has received its halal certification from the Department of Islamic Development Malaysia (Jakim), its managing director Datuk Calvin Chan said. (The Edge/Bernama)

OSK Property Holdings Bhd, the property arm of OSK Holdings Bhd (Not Rated) has partnered with Affin Bank Bhd in the bank’s new mortgage programme “Affinita”, aimed at providing women with financial solutions towards homeownership. (The Edge)

Tropicana Corp Bhd (Not Rated) has announced a partnership with Samsung Malaysia Electronics Sdn Bhd to offer artificial intelligence (AI) home appliances in its upcoming developments. (The Edge)

Kerjaya Prospek Property Bhd (Not Rated), via its wholly owned subsidiary Kerjaya Property Sdn Bhd, has officially opened Bloomsvale Shopping Gallery on Jalan Puchong, Kuala Lumpur, in a door-opening ceremony on Saturday (15 June). (The Edge)

PPB Group Bhd (Not Rated) has emerged as a substantial shareholder of Techbond Group Bhd (Not Rated) after acquiring a 15% stake in the company. PPB acquired over 82.9mn shares and 34mn unexercised warrants in Techbond from Sonicbond Sdn Bhd via a direct business transaction for RM37.7mn. The acquisition would be funded via internally generated funds. The shareholding of Sonicbond, the private vehicle of Techbond managing director Lee Seng Thye, will reduce to 54.4% after the disposal. (Bursa Malaysia/Bernama)

Fitters Diversified Bhd (Not Rated) said Cita Realiti Sdn Bhd has ceased to be its largest shareholder after selling a 6.3% stake in the fire protection equipment supplier on Friday (14 June). Cita Realiti offloaded the stake via the open market, bringing down its shareholding to 4.5%. (Bursa Malaysia/The Edge)

Multi-wall industrial paper bag maker KYM Holdings Bhd’s (Not Rated) 1QFY25 net profit declined 94.8% YoY to RM585k, due to the absence of a one-off gain amounting to RM15.3mn from the sale of a piece of land and building during the same period last year. Quarterly revenue dropped slightly by 0.8% YoY to RM22.7mn in 1QFY25, mainly due to lower sales in the carbon box division, partially offset by increased revenue from the multiwall industrial paper sacks division. (Bursa Malaysia/The Edge)

Economy

Number of 4Q 2023 vacancies rose by 32.5% to 448,181 — DOSM

The number of job vacancies in the fourth quarter of 2023 (4Q 2023) increased by 32.5% to 448,181 vacancies, compared with 338,305 in 3Q 2023, according to the Job Market Insights and My Job Profile: Online Job Offers in Malaysia big data analysis released by the Department of Statistics Malaysia (DOSM). In a statement, chief statistician Datuk Seri Dr Mohd Uzir Mahidin said that compared year-on-year, the number of job vacancies saw triple-digit growth of 119.2%, up from 77.9% in 3Q 2023. He added that in 4Q 2023, the number of firms offering jobs increased to 85,814 from 77,499 recorded in 3Q 2023. “The highest number of job vacancies advertised online was in December 2023, with 172,777 vacancies,” he said. (The Edge, DOSM)

Egg Prices Reduced by Three Sen Nationwide

The retail price of Grade A, B, and C eggs across the country has been reduced by three cents starting today (June 17) as part of the government’s new subsidy initiative. Prime Minister Datuk Seri Anwar Ibrahim said that the new prices for Grade A, B, and C eggs will be set at 42sen, 40sen, and 38sen per egg, respectively. He noted that the subsidy provision would involve government expenditure of around RM100mn, covering as much as 10sen per egg. "I want to emphasise that the problems or issues related to the cost of living of the people will continue to be dealt with by the Government in a more proactive and effective manner," he said in a statement on Monday (June 17). Retail prices for eggs in Sabah, Sarawak, and Labuan will be adjusted according to the respective zones and districts, according to Anwar. (The Star)

New MM2H participants not eligible for PR status, says tourism minister

New participants of the Malaysia My Second Home (MM2H) programme in all three categories — Platinum, Gold and Silver — are not eligible to apply for permanent resident (PR) status, according to Tourism, Arts and Culture Minister Datuk Seri Tiong King Sing. Tiong announced that the government has agreed to introduce new participation requirements for the MM2H programme. "Through this new approach, the Ministry of Tourism, Arts and Culture (Motac) is confident that the MM2H programme will attract prospective participants from the target groups, especially high net-worth individuals and digital nomads, to make Malaysia their top destination. The presence of these groups is expected to boost the local economy, especially in the tourism, housing, education and medical industries, making Malaysia a highly competitive global hub," he said. (The Edge, Bernama)

Fahmi: Ineligible sectors warned against using diesel price adjustments to hike prices

Sectors not eligible for diesel subsidies, including the construction sector, have been warned against using the recent fuel price adjustments as a pretext for raising prices of goods and services. Communications Minister Fahmi Fadzil emphasised that companies in the construction or other ineligible sectors citing the withdrawal of diesel subsidies as a reason to hike prices, is committing an offence, as they were never entitled to these subsidies in the first place. “There has been an outcry from the construction sector, claiming they need to increase the prices of cement and services because they no longer receive diesel subsidies. However, it turns out that they were never eligible for these subsidies to begin with,” he said during the ‘Sembang Santai’ programme with the Madani community in the Pulai parliamentary constituency. (The Edge, Bernama)

Targeted diesel subsidy: MOF studying appeal by Cameron Highlands farmers

The Ministry of Finance will look into the recommendations and findings of the ministry's engagement session with entrepreneurs and vegetable growers in Cameron Highlands following the implementation of targeted diesel subsidy. Deputy Minister of Finance Lim Hui Ying said all relevant information will be collected before being examined together with relevant ministries and decided jointly. She said the government is always sensitive and took note of the complaints and appeals of vegetable farmers in Cameron Highlands who raised several important points regarding the targeted programme. Most of the feedback we received from the dialogue session earlier was for a review of the eligibility conditions that limit the minimum agricultural sales of RM50,000 to RM300,000 per year, that condition is too low and they have asked for it to be raised. (The Edge, Bernama)

Every sen saved from diesel subsidy cut will be fairly returned to the people

Prime Minister Datuk Seri Anwar Ibrahim on Friday reiterated that savings from the targeted diesel subsidy implemented by the Unity Government will be fairly returned to the people. He had previously emphasised that savings from the targeted diesel subsidy would be returned to the people, specifically to support the needs of public transportation and the Rahmah Cash Assistance (STR) “We are not being unfair to the poor, every extra sen we save, we’ll return (to the people),” he said at the Madani Aspiration Gathering of Public Service Counselling Associates (AKRAB). Anwar said the targeted diesel subsidy was carried out because of excessive leakage of the fuel, especially involving its use by foreign fishing vessels. (The Edge)

Palm oil prices to climb from June, but gains likely capped — MPOC

Palm oil prices are expected to climb from June onwards, thanks to slowing production in Malaysia and rising exports, though the gains may be limited, the Malaysian Palm Oil Council (MPOC) said on Friday. Prices will find support at RM3,900 per tonne in June, amid tightening supply from Malaysia and Indonesia in the latter part of 2024, along with a surge in shipments, the council said in a statement. However, prices are likely capped at RM4,150 a tonne, due to the projected surplus of oilseeds ahead, it noted. Oilseed production is likely to increase 4% for the 2024/2025 marketing year, raising global oilseed stocks by 6% to their highest level in a decade, the MPOC said, citing estimates from the US Department of Agriculture. “Therefore, oilseed supply is expected to remain ample,” the council said. (The Edge)

China's factory output disappoints, property sector stuck in doldrums

China's May industrial output lagged expectations and a slowdown in the property sector showed no signs of easing despite policy support, adding pressure on Beijing to shore up growth. Apart from retail sales that beat forecasts due to a holiday boost, the flurry of data on Monday was largely downbeat, underscoring a bumpy recovery for the world's secondlargest economy. May industrial output grew 5.6% from a year earlier, National Bureau of Statistics (NBS) data showed, slowing from the 6.7% pace in April and below expectations for a 6.0% increase in a Reuters poll of analysts. However, retail sales, a gauge of consumption, in May rose 3.7% on year, accelerating from a 2.3% rise in April and marking the quickest growth since February. Analysts had expected a 3.0% expansion due to a fiveday public holiday earlier in the month.

Fixed asset investment rose 4.0% in the first five months of 2024 from the same period a year earlier, versus expectations for a 4.2% rise. It grew 4.2% in the January to April period. Manufacturing investment in the first five months showed robust growth of 9.6%, underpinned by China's emphasis for "quality growth" through technological breakthroughs and innovation this year. (Reuters)

China new home prices fall at fastest clip in nearly 10 years

China's new home prices fell at the fastest pace in more than 9-1/2 years in May, official data showed on Monday, with the property sector struggling to find a bottom despite government efforts to rein in oversupply and support debt-laden developers. Prices were down 0.7% in May from the previous month, marking the 11th straight month-on-month decline and steepest drop since October 2014, according to Reuters calculations based on National Bureau of Statistics (NBS) data. In annual terms, new home prices were down 3.9% from a year earlier, compared with a 3.1% slide in April. China's indebted property sector, once a key engine of the country's economic growth, has been hit by several crises since mid-2021, including developers defaulting on debt and stalling construction on presold housing projects. (Reuters)

China central bank leaves key policy rate unchanged as expected

China's central bank left a key policy rate unchanged as expected on Monday when rolling over maturing medium-term loans, and drained some funds from the banking system. The People's Bank of China (PBOC) said it was keeping the rate on CNY182bn ($25.08bn) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.50% from the previous operation. In a Reuters poll of 31 market watchers, 30, or 97%, of all respondents expected the PBOC to leave the interest rate on MLF rate unchanged. With CNY237bn worth of MLF loans set to expire this month, the operation resulted a net CNY55bn fresh fund withdrawal from the banking system. The central bank also injected CNY4bn through seven-day reverse repos while keeping borrowing cost unchanged at 1.80%, it said in an online statement. (Reuters)

Bank of Japan to trim bond buying, keeps rates steady

The Bank of Japan (BOJ) said on Friday it would start trimming its huge bond purchases and announce a detailed plan next month on reducing its nearly US$5tn (RM23.56tn) balance sheet, taking another step towards unwinding its massive monetary stimulus. While it will continue to buy government bonds at the current pace of roughly ¥6tn (US$38bn or RM178.72bn) per month, the central bank decided to lay out details of its tapering plan for the next one to two years at its July meeting. The plan to slow bond purchases was widely anticipated, but the lack of immediate details was seen by some investors as an indication the central bank will be cautious in adjusting monetary policy going forward. That dovish market interpretation sent the yen and Japanese bond yields lower. The BOJ said it will collect views from market players before deciding on the long-term tapering plan at its next meeting. As widely expected, the BOJ kept its short-term policy rate target in a range of 0% to 0.1% by a unanimous vote. (Reuters)

Indonesia's central bank intervenes to defend faltering rupiah

Indonesia's central bank intervened in the foreign exchange market to defend the rupiah, its governor said, vowing to use monetary policy to stabilise the currency after it fell to over four-year lows against the dollar. The rupiah skidded 0.9% to 16,415 per dollar in afternoon trade, the lowest level since April 2020, before paring some of those losses. Bank Indonesia (BI) Governor Perry Warjiyo told reporters the central bank intervened in the foreign exchange market and used other measures to stabilise the currency. He didn't disclose when the bank intervened, but hinted that it had occurred during the day. Warjiyo said the rupiah was "stable" and that the depreciation rate was less than other emerging market currencies such as the Thai baht and South Korean won. (Reuters)

New York manufacturing index indicates notably slower contraction In June

New York manufacturing activity contracted at a notably slower rate in the month of June, according to a report released by the Federal Reserve Bank of New York on Monday. The New York Fed said its general business conditions index climbed to a negative 6.0 in June from a negative 15.6 in May, although a negative reading still indicates contraction. Economists had expected the index to rise to a negative 9.0. The bigger than expected increase by the headline index partly reflected a significantly slower contraction by new orders, as the new orders index jumped to a negative 1.0 in June from a negative 16.5 in May. (RTT News)

US consumer sentiment ebbs in June; inflation worries linger

US consumer sentiment deteriorated in June as households worried about inflation and incomes, a survey showed. The University of Michigan's preliminary reading on the overall index of consumer sentiment came in at 65.6 this month, compared to a final reading of 69.1 in May. Economists polled by Reuters had forecast a preliminary reading of 72.0. "Assessments of personal finances dipped, due to modestly rising concerns over high prices as well as weakening incomes," said Surveys of Consumers Director Joanne Hsu. "Overall, consumers perceive few changes in the economy from May." The survey's reading of one-year inflation expectations was unchanged at 3.3%. Its five-year inflation outlook edged up to 3.1% from 3.0% in the prior month. (Reuters)

US import prices post first drop in five months in May

US import prices unexpectedly fell in May amid lower prices for energy products, providing another boost to the domestic inflation outlook. The report from the Labor Department on Friday combined with data this week showing tame inflation readings last month to keep a September interest rate cut from the Federal Reserve (Fed) on the table. US central bank officials on Wednesday pushed out the start of rate cuts to perhaps as late as December, with policymakers projecting only a single quarter-percentage-point reduction for this year. Import prices dropped 0.4% last month after an unrevised 0.9% surge in April, the Labor Department's Bureau of Labor Statistics said. That was the first decline in import prices since December. Economists polled by Reuters had expected import prices, which exclude tariffs, to edge up 0.1%. In the 12 months through May, import prices increased 1.1%, matching April's rise. (Reuters)

ECB’s Lagarde says disinflation in eurozone will be bumpy

The European Central Bank (ECB) is confident that it’s on the right path to return inflation to 2%, even though progress in the next few months will be bumpy, according to President Christine Lagarde. That optimism allowed policymakers to lower interest rates last week, she told reporters in Dubrovnik, Croatia. She refused to comment on financial-market turmoil originating in her native France, where stocks and bonds tumbled amid political uncertainty. “We do have plenty of challenges, but I really believe that we are now heading toward a disinflationary path that will have its little hiccups here and there — what we call bumps on the road,” Lagarde said Friday. “But it’s definitely on a declining path.” (Bloomberg)

Eurozone Trade Balance Swings to Surplus

Euro area visible trade balance logged a surplus in April this year versus a deficit in the same month last year, as exports growth far exceeded imports, preliminary data from Eurostat showed. The non-seasonally adjusted trade balance showed a surplus of EUR15.0bn for April, while there was a EUR11.1bn deficit last year. Economists had expected a surplus of EUR17.0bn. The trade surplus decreased from March's EUR23.7bn due to a rise in the energy trade deficit from EUR23.7bn to EUR26.2bn. Meanwhile, the surplus for chemicals trade shrunk from EUR23.4bn to EUR21.2bn. Exports from the single currency bloc grew 14.0% year-on-year in April and imports to the region rose 1.8%. During the January to April period, euro area logged a trade surplus of EUR72.8bn versus a deficit of EUR20.5bn in the same period last year. Exports to the rest of the world increased 0.8%, while imports declined 8.9%. (RTT)

UK inflation expectations ease in May: BoE survey

Britons' short-term inflation expectations softened in May, the quarterly Inflation Attitudes Survey conducted by Ipsos on behalf of the Bank of England showed. The one-year ahead inflation expectations fell to 2.6% from 2.8% in February. Respondents assessed the current inflation at 5.5% compared to 6.1% in the previous survey period. In five years' time, inflation is seen at 3.1%, unchanged from the prior survey period. By a margin of 65% to 6%, respondents said the economy would end up weaker, rather than stronger, if prices started to rise faster. This compared to 69% and 5%, respectively, in February. (RTT)

Source: TA Research - 18 Jun 2024