Economy

US: Trade deficit jumps to record high in June on strong import growth . The US trade deficit surged to a record high in June as efforts by business to rebuild inventories to meet robust consumer spending drew in more imports. The Commerce Department said that the trade gap increased 6.7% to USD75.7bn in June, an all-time high. Economists polled by Reuters had forecast a USD74.1bn deficit. Goods imports rose 1.8% to USD239.1bn, also a record high. Exports of goods gained 0.2% to USD145.9bn in June, an all-time high. The government reported last week that consumer spending picked up in the second quarter, with outlays on goods rising solidly, even as demand is rotating back to services because of vaccinations against Covid-19. The double-digit growth in consumer spending last quarter helped lift the level of GDP above its peak in the fourth of 2019. Business inventories were depleted at a rapid clip in the second quarter. (Reuters)

US: Initial unemployment claims decline for a second week . Applications for US state unemployment benefits eased last week, highlighting the latest incremental improvement in the labour market. Initial unemployment claims in regular state programs totaled 385,000 in the week ended July 31, down 14,000 from the prior week, Labor Department data showed. The figure was in line with the median estimate in a Bloomberg survey of economists, which called for 383,000 new applications. Continuing claims for state benefits fell to 2.93 million in the week ended July 24, a fresh pandemic low. (Bloomberg)

EU: Germany factory orders growth at 10-month high . Germany factory orders grew at the fastest pace in nearly a year in June underpinned by strong domestic demand, data from Destatis revealed. Factory orders advanced by more-than-expected 4.1% MoM in June, reversing a revised 3.2% fall in May. This was the biggest growth since August, when orders were up 4.5%. Orders were forecast to climb 1.9%. Excluding major orders, new orders in manufacturing were 1.7% higher than in the previous month. Domestic orders advanced 9.6%, while foreign orders went up only 0.4% in June. New orders from the euro area moved up 1.3% and that from other countries fell 0.2% compared with May. (RTT)

UK: BoE sets out plans to wean UK economy off stimulus . The BoE set out how it would ease the economy off the huge support provided during the COVID-19 pandemic and said a "modest" tightening of policy lay ahead, but it kept its stimulus at full speed despite a jump in inflation. Only one of the BoE's eight monetary policy-makers, Michael Saunders, voted to reduce the size of its bond-buying programme which remains unchanged at GBP895bn (USD1.25trn). The vote to hold its benchmark interest rate at a historic low of 0.1% on was unanimous, as expected. With more than 70% of adults in Britain now fully vaccinated against COVID-19 and most social-distancing rules lifted, Britain's economy has recouped much of its 10% crash of 2020, prompting the BoE to spell out how it plans to rein in its stimulus, when the time comes." (Reuters)

Taiwan: Inflation increases in July . Taiwan's consumer price inflation increased in July, data released by the Directorate General of Budget, Accounting & Statistics revealed. Consumer prices rose 1.95% YoY in July, following 1.87% increase in June. Economists had forecast a 1.81% increase. The indices for fuels and lubricants surged 25.87% due to a relatively lower comparison base and the index for transportation fees rose 12.27% due to the increase in airfares. Excluding fruits, vegetables and energy, core consumer prices rose 1.29% in July. On a monthly basis, the consumer price index gained 0.21% mainly because of higher water, electricity and gas prices. For the first seven months of 2021, the CPI increased 1.54% over the same period of previous year. Data showed that wholesale prices grew 1.46% monthly and grew 11.77% annually in July. (RTT)

Singapore: Retail sales growth slows in June . Singapore retail sales increased at a softer pace in June, data from the Department of Statistics showed. Retail sales grew 26.8% YoY in June, after a 79.7% rise in May. Motor vehicle sales rose 80.6% annually in June, after a 421.2% growth in the previous month. Excluding motor vehicles, retail sales gained 19.0% in June, after a 61.7% rise in the preceding month. Sales of watches and jewelry grew 78.4% yearly in June and those of department stores surged 60.0%. Sales of recreation goods gained 53.9%. Sales of petrol service stations, and furniture and household equipment grew by 43.8% and 18.9%, respectively. (RTT)

Indonesia: Exits recession with 7% GDP growth in 2Q, but virus clouds recovery . Indonesia pulled out of recession in the 2Q, reporting its strongest annual growth rate in 17 years, but analysts warned its economic recovery will suffer a setback due to a recent surge in Covid-19 infections. Southeast Asia's largest economy grew 7.07% in the April-June quarter compared with a year earlier, its first expansion in five quarters, Statistics Indonesia reported. The pace was stronger than the 6.57% growth expected in a Reuters survey of analysts, and the highest since the Oct-Dec quarter of 2004. The first quarter's contraction was revised to 0.71%. (Reuters)

Markets

AirAsia (Underperform, TP: RM0.19): Gets RM240m in proceeds following Fly Leasing-Carlyle Aviation merger. AirAsia has received USD56.83m (RM239.98m) in gross proceeds from the merger between Fly Leasing Ltd and Carlyle Aviation Partners. AirAsia held a 10.94% stake in Fly Leasing prior to the merger. (The Edge)
Comment: The gross proceeds of USD 56.83m (RM239.98m) a welcome boost to the Group’s overall fundraising strategy - to raise up to RM2.5bn through a combination of borrowing and equity raising. To recap, the Group has raised RM336.5m from two tranches of private placements earlier this year and continues to renegotiate leasing terms with all of its lessors. The pandemic continues to weigh heavily on its overall operation nonetheless. We maintain our Underperform call.

Mi Technovation (Outperform, TP: RM5.78): Invests RM29m to enter China's semiconductor test segment. Mi Technovation has subscribed for a CNY45m (RM29.36m) increase in the capital of Talentek Microelectronics (Hefei) Ltd, as part of its efforts to set its foothold in the semiconductor final test segment in China. The deal will see Mi Technovation becoming a 22.64% shareholder in Talentek. (The Edge)

T7 Global: Secures metal surface treatment services. T7 Global has secured multiple purchase orders to provide metal surface treatment services for aerospace parts from Global Tek Fabrication Co Ltd and CCS Advance Tech Co Ltd for non destructive testing, anodize, passivate, paint and part mark aerospace parts services. (BTimes)

Stella: Clinches RM13m leachate treatment plant contract. Stella Holdings has secured a RM12.78m contract to provide operations and maintenance services at the leachate treatment plant in Taman Beringin, Kepong. (The Edge)

Power Root: Instructed to temporarily halt operations in Johor factory to prevent Covid-19 spread. Power Root has been instructed by the Ministry of Health to halt operations for six days at its plant in Johor to conduct sanitisation work to prevent the spread of Covid-19. (The Edge)

Comfort Gloves: To halt Matang operations. Comfort Gloves will be halting its operations at Matang and Simpang, Perak factories from Aug 6 to 19, 2021. The decision was due to the official notification by the government that both factories have been placed under the Enhanced MCO. (BTimes)

Focus Dynamics: Bursa rejects second share split in a year. Bursa Securities has rejected Focus Dynamics Group proposed one-to-three share split, in view of the group's low adjusted share price of 1.5 sen. The group, which had 6.15 billion issued shares at Dec 29, 2020, proposed in Jan to split each of its shares into three to improve its trading liquidity. (The Edge)

LPI Capital: Inched higher earnings for 2Q. LPI Capital net profit increased 8.4% to RM83.9m in the 2Qended June 30, 2021, from RM77.4m a year ago. Revenue increased 5.1% to RM419.9m from RM399.5m last year due to the increase in the gross earned premium of its insurance subsidiary, Lonpac Insurance. (BTimes)

Market Update

The FBM KLCI might open higher today as Wall Street’s stocks hovered at fresh all-time highs on Thursday, after weekly data suggested employment in the world’s largest economy was beginning to stabilise. The blue-chip S&P 500 finished 0.6% higher in New York, marking a new closing record level, despite having pushed slightly higher during the trading day a week ago. The technology-heavy Nasdaq climbed 0.8%, also a new high, after data showed the number of Americans actively collecting jobless benefits had fallen to its lowest level of the pandemic. Ahead of Friday’s closely watched non-farm payrolls data, the US labour department on Thursday reported 385,000 initial unemployment applicants for the last week in July, down from 399,000 in the previous week. In Europe, the region-wide Stoxx 600 closed up 0.4% at another record high, while London’s FTSE 100 edged 0.1% lower after the Bank of England acknowledged that some “modest tightening” might be needed in the next two years after its latest policy meeting on Thursday.

Back home, the FBM KLCI ended the day marginally higher and bucked regional market trends as worries over the Delta coronavirus variant persisted and hawkish remarks from senior US Federal Reserve officials weighed on investors’ risk appetite. The benchmark index finished 4.45 points or 0.3% higher at 1,495.78. Regional stocks ended mostly lower with South Korea’s KOSPI fell 0.13% to 3,276.13, while Japan’s Nikkei 225 finished 0.52% higher at 27,728.12. The Shanghai Composite index closed 0.31% lower at 3,466.55, while Hong Kong’s Hang Seng Index declined 0.84% to 26,204.69.

Source: PublicInvest Research - 6 Aug 2021