PublicInvest Research

PublicInvest Research Headlines - 4 Apr 2023

Publish date: Tue, 04 Apr 2023, 10:03 AM
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An official blog in I3investor to publish research reports provided by PublicInvest Research team.

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US: Manufacturing near three-year low; casts a shadow over economy. US manufacturing activity slumped in Mar to the lowest level in nearly three years as new orders plunged, and analysts said activity could decline further due to tighter credit conditions. The survey showed all subcomponents of its manufacturing PMI below the 50 threshold for the first time since 2009. Some economists said this suggested a recession was around the corner, while others said much would depend on the services sector, whose PMI remains consistent with a growing economy. The ISM's manufacturing PMI fell to 46.3 last month, the lowest level since May 2020, from 47.7 in Feb. Outside the COVID-19 pandemic, it was the weakest reading since mid-2009. Economists had forecast the index would dip to 47.5. (Reuters)

US: Construction spending slips in February. US construction spending dipped in Feb as investment in single-family homebuilding maintained its downward trend amid higher mortgage costs. The construction spending slipped 0.1% in Feb after increasing 0.4% in Jan. Economists had forecast construction spending would be unchanged. Construction spending increased 5.2% on a YoY basis in Feb. Spending on private construction projects was unchanged after gaining 0.2% in Jan. Investment in residential construction fell 0.6%, with spending on single-family housing projects plunging 1.8%. Outlays on multi-family housing projects rose 1.4%, continuing to be supported by demand for rental housing. (Reuters)

EU: Eurozone manufacturing activity downturn deepens in March. Eurozone manufacturing activity contracted further in March as the rising cost of living and tighter monetary policy took its toll on demand but record improvement in suppliers' delivery times supported production. The PMI fell to a four-month low of 47.3 in Mar from 48.5 in Feb. Nonetheless, the score was above the flash estimate of 47.1. The decline was mainly due to the Suppliers' Delivery Times Index surging to a survey-record. The other key sub components of the PMI namely output, new orders and employment were little-changed as a whole. Manufacturing order books shrank again in Mar. Incoming new work decreased for the eleventh consecutive month and the rate of fall was broadly unchanged from Feb. New export orders also decreased but the pace of contraction was the softest since mid-2022. (RTT)

UK: Manufacturing activity sinks deeper into contraction zone. The UK manufacturing sector shrank at a faster pace in Mar as the strong improvement in supplier delivery times was more than offset by deteriorating new orders and production. The PMI fell to 47.9 in Mar from Feb's seven-month high of 49.3. The flash estimate was 48.0. The reading has remained below the neutral 50.0 for the eighth successive month. Production shrank for the eighth time in the past nine months in Mar. Manufacturers cited subdued market demand, declining new export orders and a preference among companies for reduced inventory holdings as reasons for reducing production. New business increased only fractionally as a mild improvement in domestic demand was more than offset by a further solid decline in new export orders. Foreign orders contracted for the fourteenth consecutive month on weaker demand from the US, Europe and China. (RTT)

China: Faltering March factory activity weighs on GDP outlook. China's sprawling manufacturing sector, lost momentum in March amid still-weak export orders, tapping the brakes on the country's economic recovery from restrictive COVID-19 policies . The Caixin/S&P Global manufacturing PMI fell to 50.0 in Mar. That followed Feb's reading of 51.6, which indicated the first monthly activity expansion in seven months. The survey results were well below expectations of 51.7 in a Reuters poll and echoed slower growth in an official PMI released on Friday. China's economy showed signs of a recovery in the first two months of the year, led by a pickup in services after the end of three years of strict COVID policies that had disrupted commerce and muzzled domestic demand. (Reuters)

Japan: Manufacturers' mood sours on global slowdown, service sector bounce cushions blow. Japanese manufacturers' sentiment soured in the first quarter to its worst level in more than two years, eclipsing an uptick in service-sector mood, a central bank survey showed, reinforcing views a strong post-COVID economic recovery is some time away. Corporate inflation expectations hit a fresh high with firms projecting inflation to stay above the BoJ’s 2% target five years ahead. The headline index measuring big manufacturers' sentiment fell to +1 in Mar from +7 in Dec, worse than a median market forecast for a reading of +3. It was the fifth straight quarter of deterioration and the worst level hit since Dec 2020. By contrast, big non-manufacturers' index rose for a fourth quarter to +20 from +19 in Dec, as hopes of a rebound in tourism and service demand brightened morale among retailers and hotels (Reuters)

South Korea: Inflation softens to one-year low of 4.2% in March. South Korea’s consumer inflation eased to a one-year low in Mar, coming in slightly below economists’ expectations. The consumer price index was 4.2% higher in Mar than a year earlier, compared with gains of 4.8% in Feb and a 4.3% forecast in survey. It was the slowest annual rise since Mar 2022. The index rose 0.2% on a monthly basis, after a 0.3% rise in the previous month. It matched economists’ expectation for a 0.2% rise. (Reuters)

Indonesia: Inflation lowest in 7 months. Indonesia's inflation rate slowed more than expected in Mar to reach the lowest in seven months. The CPI increased 4.97% year-on-year in Mar from 5.47% in Feb. Economists had expected inflation to slow to 5.20%. The latest inflation was the lowest since Aug, when prices rose 4.69% YoY. Core inflation slowed to 2.94% in March from 3.09% in February. Economists had forecast a growth of 3.05%. On a monthly basis, consumer prices rose 0.18% in March, after a 0.16% increase in the previous month. Economists had forecast a gain of 0.29% . (RTT)


Top Glove (Underperform, TP: RM0.62): N Sembilan factory fire only impacts 1% of capacity . Top Glove Corp clarified that the impact of the fire at its Lukut factory in Negeri Sembilan is minimal, affecting only about 1% of the group's capacity. Top Glove also said that orders had been diverted from production lines in Block A of Plant 27 to Block B, as well as to another Top Glove plant in Klang. (The Edge)

MN Holdings: Partners China firm to develop first high performance data centre in Malaysia . MN Holdings is partnering with China's Shanghai DC-Science Co Ltd to develop Shanghai DC Science's first high-performance data centre outside China. The underground utilities and substation engineering specialist said the project is estimated to have a value of over USD600m (RM2.65bn) and will boost MN Holdings’ future order book, which stood at RM325.9m as at Jan 20, 2023. (The Edge)

PLS Plantations: Partners China's Cofco to develop food security initiatives . PLS Plantations has entered into a partnership agreement with China's largest food manufacturer Cofco Food Import Co Ltd to develop and implement food security initiatives. It said the scope of the agreement includes agriculture development, food reserves, food safety, poverty alleviation, food production, food imports and food pricing. (The Edge)

Nextgreen: Enters JV to build, manage 20 oil palm waste collection centres . Nextgreen Global’s wholly-owned subsidiary Nextgreen Biomass SB has inked a shareholders’ agreement to construct and manage 20 oil palm waste collection and processing centres throughout Malaysia. The agreement was signed with Greentech Malaysia Alliances SB (GTMASB), Koperasi Sahabat Amanah Ikhtiar Malaysia (Koop Sahabat), and Koperasi Perkhidmatan Setia. Nextgreen Global MD Datuk Lim Thiam Huat said the agreement aims to establish a JV via a special purpose vehicle (SPV) called GTC Biomass which will see Nextgreen Biomass owning 65% equity interest, GTMASB 10%, KOOP Sahabat 18%, and Koperasi Perkhidmatan Setia 7.0%. (StarBiz)

Lay Hong: Buys out NH Food's stake in processed foods JV . Lay Hong has proposed to acquire the remaining 51% equity interest in its JV with NH Foods Ltd (NH Foods), Japan, as the Japanese food processing group exits its Malaysian operation. The poultry player formed a 49:51 JV with NH Foods in 2016 to produce halal food utilising Japanese technology, mainly for exports to the Middle East and Southeast Asia region. Lay Hong said the JV, NHF Manufacturing (M) Bhd, has not been able to “fully realise its intention and plans” due to the Covid-19 pandemic. (The Edge)

Sunsuria: Inks MoU with IAT for EV development . Sunsuria is exploring a collaboration with China's IAT Automobile Co Ltd to undertake research and development in EV and EV-related products. The company said the tie-up would involve the creation and manufacturing of Malaysia's own brand of EV with cutting-edge technological advances. According to the filing, IAT is China's largest independent car design company. Sunsuria IAT (M) SB is a JV that is 51% owned by Sunsuria and 49% held by IAT. "The MoU will allow the company an opportunity to collaborate with IAT to tap into the research and development in in the area of EV and EV related products and to provide automotive education (college), talent cultivation for Malaysia and South East Asia to enhance operational efficiency. (StarBiz)

Market Update

The FBM KLCI might open flat today after oil prices jumped on Monday and Goldman Sachs raised its year-end forecast for Brent crude after Opec+ nations announced unexpected production cuts of more than 1mn barrels a day in the face of weaker demand. International oil benchmark Brent crude was up 6.4% to $84.99 a barrel — having been up more than 8% in overnight trade — its biggest one-day gain in a year. US marker West Texas Intermediate was up 6.3% to $80.42 a barrel. Elevated oil prices may muddy the picture for investors who had pencilled in cooling inflation and a more dovish path for the US Federal Reserve. Broader equity markets in the US were mixed, with the blue-chip S&P 500 up 0.4% and the tech-heavy Nasdaq Composite down 0.3%. Elsewhere in Europe, there was a mixed picture in equity markets, with the region-wide Stoxx 600 down 0.1%, the German Dax 0.3% lower and the French Cac 40 up 0.3%.

Back home, Bursa Malaysia ended higher on Monday, driven by bargain hunting amid improved sentiment across the board, with the key composite index closing at an intraday high. At the closing bell, the FBM KLCI had gained 10.80 points to 1,433.39, from last Friday's close at 1,422.59. In the region, Japan’s benchmark Topix index rose 0.7% and Hong Kong’s Hang Seng index was flat, while China’s CSI 300 rose 1%.

Source: PublicInvest Research - 4 Apr 2023

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