Economy

• US: Home builder gloom persists, but some hope seen for next year. Confidence among US single-family home builders fell for a record 12th straight month in Dec as even a scramble to offer incentives for prospective buyers failed to boost traffic and lift sales in today's high-inflation, high-interest rate environment. Kicking off a week of key reports on the health of the foundering US housing market, the National Association of Home Builders said its NAHB/Wells Fargo Housing Market Index dropped two points to 31 this month, falling short of the median estimate of 34 among economists in a Reuters poll. A reading above 50 indicates that more builders view conditions as good rather than poor. (Reuters)

• EU: Eurozone yields rise, spreads widen on concerns over supply, ECB. Eurozone borrowing costs rose and spread between core and peripheral bond yields widened as investors worried about a hawkish ECB and increasing bond supply. Analysts said more public spending to fight the adverse impact of the energy crisis might raise the 10-year Bund yield to as high as 2.7% in 2023 because of increased government funding needs while excess liquidity falls. The ECB last week pledged further rate hikes to fight inflation but also announced it would start reducing its EUR5trn bond holdings from March. (Reuters)

• UK: Manufacturers see weaker demand, output fall most since 2020. UK manufacturers reported a slight fall in orders and their production declined at the fastest pace since late 2020, the Industrial Trends Survey results from the Confederation of British Industry showed. The order book balance fell slightly to -6% in Dec from -5% in Nov. Nonetheless, the balance was better than the long run average of -13% and also economists' forecast of -9%. Manufacturing output volume declined the most since Sept 2020. The output balance came in at -9% in the three months to Dec, down from +18% in the preceding period. (RTT)

• UK: To extend mortgage-guarantee program to boost housing market. The UK will extend its mortgage guarantee program, which helps people get on the property ladder, by one year in a bid to support the market through what the government called “difficult times.” The program, which started in April 2021 and sees the government offer lenders the financial guarantees needed to provide 95% mortgages on houses worth up to GBP600,000 (USD730,000), was due to expire at the end of this month. (Bloomberg)

• China: Copper climbs after government flags efforts to boost economy. Copper rose after China signalled a pro-growth stance for 2023, hinting at business-friendly policies and more support for the property market. At China’s Central Economic Work Conference, top leaders pledged to revive consumption and support the private sector, a marked shift from recent years. Officials said they will implement favourable policies to encourage private enterprises to grow, while economists said the signals are clear that the focus next year is on boosting the economy. China’s Covid policies and the crisis in its property sector have weighed on demand for industrial metals this year. (Bloomberg)

• Japan: BOJ to sit tight as markets weigh post-Kuroda path. The BOJ is expected to keep monetary stimulus unchanged at Governor Haruhiko Kuroda’s third from last policy meeting this week, as investors seek clues for the central bank’s path beyond Kuroda’s term. The BOJ is forecast to leave its negative interest rate and yield curve control program unchanged at the end of a twoday gathering, according to all 47 economists surveyed by Bloomberg. That would leave BOJ watchers focusing more on the governor’s remarks on the inflation outlook and the possibility of a review of policy or a revision of an accord between the central bank and the government. (Bloomberg)

• New Zealand: Consumer confidence at record low on soaring cost of living, Westpac. New Zealand's consumer confidence tumbled to the lowest level on record in the fourth quarter as soaring living and borrowing costs badly affected the purchasing power of households along with holiday season effects, survey data from ANZ showed. The Westpac-McDermott Miller consumer confidence index dropped to 75.6 in the final quarter of this year from 87.6 in the third quarter. The reading signals that there are many more New Zealanders out there who are pessimistic about the economic environment than there are those who are optimistic. (RTT)

Markets

• Kawan Food (Outperform, TP: RM2.50): Cancels plan to purchase Selangor land plots for second manufacturing plant. Kawan Food has cancelled its plan to buy five parcels of land measuring 7.08 acres in Shah Alam, Selangor for RM50.46m, as the vendor who was in the midst of acquiring two of the plots from Perbadanan Kemajuan Negeri Selangor (PKNS) had failed to get PKNS' agreement to sell the plots. (The Edge)

• Sern Kou: Reports fire incident at subsidiary’s manufacturing plant in Johor. Furniture maker Sern Kou Resources reported a fire incident at one of the manufacturing plants of its wholly-owned subsidiary Sern Kou Furniture Industries SB (SKFI) in Muar, Johor. The fire incident, which occurred last Friday (16 Dec), did not result in any fatalities, and none of the workers there were injured. (The Edge)

• Leform: Accepts RM10m West Coast Expressway job. Leform, through its 60%-owned subsidiary LF Engineering SB, has received a letter of acceptance from Ganda Imbuhan SB, as a subcontractor for the supply and installation of guard rails for a portion of the West Coast Expressway. (The Edge)

• Yinson: Gets another contract extension worth RM15.03m for Adoon FPSO. Yinson Holdings has secured another contract extension worth RM15.03m, for charter of its Adoon floating production storage and offloading (FPSO), which is stationed at the Antan field off Nigeria. Yinson said its indirect unit, Adoon Pte Ltd, and Addax Petroleum Development (Nigeria) Ltd entered into an agreement on 16 Dec to further extend the contract for a period of up to 16 Jan 2023. (The Edge)

• Serba Dinamik: 22 Dec deadline for Serba Dinamik's delisting status. Serba Dinamik Holdings will be delisted if it fails to submit its annual report for the financial year ended 30 June 30 (FY2022) by Thursday. The troubled oil and gas company failed to submit the annual report on 15 Dec allowed earlier by Bursa Malaysia. Serba Dinamik, in a stock filing last Friday, said it was now aiming to submit the annual report by 22 Dec, after the completion of its annual audited financial statements, five market days after its 15 Dec deadline granted by Bursa. (New Straits Times)

• Samaiden: Enters collaboration on clean energy venture in Cambodia. Samaiden Group's wholly-owned subsidiary Samaiden SB has entered into a partnership with Management Venture Asia (Cambodia) Ltd to explore clean energy-related business opportunities in Cambodia. In a statement, the group said MVA is a business consultancy and clean energy project developer based in Phnom Penh, Cambodia, which is primarily engaged in facilitating business ventures and taking products to market and market research. (StarBiz)

• Handal Energy: Associate unit wins 15-year sea sand extraction concession. Handal Energy’s 49% associate, Handal Borneo Resources SB, has today entered into a 15-year concession agreement to extract and sell marine sea sand. Handal Borneo Resources entered into the agreement for the operation, management, extraction and sales of marine sea sand with Tanjung Aru Eco Development SB (TAED), a wholly owned subsidiary of the Chief Minister of Sabah, Inc. (The Malaysian Reserve)

MARKET UPDATE

The FBM KLCI might open lower today as US stocks and global fixed-income markets fell on Monday, extending a drop last week sparked by a new round of interest rate rises and hawkish comments from central bankers. The S&P 500 closed 0.9% lower, while the tech-heavy Nasdaq Composite index lost 1.5% at the start of the last full trading week of the year, as investors assessed the pace and scale of interest rate rises to come. The Federal Reserve, European Central Bank and the Bank of England each pushed interest rates higher by 0.5 percentage points last week, a step down in the previous pace of increases. However, they stood firm on their plans to continue their attempts to slow rising prices, with the ECB saying “inflation remains far too high”. Their warnings that further interest rate rises are needed to bring record inflation under control sent global stock markets lower last week. In European equities, the regional Stoxx 600 gained 0.3%, while Germany’s Dax advanced 0.4%. The UK’s FTSE 100 climbed 0.4%.

Back home, Bursa Malaysia ended marginally lower on Monday as buying emerged during the final minutes of trading amid weakness in most key regional markets as concerns over rising interest rates and a potential recession in 2023 weighed on sentiment. At the closing bell, the benchmark FBM KLCI declined by 0.1% or 1.45 points to 1,477.09 from last Friday's closing of 1,478.54. In the region, Hong Kong’s Hang Seng index dropped 0.5% while China’s CSI 300 index slid 1.5%.

Source: PublicInvest Research - 20 Dec 2022