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RBA’s Pause Isn’t The End Game

As already expected, the Reserve Bank of Australia (RBA) kept rates on hold today, defying consensus expectations. The Bank pointed out how higher interest rates are “working to establish a more sustainable balance between supply and demand in the economy” and opted for a pause to better assess incoming data. The new CPI forecasts now see inflation declining to 3.25% by the fourth quarter of next year and fall back to target by the end of 2025. This is probably a dovish signal, as it implies the current pace of tightening is appropriate to take inflation back to target in an acceptable time frame.

However, the RBA has shown elevated sensitivity to data, and I doubt this will change very soon: another high inflation read may well convince it to add a hike before the peak. My base case is still for one last 25bp increase to be delivered in September when electricity tariffs could deliver an inflation surprise.

The Aussie dollar may underperform other peers like the NZD and the Scandies until a bullish “pocket” emerges in September, should the RBA go ahead with one last hike. Still fighting for direction.

US dollar still fighting for direction

We have recently made the case for the dollar to stay “trapped” in a situation where FX volatility fails to pick up, leaving room for carry trades to keep supporting high-yielders and weigh on funding currencies. The greenback probably needs some compelling evidence against the soft-landing narrative in the coming days to break lower.

One data release that went slightly under the radar yesterday, but in our view contained key forward-looking information, was the Federal Reserve’s Senior Loan Officer Opinion Survey.

The survey pointed at a further tightening in US lending conditions and how both households and businesses are now warier about taking on additional borrowing. Given the centrality of credit flow to the US economy, this increases the probability of a faster return to target inflation.

Outside of the US, China continued to print disappointing data: the latest being July’s Caixin PMI manufacturing, which fell more than expected into contraction territory (49.2). This has set the stage for a risk-off-leaning environment in FX this morning, which can favour some modest dollar recovery into the US data releases and help DXY consolidate above 102.00, before facing harder data-related tests.

Market commentary and analysis from Luca Santos, currency analyst at ACY Securities

Banking Sector Registers Attractive Valuation With Sequential Improvement

CGSCIMB reaffirms their Overweight call on banks, predicated on potential re-rating catalysts of sequential improvement in net interest margin in 2Q-4Q23F and potential write-back of management overlay.

“We estimate every 10% write-back in management overlay would enhance our projected FY23-24F net profits by 1.7%,” said CGSCIMB in the recent Sector Note.

CGSCIMB’s sector top pick is RHB Bank due to its attractive valuation and dividend yield as well as potential increase in dividend payout. Potential downside risks for their sector rating would be a deterioration in loan growth and asset quality.

“We expect a pick-up in loan growth in 2H amid easing inflationary pressures, stable interest rates and a stronger MYR. Moreover, margin pressure is abating and should contribute to better interest margins for the sector in 2H23,” said Maybank Investment Bank in a recent report.

The banking industry’s loan growth moderated from 4.8% yoy at end-May 23 to 4.4% at end-Jun 23. This was mainly dragged by business loan momentum easing from 1.6% yoy at end-May 23 to 1% yoy at end-Jun 23. Meanwhile, household loan growth only inched down from 5.4% yoy at end-May 23 to 5.3% yoy at end-Jun 23.

“We are not overly concerned about the weakening of the loan growth as even if loan growth disappoints, we do not expect loan growth in 2023 to be far below our projected 4- 5%, and every 1% pt cut in our loan growth projection would only lower our CY24F net profit forecasts by 0.8%, based on our estimate,” said CGSCIMB.

While CGSCIMB is negative on the moderation in loan growth, the positive observation in Jun 23 was the mom drop of RM796.5m in gross impaired loan (GIL), the largest mom decline in 1H23.

This lowered the banking industry’s GIL ratio from 1.8% at end-May 23 to 1.76% at end-Jun 23. Based on the latest trends, CGSCIMB thinks that GIL ratio should peak soon.

“Hence, we see minimal risk of GIL ratio surpassing our end-2023 projection of 2%. We were positive on the 35.7% qoq fall in the sector’s loan loss provisioning (LLP) to RM937.6m in 1Q23,” said CGSCIMB.

It is even more encouraging that the LLP would decline further in 2Q23F, deduced from the massive RM1bn reduction in the banking industry’s total provision in 2Q23, compared to a decrease of RM134.1m in 1Q23.

CGSCIMB thinks this could be partly due to the write-back of management overlay by some banks, which is the major investment theme for banks.

MOH Unions Express Strong Support For Efficient Service Delivery, Collaborative Approach

Some 22 unions under the Health Ministry have expressed their support and approval for the direction set by the ministry as it was crucial to ensure an efficient and high-quality service delivery system.

Following a convention here last week that involved the various unions, the Joint Council of Presidents and Secretary Generals of the Health Ministry Workers’ Union (MAPSU) issued a joint statement that it was fully in support of the ministry’s efforts.

Its newly elected president Ajulahin Japin said in the statement that their decision was in line with the MADANI Government concept led by Prime Minister Datuk Seri Anwar Ibrahim.

He said the ministry, led by Dr. Zaliha Mustafa, emphasised on continuous consultation and engagement sessions with ministry employees, particularly those responsible for policy implementation.

“A harmonious relationship between employers and workers is crucial for delivering an efficient and quality system.”
The convention was held on July 26 and 27 in Melaka and was attended by 52 presidents and secretary generals of various workers’ unions and it also involved the top management of the ministry. It was inaugurated by MOH (Ministry of Health)’s Deputy Secretary-General (Finance) Datuk Seri Norazman Ayob.

MAPSU represents nearly 80,000 MOH employees across 22 unions and it hoped the Health Minister and the MOH top management would pay more attention to all service schemes under the ministry.

Ajulahin said the ministry was also proactive in prioritising welfare issues and open to any suggestions put forth by the union to foster a collaborative effort in line with the aspirations of the people.

The union acknowledged that MOH, with its 119 employment schemes, naturally faced various challenges that the union aims to address. It also appreciated the readiness of MOH to engage directly with workers at the grassroots level.

Ajulahin, who is from the Sabah Medical Services Union, thanked MOH for initiating the convention and hoped it would become an annual event as it strengthened the relationship and understanding between the union and the ministry.

Ringgit Opens Lower Against The Greenback

The ringgit opened lower against the US dollar in early trade today due to the lack of interest.

At 9.07 am, the local note decreased to 4.5250/5285 against the greenback compared with 4.5175/5200 at Tuesday’s close.

Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said that the US Dollar Index (DXY) initially rose to a high of 102.41 before retracting to 102.30 points yesterday.

“Simultaneously, Fitch Rating downgraded the United States government’s AAA rating to AA+, citing concerns over weak governance and prolonged debt ceiling negotiations as key factors.

“Despite these developments, the conflicting data presents a mixed signal, as a sovereign rating downgrade typically corresponds to a weaker US currency,” he told Bernama, adding that the MYR/USD may move within a narrow range of RM4.51-RM4.52 today.

Meanwhile, the ringgit was traded mostly higher against a basket of major currencies.

It dropped against the euro to 4.9766/9804 from 4.9584/9612 at Tuesday’s close but firmed against the Japanese yen 3.1623/1650 from 3.1666/1686 yesterday and improved vis-a-vis the British pound to 5.7839/7883 from 5.7892/7924 previously.

At the same time, the local unit was traded mixed against other Asean currencies.

CGSCIMB Recommends Hartalega, Kerjaya Prospek For Long Term

On Monday, the Hartalega Holdings stock closed above the 200-day Exponential Moving Average (EMA) for the first time since mid-June.

“It pulled further away from the said moving average yesterday with its third consecutive white candle,” said CGSCIMB.

Buying interest appears to be picking up after a month-long of consolidation. The golden cross of the 20-day over the 50-day EMAs may suggest that a short-term uptrend may be underway, supported by the higher lows sequence from the RM1.88 low.

Both the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) have hooked up further, suggesting a positive momentum.

“We think that aggressive traders may want to go long now or accumulate on a pullback, with a stop-loss set at RM2.03,” said CGSCIMB.

On another note, Kerjaya Prospek Property’s stock has finally broken out of the RM0.71 resistance level yesterday after multiple attempts over the past month.

Yesterday’s white bullish candle also marked its 52-week high on the back of stronger trading volume. The rising EMAs, coupled with the higher highs and higher lows formation since its 9-month long rectangle breakout, may fuel the current bullish move in the near term.

Both the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) are still pointing higher, keeping the bullish momentum intact. CGSCIMB recommends aggressive traders to go long now or accumulate on a pullback, with a stop-loss set at RM0.69.

Hang Seng Index Futures: Struggling To Stay Above 20,000-Pt Support Level

The HSIF’s positive momentum took a breather yesterday, with the index retreating 175 pts to close at 20,028 pts.

RHB Retail Research, in a note today (Aug 2), said it began yesterday’s session at 20,204 pts. At one point, it posted a movement surge to test the day’s high of 20,404 pts on strong momentum.

However, it pulled back in the afternoon to close at 20,028 pts. The index fell 136 pts during the evening session, and was last traded at 19,892 pts.

For now, the 20- and 50-day SMA lines have intersected to form a Bullish Crossover, suggesting that the trend is turning bullish – RHB expects further upside in the upcoming sessions.

Meanwhile, strong support has formed at 19,250 pts. Unless the 19,250-pt support level is breached, the overall technical setup will remain bullish. For now, RHB retains their positive trading bias.

Factory Expansion, New Products Among Catalysts For Supercomnet

Supercomnet Technologies Bhd (SCOMNET) engages in the production of wires and cables for medical devices, electrical appliances, consumer electronics and automotive components.

According to Malacca Securities in the recent Technical Focus Report, Scomnet counts New York Stock Exchange-listed Edwards Lifesciences Corp and Denmark-based Ambu as its two main customers, both whom have business dealings for more than 10 years on average.

“Moving forward, SCOMNET will continue to roll out new products such as the mass production of nano-medicine therapy device sometime towards end-2023/early-2024 in bid to sustain revenue growth. Meanwhile, the factory expansion to cater for new medical products is expected to see commissioning in 4Q23,” said Malacca Securities.

Meanwhile, the Securities Commission has given the greenlight for SCOMNET to transfer its shares and warrants from the ACE Market of Bursa Malaysia to the Main Market. The move is a testament to the group’s financial track record and allows greater participation from institutional players.

“Technically, price has staged a downturn since end-2022 before finding stability in June 2023. After multi-months of correction, price has demonstrated signs of recovery in recent weeks to close above daily exponential moving average 120,” said Malacca Securities.

Manufacturing Activity To Remain Weak On Poor Global Demand Conditions, Says Kenanga IB

Malaysia’s Manufacturing Purchasing Managers’ Index (PMI) remained subdued in July (47.8; Jun: 47.7), indicating  a weak start for the 3Q23, though the index was slightly higher compared to the previous month, it remained at contraction level (below the neutral level: 50.0) for the eleventh consecutive month or since September 2022.

Kenanga Investment Bank weighed in today (Aug 2) on the matter stating the weakness in the manufacturing industry is primarily  attributed to weak global demand conditions.

There exist subdued demand conditions amid weak client  confidence, the bank’s economic viewpoint report stated, which led to a slowdown in output production where new orders eased sharply since January 2023 due to a slowdown in demand which moderated markedly since January 2023.

Similarly, new export orders moderated further and at the fastest rate since May 2020. And, Consequently, output levels fell for the twelfth straight month but at the same pace seen in May and June, as production volumes were scaled back.

Kenanga said cost pressures persist amid exchange rate weakness where input costs accelerated for the fourth month in July, reaching the highest since February.

This was associated with rising raw material prices amid weaker local currency, leading to higher prices for imported items.

Nevertheless, output prices were relatively unchanged, with some firms slashing selling prices to stimulate demand.

Business sentiments were softened, but the outlook remained positive where sentiment was relatively muted, but manufacturers remained optimistic that demand conditions would normalise  over the coming 12 months, as reflected by the 25th straight month of optimism for future output. 

Employment continued to fall as firms scaled back hiring due to the non-replacement of voluntary leavers. While, manufacturing conditions among major economies deteriorated in July.

In the U.S. (49.0; Jun: 46.3), flash manufacturing PMI was up to a three-month high but remained in the contraction level, reflecting a persistent deterioration in the manufacturing sector due to weak demand conditions.

In China (49.2; June: 50.5), the Caixin Manufacturing PMI fell below the neutral level for the first time in three months,  indicating a struggling growth momentum amid soft global demand.

Kenanga IB, in this light, maintains their 2023 GDP growth forecast at 4.7% (2022: 8.7%) citing the weaker PMI reading in July is in line with their expectations that the manufacturing condition will remain weak in the 3Q23 and would potentially spill over towards the end of the year due to the global economic slowdown and  the waning lower base effect recorded last year.

This is expected to weigh on the 3Q23 GDP growth outlook, which Kenanga IB forecasts to moderate sharply to 3.4% from an estimated 6.0% in the 2Q23 (1Q23: 5.6%). 

Kenanga IB also expects domestic demand to remain resilient and support overall growth. This is mainly due to the continued recovery in the tourism-related subsector largely backed by the resumption of international tourism and the steady labour market condition, as  reflected by the lower unemployment rate as well as a decent increase in household income.

However, the bank acknowledges the lingering downside risk to the growth outlook, mainly coming from the external sector.

Strategies for a Cyber-safe Elections Period

Last year, Malaysia suffered multiple cyber attacks, including personal data theft of 22.5 million from a national registry and payment gateway data breach. In the same year, hackers broke into a payslip system, extracting nearly two million payslips and tax forms, stealing up to 188.75 gigabytes of data.  Recently, an insurance group has confirmed that two of its local subsidiaries have been affected by the MOVEit zero-day vulnerability exploit. 

In Nov 2020, it was reported that a data breach had allegedly occurred involving the EC’s database, where the personal details of 800,000 voters were leaked. While not proven, the allegation and a string of other data breach issues have underlined the urgency to mitigate cyber risks as soon as possible before the state election starts.

The upcoming state election also presents a unique opportunity for cybercriminals to tailor their attack methods based on political campaigns, platforms, and candidates’ (as well as voters’) behaviors. There are mainly three types of attacks that may affect the period:

  • Cyber hacktivism: Attacks focusing largely on persuasion or dissuasion to shift, stop, or silence a political group or message. Recently evolved to deepfake videos with the advancement of AI capabilities, commonly used to smear and shame candidates, disseminate unethical propaganda, and spread fake news.
  • Traditional cyberattacks: Attacks are carried out to secure financial gain by leveraging stolen data. Most commonly seen as URL phishing and or SMS phishing, these require comprehensive endpoint protection and high security awareness
  • Identity Theft: Commonly identified as alleging improper use of identity cards. With the available national identity leaked on the dark web, it is easier for unethical parties to purchase and misuse the identity to destroy the state election campaigns. 

In ensuring a cyber-safe election period, there are a couple of solutions and recommendations that the government can implement to reduce cybersecurity risks. These include: 

  • Improve Response Times with Analytics and Automation
    • New forms of threats can evolve in a matter of minutes. The system needs to have the agility and ability to keep up with the latest malware and exploits, and to also detect and automatically prevent the risks across networks, clouds, and endpoints, within as few as five minutes.
  • Enforce Zero Trust Network Access (ZTNA) 2.0 for Networks Housing Critical Infrastructure
    • Zero Trust is a framework whereby, by default, all users are denied network access. This means securing every part of the access route with powerful next-generation tools that detect and thwart attacks. 
    • Implementing ZTNA 2.0 allows election officials to limit the attack surface by isolating internal network segments that house election data, to have continuous trust verification and security inspection, as well as strict control on legitimate employees, applications, and traffic that can access the segment. 
  • Protect Critical Endpoints
    • During the election period, extra protection must be added to numerous devices and operating systems, such as the tools storing voters’ data, as these are considered critical endpoints. A multi-method approach to block exploits, ransomware, malware, and other types of attacks also needs to be implemented. 

In addition, prospective voters need to protect themselves against cyberattacks. Some steps that individuals can implement include:

  • Think before clicking. Never click embedded links within an email, especially if the sender’s authenticity is questionable. 
  • Watch out for scare tactics. Phishers often employ scare tactics, threatening to disable an account or delay services until new or updated information is provided. 
  • Ignore unprofessional emails. Fraudulent emails are typically personalized and addressed directly to the individual; while real, authentic emails from political groups, financial organizations, or other similar businesses, will typically reference the specific details of a given transaction or account.
  • Go directly to the source. Always be wary of emails or SMS requesting confidential information, particularly requests leveraging an embedded form or a link to an unknown site. 
  • Beef up security. Block these attempts from ever entering the network in the first place with an automated, prevention-first, platform approach to cybersecurity.

With the State Election just around the corner, cybersecurity has become more important than ever. Political parties, candidates, the government, and even prospective voters need to realize that cyber criminals are looking to gain from all sides, and that everyone is susceptible to cyberattacks. While there is still time before the elections fully begin, both individuals and organizations must start focusing on the security of their data. Robust cybersecurity measures need to be put in place, and cyber-safe practices need to be implemented as we gear up for a historical period in the country.  

By Lim Suk Hua, Country Manager, Palo Alto Networks Malaysia

Enovix To Establish A Cutting Edge Next Gen Battery Plant In Penang

Enovix Corporation an advanced silicon battery company and YBS International Berhad have signed a Manufacturing Supply Agreement to establish a cutting-edge next-generation battery manufacturing facility in Penang Science Park.

Jackie Yong Chan Cheah, CEO of YBS International Berhad, expressed, “Enovix has an exciting battery technology. We believe Enovix will become a market leader and we look forward to supporting the company’s goals and sharing in its growth and success.”

Ajay Marathe, COO of Enovix Corporation, said, “We’re thrilled to announce this significant milestone in our journey to scale. In addition to working with YBS, we look forward to collaborating with MIDA, the Northern Corridor Economic Region, and InvestPenang to secure investment incentive which will support our long-term goals in Malaysia. Malaysia, and especially the Penang region, is rich with semiconductor-trained engineers who have a manufacturing-excellence mindset. We’re pleased to advance our presence in the region to support our rapid growth.”

As part of the MSA, YBS, under the direction of Enovix, will provide the building and capital for equipment and labour for Fab2 and the Gen2 Autoline 1. Enovix announced earlier this year that it established Enovix Malaysia Sdn. Bhd. In addition, the company has hired over 30 people in Malaysia including the two leaders announced in March this year.

Trump Indicted For Efforts To Overturn 2020 Election And Block Transfer Of Power

Former U.S. President Donald Trump was indicted on felony charges Tuesday for working to overturn the results of the 2020 election in the run-up to the violent riot by his supporters at the U.S. Capitol, with the Justice Department acting to hold him accountable for an unprecedented effort to block the peaceful transfer of presidential power and threaten American democracy.

The four-count indictment, the third criminal case against Trump, provided deeper insight into a dark moment that has already been the subject of exhaustive federal investigations and captivating public hearings. It chronicles a months-long campaign of lies about the election results and says that, even when those falsehoods resulted in a chaotic insurrection at the Capitol, Trump sought to exploit the violence by pointing to it as a reason to further delay the counting of votes that sealed his defeat.

Even in a year of rapid-succession legal reckonings for Trump, Tuesday’s criminal case, with charges including conspiring to defraud the United States government that he once led, was stunning in its allegations that a former president assaulted the “bedrock function” of democracy. It’s the first time the defeated president, who is the early front-runner for next year’s Republican presidential nomination, is facing legal consequences for his frantic but ultimately failed effort to cling to power.

“The attack on our nation’s Capitol on Jan 6, 2021, was an unprecedented assault on the seat of American democracy,” said Justice Department special counsel Jack Smith, whose office has spent months investigating Trump. “It was fuelled by lies, lies by the defendant targeted at obstructing a bedrock function of the U.S. government: the nation’s process of collecting counting and certifying the results of the presidential election.”

Trump was the only person charged in Tuesday’s indictment. But prosecutors obliquely referenced a half-dozen co-conspirators, including lawyers inside and outside of government who they said had worked with Trump to undo the election results. They also advanced legally dubious schemes to enlist slates of fake electors in seven battleground states won by Democrat Joe Biden to falsely claim that Trump had actually won them.

The indictment accuses the defeated president and his allies of trying to “exploit the violence and chaos” by calling lawmakers into the evening on Jan. 6 to delay the certification of Biden’s victory.

It also cites handwritten notes from former Vice President Mike Pence that give gravitas to Trump’s relentless goading to reject the electoral votes. Pence, who is challenging Trump for the GOP presidential nomination, declined overtures from a House panel that investigated the insurrection and sought to avoid testifying before the special counsel. He appeared only after losing a court fight, with prosecutors learning that Trump in one conversation called him “too honest” to stop the certification.

Trump is due in court Thursday, the first step in a legal process that will play out in a courthouse situated between the White House he once controlled and the Capitol his supporters once stormed. The case is already being dismissed by the former president and his supporters — and even some of his rivals — as just another politically motivated prosecution.

Yet the case stems from one of the most serious threats to American democracy in modern history.

The indictment centers on the turbulent two months after the November 2020 election in which Trump refused to accept his loss and spread lies that victory was stolen from him. The turmoil resulted in the riot at the Capitol, when Trump loyalists violently broke into the building, attacked police officers and disrupted the congressional counting of electoral votes.

In between the election and the riot, Trump urged local election officials to undo voting results in their states, pressured Pence to halt the certification of electoral votes and falsely claimed that the election had been stolen — a notion repeatedly rejected by judges. Among those lies, prosecutors say, were claims that mote than 10,000 dead voters had voted in Georgia along with tens of thousands of double votes in Nevada. Each claim had been rebutted by courts or state or federal officials, the indictment says.

Prosecutors say Trump knew his claims of having won the election were false but he “repeated and widely disseminated them anyway — to make his knowingly false claims appear legitimate, to create an intense national atmosphere of mistrust and anger, and to erode public faith in the administration of the election.”

The indictment had been expected since Trump said in mid-July that the Justice Department had informed him he was a target of its investigation. A bipartisan House committee that spent months investigating the run-up to the Capitol riot also recommended prosecuting Trump on charges, including aiding an insurrection and obstructing an official proceeding.

The indictment includes charges of conspiring to defraud the U.S., conspiring to obstruct an official proceeding and violating a post-Civil War Reconstruction Era civil rights statute that makes it a crime to conspire to violate rights that are guaranteed by the Constitution — in this case, the right to vote.

The mounting criminal cases against Trump are unfolding in the heat of the 2024 race. A conviction in this case, or any other, would not prevent Trump from pursuing the White House or serving as president, though Trump as president could theoretically appoint an attorney general to dismiss the charges or potentially try to pardon himself.

In New York, state prosecutors have charged Trump with falsifying business records about a hush money payoff to a porn actor before the 2016 election. The trial begins in late March.

In Florida, the Justice Department has brought more than three dozen felony counts, accusing him of illegally possessing classified documents after leaving the White House and concealing them from investigators. The trial begins in May.

Prosecutors in Georgia are investigating efforts by Trump and his allies to reverse his election loss to Biden there. The district attorney of Fulton County is expected to announce charging decisions within weeks.

As part of his federal investigation, Smith’s team cast a broad net, with his team of prosecutors questioning senior Trump administration officials, including Pence, before a grand jury in Washington. Prosecutors also interviewed election officials in Georgia, Wisconsin, Michigan and other battleground states won by Biden who were pressured by the Trump team to change voting results.

Rudy Giuliani, a Trump lawyer who pursued post-election legal challenges, spoke voluntarily to prosecutors weeks before the indictment. Giuliani was not cited by name in the indictment, but appears to match the description of one of the co-conspirators. A spokesman for Giuliani said Tuesday night that Trump had a “good-faith basis” for the actions he took.

Attorney General Merrick Garland last year appointed Smith, an international war crimes prosecutor who also led the Justice Department’s public corruption section, as special counsel to investigate efforts to undo the election as well as Trump’s retention of classified documents at his Florida home, Mar-a-Lago. Although Trump has derided him as “deranged” and called him politically motivated, Smith’s past experience includes overseeing significant prosecutions against high-profile Democrats.

The Justice Department’s investigations began well before Smith’s appointment, proceeding alongside separate criminal probes into the rioters themselves. More than 1,000 people have been charged in connection with the insurrection, including some with seditious conspiracy. – AP

Southern Score Builders Sustained By Substantial Outstanding Orderbook

Southern Score Builders (SSB8) came into being in Nov 2022 via the reverse takeover (RTO) of G Neptune Bhd by privately-owned Class G7 contractor Southern Score Sdn Bhd with a profit guarantee of RM80m over 2022-2024.

“It focuses mainly on high-rise residential building jobs in Kuala Lumpur, and civil works, such as road and drainage, and water reticulation and sewerage package works,” said Kenanga Research (Kenanga) in a recent report.

Its first construction project was in 2015, as a turnkey contractor for the development of PR1MA Jalan Jubilee. As of Mar 2023, it has so far completed a total project value of RM738m, of which RM533.5m were from a related party –Platinum Victory.

“Meanwhile, it has current outstanding orderbook of RM638.5m with tender book of RM634.0m. This should keep them busy for the next 2-
3 years,” said the research house.

SSB8 registered strong gross margin of 20% over FY19-FY21 (FYE Dec) and post the RTO, 19%-24% between 1QFY23 and 3QFY23. This was primarily due to its asset-light construction management model. It outsources construction work to reliable subcontractors at highly competitive rates.

The procurement of building materials in bulk, backed by its strong balance sheet puts it in a strong position to ask for significant
discounts from suppliers.

SSB8, through its 35%-owned associate TCS SS Precast Construction Sdn Bhd (TSPC), is currently exploring project viability and economic benefit of setting up IBS manufacturing plant in Batu Caves.

“SSB8 has already earmarked RM21.8m of the proceeds raised from the RTO exercise for this IBS venture,” said Kenanga.

Meanwhile, in Jun 2023, SSB8 signed MoU with MCC Overseas (M) Sdn Bhd and Guangdong Bright Dream Robotics Co. Ltd with the intention to form a partnership to implement and develop robotic construction technologies in Malaysia. All this would help to improve its profit margin in the future should it materialises.

Great Potential Ahead For Kerjaya Prospek With Huge Contract Wins

Kerjaya Prospek (KERJAYA) has been awarded two related-party contracts worth a total of RM46m from E&O’s indirect subsidiaries, RM24.7m from Eastern & Oriental Express Sdn Bhd for earthworks for a proposed mixed development (known as Elmina) located at Section U17, Shah Alam, and, RM21.3m from Persada Mentari Sdn Bhd for infrastructure works for the proposed Seri Tanjung Pinang Phase 2A Development in Penang.

“The completion timeline for the first contract is expected to be 17 months from the scheduled commencement date of 01 Oct 2023 while the second contract is anticipated to be completed within 12 months from 18 Sep 2023,” said Kenanga Research (Kenanga) in the recent Company Update Report.

Kenanga is positive on this win which brings its year-to-date total wins to RM984m or 66% of Kenanga’s FY23 target and firmly on track to hit their FY23F full-year job win assumption of RM1.5b. It also raised its outstanding order book to RM4.4b. Kenanga expects these contracts’ profit after tax margin to be 10%.

“Currently, its tender book stands at RM1.5b−RM2.0b from building/reclamation jobs from its sister companies, MNC industrial warehouse/factories alongside its JV with Samsung, and third-party building jobs in the Klang Valley,” said Kenanga.

Kenanga maintains a Target Price of RM1.50 and maintains the Outperform rating. KERJAYA’s focus is on the high-rise building sector currently weighed down by an oversupply in the office and residential segments.

Kenanga continues to like KERJAYA for its innovative construction solutions and lean cost structure that translate to above-average margins, its hands-on management team and track record of strong execution, and its ability to consistently win external jobs and the availability of job orders from related parties.

Risks to Kenanga’s call include further deterioration in the prospects for building jobs, rising input costs, and project cost overrun and
liabilities arising from liquidated ascertained damages.

Soft Space, Hong Leong Bank, JCB Expand JCB Card Acceptance In Malaysia

Soft Space and JCBI recently signed an agreement to enable Soft Space to work with local acquirers, such as HLB, to promote JCB Card acceptance in Malaysia.

Sofitel Kuala Lumpur Damansara is one of HLB’s merchants that has begun accepting JCB Card payments. 

“As Japanese tourist arrivals in Malaysia begin to ramp up again, we are pleased to be able to enable and promote cross-border payments between Japan and Malaysia via our partners,” said Joel Tay, CEO of Soft Space. “This merely represents a first step in our ambition to roll out similar agreements in Southeast Asia, boosting JCB Card acceptance and riding on the wave of increasing contactless card payments in the region.”

“We decided to expand the collaboration with another global leader who shares similar values in enhancing user experience through state-of-the-art technological application,” said Yoshiki Kaneko, President and CEO of JCB International Co., Ltd.

According to Andrew Jong, Managing Director of Personal Financial Services at HLB, this partnership with JCB and Soft Space signifies the Bank’s commitment to providing financial products and services that are centred around the needs of both its merchants and their customers.  

“With an influx of tourists and expats coming from Japan into Malaysia, the option to accept JCB Cards will ensure convenience for its cardholders and provide businesses with an additional opportunity to capture more tourists and grow their business. This partnership will enable us to serve the customers who are increasingly going cashless as well as help our merchants increase their sales and customer transaction value.” 

The agreement showcases the partnership progress between JCB and Soft Space since the former investment in the fintech in January 2022. This includes a series of business collaborations that are aimed at leveraging on Soft Space’s fintech-as-a-service business model, technology and regulatory knowhow, and JCB’s global recognition, vast alliances and brand reach.

Generali Malaysia Named International General Insurer of the Year at the Insurance Asia Awards 2023

Generali Malaysia has been honoured with International General Insurer of the Year – Malaysia award for the 8th consecutive year at the recent Insurance Asia Awards 2023. It is a record win for Generali, being the first and only general insurer in Malaysia to have attained this consecutive win.

This coveted title marks yet another milestone for Generali, following the successful acquisition of AXA Affin joint ventures and MPI Generali Insurans Berhad. It is testament to Generali’s position as one of Malaysia’s largest and leading general insurers in delivering innovative products and services led by customer experience and digital technology. 

Held on 27th July 2023 at Sands Expo & Convention Centre, Singapore, the Insurance Asia Awards recognises esteemed insurance companies who have made significant impact to customers with exceptional products, services and solutions. Award recipients are chosen after a rigorous selection process by a panel of judges consisting of industry experts.  

Sharing the joy of this achievement is none other than the Chief Executive Officer of Generali Insurance Malaysia Berhad and Country Head for Generali Entities in Malaysia ― Fabrice Benard. Bringing with him over 20 years of technical and strategic experiences in General Insurance coupled with a track record of senior management positions with reputable financial institutions and big four firms in France, Italy, Middle East and Asia, Fabrice has also been conferred the CEO of the Year award for spearheading the integration project that propels Generali Malaysia as the second largest general insurer in Malaysia.  

“2023 is a transformational year for Generali Malaysia as we further our ‘Lifetime Partner’ strategy with a game-changing acquisition, which has given us an expanded scale, expertise and network to better serve our customers. Receiving these two prestigious awards validates our performance as a trusted insurer and commitment to customers. A big thank you to all our valued customers, business partners, agents, brokers, distributors and colleagues—this would not have been possible without their relentless support and trust,” Fabrice said. 

Generali’s winning recipe lies in its People ― the catalyst in delivering and upholding its strong sense of purpose and Lifetime Partner ambition. Backed by a long standing history and legacy of over 190 years, Generali strives to put customers at the heart of its strategy, address their protection needs and serve them in ways that matter to them through ‘Personalized Value Propositions’, ‘Phygital Advice’ and ‘Effortless and Caring Experience’. 

This is also evident in Generali’s commitment to continuously find ways to serve the underserved market through the launch  of  its flagship initiative The Human Safety Net “Project Makan Sihat”. Project Makan Sihat, a local fundraising activity in conjunction with the global fundraising activity organised by The Human. Safety Net has raised a total of RM273,751 with its NGO partner Yayasan Generasi Gemilang to prevent malnutrition among children and families in PPR Lembah Subang. 

Oil Prices Rise More Than 1% After Sharp Drop In U.S. Crude Stocks

Oil prices rose more than 1% on Wednesday, trading near their highest since April, after industry data showed a much steeper-than-expected draw last week in crude oil inventories in the U.S., the world’s biggest fuel consumer.

Brent crude futures for October rose 92 cents, or 1.1%, to $85.83 a barrel by 0001 GMT, while U.S. West Texas Intermediate crude climbed 84 cents, or 1.03%, to $82.21 a barrel.

Both benchmarks settled lower on Tuesday, breaking a three day streak of gains.

U.S. oil inventories fell by 15.4 million barrels in the week ended July 28, according to market sources citing American Petroleum Institute figures, compared with analysts’ estimates for a drop of 1.37 million barrels.

If the U.S. government figures, due later on Wednesday, matches the industry drawdown number, it would mark the largest drop in U.S. crude inventories according to records dating back to 1982.

Oil inventories have also begun to drop in some other regions as demand outpaces supply, which has been constrained by deep production cuts from Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), that has provided price support.

Analysts expect Saudi Arabia to extend its voluntary oil output cut of 1 million barrels per day (bpd) for another month to include September in a meeting on Friday.

OPEC oil output fell in July on Saudi Arabia’s voluntary cut as well as an outage that curbed Nigerian supply, a Reuters survey found on Monday, Reuters reported.

On the demand side, gasoline inventories fell by about 1.7 million barrels, according to the API data, compared with estimates for a 1.3 million barrel drop. Distillate inventories fell by about 510,000 barrels, compared with analysts estimates for a build of 112,000 barrels.

With oil prices expected to continue to rise because of the output cuts, the Biden administration has pulled an offer to buy 6 million barrels of oil for the U.S. Strategic Petroleum Reserve, an Energy Department spokesperson said on Tuesday.

Continued Consolidation Called For Malaysia Stock Market

The Malaysia stock market has moved lower in two of three trading days since the end of the six-day winning streak in which it had jumped almost 45 points or 3.4 percent. The Kuala Lumpur Composite Index now sits just above the 1,450-point plateau and it may take further damage on Wednesday.

At 9.16am, the FBM KLCI opened at 1450.04.

RHB Retail Research, in a note today (Aug 2), said the FKLI experienced a sharp profit-taking session yesterday, dropping 12 pts to close at 1,451 pts and forming a Bearish Engulfing pattern.

It opened higher at 1,464.50 pts and reached a high of 1,468.50 pts, but momentum was reversed in the afternoon and closed sharply lower, below the previous session’s low.

The recent rally failed to follow through and likely retreat towards the 200-day SMA line in the coming sessions. However, we expect this correction will be capped at the long-term SMA line.

The medium-term outlook remains bullish, supported by the RSI above the 50% threshold, and the rising 200- and 50-day SMA lines.
Despite the short-term weakness, RHB”s positive bias remains.

Malacca Securities (MSSB) said the FBM KLCI (-0.6%) erased majority of the previous session gains, dragged down by profit taking activities in more than two-thirds of the key index components. The lower liners also retreated, while the industrial products & services sector (-0.7%) underperformed the mostly negative sectorial peers.

Sector focus: With signs of volatility emerging, MSSB reckons that sectors that are defensive in nature such as healthcare, utilities and REIT may be in the spotlight. Following the pullback on Nasdaq overnight, the technology sector may mirror the weakness.

The FBM KLCI formed a bearish candle accompanied by softer trading value. Technical indicators, however, stayed positive as the MACD Histogram remained in the positive territory, while the RSI hovered in the overbought zone. Should the key index advanced above the 1,460 level, next resistances are located along 1,480- 1,500, while the support is pegged around 1,420-1,440.

CGS-CIMB said the local benchmark FBMKLCI (KLCI) fell 8.19pts or 0.56% to end the day at 1,451.24.

Most sectors declined except for energy (+0.36%), healthcare (+0.35%) and REIT (+0.16%). The broader market was dragged down by industrial products (-0.68%), consumer products (-0.63%) and telecommunications (-0.55%).

Trading volume climbed further to 3.83bn (up from 3.29bn on Monday) whereas trading value dropped to RM1.76bn (down from RM2.49bn previously). Market breadth turned negative as 343 gainers thumped by 601 losers.

The bulls took a breather yesterday after its eighth consecutive days of gains.

The benchmark formed a black candle yesterday, sliding down from its 5-month high.

CGS-CIMB believes that a consolidation may be starting now, mainly to relieve the current overbought situation.

On the upside, prices are facing a double resistance of the downtrend line from the 1,527 high and the historical 1,460- 1,465 band.

The following resistance is at 1,476-1,480. The pullback (if it continues) may see the index fall back towards the 1,430-1,438 levels next.

The 200-day EMA may also act as a magnet to draw prices lower in the days ahead. CGS-CIMB’s portfolio stays in risk-on mode this week.

Real Estate Purchases Key To Growth To Equal 2.7% Of GDP

Juwai IQI Co-Founder and Group CEO Kashif Ansari

By purchasing residential real estate, Malaysian homebuyers contributed a total of RM42.5 billion to the economy in 2022 – equivalent to about 2.7% percent of Malaysia’s 2022 gross domestic product of RM1,791.4 billion.

Juwai IQI Co-Founder and Group CEO Kashif Ansari (pic) said: “The fact that homebuying stimulates the economy means that governmental policies that support homebuyers have much bigger benefits for economic growth.

“Real estate remains the best way for Malaysians to build wealth and obtain economic security, but it also is good for the economy. The money we spend on fees, duties and expenses when buying a home also stimulates consumption and production in everything from manufacturing to transport.

“The RM42.5 billion of economic benefits is only part of the full impact of the entire housing sector, because it leaves out the tens of billions of ringgits that materials production, property management, rental property, maintenance and renovation and other real estate activities add to the economy. It also leaves out the value of the real estate itself.

“We also looked at the GDP impact on four states: Kuala Lumpur, Selangor, Johor and Penang. In Selangor, the benefits of home purchases add up 3.1% of GDP, the largest of any state. The benefits of home purchases contributed the least to GDP in Kuala Lumpur, where they add up to 1.7% of GDP. In Johor and Penang, the GDP benefits are relatively high, at 2.9% and 3.0% respectively.

“On average, each time you buy a home, you generate for the economy an average benefit of around RM175,000, but the amount varies by state. In Johor, each transaction adds about RM 150,000 to the economy. The benefits are about RM294,000 in Kuala Lumpur, about RM201,000 in Selangor and about RM174,000 in Penang.

How Juwai Calculated RM42.5 Billions of Spending

“To estimate how much you add to the economy when you buy a home, our team used the statistical method developed by the economists at the United States’ National Association of Realtors (“NAR”), which has nearly 1.5 million members.

“In its ‘State by State Economic Impact Reports,’ the NAR used the same approach to estimate how much housing transactions contribute to the American economy annually.

“In the NAR’s model, four elements make up the total economic benefit of home purchases:

• “Income generated from real estate activities. This consists of commissions, fees, duties and moving expenses. They add up to about 10% of the average home price.

• “Related expenditures. These include furniture and remodelling, related retail purchases, and other goods and services that we determined equal about 3.5% of the average home price.

• “Housing purchase multiplier. Like other economic activity, housing expenditures circle through the economy. Households buy from companies. These companies pay their workers and suppliers. Workers and suppliers also buy goods from other firms, and so on. The multiplier seeks to account for the total impact of the amount spent.

• “New home construction. Home purchases lead to the construction of new homes, and in Malaysia one new home is constructed for every six purchased. The new home construction component of each purchase transaction thus equates approximately 17% of the average home price.”

Fitch Downgrades U.S. Credit Rating, Citing Mounting Debt And Political Divisions

Fitch Ratings has downgraded the United States government’s credit rating, citing rising debt at the federal, state, and local levels and a “steady deterioration in standards of governance” over the past two decades.

The rating was cut Tuesday one notch to AA+ from AAA, the highest possible rating. The new rating is still well into investment grade.

The decision illustrates one way that growing political polarization and repeated Washington standoffs over spending and taxes could end up costing U.S. taxpayers. A lower credit rating, over time, could raise borrowing costs for the U.S. government.

It’s only the second time in the nation’s history that its credit rating has been cut. In 2011, the ratings agency Standard & Poor’s stripped the U.S. of its prize AAA rating after a prolonged fight over the government’s borrowing limit. The Government Accountability Office, in a 2012 report, estimated that the 2011 budget standoff raised Treasury’s borrowing costs by $1.3 billion that year.

At the same time, the huge size of the U.S. economy and historic stability of the federal government has kept its borrowing costs low. Global investors often flock to U.S. Treasury securities during periods of economic turmoil, lowering the interest rate paid by the U.S. government.

Fitch had warned May 24 that it could remove the government’s triple-A rating as Congress again struggled to raise the borrowing limit. A deal was reached nearly a week later that suspended the limit and cut about $1.5 trillion from the government deficit over the next decade.

Fitch cited the worsening political divisions around spending and tax policy as a key reason for its decision. It said U.S. governance has declined relative to other highly rated countries and it noted “repeated debt limit standoffs and last-minute resolutions.”

Biden administration officials strongly criticized Fitch’s move. Treasury Secretary Janet Yellen said it was “arbitrary” and “based on outdated data.”

Yellen noted that the U.S. economy has rapidly recovered from the pandemic recession, with the unemployment rate near a half-century low and the economy expanding at a solid 2.4% annual rate in the April-June quarter.

Fitch informed Biden administration officials that the Jan. 6, 2021 insurrection was a factor in its decision to downgrade because it indicated an unstable government, according to a person familiar with the discussions between the administration and the rating agency. Fitch produced a report last year that showed government stability declined from 2018 to 2021, but increased since Biden assumed the presidency, said the person, who was granted anonymity to disclose private conversations.

Another factor in Fitch’s decision is that it expects the U.S. economy to tumble into a “mild recession” in the final three months of this year and early next year. Economists at the Federal Reserve made a similar forecast this spring but then reversed it in July and said growth would slow but a recession would likely be avoided. – AP

Hong Kong Viable Stocks – PetroChina, TravelSky Technology

(Photo credit: Resource Network Global)

PetroChina is eyeing to resume its bullish movement after staging a rebound from the 21-day SMA line. The stock recently underwent a correction and found support near the moving average line.

RHB Retail Research, in a note today (Aug 2), said if the counter climbs above the HKD5.80 resistance, a bullish bias will emerge.

In this case, the momentum may lift PetroChina towards the next resistance pegged at HKD6.10 and followed by HKD6.40. On the downside, falling below the HKD5.50 support will set off the bearish phase.

TravelSky Technology saw a bullish setup being confirmed after it broke past the resistance on strong volumes.

The stock has breached past the HKD15 resistance to form a “higher high”, firming its position above the 21-day SMA line – suggesting the counter has completed its consolidation and is poised to extend the upside movement.

Riding on the momentum, TravelSky Technology should climb towards HKD16, followed by HKD17. If it retreats below the HKD14 support, this negates the bullish setup.