Behind The Action: Pankaj C Kumar – Friday, 11 June 2021
Markets
According to the US Treasury Secretary and former Fed Chair, Jenet Yellen, while inflationary pressure is likely to persist and continue on a y-o-y basis, it is not permanent. She also commented that the US should push for the US$4 trillion spending plan, a move that will see not only higher inflation into next year but also higher interest rates. At the same G7 summit, finance ministers entered into a landmark decision that will pave the way for the imposition of a minimum global corporate tax of at least 15%. Locally, EPF announced a stellar 1Q 2021 performance with gross investment income rising by 59% y-o-y to RM19.29bil, with 74% of the income derived from its equity exposure. Interestingly, EPF also revealed that it had to-date approved RM57.97bil in i-Sinar withdrawals for 6.49mil members, while under the i-Lestari facility, RM20.8bil has been paid out to 5.27mil members.
Economy
The May 2021 Institute for Supply Management (ISM) for the Non-Manufacturing sector rose to 64.0 from 62.7 in the preceding month. Investors’ focus this week was obviously on inflation readings, both from the US and China. US Consumer Price Index (CPI) for May came in at its fastest pace in 13 years with a jump of 5% y-o-y, ahead of market expectations of a 4.7% rise, while the core inflation rate jumped 3.8% y-o-y against a forecast of 3.5% increase. Meanwhile, China’s May 2021 CPI increased by 1.3% y-o-y but the Producer Price Index (PPI) surged 9% y-o-y, a fresh 13-year high. On external trade, Chinese exports for May 2021 came in 27.9% higher y-o-y but imports surged 51.1%, which was the highest in more than 10 years. China’s trade balance with the US remains in its favour as the May trade surplus came in at US$31.8bil, up 13.1% from April’s surplus of US$28.1bil. Locally, Bank Negara revealed that Malaysia’s total international reserves as at 31-May stood at US$110.9bil, US$0.3bil higher compared with US$110.6bil as at May 12. Malaysia also reported approved investments data this week which showed foreign direct investments (FDIs) for the 1Q of 2021 leapfrogging to RM54.9bil from RM11.4bil a year ago, a jump of 383% y-o-y. In related news, Austria’s AT&S, a printed circuit board and integrated circuit substrates manufacturer, unveiled its plan to have its Southeast Asia production hub in Malaysia and with a proposed investment of €1.7bil or RM8.5bil. In other news, Malaysia’s unemployment rate for April 2021 improved by 0.1 percentage points to 4.6% while Malaysia’s May palm oil stock level rose 1.5% to reach 1.57mil tonnes as crude palm oil production increased 2.8% but exports fell by 6%.
Corporate
The FBM KLCI 30-stock index will see one change that will take effect from Monday, June 21, 2021, with Mr. D.I.Y. Group (M) replacing Supermax. Meanwhile, Jardine Cycle & Carriage Limited only managed to secure 88.04% of Cycle & Carriage Bintang at the close of the offer period to take the latter private at RM2.40 per share. In other M&A activities, Kuala Lumpur Kepong (KLK) announced a deal to buy a 56.2% stake in IJM Plantations (IJMP) from its parent company, IJM Corporation at RM3.10 per share, valuing the deal at RM1.534bil. KLK will also extend a mandatory general offer to acquire all the remaining IJMP shares not already held by KLK and persons It’s All Transitory Pankaj C Kumar BEHIND THE ACTION acting in concert upon the execution of the Sale and Purchase Agreement, and the same becoming unconditional, at a cash offer price of RM3.10 per IJMP share. Top Glove meanwhile reported its 3Q FY2021 report card that missed market expectations with both revenue and net earnings falling by 22.4% and 29% to RM4.16bil and RM2.03bil respectively as the effect of lower average selling prices kicks in. Equity Global equity markets closed mixed to firmer the past week with markets that trended higher experiencing gains of between 0.1% and 1.2% while markets that fell eased between 0.1% and 0.8%. The KLCI closed the four-day trading period 0.7% lower at 1,579.90 pts. For the week, net foreign outflow amounted to RM295mil as retailers and local institutions maintained their respective net buying interest at RM271.1mil and RM23.9mil.
Eye On Week Ahead
A slew of economic data points out of the US are due next week. On Tuesday, the monthly retail sales will be out with consensus looking at a flat m-o-m growth of zero percent. On the same day, the IPI and PPI too are expected to be released while housing starts and building permits are due on Wednesday, as the market is looking at 1.57mil and 1.73mil annualized rate respectively. The most anticipated event next week is the 2-day Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday. The market anticipates no change to the US Fed Fund Rate but the Fed’s assessment of the factors that determine its rate moves and its tapering plans, if any, will be closely monitored.