MY MARKET WATCHTOWER | KLCI REBounds TO OPEN MARGINALLY HIGHER

●US stocks closed: the three major indices collectively closed down

●Expert: The economy is slowing down, inflation is cooling, and the Bank of China will not raise interest rates this week

●RAM: Banks' net interest earnings continue to be pressured

●In August, palm oil inventories increased to 1.9 million tons

●Malaysia Digital Bank is here! GX Bank was the first to be approved to operate

●Follow individual stocks: HARTA, HEXIND, GREATEC, CLMT

US stocks closed down overnight on Tuesday, mainly due to rising crude oil prices putting pressure on stock indexes. The market is paying attention to CPI inflation data this week. At the same time, the US economy and the Bank of America warned that US economic growth may be weaker than expected, and the valuation of US stocks is too optimistic.

The Dow fell 195.74 points, or 0.56%, to 34641.97 points; the NASDAQ fell 10.86 points, or 0.08%, to 14020.95 points; and the S&P 500 fell 18.94 points, or 0.42%, to 4496.83 points.

Bursa Malaysia rebounded from yesterday's decline and opened slightly higher today, mainly due to prudent trading conditions, and lower valuations attracted investors back to the market.

There were 272 rising stocks, 211 falling stocks, and 952 had no ups or downs.

As economic growth slows and inflation continues to cool down, economists expect the Bank of China to remain unchanged at 3.0% overnight policy interest rate (OPR), as is the case with other central banks in Asia.

After visiting 27 economists, foreign media came to a unanimous conclusion that the Bank of China will not raise interest rates at the Monetary Policy Committee meeting this Thursday (7th).

Winka Huaren, an ASEAN economist at OCBC Bank, said that inflationary pressure is easing, the Fed's hawkish tendencies are under control, and there are currently limited reasons for the Bank of China to change its policy stance.

“Currently, the Bank of China's focus is still on financial stability and external risks,”

He said that the current “slightly relaxed” policy of the Bank of China can still support a slowdown in growth, so there is no urgent need to relax the policy. Furthermore, the Bank of China's interest rate hike cycle is moderate compared to other Asian peers, which means there is less room for interest rate hikes.

Of the 25 economists who made predictions, 24 expected the central bank to keep interest rates at 3.0% by the end of the year, while only 1 economist expected an increase of 25 basis points to 3.25% in November.

According to the Malaysian Rating Agency (RAM), the profit performance of the eight domestic banks in the next quarter was mixed, and indicates that the trend of net interest earnings (NIM) narrowing will continue.

Through a statement, RAM pointed out that in the second quarter, most banks faced the problems of a further decline in NIM and an increase in loan loss provisions. The industry's average NIM for the second quarter was 2.08%, down 5 basis points from quarter to quarter.

“In any case, compared to a quarterly decrease of 29 basis points in the first quarter of this year, the decline in the second quarter was not that serious.”

Huang Yunqing (transliteration), co-head of the ratings department of RAM financial institutions, said that continuous interest rate hikes in 2022 prompted banks to enjoy significant NIM growth last year, but with earnings already peaking, this trend reversed in the first half of 2023.

“The increase in interest on customer deposits has led to higher financing costs in the banking industry, as well as increased competition among peers in terms of deposits, and the continued normalization of current and savings account (CASA) ratios, all have had a significant impact on NIM.”

The good news is that competition for customer deposits has abated, and at the same time, the National Bank raised interest rates by 25 basis points in May, allowing NIM to begin to stabilize.

Due to increased palm oil production and weak exports, Bloomberg predicts that Malaysia's palm oil inventory at the end of August will soar to its highest level in nearly half a year.

According to Bloomberg survey data, China's palm oil stocks will increase by 10% month-on-month to 1.9 million tons by the end of August.

As for palm oil production, it is estimated that it will rise 7.5% month-on-month to 1.73 million tons, the highest level since October last year; however, exports are estimated to decrease by 1.5% to 1.33 million tons.

Furthermore, since palm oil prices have remained high recently, which affects demand, it is difficult for Malaysian palm oil futures to remain above RM4,000.

The bank issued a statement on Tuesday stating that it successfully passed the deadline set by the Bank of China, that is, before April 2024, and became the first digital bank to be approved for operation, but currently it is only open for test use by group employees.

The bank said it will use the latest technology to provide services and meet the needs of niche groups or small, medium and micro enterprises (MSMEs).

Furthermore, the bank can provide services 24 hours a day, including providing a variety of channels and platforms to support customer needs.

The bank pointed out that for niche groups and micro, small and medium-sized enterprises, the inability to obtain financial services is nothing new, and it is even more difficult to raise at least RM1,000 as an emergency fund. For this reason, the emergence of this digital banking industry is believed to bring about positive changes.

Focus on individual stocks

Executive Chairman He Tejia Guan Jin'an said at a press conference after the shareholders' meeting today that the glove industry is currently facing multiple challenges and is expected to continue until the end of 2024 or 2025 before it can see the light of day.

Kwan Kam On added that market demand fell sharply due to users rushing to buy and stocking up in large quantities during the pandemic. However, as the expiration date of glove products is about to expire, customers will need to restock them again, and it is estimated that market demand will pick up at that time.

“Our glove products are generally valid for 3 to 5 years, which predicts that the market's glove demand recovery will begin at the end of 2024. Coupled with the current average price of products nearing the bottom, it is expected to help stimulate future glove market demand.”

He pointed out that the current unfavorable factors will continue to exist, and problems such as the imbalance between supply and demand in the market and regional competition will continue to plague He Tejia.

According to the statement, after reaching the terms, the company expects to complete the acquisition by the end of this year.

Benny Hong, the company's managing director, said that Pacific Office has 33 years of operating experience and is a leader in the stationery and office supplies supply business.

“The company has a very extensive customer database across the country, which brings us added value and creates synergies with our existing business.”

Guo Lingling, the group's financial director and environmental, social and regulatory (ESG) leader, pointed out that the equipment in question will generate about 43,000 megawatt-hours of green energy, which is equivalent to the fixed carbon emissions of 54.6 million trees within 10 years.

“This will also reduce electricity costs for our BK1 plant by about RM900,000 per year.”

According to the statement, CapitaMall will receive a net revenue of RM50.5 million from this divestment, and all of this maternity care will be used to repay the loan.

According to the total loan amount up to the end of June, the maternity care debt ratio will improve from 44.1% to 43.5%.

CEO Chen Chunxiang (transliteration) said in the statement that this is the first time that CapitaMall has sold out of the industry. This is also in line with the TRUST's strategy of divesting non-core assets for arbitrage and restructuring its asset portfolio.

The 12-storey 3 Damansara office building, located in Petaling Jaya, is part of the 3 Damansara integrated commercial development project.