MY Market Watchtower | WEAK SENTIMENT AHEAD, KLCI DROP 5.50 POINTS

●Fed minutes suggest possible further rate hikes, overnight U.S. stocks closed lower

●Stocks to watch: PERSTIM, PTRANS, SAM, HSSEB

Us stocks closed lower on Wednesday, with major indexes falling for the second consecutive trading day. Minutes from the July Federal Reserve monetary policy meeting mentioned the need to further tighten policies due to inflation risks, suggesting possible continued rate hikes.

All three major us stock indexes recorded declines, with Nasdaq and S&p 500 falling by 6.1% and 4%, respectively, while Dow fell by 2.2%.

Due to the subdued market sentiment for profit-taking, the Malaysian exchange opened slightly lower on Thursday, echoing the weak sentiment in regional markets.

At 9:15 am, the FBM KLCI dropped 5.50 points from the Wednesday closing of 1463.51 points to 1458.01 points.

There were 141 gaining stocks, 272 declining stocks, 310 unchanged, and 1617 not traded.

Turnover reached 0.51211 billion shares, valued at 0.13854 billion Malaysian Ringgit.

The Federal Reserve released the minutes of the July monetary policy meeting. At the July meeting, the Fed raised interest rates to their highest level in over 22 years.

The minutes state that inflation risks may require further policy tightening. Only two Fed officials leaned towards keeping rates stable in July, with most Fed officials believing there is a "significant" upside risk to inflation. Several participants warned of the risk of policy tightening excessively. Some participants believe that economic risks are becoming more balanced.

The minutes indicate that participants expressed that economic activity appears to be gradually slowing down. Federal Reserve staff no longer expect an economic recession, forecasting a slight increase in the unemployment rate.

The minutes emphasize the inflation risk: "Participants noted that inflation is unacceptably high and more evidence is needed to convince people that price pressures are subsiding."

The minutes state that real GDP grew at a moderate pace in the first half of this year. The labor market remains very tight, although imbalances in the labor market supply and demand are gradually decreasing. Consumer price inflation remained high in May, with current information indicating a slight decrease in inflation in June, but still at elevated levels.

In the second quarter, total non-farm employment set its lowest monthly average growth rate since the mid-2020 economic recovery, although employment growth remains strong compared to pre-pandemic levels. Similarly, according to the Job Openings and Labor Turnover Survey, the private sector job vacancy rate in May fell to its lowest level since March 2021, but still well above pre-pandemic levels.

The data indicates that inflation continues to show signs of slowing down but remains at a high level. As of May, the overall personal consumer expenditure price has risen by 3.8% over a 12-month period, while the core personal consumer expenditure price excluding energy prices and many consumer food price changes has risen by 4.6%. The 12-month mean of the personal consumer expenditure price index compiled by the Dallas Federal Reserve Bank in May is revised to 4.6%.

In June, the CPI year-on-year growth rate was 3.0%, while the core CPI growth rate was 4.8% during the same period. Short-term inflation expectations indicators have decreased along with actual inflation but remain higher than pre-pandemic levels. In contrast, medium to long-term inflation expectations indicators are within the range of the decade before the pandemic.

Although the dot plot released in June shows that most officials lean towards two more rate hikes this year, Powell emphasized after the July rate decision announcement that the Fed will make decisions at each meeting.

A report released by the U.S. Department of Commerce shows that retail sales in the U.S. rose by 0.73% month-on-month in July, marking the largest increase in six months, with growth for the fourth consecutive month, surpassing market expectations of 0.4%. The year-on-year increase was 3.17%. Core retail sales rose by 1% month-on-month, also exceeding the previous expectation of 0.4%.

Since March of last year, the Fed has cumulatively raised rates by 525 basis points. Although borrowing costs have reached the highest level in 22 years, two-thirds of the economy represented by consumer spending remains resilient, reducing the risk of a U.S. economic recession.

Following the release of unexpectedly strong U.S. retail sales data, concerns about interest rates remaining high for a longer period have intensified, leading to a simultaneous decline in U.S. stocks and bonds. Apart from the fall in U.S. stocks, the yield on the 10-year U.S. Treasury bonds once touched 4.274%, hitting a high not seen since October 24th of last year, while the 2-year U.S. Treasury bond yield briefly reached 5.024%, the highest since July 7th.

The company's first-quarter revenue was 0.2 billion 39.16 million ringgit, a drastic 45.50% year-on-year decline, nearly halved.

The tin plating industry reported that both sales volume and selling prices declined in the first quarter, leading to a decrease in revenue. At the same time, it also faced a provision loss of 8.1 million ringgit and a positive loss of 7.8 million ringgit, resulting in a profit to loss transition.

Perak Transit reported to the exchange on Wednesday that as of the end of the second quarter in late June, it recorded revenue of 41.53 million 3000 ringgit, a 1.41% year-on-year increase.

Looking at the first half of the year, the net profit reported was 31.17 million 7000 ringgit, a 7.09% year-on-year increase, while the revenue reported was 88.91 million 6000 ringgit, a 7.4% year-on-year increase.

Among them, the integrated bus station business contributed to the performance improvement from the previous quarter.

Overall, post-pandemic strong pedestrian and transportation demand recovery momentum continues, with the group expecting passenger traffic to continue growing in 2023.

Pili Express remains bullish on Jinbao Terminal, while Meiluo Terminal will be completed in the second half of the year.

At the same time, the company's first quarter revenue was 0.37 billion 8.89 million Ringgit, down 13.02% year-on-year.

SAM Engineering's first quarter performance suffered, mainly due to drag from the equipment business.

The equipment business contributed 0.2 billion 11.87 million Ringgit or 68.81% of the company's revenue in the first quarter, but decreased by 30.9 million Ringgit year-on-year.

SAM Engineering stated that its equipment business faced a decline in customer demand in the semiconductor and data storage sectors, leading to reduced revenue.

Another key business—aviation business, reported a year-on-year revenue growth of 1.1 million Ringgit, reaching 96.02 million Ringgit, mainly benefiting from favorable foreign exchange.

The company reported to Bursa Malaysia on Wednesday, with a 29.04% year-on-year increase in second-quarter revenue to 48.85 million ringgit.

Looking at the first half of the year, revenue increased by 27.50% year-on-year to 94.71 million ringgit; while net profit rose by 47.97% to 9.53 million ringgit.

Deputy Chairman Tan Sri Kuna Sittanpalan stated that the company will continue to expand its partner relationships to open up more channels for revenue, thereby driving the company's long-term net profit performance.

Furthermore, with the diversified strategy in the past, the company is now entering a new growth phase.