MY MIDDAY INSIGHTS | REGIONAL RETREAT AFTER FED DOWNER, KLCI DROP 3.40 POINTS

Although the Federal Reserve remains on hold as expected, it suggests that interest rates will be raised again this year, causing the three major US stocks and Asian stocks to fall together overnight.

The half-day trading volume was 1.8 billion shares, with a transaction value of RM1 billion.

The FTSE Malaysia All Stock Index closed at 10,723.12 points, down 31.92 points.

There were 274 rising stocks, 549 falling stocks, 712 had no ups or downs, and 839 had no transactions.

As of 12:30 noon, the ringgit exchange rate was 4.6833 to 1 US dollar.

The Federal Reserve remains on track as expected. The bitmap suggests that interest rates will be raised again during the year, and interest rates will remain unchanged for a long time thereafter.

In the interest rate statement released on Wednesday, the Federal Open Market Committee (FOMC) once again mentioned that officials will determine “the extent to which additional policy tightening is appropriate.”

Federal Reserve Chairman Powell said that officials “are ready to raise interest rates further if appropriate, and the FOMC plans to keep monetary policy at a restrictive level until it is convinced that inflation is continuing to fall towards the target.”

The FOMC kept the federal funds rate unchanged in the 5.25%-5.5% range. Quarterly forecasts show that 12 out of 19 officials are inclined to raise interest rates again within the year.

Powell said at the press conference, “We are committed to achieving and maintaining a sufficiently restrictive monetary policy stance, hoping that the inflation rate can be reduced to 2% over time.”

He stressed that the Federal Reserve will “act with caution” when evaluating data and changing economic prospects and risks. This attitude echoes his statement at the Jackson Hole annual meeting last month.

Powell said, “We think we're very close to what we need to achieve.”

Due to the strong economy and labor market, expectations of Fed officials for policy easing next year are lower than before.

According to the median estimate, they currently expect the federal funds rate to fall to 5.1% by the end of 2024, which is higher than the 4.6% forecast in June. The latest forecast is that interest rates will fall to 3.9% by the end of 2025 and 2.9% by the end of 2026.

US Treasury bonds declined in response, and the yield on 2-year, 5-year, and 10-year treasury bonds all rose to the highest level in more than a decade. The dollar reversed its decline. The S&P 500 index retreated.

Officials continue to expect inflation to fall below 3% next year and return to 2% in 2026. The economic growth forecast was raised to 2.1% in 2023, and the growth rate is expected to slow to 1.5% in 2024.

Policymakers now expect the unemployment rate to rise to 4.1% in 2024, compared to 4.5% in June.

Powell pointed out at the press conference that a “soft landing” is not the Federal Reserve's baseline expectation for the economy, but rather a major goal on the road to fighting inflation.

Asian currencies came under pressure on Thursday after hawkish comments from the Federal Reserve suggested that the policy would remain restrictive for a longer period of time.

The Federal Reserve kept the benchmark interest rate unchanged, but left the door open for another rate hike within this year. The US stock market fell, and US bond yields climbed. Market participants in the Asian region believe that the trend in the US market is expected to trigger a ripple effect in Asia, and the Bank of Japan policy meeting on Friday is the next important focus.

Asian currencies generally declined today. As of 2.30 p.m. local time, the ringgit reached the level of 4.6875 and rebounded slightly.

John Weir, chief global strategist at Nikko Asset Management in Tokyo, said, “The bitmap is more hawkish than expected. Federal funds futures suggest that interest rates will rise by 13 basis points in December 2024, equivalent to half of a rate hike. This is a mild negative factor for Japan and other Asian markets, and Hong Kong is relatively sensitive to this.”

Matthew Haupt, fund manager of Wilson Asset Management in Sydney, also said, “It is expected that hawkish signals from the Federal Reserve will put pressure on risky assets in the very short term, and the dollar will strengthen over a longer period of time.”

Delivery Hero said the sale is still in the early stages, and the divested shares include the Pandas brand (Foodpanda) from Malaysia, Singapore, the Philippines, Thailand, Cambodia, Myanmar and Laos.

“The sales negotiations are in the preliminary stages, and it has not been determined whether the deal will be completed.”

The company responded to the German “Economic Weekly” report about the divestment of Foodpanda. Delivery Hero's stock price once surged 13.5% on Wednesday as the news came to light.

Currently, it is still unknown who will take over, but earlier news indicated that Grab plans to buy shares in Foodpanda for more than 1 billion euros (about RM4.987 billion). However, Grab has not made any response on this matter.

Delivery Hero CEO Oosberg said the company had “slightly withdrawn” its investments in relevant regions as early as last month to focus on profitability.

“This also indicates that some customers may not be interested in the services we are providing today.”

Foodpanda operates in 11 markets in Asia. In addition to the countries mentioned above, there are also Hong Kong, Taiwan, etc.

During the epidemic, the takeout delivery business exploded. The main reason was the continuous introduction of attractive discounts. In addition, in order to avoid physical contact or transmission, people chose takeout to solve the problem of 3 meals a day.

Interestingly, Olsberg also indicated last month that Asia is the region with the most investment opportunities.

Unfortunately, after the pandemic ended, investors' confidence in Delivery Hero declined drastically, so the company's mission was nothing more than to work to turn losses into profits and achieve profits.

In the first half of last year, the company had a total net loss of 323 million euros (approximately RM1,611 million), but in the first half of this year, it achieved net profit before interest amortization and depreciation (EBITDA) correction.

In any case, the company's revenue for the second quarter increased 26.11% year-on-year to RM79.61 million.

In the first half of the fiscal year, KRONO Asia made a total net profit of RM5.6 million, 5.23% year-on-year, while revenue increased 18.42% year-on-year to RM142.64 million.

According to KRONO Asia, its revenue mainly comes from China, Singapore and the Philippines, which contributed 34.8%, 29.3% and 21.7% of revenue, respectively, in the first half of the fiscal year.

Through the MOU mentioned above, the two sides will explore potential joint venture plans to install rooftop solar power generation systems in all towns and development projects under Senami Industries.

Pilot projects related to the solar energy plan include renting out up to 1,000 roof units or installing rooftop solar systems in the City of Elmina project.

In addition, Morinami Industries and National Energy will also explore the construction of electric vehicle charging stations and the implementation of micro-grid solutions in the former project.