Euro zone bond yields rise ahead of German inflation data

Following regional readings, Germany’s national data due at 1200 GMT is expected to show inflation rose 2.3 per cent year-on-year in May, compared to 2 per cent in April, according to a Reuters poll, holding above the European Central Bank’s target of close to but below 2 per cent. — AFP pic

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LONDON, May 31— Euro zone bond yields rose ahead of Germany’s inflation reading today, though kept below recent highs, ahead of broader euro zone data tomorrow.

It was an otherwise quiet trading session with traders in the United Kingdom and United States on public holiday.

Though yields started the week higher, they stayed far below recent highs, as expectations of a dovish tone from the European Central Bank at its June 10 meeting continued to drive the market.

Bond yields rose sharply earlier in May driven by a brighter economic outlook, prompting speculation that the ECB may slow its bond buying. But comments from ECB President Christine Lagarde and other policymakers that it is too early to remove the support have brought down bond yields.

Inflation has been bond investors’ key focus this year, driven higher by pent-up demand supply constraints as economies re-open, and whether it will be transitory as central bankers argue.

Today, following regional readings, Germany’s national data due at 1200 GMT is expected to show inflation rose 2.3 per cent year-on-year in May, compared to 2 per cent in April, according to a Reuters poll, holding above the European Central Bank’s target of close to but below 2 per cent.

Germany’s 10-year yield, the benchmark for the bloc, was up nearly 2 basis points to -0.17 per cent by 0720 GMT, far below its recent two-year highs at -0.074 per cent.

“Above-consensus CPI readings from Germany today could pose risks to Bunds though as this would be a harbinger for a higher euro area flash (inflation) tomorrow,” Commerzbank strategist Rainer Guntermann told clients.

But he added that with core euro area inflation, which strips out volatile food and energy costs, likely to remain below 1 per cent, that is unlikely to change ECB sentiment.

Italy’s 10-year yield meanwhile rose nearly 1 basis point to 0.93 per cent, keeping the closely watched gap between Italian and German 10-year yields at 109 bps, the lowest in over two weeks.

In the primary market, Belgium will raise up to €3.4 billion (RM17.1 billion) from the re-opening of bonds due 2025, 2031 and 2050.

Focus this week is on the European Union, which is expected soon to reveal details about the funding plan for its coronavirus recovery fund after all member states backed the ratification of a law that will allow the EU to start borrowing on the market. — Reuters

Source: Malay Mail

PropertyGuru to acquire REA Group’s units in Malaysia, Thailand

KUALA LUMPUR, May 31 — PropertyGuru Group has entered into an agreement to acquire all the shares in REA Group’s operating entities in Malaysia and Thailand, which operate iProperty.com.my and Brickz.my in Malaysia as well as thinkofliving.com and Prakard.com in Thailand.

The transactions are expected to complete in July 2021.

In a statement today, PropertyGuru Group said as part of the agreement, REA Group would receive an 18 per cent equity interest in the enlarged PropertyGuru Group and appoint a board director.

PropertyGuru Group chief executive officer (CEO) and managing director Hari V. Krishnan said this acquisition is a key milestone in the company’s history and is an exciting opportunity to integrate a trusted local brand in Malaysia and demonstrated its commitment to the market.

“A key objective of the transaction is to accelerate the development of the proptech industry in Malaysia,” he said.

He said the addition of iProperty.com.my and Brickz.my would bolster PropertyGuru Malaysia’s ability to provide consumers with the most diverse digital marketplaces, together with the most comprehensive set of data, actionable insights and services to support home ownership aspirations of Malaysians.

Krishnan said PropertyGuru.com.my and iProperty.com.my are two rapidly growing and best-in-class property marketplaces in Malaysia.

“It will enable both companies to combine resources, accelerate innovation and provide enhanced digital solutions to home seekers, property agents and developers.

“It will allow the group to share the best data solutions and insights and bring transparency and access to the Malaysian property market as it continues to simplify the buying journey for home seekers,” he said.

Meanwhile, REA Group CEO Owen Wilson said, by joining PropertyGuru Group, it has created new opportunities for collaboration and access to a deeper pool of expertise, technology and investment.

“It positions these already strong brands well to accelerate the next wave of proptech innovation in South-east Asia,” he added. — Bernama

Source: Malay Mail

Securities Commission opens investigation into oil firm Serba Dinamik

The Securities Commission is probing the firm after the company's auditor flagged issues last week. — Reuters pic

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KUALA LUMPUR, May 31 — Malaysia's Securities Commission said it has commenced an investigation into oil and gas firm Serba Dinamik Holdings Bhd after the company's auditor flagged issues last week.

In an email response to Reuters on Monday, the regulator said it has secured documents and records from the company to assist its investigation. — Reuters

 

Source: Malay Mail

China’s factory activity slows slightly in May as raw materials costs surge

The official PMI, which largely focuses on big and state-owned firms, has stood above the 50-point mark that separates growth from contraction for over a year.. — Reuters pic

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BEIJING, May 31 — China’s factory activity slowed slightly in May as raw materials costs grew at their fastest pace in over a decade, weighing on the output of small and export-oriented firms.

The official manufacturing Purchasing Manager’s Index (PMI) inched lower to 51.0 in May, against analyst expectations that it would remain unchanged from April at 51.1, data from the National Bureau of Statistics (NBS) showed today.

The official PMI, which largely focuses on big and state-owned firms, has stood above the 50-point mark that separates growth from contraction for over a year.

While the Chinese economy has largely shaken off the gloom from the Covid-19 pandemic, offficials warn the foundations for the recovery are not yet secure amid problems like higher raw material costs and the pandemic situation overseas.

Iris Pang, chief economist for Greater China at ING, said in a note that “external demand will likely remain flat” as economic recoveries in the United States and parts of Europe are likely to be “offset by increasing Covid cases in Asean, which is the biggest trade partner of China.”

Some emerging Covid-19 cases China’s Guangdong province, where most electronic factories are located, continued semiconductor chip shortages and high commodity prices are also among the challenges facing producers, she added.

A sub-index for new export orders stood at 48.3 in May, down from 50.4 in the previous month and slipping sharply into contraction.

A sub-index for raw material costs in the official PMI stood at 72.8 in May, up from April’s 66.9 and hitting the highest level since 2010.

Prices for commodities such as coal, steel, iron ore and copper have surged this year, fuelled by post-lockdown recoveries in demand and easing liquidity globally.

China’s policymakers have repeatedly expressed concern about rising commodity prices in recent weeks and called for stricter management of supply and demand and to crack down on “malicious speculation.”

“We expect commodity prices to stabilise in the coming months,” said Louis Kuijs, head of Asia economics at Oxford Economics.

Tougher oversight on spot and futures markets and increased global commodity supply in the second half of 2021 should help reduce cost pressures on China’s firms, he said.

In addition to surging raw material prices, Chinese factories are struggling with high shipping costs and an appreciating Chinese currency. Some are able to pass on the higher costs to overseas customers, while some small firms are stopping taking orders to avoid losses.

A sub-index for the activity of small firms stood at 48.8 in May, sharply down from April’s 50.8.

Firms continued to lay off workers and at faster pace, the official data also showed.

In the services sector, activity expanded for the 15th straight month, and at a faster pace, with the non-manufacturing PMI index rising to 55.2 from 54.9 the month before.

China posted a record 18.3 per cent growth in the first quarter, but analysts expect the brisk expansion to moderate later this year. — Reuters

Source: Malay Mail

Asia shares try to extend rally ahead of US jobs test

Chinese blue chips slipped 0.4 per cent, while a survey showed a slight slowdown in factory activity but a pick-up in the giant service sector. — Reuters pic

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SYDNEY, May 31 — Asian shares were trying to extend their recent rally to a third week today in the hope US jobs figures show the expected revival in hiring in May and keep the global recovery on track.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.3 per cent, having rallied 2.2 per cent last week. Japan’s Nikkei fell 0.7 per cent, while Australia touched a fresh all-time peak.

Chinese blue chips slipped 0.4 per cent, while a survey showed a slight slowdown in factory activity but a pick-up in the giant service sector.

“It feels like a market looking for direction in the face of uncertainty around the interplay between much-feared inflation and much hoped-for growth recovery,” says Patrik Schowitz, global multi-asset strategist at JP Morgan Asset Management.

“In this environment, while we continue to reduce risk exposure, we stay long given just how strong growth is likely to stay, as well as the remaining upside to economic and earnings growth expectations.”

Markets in the United States and Britain are closed for a holiday, but futures were still trading in Asia with the Nasdaq up 0.2 per cent and S&P 500 ahead by 0.1 per cent. EUROSTOXX 50 futures eased 0.1 per cent.

The main event of the week will be US payrolls on Friday with median forecasts at 650,000 but the outcome is uncertain following April’s shockingly weak 266,000 gain.

That April figure was close to 750,000 lower than forecasts, the largest “miss” in the history of the series.

NatWest Market economist Kevin Cummins noted that even with a rise of around 550,000 total payrolls would still be 7.7 million below the February 2020 level.

“The labour market would still be considered a long way from being recovered,” he added. “In our opinion, the data are unlikely to convince Fed Chair Powell that progress has been substantial enough just yet to start signalling tapering.”

The Federal Reserve next meets on June 16 and this week will be the last chance for members to talk on policy before the blackout period starts on June 5.

So far, investors have taken the Fed at its word that the labour market needs to improve a lot more before it talks of tapering. That helped yields on US 10-year notes ease to 1.58 per cent even as data on core inflation topped forecasts.

Twin deficits

The economic outperformance of the United States has a downside in that it has sharply widened the country’s trade deficit and added to its need for foreign funding for an already huge budget shortfall. “The US economy will face a period of high fiscal deficits and rising debt levels for the foreseeable future, ensuring that ‘twin deficit’ risk for the USD will remain a feature of the market landscape for years to come,” said Ray Attrill, head of FX strategy at NAB.

The dollar index stood at 89.983, near a five-month low. The euro was steady at US$1.2199 (RM5.05), just off a four-month high of US$1.2266 hit last week.

The dollar has fared better on the Japanese yen as investors borrow the currency at super-low rates to buy higher-yielding assets. The dollar was last at 109.84 yen after touching a two-month top of 110.19 last week.

China’s yuan has gained 1.7 per cent so far in May to trade at three-year highs and breach the psychologically important 6.4 per dollar level.

Concerns about global inflation and extreme volatility in cryptocurrencies has been a boon for gold which was holding at US$1,903, after hitting a four-month high at US$1,1912 last week.

Oil prices were firm after gaining more than 5 per cent last week to reach two-year closing highs as expectations of a rebound in global demand outweighed concerns about more supply from Iran once sanctions are lifted.

All eyes will be Opec this week as it reviews its supply agreement, and any hint of an increase in output could pressure prices.

Brent added 13 cents to US$68.85 a barrel, while US crude rose 21 cents to US$66.53. ­— Reuters

Source: Malay Mail

Bursa Malaysia lower at mid-morning on selling in index-linked counters

Market breadth was negative with losers overwhelming gainers 840 to 183, while 275 counters were unchanged, 884 untraded and 58 others suspended. — Bernama pic

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KUALA LUMPUR, May 31 — Bursa Malaysia remained lower at mid-morning weighed by selling in index-linked counters.

Out of the 30 heavyweight counters, only Top Glove traded higher, putting on four sen to RM5.13 while PPB Group was flat at RM18.62.

The rest were in the red.

At 11am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) shrank 14.01 points, or 0.88 per cent, to 1,580.43 from 1,594.44 at Friday’s close.

The index opened 23.40 points lower at 1,571.04 and declined further to a low of 1,568.47 in the morning trade.

Market breadth was negative with losers overwhelming gainers 840 to 183, while 275 counters were unchanged, 884 untraded and 58 others suspended.

Total volume stood at 3.27 billion units worth RM1.56 billion.

Among other heavyweights, Maybank fell three sen to RM8.17, Public Bank slipped five sen to RM4.22, PChem erased 15 sen to RM7.99, and Tenaga was seven sen weaker at RM9.92.

Of the actives, HB Global rose seven sen to 36 sen, Managepay Systems was up one sen to 24 sen, and Kumpulan Jetson was 19 sen higher at 77.5 sen.

The top losers list was led by Nestle, dipping 70 sen to RM135.80, followed by Serba Dinamik which declined 48 sen to RM1.13, and Hengyuan Refining was 42 sen lower at RM5.26.

On the index board, the FBM Emas Index slid 109.17 points to 11,469.33 and the FBMT 100 Index slipped 101.75 points to 11,174.85.

The FBM Emas Shariah Index decreased 113.05 points to 12,733.99, the FBM 70 weakened 144.73 points to 14,724.92, and the FBM ACE gave up 107.13 points to 7,736.75.

Sector-wise, the Financial Services Index lost 149.67 points to 15,017.46, the Plantation Index declined 49.37 points to 6,859.09, and the Industrial Products and Services Index edged down 2.72 points to 190.37. — Bernama

Source: Malay Mail

China officials talk down buoyant yuan as basket hits five-year high

The central bank-backed Financial News also warned of possible factors that could lead the yuan to weaken against the dollar, and regulators said last week they will crack down on forex market manipulation, while reiterating that China’s currency policy will remain unchanged. — Reuters pic

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SHANGHAI, May 31 — China’s yuan climbed to a five-year top against a trade-weighted basket of currencies today, exerting pressure on the country’s exporters, even as officials continued to warn against excessive speculation.

Former foreign exchange regulator Guan Tao joined a slew of current and former Chinese officials cautioning against speculative yuan trade in a commentary in the official China Securities Journal.

“Recently, there are rising signs of cyclical ‘herding’ in the domestic forex market,” Guan, a former senior official at the State Administration of Foreign Exchange (SAFE), wrote.

Expectations of persistent yuan strength “not only harm the orderly operation of the forex market, but also increase the financial burden of the exporting sector.”

Guan’s comments come after a former central bank official told the official Xinhua news agency that the yuan may have overshot in its rapid appreciation against the US dollar, and that the rise is not sustainable.

The central bank-backed Financial News also warned of possible factors that could lead the yuan to weaken against the dollar, and regulators said last week they will crack down on forex market manipulation, while reiterating that China’s currency policy will remain unchanged.

The string of official comments come after the yuan recorded its best weekly performance against the dollar since November last week, though signs of concern over strong one-way bets on the currency have slowed the rally.

Today, the People’s Bank of China (PBOC) lifted the yuan midpoint to a three-year high. It set guidance at 6.3682 per dollar prior to market open, 176 pips firmer than Friday and the strongest since May 17, 2018.

The firmer fixing also pushed the trade-weighted yuan basket index up to 98.22, the firmest since March 29, 2016. Market players have widely viewed the 98 mark as the basket’s ceiling, as levels above that are seen to pose a disadvantage for the yuan versus its trading partners.

Spot yuan rose to a top of 6.3611 per dollar this morning, its strongest since May 18, 2018, before giving back some gains to trade at 6.3627, up 47 pips on the day.

Offshore yuan strengthened to 6.3565 per dollar, its firmest since May 23, 2018, and was last changing hands at 6.3585.

“For banks’ proprietary trade, traders are paying attention to the official comments and attitude while also monitoring state bank actions,” said a chief trader at a foreign bank in Shanghai.

He said the yuan’s rise could face some resistance as overseas corporates buy dollars to make upcoming dividend payments.

“Some had purchased dollars mid-month, but these flows are not over yet. Some companies are monitoring the market and waiting for better prices.”

Iris Pang, chief China economist at ING in Hong Kong, said in a note that yuan uncertainty presents a headache for companies, but that warnings from the PBOC about volatility should not be ignored.

“We believe that the PBOC is experimenting how much volatility the market can endure, and how behaviour of market participants can move the yuan. The PBOC could use window guidance to (financial institutions) not to speculate on yuan direction,” Pang told Reuters. — Reuters

Source: Malay Mail

Ringgit opens lower against US dollar ahead of full lockdown

Against other major currencies, the local note was also traded lower at opening. — Reuters pic

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KUALA LUMPUR, May 31 — The ringgit opened lower against the US dollar today, as investors adopted a cautious measure ahead of the full movement control order (FMCO) across the country starting tomorrow, an analyst said.

At 9.01am, the local currency declined to 4.1420/1500 against the greenback from Friday’s close of 4.1320/1350.

Bank Islam Malaysia Bhd economist, Adam Mohamed Rahim said the sudden announcement of a two-week full movement control order (FMCO) phase one (June 1-14) on Friday may cause some short-term local market volatility.

“Investors may be concerned about the economic impact from the lockdown and therefore, will tend to shift towards currencies of countries which are more stable, especially in terms of handling the Covid-19 crisis,” he told Bernama.

The National Security Council on Covid-19 management has decided to implement a total lockdown on the social and economic sectors (first phase) nationwide beginning June 1, under which all sectors will not be allowed to operate, except for essential economic and service sectors.

The decision was reached after taking into account the recent Covid-19 situation in Malaysia, with daily cases exceeding 8,000 and active cases surpassing 70,000.

Meanwhile, the Ministry of International Trade and Industry (MITI) on Sunday announced that 18 manufacturing and manufacturing-related services sectors are allowed to operate under the FMCO.

Thirteen of the sectors are allowed to operate at 60 per cent workforce capacity, while the remaining five are permitted to operate with 10 per cent workforce.

Against other major currencies, the local note was also traded lower at opening.

The ringgit eased slightly against the Singapore dollar to 3.1293/1366 from Friday’s close of 3.1213/1238 and weakened vis-a-vis the euro to 5.0495/0597 from 5.0344/0385.

It also depreciated against the yen to 3.7727/7803 from 3.7598/7629 and was lower against the British pound at 5.8742/8859 from 5.8604/8651. — Bernama

Source: Malay Mail

Bursa Malaysia opens lower across the board ahead of total lockdown

Market breadth was negative with losers outnumbering gainers 740 to 40, while 123 counters were unchanged, 1,279 untraded and 58 others suspended. ― Picture by Hari Anggara

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KUALA LUMPUR, May 31 — Bursa Malaysia opened the week in the red across the board on cautious market sentiment ahead of the total lockdown nationwide beginning tomorrow on the back of higher Covid-19 cases.

At 9.02am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) erased 23.64 points, or 1.48 per cent, to 1,570.80 from 1,594.44 at Friday’s close.

The index opened 23.4 points weaker at 1,571.04.

Market breadth was negative with losers outnumbering gainers 740 to 40, while 123 counters were unchanged, 1,279 untraded and 58 others suspended.

Total volume stood at 525.94 million units worth RM184.68 million.

Malacca Securities Sdn Bhd, in a note, said the local stocks may face selling pressure today following the National Security Council’s decision to implement a two-week full movement control order (FMCO) phase one (June 1-14) nationwide.

This was due to the spike in daily Covid-19 cases. Malaysia posted 6,999 new cases on Sunday.

“We expect a negative bias tone on the broader market over the total lockdown. However, investors may focus on vaccine or pharmaceutical-related stocks amid the ongoing vaccination programme.

“Besides, sectors such as technology and shipping that are linked globally, as well as PPE-related should continue to be operational under the FMCO and should get traders attention,” the brokerage firm said.

Globally, the US stock markets marched higher as the Dow registered small gains (+0.2 per cent), boosted by optimism over the massive budget proposal from US President Joe Biden.

European stock markets were upbeat, while Asian stock markets closed mostly higher.

Meanwhile, Rakuten Trade Sdn Bhd expects the index to hover within the 1,590-1,600 range today, with both the Brent crude and crude palm oil (CPO) looking good, and CPO to close on the all time highest average for May.

Among the heavyweights, Maybank fell five sen to RM8.15, Public Bank declined eight sen to RM4.19, PetChem depreciated 18 sen to RM7.96, while Tenaga was 10 sen lower at RM9.89.

Other top losers included MPI which shed RM1.20 to RM36.00, Nestle which fell RM1 to RM135.50, and BAT which contracted 54 sen to RM15.26.

Of the actives, Tanco was flat at 14.5 sen, Vsolar eased half-a-sen to two sen, while Kumpulan Jetson was 2.5 sen higher at 61 sen.

On other developments, trading of shares in Eka Noodles Bhd is suspended today after the local bourse rejected its application for a further extension of time to submit its revised proposed regularisation plan.

In a filing last last week, the rice and sago sticks manufacturer said Bursa Securities felt the company had not demonstrated to its satisfaction any material development towards the finalisation and submission of the regularisation plan to the regulatory authorities.

Following the suspension, Eka Noodles will be delisted on June 2, unless an appeal against the delisting is submitted before May 28.

On the index board, the FBM Emas Index contracted 217.25 points to 11,361.25 and the FBMT 100 Index depreciated 189.19 points to 11,087.41.

The FBM Emas Shariah Index erased 237.70 points to 12,609.34, the FBM 70 weakened 335.27 points to 14,534.38, and the FBM ACE dropped 291.47 points to 7,552.41.

Sector-wise, the Financial Services Index dipped 219.36 points to 14,947.77, the Plantation Index slipped 75.71 points to 6,832.75, and the Industrial Products and Services Index edged down 5.64 points to 187.45. — Bernama

Source: Malay Mail