MY MARKET WATCHTOWER | WEAK SENSION AHEAD, KLCI DROP 5.50 POINTS

●Federal Reserve minutes suggest interest rate hikes may continue overnight, and US stocks closed down

●Follow stocks: PERSTIM, PTRANS, SAM, HSSEB

US stocks closed lower on Wednesday, with major indices falling for the second consecutive trading day. The minutes of the Federal Reserve's July monetary policy meeting said that the risk of inflation requires further policy tightening, suggesting that interest rates may continue to be raised.

The three major US stock indexes all recorded declines. The NASDAQ and S&P 500 fell 6.1% and 4%, respectively, and the Dow fell 2.2%.

Bursa Malaysia opened slightly lower on Thursday due to poor market sentiment and chose a profitable settlement, in line with the weak sentiment of regional exchanges.

At 9:15 a.m., the FTSE Malaysia Composite Index (FBM KLCI) fell 5.50 points to 1458.01 points from Wednesday's close of 1463.51.

There were 141 rising stocks, 272 falling stocks, 310 had no ups or downs, and 1,617 had no transactions.

The turnover reached 5121.1 million shares, worth RM138.54 million.

The Federal Reserve announced the minutes of the July monetary policy meeting. At the July meeting, the Federal Reserve raised interest rates to their highest level in more than 22 years.

The minutes of the meeting said that the risk of inflation may require further policy tightening. Only two Fed officials prefer to keep interest rates stable in July. Most Fed officials believe there is a “significant” upward risk for inflation. Many participants warned of the risk of unexpectedly overtightening policies. Some participants felt that the economic risks had become more balanced.

According to the minutes, participants said that economic activity appears to be gradually slowing down. Federal Reserve staff no longer anticipate a recession, and the unemployment rate is expected to rise slightly.

The minutes of the meeting emphasized the risk of inflation: “Participants said inflation is unacceptably high, and more evidence is needed to convince people that price pressure is fading.”

According to the minutes of the meeting, real gross domestic product grew at a moderate rate in the first half of this year. The labor market is still very tight, although the imbalance between supply and demand in the labor market is gradually decreasing. The annual consumer price inflation rate was still high in May. Available information indicates that inflation declined in June, but it is still high.

In the second quarter, the total number of non-farm payrolls recorded the lowest average monthly increase since the economic recovery in mid-2020, although the increase in employment was still strong compared to before the pandemic. Similarly, according to job vacancy and labor mobility surveys, the private sector vacancy rate fell to its lowest level since March 2021 in May, but is still well above pre-pandemic levels.

The data shows that inflation continues to show signs of slowing down but is still high. In the 12 months ending May, overall personal consumption expenditure prices rose 3.8%, and core personal consumption expenditure prices after deducting changes in energy prices and food prices for many consumers rose 4.6%. The 12-month personal consumption expenditure price index compiled by the Federal Reserve Bank of Dallas averaged 4.6% after the May revision.

In June, the CPI increased by 3.0% per annum, while the core CPI increased by 4.8% during the same period. Short-term inflation expectations declined along with actual inflation, but were still higher than pre-pandemic levels. In contrast, medium- to long-term inflation expectations are within the range of ten years before the pandemic.

Although the bitmap released in June shows that most officials prefer to raise interest rates two more times during the year, Powell stressed after announcing the interest rate decision in July that the Federal Reserve will make decisions at each meeting.

According to a report released by the US Department of Commerce, the US retail sales data for July rose 0.73% month-on-month, the biggest increase in six months. It grew for four consecutive months, better than market expectations of 0.4%, and a year-on-year increase of 3.17%. Core retail sales rose 1% month-on-month, which was also stronger than the 0.4% forecast previously.

Since March of last year, the Federal Reserve has raised interest rates by a total of 525 basis points. Although borrowing costs have reached a 22-year high, consumption, which accounts for about two-thirds of the total economy, is still strong, and the risk of a recession in the US economy has decreased.

Fortune and disaster prevailed. With the release of better-than-expected US retail sales data, market concerns that interest rates might remain high for a longer period of time intensified, and the US faced a double whammy. In addition to the decline in US stocks, the 10-year US Treasury yield once hit 4.274%, a high since October 24 last year. The 2-year US Treasury yield once hit 5.024%, the highest since July 7.

The company's revenue for the first quarter was RM239.16 million, a sharp drop of 45.50% year-on-year, close to halving.

Ma Tin Plating said that sales volume and sales prices fell in the first quarter, leading to a decline in revenue. At the same time, it also faced a provision loss of RM8.1 million and a positive loss of RM7.8 million, so it changed from profit to loss.

Perak Express reported to the exchange on Wednesday that up to the second quarter of June, it recorded a turnover of RM41,533,000, an increase of 1.41% year-on-year.

Looking at the first half of the year, net profit was reported at RM31.177,000, up 7.09% year-on-year, while revenue was reported at RM88916,000, up 7.4% year-on-year.

Among them, the contribution of the integrated bus stop business increased, boosting the performance of the past quarter.

Overall, strong traffic and traffic demand recovery continued in the post-pandemic era, and the Group expects passenger traffic to continue to grow in 2023.

Perak Express is still optimistic about the Jinbao terminal, while the Merro terminal will be completed in the second half of the year.

Meanwhile, the company's revenue for the first quarter was RM37,89 million, down 13.02% year-on-year.

SAM Engineering's performance in the first quarter was poor, mainly due to being dragged down by the equipment business.

The equipment business contributed RM211.87 million or 68.81% of the company's turnover in the first quarter, but decreased by RM30.9 million year-on-year.

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

Another major business, the aviation business, saw a year-on-year increase in handover revenue of RM1.1 million to RM96.02 million, mainly due to favorable foreign exchange.

The company reported to the Malaysia Stock Exchange on Wednesday that its turnover for the next quarter increased by 29.04% per year to RM48,89,000.

Looking at the first half of the year, turnover increased 27.50% to RM94.712,000; net profit increased 47.97% per year to RM9.538,000.

Executive Vice Chairman Tan Sri Kuna Sidampalan said that the company will continue to expand partnerships and open up more channels for revenue, thereby boosting the company's long-term net profit performance.

Furthermore, with the previous strategy of diversification in the field, the company will now begin a new phase of growth.