Capital markets news summary for Mon 27 Feb 2023

Capital markets news summary for Mon 27 Feb 2023

Cautious trading in Bursa this week

Geopolitical risk arising from China’s reported increase in support for Russia and hawkish US Federal Reserve pushing up rates will weigh on regional risk sentiment with investors shifting to safe-haven trades. As such, the FBM KLCI will move within a tight band of 1,450-1,470. US personal spending in Jan rose 1.1% month-on-month after adjusting for price changes, rebounding from a 0.3% fall in Dec, suggesting rates will increase. A sell off in Bursa is expected. Negative sentiment however may be tempered against potentially positive news on China’s purchasing managers’ index due on 28 Feb. Malaysia’s inflation rate fell to 3.7%, the lowest since Jul 2022 and within market estimates. The FBM KLCI shrank to 1,456.80 on Fri, down 20.10 points from a week ago. Turnover volume for the week was lower at 16.79b units worth RM10.89b compared with 18.22b units worth RM10.88b the prior week.

MASB issues amendments to sale and leaseback standard

The Malaysian Accounting Standards Board (MASB) issued Lease Liability in a Sale and Leaseback (Amendments to MFRS 16 Leases), which is identical to the amendments to IFRS 16 issued by the International Accounting Standards Board on 22 Sep 2022. Although MFRS 16 stipulates the accounting for sale and leaseback at the date of the transaction, it previously did not specify how to measure the lease liability when reporting after that date. The amendments add subsequent measurement requirements by clarifying that a seller-lessee must subsequently measure the lease liability such that it does not recognise the gain or loss relating to the asset which is leased back. The amendments will apply from 1 Jan 2024.

Western chipmakers expand in Singapore

French substrate manufacturer Soitec will invest USD430m to add 45,000 square metres of floor space at its plant in Pasir Ris Wafer Fab Park in northeast Singapore. The plant is its only production facility outside France. The project will be completed in 2024 and double its 300mm silicon-on-insulator wafer capacity to 2m units annually. These wafers are widely used in smartphones. The company will also double its staff at the plant to more than 600 by 2026. Separately, US semiconductor manufacturing equipment maker Applied Materials held a ground-breaking in Dec 2022 for a new USD450m 65,000 square metre plant in Tampines in eastern Singapore which will be completed in 2024. It is the company’s Asian hub and largest facility outside the US which serves its main customers including Taiwan Semiconductor Manufacturing Co. The company will grow its workforce by 40% to more than 3,500. Singapore’s attraction includes a sizeable ecosystem of suppliers and partners, geopolitical neutrality and supply-chain diversification.

Home Ministry approved 380,000 foreign workers who overstayed

The measure allows the workers without valid travel documents to immediately seek employment and address the issue of the lack of workers. The plan is based on Bank Negara Malaysia’s recommendation to ease hiring conditions. The relaxation is given to selected critical sectors including plantation, agriculture, manufacturing and services. For Phase 1, industry players need to hire 518,000 foreign workers, which is important to support the economy’s projected growth of 4.5%.

France’s Thales is hiring 12,000 new staff

The defence and technology group is experiencing strong demand across its product range. Over the past 8 years, the company has been recruiting 5,000-8,000 people annually, but last year the figure ballooned to 11,500. The company’s defence and security, aeronautics and space, identity and digital security segments are growing strongly. Amongst others, it will be delivering a Ground Master 200 radar air defence system to Ukraine in May. It is one of the main beneficiaries of the Ukraine War with its share price rising 60% since the start of the war, outperforming the Refinitiv Europe Aerospace & Defence index. France’s military spending will increase by more than 1/3, with the 2024-2030 military budget set to rise to EUR413b, up from EUR295b in 2019-2025 as the army adapts to a new security environment.