☕️ Impending recession, according to Sahm Rule which has 100% hit rate

1. MARKET SUMMARY 📈

2. NUMBERS AT A GLANCE 🔢

The cost of shuttlecocks is expected to increase by 10% to 20%, making the sport more expensive for casual players. A typical two-hour session that uses a dozen shuttlecocks, currently costing around RM80, will see players paying RM2-RM3 more per person per session. And this has got to do with pigs and ducks. The price hike is linked to falling pork prices in China, which has increased consumer demand for pork and led to fewer farmers raising ducks and geese, thus driving up the cost of the feathers used in shuttlecocks.

Japan's corporate bankruptcies in the first half of this year reached the highest level in a decade, with 4,887 cases, a 22% increase from the same period last year. Factors such as high prices, labour shortages, and the reduction of Covid-era relief measures have complicated business management. The total debt from these bankruptcies was JPY681.02 bil (RM67 bil), primarily affecting small and mid-sized firms. Teikoku Databank, the research firm, predicts that the number of bankruptcies could surpass 10,000 by year-end.

A study by cybersecurity firm Cohesity revealed that a significant majority of companies hit by ransomware in Malaysia and Singapore paid the ransom to resolve the incidents, with 76% of Malaysian and 64% of Singaporean firms making payments. The survey, involving 504 IT decision-makers, also indicated that 77% of Malaysian and 65% of Singaporean companies experienced ransomware attacks in the last six months. Notably, 54% of Malaysian companies paid between USD100,000 and USD499,999 for data recovery, while 27% paid over USD500,000 (RM2.25 mil).

3. IN MALAYSIA 🇲🇾

The Thailand-Malaysia border is getting a new ‘lease on life’ under PM Anwar

• During PM Anwar Ibrahim's working visit to Rantau Panjang and Sg Golok, alongside his counterpart Thai’s PM Srettha Thaivisin, PM Anwar stated that Putrajaya is fully committed to expediting the Peace Dialogue Process in southern Thailand. However, PM Anwar added that Malaysia’s role is to act as the facilitator and the matter of southern Thailand’s peace negotiation is still a domestic issue for Thailand. Plus, former National Security Council director-general Mohd Rabin Basir was appointed as the new chief facilitator of the Malaysian Government effective July 1. Malaysia’s mediator role in neighbouring conflicts is not something new. Previously, Malaysia has been actively involved in mediating peace between the Manila Government and the rebels in Mindanao starting in 2001. The Malaysia-facilitated peace process concluded with the signature of the Comprehensive Agreement on the Bangsamoro in 2014.

• During the same visit to the Malaysia-Thailand border, PM Anwar and his counterpart were also briefed on constructing the Rantau Panjang-Sungai Golok second bridge. The bridge is slated to be completed by the end of 2026. Once completed, then both Governments will decide whether or not to repair the first bridge that was built in 1971. The second bridge is set to boost trade and tourism in the East Coast states with Thailand, the second largest trading partner in ASEAN in terms of export figures, with Malaysia exporting RM58.71 bil of goods in 2023.

• While the northern border is starting to be deemed as the new development corridor, there are still ‘elephants in the room’ that need to be resolved. Several residents in the northern states started to realise that the supply of RON95 petrol is running out quicker than usual. One of the residents claimed that the fuel smuggling syndicate shifted from diesel to RON95 petrol after Putrajaya lifted the blanket subsidy on diesel on June 10. Allegedly, the Immigration, Customs, Quarantine and Security border checkpoint in Durian Burung, Kedah is the favoured transit point instead of using the rat routes due to increased army patrols at the latter.

• The Sabah-Sarawak border with Indonesia is also getting its time in the spotlight as Putrajaya agreed to allocate RM1 bil for enhancing the border infrastructures. According to DPM Fadillah Yusof, the move is in line with the relocation of Indonesia’s new capital to Nusantara, thus, immigration checkpoints need to be upgraded to facilitate the movement of people from both countries.

Shorts

1. Malaysia clinched its first medal (bronze) in the Olympic men’s badminton doubles as world No.3 Aaron Chia-Soh Wooi Yik defeated Denmark’s world No.2 Anders Skaarup Rasmussen-Kim Astrup 16-21, 22-20, 21-19. This is the pair’s second bronze medal, after having finished third in Tokyo 2020. Next up to deliver another bronze — Lee Zii Jia vs India’s Lakshya Sen tonight at 2030.

2. No automatic replacement holiday on September 17 for the overlap between Malaysia Day and Prophet Muhammad’s birthday (Maulidur Rasul) on September 16. The Prime Minister’s Department quoted that the Holidays Act 1951 (Act 369) does not provide for an automatic replacement holiday for public holidays that overlap or fall on the same working day.

3. Under the new regulations that mandate all major social media platforms to apply for the class licence to keep operating in Malaysia, Deputy Communications Minister Teo Neo Ching added that under the requirement of the class license, the said social media platforms need to have a local presence in Malaysia.

4. Tourism Minister Tiong King Sing announced that the tourist arrivals from China have increased by 194% for the first five months of the year, amounting to 1.19 mil Chinese visitors. Tiong attributes this success to the visa-free travel arrangement between both countries and the increased flights from China cities to Kuala Lumpur and Kota Kinabalu.

5. Another by-election incoming. Following the death of Sharifah Azizah Syed Zain, the incumbent of the Mahkota seat in Johor, the Johor State Assembly Speaker Dr Mohd Puad Zarkashi has notified the now vacant seat to the Election Commissions (EC). Since the state elections dubbed GE15 2.0 in 2023, the country has gone through eight by-elections at both state and federal levels. So far, the Unity Government is leading the score with 5-4 against Perikatan Nasional (excluding Tionman). Lists — Parliamentary by-election in Malaysia and State by-election in Malaysia.

Business

1. Proton Holdings Bhd is aiming to start selling its first electric vehicle (EV) model dubbed e.MAS 7 by the end of this year. The new C-segment sport utility vehicle (SUV) will be introduced as a completely built-up (CBU) model to expedite the launch of the EV model, to be transitioned into a completely knocked-down (CKD) model later down the road. Proton e.MAS 7 will be the first out of five models to be based on the Global Modular Architecture (GMA), co-developed by Geely and Proton.

2. Malaysia’s first digital bank, GX Bank Bhd has acquired 750,000 customers, in under one year of operation. GX Bank chairman Zaiton Mohd Hassan stated that the bank will fork out RM1.5 bil to identify and develop new talent in the digital financial sector for the next five years. At the moment, more than 95% of GX Bank’s headcount comprises Malaysians. 1% unlimited cashback and 3% per annum daily interest - it’s good, and it’s true. Sign up with our referral link here if you haven’t got yours! 

4. AROUND THE WORLD 🌎

Hezbollah is studying a “real and studied” inevitable response to Israel’s attack
A new day emerges, and more news of war looming at the Middle Eastern front. Recently Hezbollah leader Hassan Nasrallah has claimed that the war with Israel has “entered a new phase” following Israel’s assassination of its senior commander Fuad Shukr in Beirut on 30th July. He also said that Hezbollah is considering a more meticulous response to the attack, despite several countries urging the Lebanese group against retaliating. Nasrallah added that Israel has “crossed red lines' and now, a response is inevitable. A day after the Beirut attack, another strike happened in Tehran, which killed Hamas political leader Ismail Haniyeh, further escalating fears of a joint response between Iran and Lebanon, and a possible all-out war in the region.

In a separate news, Iran's Permanent Mission to the UN has said that Hezbollah will likely respond to Israel's assassination of one of its top military commanders by hitting "broader and deeper targets" in Israeli territory and will not restrict itself to military targets. Hezbollah by far has an unwritten understanding that adheres to certain limits in their military operations targeting primarily military objectives only, but it seems like the Israeli attack on Beirut has now changed the situation.

Happenings in the AI world

• Character.AI co-founders to join Google in a new licensing deal

  Founders of start-up company Character.AI, Noam Shazeer and Daniel De Freitas are joining search giant Google in a non-exclusive licensing deal that allows Google to license the artificial intelligence (AI) start-up’s technology. Existing investors will see shares bought out at a price that would translate into a USD 2.5 bil valuation for the company, which is significantly higher than its earlier valuation of USD 1 bil. Character.AI is a platform that lets anyone make their own customised chatbot, impersonating anyone and anything — living, dead, or imaginary. People have made millions of chatbots, or “characters”, and some of them are popular conversation partners. Meanwhile, most of Character.AI’s team will remain and continue building the Character.AI products.

• Hiccups at Nvidia: Anti-trust, product flaws and delay

  After many complaints from its competitors, Nvidia is now subject to the US Dept of Justice investigation for possible abuse of its AI chip market dominance. DOJ investigators are looking at whether Nvidia pressured cloud providers to buy multiple products, and whether it charges its customers more for networking gear if they want to buy AI chips from rival companies. For context, Nvidia dominates roughly 80% of the AI chip market. After the news, Nvidia company shares plummeted around 3.6% in premarket trading on Friday.

  On another note, the company’s upcoming AI chips will be delayed perhaps three months or more due to design flaws. This could affect Nvidia’s customers including Meta Platforms Inc., Google LLC and Microsoft Corp. This delay means that big shipments aren’t expected until the first quarter of 2025.

Markets: Bloody Friday Edition
Concerns over tech earnings and a slowing US economy sent the tech-heavy index Nasdaq down 2.4% on Friday after a softer-than-expected jobs report. The Nasdaq has dropped by 10% from its record close on July 10, sending it into correction territory. A stock or index is considered to be in correction when it closes 10% below its previous record high closing. That said, Nasdaq is still up 11.8% year-to-date. Japan’s Nikkei 225 got hit even worse as it fell 5.8% on Friday, making it the index’s biggest daily drop since Mar 2020 (remember what happened then?) as US economic fears spread across the Pacific. In Malaysia, the FBM KLCI was down 0.81% with 1,316 counters in the red, 155 that gained and 267 that remained unchanged.

Should we start rushing for the exits? Let’s look at the data. Over the last 44 years, the Nasdaq has slipped into correction territory a total of 24 times and in two-thirds of these cases, a month after falling into correction, the index was trading higher. Could be just a blip. But let’s look at what a massive whale was doing. In Q2, Warren Buffett’s Berkshire Hathaway sold USD75.5 bil worth of stock on a net basis and it slashed its largest position, which is Apple, by almost 50%. Berkshire now sits on a massive cash pile of USD276.9 bil. Is Buffett seeing something that we aren’t?

Shorts

1. Global food authority declares Phase 5 famine in Sudan’s North Darfur 

   The Integrated Food Security Phase Classification (IPC), a UN-backed global authority on food security has declared a Phase 5 famine in the North Darfur region of Sudan. The region suffers from the ongoing war between the army and the paramilitary Rapid Support Forces (RSF), creating the world’s biggest internal displacement crisis and leaving 25 mil people (half of its population) in urgent need of humanitarian aid. IPC Phase 5  is an area where at least one in five people or households severely lack food and face starvation and destitution, ultimately leading to critical levels of acute malnutrition and death. This is only the third time a famine determination has been made since the system was set up 20 years ago.

2. Another UK city explodes in far-right, anti-Muslim riots 

   Another riot by UK’s far-right groups has erupted in Sunderland after Southport, London and Hartlepool, resulting in 8 people arrested and 3 police officers hospitalised. Mobs were seen surrounding a mosque and chanting Islamophobic slogans, while the police faced serious and sustained levels of violence. These riots are instigated by far-right groups who have been spreading misinformation about recent knife stabbings and inciting violence against Muslim minorities across Britain. Interior Minister Yvette Cooper has taken the matter seriously and is committed to taking the strongest possible action and ensuring rioters eventually face the full force of the law.

5. FOR YOUR EYES 📺

1. Apple made the quantum leaps with its own ARM architecture M1 chips a few years ago, and now Microsoft may be making the same leap with Qualcomm’s Snapdragon X Elite in its latest Surface laptop.

2. Impending recession? The Sahm rule has been triggered. The rule signals a recession once the unemployment rate increases 0.5% above it previous 12-month low and there has not been a single time where this indicator provided a false signal in the past 65 years. The Sahm rule is named after economist Claudia Sahm, who has accurately forecast every US recession since the 1970s.