KUALA LUMPUR (Nikkei Markets) -- Shares in Malaysia and Singapore held steady on Thursday as investors crunch the numbers from a mixed bag of U.S. economic data and track geopolitical developments.
The FBM KLCI fell 0.2% at 1,854.44 as a selloff in heavyweight banking stocks and Kuala Lumpur Kepong outweighed gains in consumer stocks. The Straits Times Index, meanwhile, was up 0.1% at 3,536.76 thanks to industrials and consumer staples stocks.
Overnight data from the U.S. showed upbeat industrial production and positive earnings from major retailers, but softer homebuilding and a fall in building permits. The yield on the 10-year Treasury remained above 3% amid hints from North Korea that it may pull out of talks with the U.S.
Asked if the summit was still on, President Donald Trump said Wednesday "we'll have to see" and maintained that he will still insist on the denuclearization of North Korea. North Korea had said it will reconsider a June 12 meeting if Washington insists on Pyongyang relinquishing nuclear weapons.
Later on Thursday, Chinese Vice Premier Liu He is expected for more high-level trade talks in Washington. Investors are keeping a close watch on the talks for any breakthrough on the tariff standoff between the world's two biggest economies.
Economists said that the latest data from Malaysia suggest economic growth may have peaked at 5.4% year-on-year in the first quarter amid uncertainties surrounding the new government's fiscal policy and worries that it may not be able to achieve its budget deficit reduction target.
"Foreign and institutional investors are not convinced that the new government will be able to hit its fiscal deficit target," said Phillip Mutual Chief Strategist Phua Lee Kerk. "Next year is a huge question mark."
The newly-elected government announced that it will reintroduce the sales and services tax after reducing the rate of the highly-unpopular Goods and Services Tax to zero from June. The previous government planned to trim the fiscal deficit to 2.8% of the gross domestic product in 2018.
"While revenue losses this year will be offset to some degree by higher oil prices, this development is unlikely to be structural or act as a permanent substitute for the GST itself," said Anushka Shah, an analyst at ratings agency Moody's Investors Service.
Malaysia's top three banks by assets fell. Malayan Banking (Maybank) lost 0.4% while smaller rivals CIMB Group Holdings was down 0.6% and Public Bank declined 0.7%.
Kuala Lumpur Kepong dropped 3.9% after the palm oil producer reported a 35% drop in second-quarter net profit. Real estate developer SP Setia declined 2% after its chief executive told reporters that gross profit margin is expected to be squeezed this year due to weak market sentiment.
Consumer stocks, however, rallied in anticipation of higher sales from stronger consumer spending. Departmental store operator Parkson Holdings surged 12% while cigarette maker British American Tobacco (Malaysia) rose 3.6%. Food and beverage company Nestle (M) was up 0.4%.
DBS Bank said in a Thursday note that it is still optimistic of a better second half for Singapore despite a break in the near term.
"Its strong external position should stand out as rising rates and strong USD are likely to continue to place markets in defensive mode," it said.
Electronics-related stocks weakened. Contract manufacturing giant Venture Corp. lost 2.3% while Intel test handling machine supplier AEM Holdings edged down 3.5%.
Singapore's non-oil domestic exports rose 11.8% on-year in April, reversing from the downwardly revised 3.2% contraction in March. The growth was supported by the robust expansion in the non-electronic exports segment, which offset a decline in electronics exports.
Keppel Corp. rose 1% after reporting on Wednesday that a unit had secured contracts from Van Oord to build two high-specification dredgers.
-- Alexander Winifred and Joannah Perez
