Wednesday, August 2nd, 2017

 

Hong Kong traders feel pinch as Apple’s China charm fades

HONG KONG, Aug 2 — In an empty mall that once bustled with trade in high-end smartphones, a Hong Kong shopkeeper sits surrounded by boxes of Apple Inc headphones, grumbling that business is grim – a domino effect of lacklustre demand from…


Sanctions gap lets Western firms tap Russian frontier oil

MOSCOW, Aug 2 — A gap in US sanctions allows Western companies to help Russia develop some of its most technically challenging oil reserves, and risks undermining the broad aim of the measures, a Reuters investigation has found. When…


More companies expected to propose dividend reinvestment plans

PETALING JAYA: More companies, especially banks, are expected to offer dividend reinvestment plans (DRPs), even though such schemes are not among the most popular arrangements here, because of the additional flexibility they accord companies to manage their capital position given the current economic climate.

Rakuten Trade head of research Kenny Yee said it is possible that more companies will launch DRPs.

“I don’t think it (DRP) is catching on yet because if the (dividend) yield is good for the year, most would opt to take the dividend. If the yield for the year is 5%-6%, most would want to realise the dividend,” he told SunBiz.

He said, currently, the dividend yield of companies is not exceptionally high, averaging some 2%-3%.

“If you exclude those traditionally high dividend yield stocks, maybe investors would opt to reinvest,” Yee said, adding that the option to realise the dividend or to reinvest depends on what shareholders want.

Banks that have offered DRPs include Malayan Banking (Maybank), CIMB Group, AMMB Holdings, BIMB Holdings, Affin Holdings and the former RHB Capital. The first DRP in Malaysia was proposed by Maybank in March 2010. Other companies that have offered DRPs include Axiata Group, Telekom Malaysia, SP Setia, Malaysia Airports Holdings and more.

DRPs typically provide companies with additional flexibility in managing their capital position while providing shareholders with an opportunity to enhance the value of their shareholdings by investing in new shares at a discount.

Yee said companies that launch such schemes tend to improve their cash flow, rather than pay out all dividends in cash.

“The small caps would want to preserve their cash flow for future growth, while big caps have ample cash holdings, so it’s more likely that the big caps will offer DRPs.”

He said it does not mean that once a DRP is announced, shareholders will opt for the plan, as it also depends whether the company has a steady business. For companies that have a sustainable business, a DRP can be a better option.

“If they (shareholders) are looking for long-term (play), of course a DRP should be okay. But if they want to realise their dividend gains, they would just pick the dividend. If they’re confident of the long-term prospects of the company, then the DRP will be a better offer. If the dividend is too little, you might as well reinvest it. It’s up to the individual and the company that they have vested interest in,” explained Yee.

For banks, he said, a DRP will be a better option for shareholders as it believes that banks are growing and has a relatively stable business. By reinvesting, returns would be higher than the dividend yield.

A chief investment officer (CIO) with an asset management firm concurred, agreeing that more companies will launch DRPs.

“One of the reasons is they don’t have to pay out cash, but instead convert that cash that is supposed to paid out to shareholders into shares. It is one form of enhancing the capital base, although sometimes it can be earnings-dilutive,” he said.

The CIO pointed out that banks are more likely to initiate DRPs as banks are in more need to conserve and raise capital. Banks also need to maintain certain amount of liquid and common equity tier 1 capital according to Basel III standards, unlike other companies.

He said the choice to take the dividend or reinvest largely depends on the discount or the pricing of the dividend reinvestment of the stock.

“If the discount is good, I would advise to reinvest. The discount would have to be more attractive than taking the cash dividend, then it makes more sense to invest. If it’s a 5 sen dividend, and the discount is more than 5 sen, then it makes sense to reinvest, but this will depend on the individual shareholder’s preferences, whether the person prefers an income stream,” he said.


Employees getting bigger share of corporate earnings

PETALING JAYA: Malaysia has seen a steady growth in labour income share by almost 5 percentage points to 35.3% for the past six years from 2010 to 2016, according to MIDF Research.

The increase in labour income share signals that employees are getting a larger share of corporate income generated and it is expected to hit 40% by 2020 from 35.3% in 2016, reflecting the fact that Malaysia is moving closer towards developed nation status.

Most of developed economies show labour income share ranging from 45% to 55%, which probably explains why domestic spending in these economies is significant in driving up domestic economic activity, it said.

MIDF Research noted that the labour income share rise is attributable to the implementation of the new minimum wage RM1,000 per month in Peninsular Malaysia and RM920 per month for Sabah and Sarawak in 2016, among others.

However, Malaysia’s corporate earnings share, which is reflected by gross operating surplus, declined from 64.6% in 2010 to 59.5% in 2016.

“In simple words, for every RM1 generated in 2016, 35.3 sen was paid to the employee and 59.5 sen went to corporate earnings while another 5 sen was received by the government,” said MIDF Research.

The research house highlighted that income growth of the low income group grew faster than that for other groups after the global financial crisis in 2008. Income growth of the Bottom 40 (B40) for the period of 2012 to 2014 was 17.2%, while Middle 40 and Top 20 recorded only 11.3% and 8.2% respectively.

“We believe the upward trend in income growth of the B40 as well as other groups was driven by the policy reform undertaken by the government to address the income inequalities gap. In addition, we foresee the momentum in income growth for all groups will sustain due to the increase in the share of labour income and government revenue in 2016,” it said.

MIDF Research said the services sector remained as the biggest contributor for labour income at 21.4% in 2016.

The most notable rise is in the manufacturing and construction sectors as the labour income share rose from 7.5% and 2.5% in 2010 to 8% and 3.6% in 2016, respectively.

“Therefore, with the improving trade activities and construction of infrastructure projects in Malaysia, we can expect the labour involved in the manufacturing and construction sectors to benefit by receiving higher wages and salaries,” it noted.


FMM unhappy with tabling of Employment Insurance System bill

KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) is concerned with the tabling of the Employment Insurance System (EIS) bill, citing issues such as double benefits for workers under voluntary or mutual separation schemes (VSS or MSS) and further deterioration in work attitude and commitment.

A new law to implement the EIS, which could benefit thousands of retrenched employees a year, was tabled in the Dewan Rakyat on Monday. The system, to be managed by the National Social Security Organisation, is expected to come into force on Jan 1, 2018, with payouts starting from 2019.

According to the FMM, the Human Resources Ministry had always said – at all engagements with employers which the FMM had participated in – that the EIS is to protect the interests of workers who had been retrenched and were not paid their employment termination and layoff benefits (ETLBs) and to help tide them over when seeking new employment.

However, press reports implied that the bill is providing financial aid to all who are unemployed, including those who took up VSS and MSS, and even allowing dependents to claim in the event an insured employee dies, falls into a coma or becomes of unsound mind.

“FMM reinforces that workers under VSS and MSS will be receiving double benefits, which are from their severance package and the EIS. Likewise, those who have been retrenched and received their ETLB will be receiving double benefits,” FMM said in a statement.

It said the transfer of benefits to dependents is confusing and this provision has never been highlighted during engagements with employers.

“Employers need to be given access to the bill to review the details so that we could further highlight our concerns to the government.”

It added that human-related costs would rise significantly without commensurate increase in work productivity and quality.

“We are most concerned that the EIS could cause further deterioration in work attitude and commitment. Consideration has to be given to the business sector’s capacity to absorb continually rising costs of doing business which is affecting sustainability and competitiveness,” said FMM.


02/08/2017 23:02:06

KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) is concerned with the tabling of the Employment Insurance System (EIS) bill, citing issues such as double benefits for workers under voluntary or mutual separation schemes (VSS or MSS) and further deterioration in work attitude and commitment.
A new law to implement the EIS, which could benefit thousands of retrenched employees a year, was tabled in the Dewan Rakyat on Monday. The system, to be managed by the National Social Security Organisation, is expected to come into force on Jan 1, 2018, with payouts starting from 2019.
According to the FMM, the Human Resources Ministry had always said – at all engagements with employers which the FMM had participated in – that the EIS is to protect the interests of workers who had been retrenched and were not paid their employment termination and layoff benefits (ETLBs) and to help tide them over when seeking new employment.
However, press reports implied that the bill is providing financial aid to all who are unemployed, including those who took up VSS and MSS, and even allowing dependents to claim in the event an insured employee dies, falls into a coma or becomes of unsound mind.
“FMM reinforces that workers under VSS and MSS will be receiving double benefits, which are from their severance package and the EIS. Likewise, those who have been retrenched and received their ETLB will be receiving double benefits,” FMM said in a statement.
It said the transfer of benefits to dependents is confusing and this provision has never been highlighted during engagements with employers.
“Employers need to be given access to the bill to review the details so that we could further highlight our concerns to the government.”
It added that human-related costs would rise significantly without commensurate increase in work productivity and quality.
“We are most concerned that the EIS could cause further deterioration in work attitude and commitment. Consideration has to be given to the business sector’s capacity to absorb continually rising costs of doing business which is affecting sustainability and competitiveness,” said FMM.


Oman takes US$3.55b China loan to cover budget deficit

MUSCAT, Aug 2 — Oman today announced it has taken out a US$3.55-billion (RM15.2 billion) loan from Chinese banks to cover its budget deficit for the current fiscal year. The sultanate had originally planned to raise US$2 billion on the Chinese…


Dow breaches 22,000 powered by Apple rally

NEW YORK, Aug 2 — The Dow Industrials breached the 22,000 mark for the first time ever today, helped by a rally in Apple’s shares. The Dow Jones Industrial Average rose 31.71 points, or 0.14 per cent, to 21,995.63. The S&P 500 gained 2.02…


Petronas secures another block in Gulf of Mexico

KUALA LUMPUR,  Aug 2 — Petroliam Nasional Bhd’s (Petronas) subsidiary PC Carigali Mexico Operations S.A de C.V. has been awarded shallow water Block 6 in Gulf of Mexico’s Salina Basin. In a statement today, Petronas said, Block 6 covered…


Commerzbank reports Q2 loss as restructuring bites

BERLIN, AUG 2 — Germany’s second-largest lender Commerzbank reported a net loss for the second quarter day as restructuring costs hit, but said it still expects to make a profit over the full year. The Frankfurt-based group booked a net loss…