Sunday, August 13th, 2017


Yemen central bank complains to Saudi-led coalition about cash deliveries

DUBAI, Aug 13 —Yemen’s central bank has complained to its allies in a Saudi-led military coalition about a lack of cash deliveries needed to pay salaries, in a sign of the government’s struggle to keep the war-torn country’s economy…

[Editor’s Pick] Preparing for an ageing nation

KUCHING: “It is never too early to think about retirement” – such a quote may not be deemed relevant by graduates or young entrants to the workforce. However, such is the reality of long term financial planning, whereby it is necessary to start at a young age and stays relevant at each key life stages. […]

CGC, 4 parties sign MOU over Pan Borneo Highway Sarawak project subcontractors

KUALA LUMPUR, Aug 13 — Credit Guarantee Corp Malaysia Bhd (CGC) has signed a memorandum of understanding (MOU) involving five parties to provide financial guarantees to eligible domestic sub-contractors through its Bizjamin/-i scheme, for the…

Loan-to-deposit ratio at comfortable level, says Maybank

KUALA LUMPUR, Aug 13 —Malayan Banking Bhd’s (Maybank) group loan-to-deposit ratio (LDR) is at a comfortable level of 94.7 per cent as at end-March 2017 and not 101 per cent as stated in a Bloomberg report released Friday,  Aug 11, 2017. Its …

Leadmont explains Star City project delay

PETALING JAYA: The halt of the mixed development Selayang Star City project since early this year has raised eyebrows in the property market, giving rise to concerns that it could be a sign of more such occurrences.

Disgruntled buyers have expressed their anger on property blogs, questioning the delay of the project, which comprises a shopping mall, a hotel and three blocks of serviced apartments.

In response to SunBiz via email, the project developer Leadmont Development Sdn Bhd said construction works for the mixed development project are expected to resume in October, upon completion of its remodelling exercise.

The group said the delay has noting to do with its financial position, but to better prepare for the group’s future launches.

Stressing that there is no issue of cash constraint, it explained the remodelling exercise is aimed at reducing the group’s burden going forward. However, it did not give details for the remodelling on whether it includes any bank borrowings going forward.

“As financial institutions have been cautious in lending to retail in recent years, our funding strategy has been always to minimise bank borrowings. For example, this project is funded (by far) by cash without any bank borrowings, (with) land and construction free from encumbrances.

“In order not to overly exhaust the cash position of our company and to balance the commitments in some of the potential new launches, we had to remodel our construction progress and financial model, with inputs and support by main contractors, our tenants and financial institutions,” it noted.

In an email reply to SunBiz, however, the Selayang Municipal Council said it has been informed by the developer that there was a change in the contractor for the Selayang Star City project, without mentioning the reason.

According to the Selayang Municipal Council, currently a total of five abandoned projects are being revitalised within the area, including Gombak Perdana Villa, Apartment Selasih, Taman Sedaya (Astana Square), Selayang Spring Barisan Tenaga Perancang and Taman Sri Garing projects.

Meanwhile, there are three projects that are under the revitalisation plan, namely Taman Selayang Mutiara, Rancangan Tersusun Kg Kiai Arshad and Projek Pembesaran Kg Baru Kundang.

Nonetheless, Leadmont said it is optimistic that Star City Mall, which spans about 1 million sq ft, will be completed by 2018, while the serviced apartments, together with the Holiday Villa Hotel are to be completed in 2019, with an average take-up rate of 60%. Another block of serviced apartments is yet to be launched.

The build-ups of the units range from 624 sq ft to 1,280 sq ft, with an average selling price of about RM620 per sq ft.

Leadmont general manager (business development and investment) Lum Youk Lee had reportedly expected the mall to open its doors by the second quarter of 2017.

Leadmont said the group continues to receive support and trust from its retailers, despite predicaments of changes to the opening date.

The group has managed to secure a tenancy rate of above 75%, including supermarket, departmental store, cinema, fitness and bowling.

“We remain optimistic with this unique integrated retail product, truly one of its kinds in Selayang by far,” it added.

Leadmont’s completed projects include centreSTAGE PJ, Amansiara Business Park Selayang, and Leadmont Hill Cheras, to name a few.

It also has an upcoming project at Jalan Sultan Ismail, which is slated for launch within the year.

A check with the Companies Commission of Malaysia shows that Leadmont Group, which was established in April 2000, registered a net profit of RM20.42 million on the back of RM268.5 million in revenue for the financial year ended Feb 28, 2015, the latest financial results available.

Wong Tzy Jian holds a 99.7% stake in Leadmont, while Wong Hon Chong and Lai Kui Yin own the remaining 0.2% and 0.1% stake respectively.

HLIB Research revises Q2 GDP forecast to 5.8%

PETALING JAYA: HLIB Research has raised its growth forecast for the Malaysian economy to 5.8% for the second quarter (Q2) from 5.5%, after the release of various indicators that showed higher strength.

Subsequently, the full-year GDP forecast has also been lifted from 4.9% to 5.4%, on the back of strong Q2 manufacturing and services growth, but offset slightly by deterioration in mining and weaker agriculture sectors. The Q2 GDP results are expected to be announced this Friday.

Although HLIB Research expects growth impetus to remain resilient in 2H’17, it foresees a more moderate 2H as the base effect and exuberance wear off.

“In particular, agriculture growth is expected to ease further as the incremental recovery from El Nino wears off while mining activity will continue to be constrained by output cut commitment. Manufacturing growth acceleration is expected to taper on reduced global optimism. Meanwhile, a more subdued capital market activity will lead to slower growth in finance sub-sector,” it noted.

Meanwhile, HLIB Research opines that the central bank will keep the Overnight Policy Rate at current levels as growth stability has not been jeopardised by the spillover of robust exports to domestic demand; inflationary pressures ease; and recent improvement in loan growth is consistent with the pace of economic activity.

The research said in a separate report that the moderation in the Industrial Production Index (IPI) growth, which grew 4% in June, emanated from slower expansion in manufacturing and electricity sub-sectors, but was slightly offset by a mining output rebound after two consecutive months of contraction.

Nonetheless, it expects the near-term outlook for manufacturing IPI to remain favourable due to continued expansion in forward indicators such as global Purchasing Managers’ Index, world chip sales and business confidence.

US-North Korea tensions not a risk to the ringgit

PETALING JAYA: The escalating tensions between the US and North Korea does not seem to be an imminent risk to the ringgit, said FXTM vice-president of corporate development and market research Jameel Ahmad.

“While news of escalating geopolitical tensions between the US and North Korea are dominating the global headlines, investors should not currently be concerned over a potential shift of volatility in the ringgit,” he said in a statement last Friday. The ringgit weakened slightly to 4.2950 against the US dollar at 5pm last Friday.

He said the “war of words” between US President Donald Trump and North Korea after the former’s “fire and fury” comments has largely dictated the direction of markets mid-week last week, weakening risk appetite but benefiting safe-havens like gold and the Japanese yen.

“This period of risk-off might continue until these tensions cool down, and this is seen as a potential risk for emerging market currencies that are known to suffer when investors are less prepared to take on risk.

“It is worth pointing out the risk premium being priced into the financial markets is not actually that heavy, but the fact that this has transpired during a very quiet period of trading makes the losses seem worse than they actually are,” he added.

Jameel said it would be wrong to suggest that investors should not monitor these tensions, but noted that they are nothing new and have been brewing for some time.

He said investors would not have reacted and the markets would have remained in summer mode if Trump’s comments had not come across as aggressive as they did.

Meanwhile, Bank Negara Malaysia has been taking a strong stand against the trading of the ringgit in the offshore market.

Last week, the central bank said the trading of ringgit in any shape or form overseas is against Malaysia’s policy.

It said that the recent introduction of ringgit futures trading at the Singapore Exchange and the Intercontinental Exchange (ICE Futures Singapore) was inconsistent with Malaysia’s foreign exchange administration policy and rules.

It reminded all market participants to observe existing rules, adding that appropriate action under the law would be taken against any person not complying with its rules.

Maybank loan-to-deposit ratio at comfortable level, below 100%

PETALING JAYA: Malayan Banking Bhd's (Maybank) group loan-to-deposit ratio (LDR) is at a comfortable level of 94.7% as at end March 2017 and not 101% as stated in a foreign wire report released last Friday.

Maybank Group CFO Datuk Amirul Feisal Wan Zahir said, the news article and the Malaysian banking analyst research report it quoted, did not give a true picture of Maybank's careful management of its assets and liabilities.

“Maybank runs its business at the highest level of prudence and transparency and we have clearly disclosed in our quarterly earnings presentations, the levels of both our LDR and liquidity coverage ratio (LCR),” he said.

Feisal said that for Maybank's Malaysian operations, its LDR as at March 2017 was 90.6%, and this has remained fairly stable over the last year from the 90.2% in March 2016. It was in fact lower quarter-on-quarter from the 91.3% level recorded in December 2016, arising from deposit growth which outpaced loan growth. Deposits growth was also supported by low-cost CASA (current account & savings account) growth. The group, he added, has been actively focusing its attention on increasing its CASA component, and where necessary, moving away from the higher funding cost segments, such as fixed deposits.

Maybank's Singapore operations, meanwhile, had an LDR of 89.5% as at March 2017, while Maybank Indonesia's LDR at the bank level stood at 88.4%.

“To state that our LDR ratio is approaching 101% is wrong and can lead to misunderstanding among our stakeholders, including our customers, shareholders and regulators,” added Dato' Feisal.

He said that the research report which stated Maybank's LDR as being 99.2%, had excluded the Islamic investment accounts (IAs) from its computation of Maybank Group's LDR, hence resulting in it reporting a higher LDR for Maybank.

“This is a misrepresentation of LDR computations as IA should be included in the LDR computation for Maybank Group and Maybank Malaysia as provided for under Malaysian banking guidelines. If IA is excluded from the LDR computation, then the associated loan amount should also be excluded in the computation as investment accounts are meant to fund loans,” he said.

IA is a banking product offered by Maybank Islamic Bhd, which in essence, is similar to traditional deposits with CASA and time deposit features, and used to fund Islamic assets. The IAs were reclassified from Mudarabah deposits under the old guidelines on Islamic banking to Mudarabah Investment Accounts (IAs) starting from July 2015. This is in line with Maybank Group's commitment in complying with, and embracing the Islamic Financial Services Act (IFSA).

Feisal also clarified that the group's liquidity coverage ratio, which measures how sufficiently banking institutions hold high-quality liquid assets to withstand an acute liquidity stress scenario over a 30-day horizon, stood at 134% as at end March 2017. This was well above the Bank Negara Malaysia requirement of 80% for the year 2017.

On the issue of some Malaysian banks' (including Maybank's) net interest spread being less than two percent as also stated in the Bloomberg article, Feisal said that Maybank's net interest margin (NIM) stood at a healthy level at 2.43% as at 1Q FY2017. “We have actually seen our NIM expand 9 bps from 2.34% a year ago arising from our disciplined loan pricing and ability to reduce our cost of funding by focusing on CASA growth.”

With regard to the statement on Malaysian banks' growing reliance on foreign currency debt issuances, Feisal clarified that Maybank Group's total borrowings, including subordinated debt and capital instruments was 7.6% of total assets. As part of Maybank Group's prudent risk management approach to avoid foreign currency exposure mismatch for its assets and liabilities, Maybank only raises foreign currency borrowings to fund client requirements in that particular currency.

On the concern raised in the news report about lending to riskier clients, Maybank Group has always applied a disciplined and prudent credit management framework in accordance with our risk appetite. Regular oversight via committees that encompasses senior executives and board members is applied at all times to ensure that asset quality is managed appropriately.

Global Equities Weekly Highlights [13 Aug 2017]: Brazil top performer as equity markets revived

Global equity markets as a whole recovered from the previous week, with the MSCI AC World Index recording a 0.31 per cent gain over the week ended August 4, 2017. Amongst the developed market, the European equity market edged out both Japan and the US, notching a 1.15 per cent rise from the previous week. […]

Malaysia bond market weekly updates -13 August 2017

Global financial markets were in risk-off mode based on the Thomson Reuters BPAM All Bond Index Performance, as geopolitical tension escalated following North Korea’s threat to launch four ballistic missiles into the waters near Guam, a US territory in the Pacific Ocean. Hence, the Thomson Reuters BPAM All Bond Index grew by 0.123 per cent […]