Thursday, October 19th, 2017

 

Goldman Sachs CEO touts Frankfurt for post-Brexit banking

NEW YORK, Oct 19 ― Goldman Sachs chief executive Lloyd Blankfein took to Twitter today to tout Frankfurt’s “great” weather among other attributes, but stopped short of naming the German city as a post-Brexit headquarters. “Just left…


CIMB Thai posts lower Q3 earnings

PETALING JAYA: CIMB Thai Bank PCL’s net profit for the third quarter ended Sept 30, 2017 plunged 82.2% to 76.5 million baht (RM9.7 million) from 431.1 million baht (RM54.8 million) in the previous corresponding period.

The sharp drop in earnings was due to losses on financial liabilities designated at fair value as well as higher bad and doubtful debts and impairment losses.

Its consolidated operating income for the quarter under review, however, expanded 7.8% from 3.21 billion baht to 3.46 billion baht.

For the nine months of the year, its net profit fell 30.6% to 554.4 million baht due to higher provisions.

CIMB Thai president and CEO Kittiphun Anutarasoti said in a statement that the bank saw a 9.8% year-on-year increase in provisions as a result of higher non-performing loans (NPL) compared with end-September 2016.

Consolidated operating income for the nine months rose 1.5% to 9.84 billion baht on higher net interest income.

CIMB Thai said its net interest margin over earning assets stood at 3.88% during the period compared with 3.76% a year ago due to more efficient management of funding cost.

As at Sept 30, 2017, the bank’s total gross loans including loans guaranteed by other banks and loans to financial institutions rose 2.1% to 210.8 billion baht from Dec 31, 2016.

Gross NPL stood at 12.2 billion baht with a lower equivalent gross NPL ratio of 5.7% compared with 6.1% as at Dec 31, 2016. The lower NPL ratio was mainly due to the sale of some NPLs in 1Q17, more efficient risk management policies and improved asset quality management and loan collection processes.

CIMB Thai’s loan loss coverage ratio increased to 85.1% as at Sept 30, 2017 from 77.3% as at Dec 31, 2016. As at Sept 30, 2017, total provisions stood at 10.3 billion baht, showing an excess of 3.6 billion over Bank of Thailand’s reserve requirements.

Total consolidated capital funds as at Sept 30, 2017 stood at 43.8 billion baht. Its BIS ratio stood at 18.0%, 12.7% of which comprised tier-1 capital.
CIMB Group Holdings Bhd owns about 94% of CIMB Thai.


China economy cools in Q3 but still on track to meet 2017 growth target

BEIJING: China’s economy slowed marginally in the third quarter but is well on course to beat the government’s annual target.

The world’s number two economy expanded 6.8% in July-September, but while the figures released today were slightly down from the 6.9% of the previous two quarters they indicated stability after a years-long slowdown in growth.

“The national economy has maintained the momentum of stable and sound development in the first three quarters, with favourable factors accumulating for the economy to maintain medium-high rate of growth,” said National Statistics Bureau spokesman Xing Zhihong.

“However, we must be aware that international conditions remain complicated and volatile and the national economy is still at a crucial stage of restructuring with the foundation for sound development yet to be consolidated.”

While well off the breakneck rates of a decade ago, the reading put the economy well on course to eclipse the official target of about 6.5% for the whole year.

The economy grew 6.7% last year, which was its slowest pace for more than a quarter of a century.

“Relatively strong economic performance this year offers a good opportunity for the government to address several long-term economic issues,” Raymond Yeung, chief Greater China economist at Australia & New Zealand Banking Group in Hong Kong, wrote in a recent report.

“(China President) Xi (Jinping) also needs to shift China’s economy from a credit-intensive, property-led growth model to one that supports sustainable growth,” he said, according to Bloomberg News.

Beijing has for years been trying to transition the economy from one reliant on exports and state investment to domestic consumption.

Today’s figures suggest their work is paying off. Brisk consumer spending and strong factory output fuelled economic growth in July-September, while retail sales rose 10.4% on-year during the first three quarters.

“Consumption is the stabilising factor of the economy, and industrial output actually quickened in September,” Grace Ng, an economist at JPMorgan Chase & Co in Hong Kong, said.

The services industry contributed the majority of China’s economic growth, according to the Statistics Bureau. – AFP


Auto sector TIV still showing growth

PETALING JAYA: MIDF Research has maintained its forecasts and “overweight” call on the automotive sector despite the weak total industry volume (TIV) in September, on the back of improving core operating environment.

“Despite the September weakness, TIV is still showing growth of 2% year-to-date and accounts for 71% of our full-year forecast of 596,000 units. The Malaysian Automotive Association (MAA) expects October TIV to recover on a longer working month while the build-up to year-end sales campaigns should see improvement in TIV for the remainder of the year,” it said in its sector update report today.

MIDF Research noted that Mazda sales have been weak and September TIV has yet to reflect numbers from the new CX5, which is expected to trickle in from October. However, Mazda is a niche player with about 2% market share.

Meanwhile, it said, the new MyVi would be an important catalyst to stimulate TIV for the remainder of the year.
“More importantly, the sector’s underlying core operating environment is turning positive. Currency strength, roll-back of rebates, improving loan approval rate – hire purchase loan approvals have held up above 50% for the past three months – underpin our overweight call on the sector,” MIDF added.

The research house noted that the ringgit’s strength has also been a positive factor for the sector, especially in the past two months. Among the auto players under MIDF Research’s coverage, UMW Toyota has the largest exposure to the US dollar given that all its imported complete knocked down (CKD) kits and complete built up (CBUs) from Thailand are transacted in US dollar.

The ringgit also strengthened against the yen and BAuto is a key beneficiary as its imports are 100% exposed to the currency. Perodua is another beneficiary given its exposure to yen and partly US dollar.

On another note, MIDF Research said most companies are rolling back rebates, based on meetings it had with auto players and ground checks.

“Our chat with Toyota dealers in town suggests distributor rebates have reduced by 30-50% while Tan Chong is also looking to reduce rebates for its models in return for longer warranty period (from three years to seven years),” it said.

Bermaz Auto Bhd remains MIDF Research’s top sector pick at unchanged target price of RM2.55 with key catalysts being a 30% year-on-year increase in FY18F TIV, more than doubling in associate earnings contribution, attractive dividend yield of 6%, value unlocking from the listing of BAuto Philippines and stronger ringgit against the yen.


Vivocom, Pegasus Diversified unit team up to bid for ECRL deal

PETALING JAYA: Vivocom Intl Holdings Bhd is teaming up with MACfeam Sdn Bhd (MSB) to bid for the RM55 billion East Coast Rail Line (ECRL) project.

The group told Bursa Malaysia that its unit Vivocom Enterprise Sdn Bhd (VESB) had entered into heads of agreement with MSB to form a consortium to jointly tender for the ECRL job.

MSB, a unit of Pegasus Diversified Bhd, provides services to engineering, construction fields, manufacturing, fabrication and supply especially in the oil and gas industries and power generation development.

Both parties have agreed to execute the agreement to outline principal terms and conditions to establish rights and obligations in relation to the consortium and collaboration on the project. The joint venture was formed on a 60:40 basis, with VESB holding a 60% stake in the consortium.

Vivocom said it will finance the cost and outlay by way of internally generated funds and/or bank borrowings. Barring unforeseen circumstances, the group said the proposed collaboration is expected to contribute positively to its future earnings.

ECRL is an electrified railway line connecting the east and west coasts of Peninsular Malaysia. The project has 22 stations along a 688km line from Pengkalan Kubor, Kelantan to Port Klang, Selangor.

Vivocom shares closed unchanged at 14.5 sen with 40.76 million shares traded today.


Vivocom, partner to bid for East Coast Rail Line deal

PETALING JAYA: Vivocom Intl Holdings Bhd is teaming up with MACfeam Sdn Bhd (MSB) to bid for the RM55 billion East Coast Rail Line (ECRL) project.

The group told Bursa Malaysia that its unit Vivocom Enterprise Sdn Bhd (VESB) had entered into heads of agreement with MSB to form a consortium to jointly tender for the ECRL job.

MSB, a unit of Pegasus Diversified Bhd, provides services to engineering, construction fields, manufacturing, fabrication and supply especially in the oil and gas industries and power generation development.

Both parties have agreed to execute the agreement to outline principal terms and conditions to establish rights and obligations in relation to the consortium and collaboration on the project. The joint venture was formed on a 60:40 basis, with VESB holding a 60% stake in the consortium.

Vivocom said it will finance the cost and outlay by way of internally generated funds and/or bank borrowings. Barring unforeseen circumstances, the group said the proposed collaboration is expected to contribute positively to its future earnings.

ECRL is an electrified railway line connecting the east and west coasts of Peninsular Malaysia. The project has 22 stations along a 688km line from Pengkalan Kubor, Kelantan to Port Klang, Selangor.

Vivocom shares closed unchanged at 14.5 sen with 40.76 million shares traded today.


MAI, MIDF launch RM200m fund for auto parts vendors

PETALING JAYA: Malaysian Industrial Development Finance Bhd (MIDF) expects to fund 120 auto companies with total financing assistance of up to RM200 million via the MAI-MIDF Industry 4.0 Development Programme.

Launched today, the programme is the result of a strategic alliance between MIDF and Malaysia Automotive Institute (MAI) and aims to further catalyse the development of automotive parts and component manufacturers, towards supply chain excellence, efficient manufacturing and higher value competitiveness.

“With this strategic alliance, we are expecting to fund 120 companies with a total financing assistance of up to RM200 million between 2018 and 2020. Thus far, MIDF has assisted companies in the automotive sector with financing amounting to RM544.8 million,” MIDF group managing director Datuk Mohd Najib Abdullah said in a statement today.

He said the collaboration will mark another milestone for MIDF. The company was the financier of Malaysia’s first motor assembly plant, a joint venture between AB Volvo of Sweden and Federal Co. Ltd of Malaysia to assemble Volvo cars in 1966.

“MIDF’s collaboration with MAI will assist the local automotive manufacturers as well other supporting automotive service providers to achieve international standards and be ready for the international markets.”

MAI CEO Datuk Madani Sahari said such collaborations are now more important than ever as it enables the capitalisation on strengths and specialisations to serve the automotive community.

“Vehicles on our roads are rapidly evolving from mere mechanical equipment to becoming integrated machines that compliment our lifestyle, requiring diverse disciplines and specialisations. It is important that this same diversity is embedded into governance that are responsible to encourage competitiveness within our own industry,” he said.


Bintai Kinden, Vista Springs in RM350m Malacca development

PETALING JAYA: Bintai Kinden Corp Bhd and Vista Springs Development Sdn Bhd will jointly develop a RM350 million project on 4.744 acres of freehold land in Bachang, Malacca.

In a filing with Bursa Malaysia today, the company said its wholly owned subsidiary Kejuruteraan Bintai Kindenko Sdn Bhd had entered into a memorandum of understanding (MoU) with Vista Springs to establish a joint venture.

Under the MoU, the parties will combine their skills, experience and resources to develop the land, which is meant for hospitality, residential and/or commercial purposes.

The proposed development is subject to due diligence and feasibility studies, which will be conducted before the parties enter into any binding contract for the development.

The estimated RM350 million gross development value is expected to contribute positively to the future earnings of the group. Bintai Kinden’s share price fell 2.78% to close at 17.5 sen today with a total of 246,000 shares traded, giving it a market capitalisation of RM50.33 million.


Budget 2018 – debate over DIBS

KUALA LUMPUR: Although the central bank has stressed that access to financing is not the primary issue for affordable housing, some quarters are still hopeful that the government will consider relaxing some of the lending restrictions in Budget 2018.

In addition, some are also calling for the return of developer interest bearing schemes (DIBS), which were banned in Budget 2014 following the sharp and quick rise in property prices as speculators took advantage of such schemes that were offered by property developers to “flip” properties.

“You have to look at bank financing and maybe relax some of the criteria in terms of lending restrictions that we have seen in the past. Especially things like DIBS and all that. Perhaps DIBS should be brought back, only for first-home buyers in order to assist them. Just a simple policy decision to allow DIBS for first home buyers… that would really help them and help to spur the housing market,” said Knight Frank managing director Sarkunan Subramaniam.

The Real Estate and Housing Developers’ Association Malaysia (Rehda) also said that home buyers’ ability to secure financing has been negatively impacted by the various cooling measures and financing guidelines introduced since 2010.

Rehda proposed a Home Ownership Assistance Programme (HOAP) to the Urban Wellbeing, Housing and Local Government Ministry aimed to address the affordability issue faced by first time buyers where developers will include the interest of the housing loan disbursed during construction period into the purchase price.

It added that the HOAP be restricted to houses priced RM500,000 and below, property under construction, household income RM10,000 and below, as well as to include interest on mortgage during construction period in the house prices.

However, the National House Buyers Association (HBA) secretary-general Chang Kim Loong said including interest on mortgage during the construction period into house prices is a “repackaged” or permutation of DIBS, where interest is capitalised.

“Developers being entrepreneurs have to be responsible and bear the risks that come with their investment. They should not be allowed to enjoy profits at the expense of house buyers bearing the risks on their behalf.

“Thus, when developers claim that DIBS is good because they ‘assist new buyers’, they should be asked to use the built-then-sell 10:90 concept instead if they are sincere in not wanting to shift the risks to the house buyers,” he said.

HBA in its Budget 2018 wishlist called for DIBS to continue to be prohibited and outlawed, as the banning of such schemes has been effective in curbing the escalation of house prices.

The Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector (PEPS), Malaysia president Foo Gee Jen said that ease of financing in terms of cost and availability and low upfront commitment was one of the factors undermining affordability.


Budget 2018 – Lower income and corporate taxes?

PETALING JAYA: Budget 2018 could see a reduction in corporate personal income taxes in the wake of rising cost of living.

The Socio-Economic Research Centre (SERC) executive director Lee Heng Guie opined that the government’s priority would be addressing the higher cost burden, which not only affects the people but also businesses.

As the regional countries are moving towards a more competitive tax structure, he is hoping that the government could lower the corporate tax.

Associated Chinese Chambers of Commerce and Industry of Malaysia’s (ACCCIM) SMEs and Human Resource Development Committee chairman Koong Lin Loong concurred, saying that the tax rate on chargeable income up to the first RM500,000 should be reduced by 1% to 17% from the current 18%.

Moreover, he said the RM500,000 threshold is too low and that it should be increased to RM1 billion or RM2 billion.

Koong stressed that Malaysia should follow the regional countries’ steps in reducing the corporate tax aggressively.

“The Asian countries are very aggressive. They have lowered it down to almost 20%. Can we have a 1% reduction per year?”

Lee opined that the 1% to 4% tax rate reduction for companies with significant increase in taxable income announced in the last budget was insufficient to address the businesses’ needs.

“It will be more impactful and cost savings if the government can provide outright reduction.”

On personal income tax, Lee is of the view that “it is not much” to ask for 1% to 2% as the people will have more disposable income for daily expenses.

“We know the government will still allocate money for capex, but if you can give direct tax rebate and tax reliefs or even tax cut into the pockets of households, I think it is more direct and the people can spend it.”

Koong also pointed out that the top range of 28% for personal income tax is too high, which will discourage foreign direct investments and the inflow of expatriates.

He said the ideal top range rate should be 26%, the level before it was raised to 28% a few years ago.

“Those days personal income tax is similar to corporate tax, but now it is the other way round. Corporate tax is reducing, but they (the government) increased the personal income tax.

The government need to readjust this, otherwise foreign investors see the Malaysian tax is too high.”

Meanwhile, Koong also hopes the personal relief of RM9,000, will be increased to RM12,000 to RM13,000.

“This RM9,000 relief has been stagnant for the past five to six years, it’s time to increase to address the high cost of living. We also expect higher tax relief for children, currently is about RM2,000 per child, so we think it should double. Let the parents to have more disposable income.”