Sunday, November 19th, 2017


Crude Palm Oil Weekly Updates – November 18, 2017

Malaysian palm oil futures slid for the third consecutive weeks, tracking weakness from related edible oils from Dalian Commodity Exchange and Chicago Board of Trade (CBOT), and weighed down by strengthening of ringgit. The benchmark crude palm oil futures (FCPO) contract plunged 3.75 per cent to RM2,694 on Friday, which was RM105 lower than RM2,799 […]

Toshiba to raise US$5.3b from new shares to avoid delisting risk

TOKYO, Nov 19 — Toshiba Corp said it would raise ¥600 billion yen (RM22.2 billion) from a sale of new shares, a key step that would allow the troubled conglomerate to remain a publicly traded company even if the sale of its chip unit is…

Kejuruteraan Asastera sees potential in mechanical sector business growth

KUALA LUMPUR: The newly Ace Market-listed Kejuruteraan Asastera Bhd (KAB) intends to grow its mechanical engineering (M&E) business to account for 50% of the group’s total revenue contribution in the next five years, from less than 10% currently.

KAB’s current core business, the electrical engineering services, which contributes almost 90% of its total revenue, involves the installation, testing and commissioning of electrical systems. Its M&E services include the installation, testing and commissioning of air-conditioning and mechanical ventilation systems.

KAB, which was the most active stock, closed at a premium of 20%, or 5 sen, over its issue price of 25 sen in its debut on the Ace Market of Bursa Malaysia last Friday.

Its shares opened at 33 sen, hit a low of 28 sen and high of 33 sen before ending its maiden day at 30 sen, with 159.92 million shares traded.

Speaking at a press conference after the group’s listing ceremony, its managing director Datuk Lai Keng Onn said going forward the company aims to expand and strengthen its M&E services capabilities, driven by positive outlook for the construction sector and by undertaking more affordable housing projects.

“Actually, the M&E contract value for affordable housing projects is higher. So we are aggressively tendering for it. That’s why if the market has a lot of affordable housing projects, it is an advantage for us. We also can see that currently there is huge potential for us to grow in the mechanical sector,” he said.

Lai said the group is also targeting to expand its geographical presence in Kuala Lumpur, Johor as well as Penang, noting it is in the process of finalising one or two affordable housing scheme projects in Johor.

Lai expects KAB’s current order book of RM210 million will keep the group busy until 2019, and is expected to hit RM250 million by year-end. The company is now awaiting the outcome of its bids worth RM250 million for contracts that include affordable housing and mixed-development projects.

Lai said the group is also keen to participate in tendering for infrastructure projects in the future, including the Mass Rapid Transit project.

For the third quarter ended Sept 30, 2017, KAB posted a net profit of RM2.12 million, on the back of RM30.18 million revenue. For the nine months period, it registered a net profit of RM5.35 million, with a revenue of RM83.23 million.

The group raised RM20 million from its initial public offering (IPO), which comprises a public issuance of 80 million new shares and offer for sale of up to 32 million existing shares. Of the proceeds raised, 58% will be used for working capital, 12.5% for capital expenditure, 9.1% for repayment of bank borrowings and 17% for listing expenses. About 3.4% will be used to set up a proposed new branch office in Johor Baru and an additional office in Kuala Lumpur.

Its public offer of RM16 million issue shares was oversubscribed by 57.33 times.

Malaysia on strong growth path

KUALA LUMPUR: Compared to forecasts at the start of the year, Malaysia is one of the economies in Asean that surprised most to the upside, said Standard Chartered Bank head of Asean Economic Research Edward Lee.

“The pickup in external demand was not unexpected but domestic strength exceeded expectations,” he told SunBiz after the Malaysian economy recorded a stronger growth of 6.2% in the third quarter of 2017 (Q3), the best since Q2 of 2014, mainly driven by private sector spending.

“Q3 GDP (gross domestic product) print came in above consensus of 5.7% and our own forecast of 5.8%. The economy continues to be very strong, with private consumption and investments maintaining their strength. We had expected some slowdown in the consumer but this did not materialise,” added Lee.

Lee said his 2017 full year forecast was 5.4% but with the 2017 nine months GDP growth averaging at 5.9%, he noted that there is upside bias to its full-year call.

Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim last Friday said given the continued strong growth performance in Q3, the Malaysian economy is on course to register growth that is close to the upper range of the official projection of 5.2%-5.7% in 2017. Domestic demand is expected to support this expansion.

On the external front, exports will continue to benefit from the favourable global demand conditions. Headline inflation is expected to average at the upper end of the forecast range of 3%-4% for 2017 as a whole.

He also pointed out the possibility of 2017 GDP coming in beyond 5.7%, but noted that it is too early to tell.

“But the numbers look good because the export sector is still showing double-digit growth and that will be a pleasant surprise. But watch the external environment, which will have an influence,” said Muhammad.

Commenting on how some people are not feeling the growth, Muhammad said this is due to sustained cost of living pressures, especially the B40 groups and concerns over employment opportunity.

“We need to look at it in totality, we need to look at an economic policy that can create better paying jobs, we need to look at industries that can generate high value added, we need to relook our education policy to train our people to be more productive.”

MIDF Research forecast GDP to average at 5.8% in 2017. Based on the current development and indicators, it is optimistic that Malaysia’s economy will expand by 5.8% this year given the upbeat performance of domestic and global economy. Besides stable labour market, continued wage growth and moderating inflation will support and spur domestic economy.

“Moving forward, we foresee the economic performance in the fourth quarter of 2017 to expand at slower pace,” said MIDF.

Meanwhile, Muhammad said the exposure of financial institutions to the property sector is at prudent levels but is more concerned on the negative spillovers of the oversupply of properties to the other sectors.

He pointed out three segments in the property sector that is of concern, including high-rise condominiums, office space and shopping malls.

“What concerns us is that if you’re not careful, the oversupply in the real property sector might have an impact in other economy sectors as well, for instance, loss of jobs, loss of spillover effects from the construction industry,” said Muhammad.

He said the ringgit is reflective of Malaysia’s economic strength, with more liquidity in the market now.

“The ringgit levels are not influenced by speculative flows but reflective of real economic activities in the financial market.”

Any adjustment to policy a normalisation

KUALA LUMPUR: Malaysia has the flexibility to adjust the degree of its monetary policy accommodativeness, which it stressed will be a “normalisation” of interest rates, said Bank Negara Malaysia (BNM) governor Tan Sri Muhammad Ibrahim.

“We’ve hinted that once the growth of economy is entrenched, economic expectation is positive, inflation is what we’ve expected and financial imbalances have not increased significantly or becoming a problem, it will give us a bit of flexibility to adjust the degree of monetary policy accommodativeness. It’s not a tightening but a normalisation of interest rates,” Muhammad said after announcing the country’s Q3 GDP last Friday.

He said real interest rates have been negative for almost a year, which is not something abnormal. Moreover, he said the economy has gone through longer periods of negative real interest rates, such as in 2009, where negative real interest rates were present for over one-and-a-half-year.

Despite the different scenario now with the elevated household debt being a recent phenomena, Muhammad said there are still certain things that we can link with.

“For example, if there is a negative interest rate, there will be some financial imbalances and if it’s too long, if we have an opportunity to correct that imbalance, we should take it. At this moment, we have that flexibility,” explained Muhammad.

Standard Chartered Bank head of Asean Economic Research Edward Lee said with the latest Monetary Policy Committee statement clearly highlighting the central bank’s hawkish stance, it sees the overnight policy rate being hiked by 25bps in January 2018.

“But this is not the start of a tightening cycle. If anything, the risk is for no hike rather than more hikes,” Lee told SunBiz.

OCBC Bank economist Barnabas Gan said BNM’s persistent rhetoric in indicating it wants to adjust monetary policy suggests that the central bank is gearing up market expectation for an eventual rate hike in its upcoming meetings, and look for BNM to deliver at least a one-time rate hike into 2018 then. – by Ee Ann Nee

The week at a glance 19 November 2017

Sabah & Sarawak MPOB increases palm oil production through technology integration The Malaysian Palm Oil Board (MPOB) has targeted to raise the production of palm oil to six tonnes per hectare by increasing productivity through up-to-date technology integration, its Director-General, Datuk Dr Ahmad Kushairi Din said. The MPOB is actively stepping up palm oil research […]

Singapore growth could top 3pc in 2017, says prime minister Lee

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