Monday, December 18th, 2017


Record highs on Wall St, driven by tax bill hopes, M&A flurry

NEW YORK, Dec 18 — The major US stock indexes hit record highs in a broad rally today as the long-awaited bill to lower taxes looked set to be passed into law and buoyed by about US$11 billion in corporate deal-making. More US Republicans…

FTA with Sri Lanka will facilitate exports of Msian products, services, says PM

COLOMBO, Dec 18 — Products and services from Malaysian companies are expected to easily penetrate the market in Sri Lanka if both countries are able to forge a Free Trade Agreement. Prime Minister Datuk Seri Najib Razak said among the main…

Rand surges as investors raise stakes on Ramaphosa to lead ANC

DUBAI, Dec 18 — The market appears to be backing only one horse in the African National Congress’ leadership race. South Africa’s rand surged to the strongest level against the dollar in more than three months, bond yields fell and bank…

GLCs crowding out private investment, says ADB economist

PETALING JAYA: The growing presence of government-linked corporations (GLCs) in recent years is crowding out real private investment, according to Asian Development Bank (ADB) lead economist Jayant Menon.

In his recent policy paper titled “Government-Linked Companies: Impacts on the Malaysian Economy”, he said private firms tend to invest less in industries where GLCs are dominant, as the latter are seen to have preferential access to government contracts and benefit from regulations.

Based on his study, Menon said he found that when GLCs are dominant in an industry, investment by private firms in the sector is significantly negatively impacted.

Conversely, when GLCs do not dominate an industry, the impact on private investment is not significant.

“This suggests a negative relationship between the share of GLCs in an industry and the rate of investment by private firms,” he said.

Using either the industry share of operating revenue or income as a proxy for market share, Menon said he found that GLCs are most dominant in utilities (93%) and transport and warehousing (80%).

Nevertheless, he said GLCs tend to play a dominant role in all sectors except for some food-related, mineral, and services industries.

Meanwhile, Jayant said despite the Economic Transformation Programme undertaken by the government previously to reduce its role in the country’s business, GLCs’ shares in the FTSE Bursa Malaysia Kuala Lumpur Composite Index of the stock market increased from 43.7% to 47.1% between 2011 and 2015.

Although the programme was declared a success when it was concluded in 2015, he said the net result left the authority playing an even greater role in business.

Jayant said this is given that the divestment programme was associated with an even more aggressive programme of diversification, where government entered new sectors as it appeared to be reducing its influence in existing ones.

Therefore, he recommends that the government implement a transparent, time-bound and committed programme of divestment, seeing it as the only real solution.

“Commitment to divestment is admittedly complicated and requires a separate study focusing on much broader issues. But at a minimum, it would seem to require confronting vested interests and addressing the underlying political economy motivations that continue to provide a lifeline for GLCs and allowing them to flourish,” Jayant said.

Kenanga launches Malaysia’s first AI-leveraged investment fund

PETALING JAYA: Kenanga Investors Bhd has launched a Artificial Intelligence (AI) fund, Kenanga Global Multi Asset Fund, which is the first-of-its-kind in Malaysia.

The fund leverages on the breakthroughs in AI to identify profit opportunities from short-term predictive relationships in pricing and volume data. It then constructs portfolios with a focus on capital preservation based on forecasts of instruments’ movements.

It said in a statement that the fund aims to deliver absolute returns in any market condition by diversifying into global index futures with a long/short strategy.

“An example of this is the target fund’s (TCM Global Index Fund (Cayman) Ltd) performance in 2016, it was able to profit from the various opportunities in asset mispricing to deliver a return of 23.2% compared to the S&P 500 benchmark of 12.0%,” said Kenanga Investors executive director and CEO Ismitz Matthew De Alwis.

Kenanga Global Multi Asset Fund feeds into the TCM Global Index Fund, which is managed by Taaffeite Capital Management, LLC.

The TCM Global Index Fund is an absolute return fund measured against a benchmark of 15% per annum over two to three years which profits from the daily movement of global equity and fixed income indices. Its underlying assets are a long/short basket of 25 liquid global indices rebalanced once a day based on probabilistic forecasts of how indices will move over the next 24 hours.

Bright prospects for Dialog Axiata to add investment in Sri Lanka, says PM

COLOMBO, Dec 18 — Axiata Group Bhd’s unit, Dialog Axiata Plc, which is Sri Lanka’s largest telecommunications service provider, has bright prospects to increase its investment by another US$300 million in the country as its licence issue is…

Europe wants to regulate bitcoin to clamp down on illegality

PARIS, Dec 18 — European governments are pushing for bitcoin regulation amid mounting alarm that the world’s most popular digital currency is being used by money-launderers, drug traffickers and terrorists. French Finance Minister Bruno Le…

Ekovest to table IWCity proposal to shareholders, KPRJ agrees to sell

PETALING JAYA: Ekovest Bhd, which has decided to put forward the proposed takeover of Iskandar Waterfront City Bhd (IWCity) to minority shareholders, has entered into a conditional share sale agreement with Kumpulan Prasarana Rakyat Johor Sdn Bhd (KPRJ) to acquire its 6.40% interest in IWCity for RM80.39 million cash or RM1.50 per share.

“It is the intention of Ekovest to acquire as many IWCity shares as possible via acquisitions from the open market and/or direct business transactions during the offer period at a consideration of not more than the offer price of RM1.50,” Ekovest said in a stock exchange filing.

A proposed offer to acquire the 62% stake it does not own in IWCity is to be tabled to non-interested shareholders at an EGM, targeted to be held in mid February 2018 or earlier. The proposed offer is for either RM1.50 cash for an IWCity share, or one Ekovest share for one IWCity share.

Tycoon Tan Sri Lim Kang Hoo, who controls both Ekovest and IWC, made a proposal to merge the two companies after a proposed deal between IWC and parent company Iskandar Waterfront Holdings Sdn Bhd fell through.

The proposed offer is conditional upon, in the event of a voluntary general offer, Ekovest individually holding more than 50% of the voting shares of IWCity; and should it become a mandatory general offer, Ekovest and the persons acting in concert collectively holding more than 50% of the voting shares of IWCity.

The cash consideration for the exercise will be funded using a combination of bank borrowings and internally generated funds of Ekovest, which is yet to be finalised.

IWCity has interest in properties in Plentong Land, Danga Land and Sutera Land, which collectively have a market value of RM3.68 billion.

The total audited net book value of land held for property development and property development costs of the IWCity as at Dec 31, 2016 was RM1.01 billion.

Based on the offer price of RM1.50 per offer share, the implied total purchase consideration for Ekovest to acquire a 100% equity interest in IWCity is RM1.26 billion.

“From Ekovest management’s perspective, this means that Ekovest will only need to pay RM28.81 per square foot to have full access or control over the IWCity group’s 1,000-acre land bank, which is currently valued at RM84.49 per square foot.”

In an outright land purchase, Ekovest may only be able to acquire 41 acres and 257 acres of the same land bank.

The offer price of RM1.50 represents a discount of more than 50% to the estimated revised net asset value of IWCity of RM3.03 per IWCity share.

The group said the enlarged land bank of more than 1,000 acres will strengthen its property development business. Ekovest can also expand its concept of river beautification and rehabilitation along the Gombak River to Johor Baru, considering the land bank of the IWCity group along the Tebrau River.

IWCity is expected to contribute positively to future earnings of the Ekovest group, backed by the land disposal to Greenland Tebrau and launch of new property development projects.

Ekovest's share price fell half a sen or 0.54% to close at 91.5 sen with 744,400 shares changing hands. IWCity's share price closed unchanged at RM1.32 with 1.5 million shares changing hands.

EU launches probe into Ikea’s Dutch tax deals

BRUSSELS, Dec 18 — The EU today opened an in-depth investigation into Swedish furniture giant Ikea’s tax deals in the Netherlands, in the latest salvo by Brussels against the tax affairs of multinationals. With the probe, the European…

Foreign inflows in line with Bursa’s movement

PETALING JAYA: Foreign investors continued to amp up their stakes on stocks listed on Bursa Malaysia last week, according to MIDF Research weekly fund flow report.

In fact, there has been four consecutive weeks of gradual foreign net inflow into Malaysia.

MIDF said based on preliminary data from Bursa Malaysia which excluded off market trades, foreign investors bought RM495.3 million net for the week ended Dec 15.

Besides that, MIDF said the FBM KLCI also took the market by surprise, leading other global benchmarks with a whopping 1.85% weekly gain.

It said the local benchmark closed above 1,750 points, a level not seen in more than a month.

MIDF added that the ringgit resumed its strengthening streak for the seventh week, appreciating 0.20% to finish at RM4.0795 against the greenback.

Meanwhile, the research house said the global equity markets ended the week mixed amidst a raft of central bank decisions by major economies.

“Despite a bout of uncertainty on the tax bill plans, all three major US benchmarks sealed fresh closing highs on Friday, each locking in weekly gains above 0.9% after Senator Marc Rubio expressed his support for the bill.

“The dollar index followed suit, advancing 0.47% the same day to settle at 93.932 points while marking its third straight week of gains,” it said.

MIDF noted that the Brent crude oil price dropped slightly by 0.27% for the week, to settle at US$63.23 per barrel, weighed down by US production which is reaching close to top producers such as Saudi Arabia and Russia.

“It is now the third uninterrupted week of foreign funds leaving Asia with the provisional aggregate data from the seven Asian exchanges suggesting that investors classified as “foreign” disposing -US$649 million net last week,” it added.