Thursday, January 11th, 2018


Luxury property projects freeze impedes readjustment phase: Ideas senior fellow

KUALA LUMPUR: The government’s move to freeze approvals for luxury property projects is a direct interference in the market as it impedes the readjustment phase that is necessary for the property sector to adjust to the present economic system, according to the Institute for Democracy and Economic Affairs (Ideas) senior fellow Dr Carmelo Ferlito.

He said even if the bursting of the Malaysian property bubble seems unavoidable, the proposed solution does not go in the right direction.

“The emerging of unsold properties is just the final symptom of a process. Government intervention at this stage would only impede the readjustment phase that is necessary for the property market to discover how to be consistent with the present economic system,” Ferlito opined in a statement released today.

Freezing approvals for luxury property development is not the right policy because of the unique nature of luxury products, which makes them less sensitive to cyclical fluctuations, he explained.

“Such a measure might generate panic among small investors, accelerating and aggravating the pace of the crisis.”

The move also lacks the consideration of ramifications of adopting such a policy, which is an excessive demonstration of government powers to suppress the free market, Ferlito said.

“What it seems advisable, on the other side, is an information campaign, oriented to create awareness about the present property market conditions, in particular among those people that got involved in the bubble without proper finance knowledge,” he said.

Bank Negara Malaysia reported that as of the first quarter of 2017, total unsold residential properties stood at 130,690 units, the highest in a decade, and about 83% of the total unsold units were in the above RM250,000 price category.

There is no doubt that there is a risk of property market imbalance and therefore policy measures need to kick in, Ferlito’s statement said.

The government decided to freeze approvals for luxury property developments indefinitely from Nov 1, 2017 to control the oversupply in the property market. The directive temporarily stops the development of shopping malls, commercial complexes and condominiums valued above RM1 million a unit until the excess supply is cleared.

CIMB to trim stakes, cede control of asset management JVs

KUALA LUMPUR: CIMB Group Holdings Bhd is relinquishing control of its asset management joint ventures with Principal Financial Group Inc by divesting part of its stakes for RM470.29 million.

CIMB is expected to recognise a gain on disposal of RM950 million and a common equity tier 1 ratio improvement of 18 bps after the divestment.

CIMB is divesting a 20% stake in CIMB-Principal Asset Management Bhd (CPAM) to Principal International (Asia) Ltd, and a 10% stake in CIMB-Principal Islamic Asset Management Sdn Bhd (CPIAM) to Principal Financial Services Inc.

Once completed, Principal will increase its ownership to 60% with CIMB retaining a 40% stake in each of the entities.

CIMB and Principal Financial Group have signed agreements for Principal to gain additional ownership of CPAM, which has more than RM70 billion in assets under management, as well as CPIAM, pending regulatory approval.

CIMB group CEO Tengku Datuk Seri Zafrul Tengku Abdul Aziz said as a leading Asean universal bank, asset management continues to be an integral part of its regional banking business.

“This shareholding realignment will ensure that our asset management joint venture with Principal achieves its maximum potential and continues to be sustainably value-accretive to CIMB.

“Scale and extensive investment expertise are important to this business and we believe this strategic realignment will enhance the value proposition of the joint venture to enable us to serve our customers better,” he said in a statement.

The transaction is expected to be completed in the second quarter of 2018 and is subject to the relevant approvals.

CIMB and Principal have teamed up in the region since 2004 and grown their operations across Malaysia, Singapore, Indonesia and Thailand.

Foreign holdings of govt bonds to rise: MARC

PETALING JAYA: Foreign holdings of government bonds are expected to increase towards the end of 2018 and record a net positive inflow, according to the Malaysian Rating Corp Bhd (MARC).

This is on the back of expectation of an overnight policy rate (OPR) hike in early 2018; upbeat outlook of the ringgit; improvement in crude oil prices; and strengthening of the US economy that could lead to a faster pace of interest rate normalisation.

“The lower volume of maturing Malaysian Government Securities (MGS)/ Government Investment Issues (GII) papers in 2018 with a projected total value of RM62.8 billion should also provide support,” MARC said in a report titled “2018 Bond Market Outlook: Getting Back in Cycle”.

The rating agency expects gross issuance of MGS/GII in 2018 to come in within the range of RM100 billion to RM105 billion, premised on the government’s budget deficit estimate of RM39.8 billion (as per Budget 2018); RM62.8 billion worth of MGS/GII papers projected to mature in 2018; and MARC’s forecast of a GII-to-MGS ratio of 44:56.

On corporate bonds, the primary market’s gross issuance this year is estimated to be in the range of RM90 billion to RM100 billion, slightly higher than the earlier projection of RM85 billion to RM95 billion. This will be driven by sturdy pipeline of issuances from the government guaranteed (GG) segment related to the financing of current and new large-scale infrastructure projects, including the extensions of the LRT 3 and the MRT 2 lines as well as the ECRL and the Merdeka PNB118 tower.

“The primary market is expected to take a breather in 2018 following a bumper year in 2017 when issuers had rushed to raise funds given the prospects of monetary policy normalisation and therefore likely higher borrowing costs ahead.”

Unrated corporate bonds issuance is also expected to continue growing because of savings on issuance costs as well as capital market incentives introduced in Budget 2018.

In the secondary market for MGS and corporate bonds, MARC anticipates bond yields to increase gradually in 2018.

Meanwhile, MARC anticipates Bank Negara Malaysia to hike the OPR by between 25 and 50 basis points this year given the increased likelihood of Malaysia’s gross domestic product growth hitting above the 5% level again in 2018.

The research house also expects both cost-push and demand-pull factors to keep the inflation rate hovering at around 3% in 2018, with the lagged inflation effect of both higher pump and food prices in the last few months of 2017 to persist.

Airlines, oil shares lead as US stocks resume upward climb

NEW YORK, Jan 11 — Shares of airlines and energy companies were among the early winners today as US stocks resumed their upward climb after the pullback in the prior session. About 30 minutes into trading, all three major indexes had gained…

Forex losses dent Atlan Q3 earnings

PETALING JAYA: Property investment, hospitality and auto-components company Atlan Holdings Bhd’s earnings plunged 90.3% to RM1.61 million in the third quarter ended Nov 30, 2017 (Q3FY18), mainly due to lower profit and foreign exchange losses of RM7.3 million.

The company made a net profit of RM16.68 million in the previous year's corresponding quarter.
Its revenue for the quarter increased by 2.4% to RM186 million, compared with RM181.6 million in the same period last year, attributed by higher revenue from automotive and investment holding segments.

The group has declared a third interim single-tier ordinary dividend of 10.0 sen per share in respect of the financial year ending Feb 28, 2018 amounting to RM25.36 million which is payable on March 15, 2018.

For the nine months period, its net profit decreased 46% to RM22.7 million, from RM41.9 million a year ago, while revenue declined 1.7% to RM602.7 million, against RM613 million previously.

On its prospects, Atlan said it expects the industries in which it operates in to remain challenging, with the volatile ringgit against the US dollar and competitive business environment.

Atlan said it will continue its efforts to strengthen its operational efficiencies and control costs in order to remain competitive and profitable in the remaining quarter of the financial year ending Feb 28, 2018.

On Bursa Malaysia today, Atlan closed two sen or 0.47% higher at RM4.28 with 1,000 shares traded.

Brexit backer Farage moots second EU referendum

LONDON, Jan 11 — Leading Brexit campaigner Nigel Farage suggested today that Britain hold a second referendum on EU membership which he claims would silence those who are against leaving the bloc, but the proposed new vote is getting support…

Vivocom’s major shareholders give HK firm more time to acquire stake

PETALING JAYA: Vivocom International Holdings Bhd's substantial shareholders have given Hong Kong-listed CNQC International Holdings Ltd more time to complete the acquisition of a 28.59% equity interest in the company.

Ang Li-Hann and Golden Oasis Resources Sdn Bhd have agreed to give CNQC until Jan 25 to complete the purchase. The duration of the indicative term sheet between the two parties was until Jan 11, 2018.

Following the completion of the acquisition, CNQC will emerge as the largest shareholder of Vivocom.

“Up to the date of this announcement, no binding agreement has been entered into between CNQC, Ang Li Hann and Golden Oasis Resources Sdn. Bhd in respect of the potential acquisition. As such, the shareholders of Vivocom shall exercise caution when dealing in the securities of the company,” the board of directors said in a filing with the stock exchange.

CNQC is a contractor principally engaged in the foundation business and machinery leasing business in Hong Kong and Macau.

On Bursa Malaysia today, Vivocom fell 3.57% to close at 13.5 sen with 11.36 million shares done.

Strong growth in November manufacturing sector sales

KUALA LUMPUR: Malaysia’s November manufacturing sales continued to record a strong growth of 10.9%, rising to RM66.6 billion compared with RM60.1 billion reported a year ago.

Year on year, the significant increase in sales value in November 2017 was due to increases in electrical and electronic products (8.8%), petroleum, chemical, rubber and plastic products (17.8%) and non-metallic mineral products, basic metal and fabricated metal products (4.8%). These three sub-sectors contributed 79.7% to the sales value of the manufacturing sector.

The total number of employees engaged in the manufacturing sector in November 2017 was 1.05 million, an increase of 2.3% or 23,960 from 1.03 million persons in November 2016.

Salaries and wages paid rose 9.2% (RM297.2 million) to record RM3.53 billion, thus registering an average salaries & wages per employee of RM3,347 in November 2017.

Sales value per employee gained 8.4% to record RM63,186 against that in the same month of the previous year.

Powerful growth in Germany fuels calls to share the wealth

BERLIN, Jan 11 — Strong growth data in Germany came as welcome news today for politicians haggling over spending and unions battling for more pay, although observers warn the good times can’t last forever. Gross domestic product in…

Stocks in Focus (12-1-2018)

KUALA LUMPUR (Jan 11): Based on corporate announcements and news flow today, companies in focus tomorrow (Jan 12) may include: LBS Bina, Ta Ann, R&A,…