Monday, February 12th, 2018


Crude climbs as Opec sees global demand trumping shale’s growth

NEW YORK, Feb 12 — Crude rose after the worst weekly decline in two years as Opec shrugged off the threat that US shale drillers will swamp the market with excess supplies. Futures in New York advanced as much as 2.8 per cent, the biggest…

Broadcom lines up biggest debt financing ever for Qualcomm

NEW YORK, Feb 12 — Broadcom Ltd has lined up as much as US$106 billion of debt financing to back its proposed acquisition of Qualcomm Inc, winning what would be the biggest corporate loan on record at a precarious time for credit markets. As…

Chinese bank lending surges to record high in January

BEIJING, Feb 12 — Chinese bank lending rose fivefold month-on-month in January, reflecting Beijing’s desire to support economic growth while continuing to strengthen financial infrastructure and keeping debt in check. Banks in the world’s…

Stocks’ drop brings scrutiny of complex low-volatility bets

NEW YORK, Feb 12 — Wall Street’s plunge this week has brought scrutiny to complex niche products to trade on volatility that market experts believe were poorly structured and exacerbated swings in stocks. Only days before markets began to go…

US stocks open higher, Dow rises 1.4pc

NEW YORK, Feb 12 — US stocks rose early today ahead of a heavy week of key economic data releases and policy announcements by President Donald Trump as investors hoped to shake off last week’s volatility. About 15 minutes into trading, the…

EPF warns of bumpy year for equities

PETALING JAYA: The Employees Provident Fund (EPF), which recorded the highest ever gross investment income of RM53.14 billion in 2017 and announced the highest dividend payout in the last two decades, foresees 2018 to be a bumpy year for the stock market following the recent heavy sell-off across the globe.

The EPF’s equities portfolio contributed 59.23% to investment income in 2017.
“With the market pullback in February, it is quite clear that unwarranted optimism that the market will only go into one direction for long time has been broken … people will look at economic fundamentals, rather just taking a bet that the market will just go up,” CEO Datuk Shahril Ridza Ridzuan told a media briefing here on the EPF’s 2017 dividend today.

Despite that, he said the volatility will help boost market liquidity, which is favourable for the pension fund.

Following the recent correction globally, Shahril said, valuations for the equity market have become more reasonable as global stocks were fundamentally overbought in some areas.

The local market’s key index rebounded 10.35 points or 0.57% to close at 1,830.17 points yesterday after a 19.62-point or 1.07% fall last Friday. Year to date, the index has gained 1.86%.

Shahril cautioned that inflation, which is currently under control given the recent interest rate increase, is one of the major risks this year in anticipation of continued economic and corporate earnings growth.

Commenting on the coming general election (GE), Shahril believes investors will not be affected by any short-term headwinds as economic fundamentals remain resilient.

“Everybody knows GE is this year, so there is no uncertainty about that. Most investors have already priced that in. Most people will focus on corporate results.”

The EPF, which has a presence in 30 global markets, is continuously looking to diversify its portfolio to benefit from global growth, with the Latin American equity market seen as an expansion target for this year, Shahril said.

In addition, it is targeting higher global assets exposure of 32% this year from 28% in 2017.

“We need to have a balanced portfolio. At 28%, we think it is under where we think we should be. It should be running about 32%,” he added.

Despite having only accounted for 28% of total asset exposure, global investments contributed 41.1% to total income contribution, thanks to gains in the banking sector.

However, syariah investments underperformed, dragged by impairments in the oil and gas as well as mobile telecommunication sectors, registering a 6.4% dividend rate, lower than the conventional scheme’s 6.9% for 2017.

Currently, the EPF has 700,00 members for the syariah scheme, with RM68 billion in funds. A total of RM100 billion has been allocated for the scheme since registration opened in August 2016.

Syariah investments accounted for 47.5% or RM376.03 billion of the EPF’s total investment asset of RM791 billion in 2017, which is 2.5 percentage points shy from the pension fund’s target of 50%.

Shahril highlighted that the banking sector is the only “missing part” for syariah investment due to the lack of syariah-compliant banking institutions.

“We're taking steps towards that direction, that's why we've been pushing MBSB (Malaysia Building Society Bhd) to become a full-fledged Islamic bank. Hopefully over time, we'll be able to find ways for more exposure in the Islamic banking sector.”

No much improvement in Malaysia’s housing affordability despite soft property market

KUALA LUMPUR: There has not been much improvement in Malaysia’s housing affordability despite a slow and challenging property market with little growth in transactional activity from the downtrend that was seen since 2013, according to real estate consultancy firm Rahim & Co International Sdn Bhd.

Executive chairman Tan Sri Abdul Rahim Abdul Rahman said this is because while the number of transactions fell, the value did not drop much.

“This shows that prices have not gone down so much as opposed to the number of transactions. Although developers are under pressure to lower their prices but they can lower their prices so much only after taking into consideration cost of building,” he added.

Rahim & Co research director Sulaiman Akhmady Mohd Saheh said housing affordability is calculated as ratio of average house price to median annual household income, or the number of years of annual income needed to cover the cost of buying an average house.

“An average terraced house would cost Malaysians 5.3 years of their household income,” he told a media briefing at the Rahim & Co’s property market review 2017/2018 here yesterday.

According to its research Johor’s housing affordability rose to 3.9 years, from 3.7 a year ago despite transaction value falling in the state, while Selangor’s and Penang’s remained flat at 5.2 years and 6.9 years respectively.

Prospective home buyers in Sabah need the most number of years at 8.4, a slight improvement from 8.5 in 2016. Those in Kuala Lumpur saw a slight improvement in affordability with 6.8 years of household income in 2017, from 7.0 in 2016.

Sulaiman said 2014-2016 saw a slight improvement in housing affordability as the income level of households increased. However, in 2016-2017 income growth was at a slower pace compared to the growth in house prices.

“The government’s Economic Transformation Programme of moving from a middle income nation to a higher income nation is a big challenge currently,” said Sulaiman.

Rahim however opined that it was not all doom and gloom for 2018, explaining that the property market will be flat this year and not go into recession, with the impending elections expected to provide firmer direction for the nation, hence re-igniting the momentum in the property sector.

The high-end residential category remains flat with prices contracting 10% in the past 18 to 24 months, or 15%-20% lower than the original asking prices in the secondary market.

In the office sector, oversupply concerns continue to lurk as the Klang Valley’s supply reached 131 million sq ft. With incoming supply of 18-20 million sq ft estimated to enter the market in the next few years, continued pressure will be seen on the occupancy rate and effective rental rates.

In the retail category, a further 18.2 million sq ft is expected to become available over the next four years, adding further pressures on retail mall owners. As at 2017, there was 69.8 million sq ft of retail space in the Klang Valley with an average occupancy rate of 85.2%.

“The retail and office segment will see continued pressure, which makes developers more creative and accommodative to new tenancies,” said Sulaiman.

PUNB wants more entrepreneurs to explore DFTZ

MELAKA, Feb 12 — Perbadanan Usahawan Nasional Berhad (PUNB) is encouraging more entrepreneurs under its purview to explore the Digital Free Trade Zone (DFTZ) to grow their businesses, said its Chairman, Tan Sri Mohd Ali Rustam. He said the…

EU watchdogs warn consumers of cryptocurrency ‘pricing bubble’

LONDON, Feb 12 — Virtual currencies such as bitcoin have shown clear signs of a pricing bubble and consumers could lose all their money, the European Union’s banking, securities and insurance watchdogs said today. Bitcoin, the best known…

Malaysian economic growth slowed in Q4: Poll

KUALA LUMPUR: Malaysia’s economy grew more slowly in the last quarter of 2017 than the blistering pace set in July-September, a Reuters poll showed, as exports increased at a slower rate.

The median forecast in the poll of 12 economists was for annual growth of 5.7% in October-December, compared with the previous period’s 6.2% – the fastest rate since the second quarter of 2014.

Forecasts for the fourth quarter ranged from 5.2% to 6.1%.

“The best is behind us,” ING said in a note today about Malaysia’s growth pace, noting that a high base effect has been impacting growth rates in several Asian economies.

Whatever Malaysia’s fourth quarter number, 2017 have brought Malaysia its fastest full-year growth since 2014’s 6%.

Growth in each of 2017’s first three quarters topped 5.5%.

Brian Tan, a Singapore-based economist with Nomura, said the fourth quarter brought a “slowdown in exports which looked quite sharp, but we suspect it was due to the ringgit appreciation during the period”.

In October-December, exports rose 12.4% from a year earlier, down from increases of more than 20% in each of the first three quarters. The peak increase, in July-September, was 22.1%.

Malaysia reports its trade figures in ringgit.

During 2017, the currency strengthened more than 10% against the dollar.

Industrial production rose 2.9% annually in December, down from 5% a month earlier.

Growth in Southeast Asia’s third-largest economy beat expectations in the third quarter, helped by private sector spending.

In October, the government revised up its 2017 full-year growth projection to 5.2-5.7%, up from 4.3% to 4.8%.

Malaysia’s economy grew 4.2% in 2016.

Robust private consumption is expected to have propped up fourth quarter growth, with higher motor vehicle and retail sales and strong consumer sentiment, HSBC said in a note.

The volume index of wholesale and retail trade rose 6.8% in the fourth quarter, according to data released last week by Malaysia’s statistics department.

Strong growth figures over the past three quarters and rising inflation rates prompted Bank Negara Malaysia in January to raise its key interest rate by 25 basis points to 3.25%. It was the first hike in three and a half years.

ING, which forecasts 5.5% annual growth for 2017’s fourth quarter, has pencilled in one more 25 basis point rate hike, for the third quarter of this year. – Reuters