Monday, April 9th, 2018

 

Wall Street higher as US-China trade war worries ebb

NEW YORK, April 9 — Wall Street rebounded from last week’s trade tariff driven selloff to open higher today, taking comfort in comments from the Trump administration officials who stressed the trade dispute with China could be resolved through…


Oil rallies as concerns grow over geopolitics

LONDON, April 9 — Oil rose today, boosted by investor caution over an air strike on a Syrian air base over the weekend, which overshadowed some of the concern that has undermined the crude market over an intensifying trade dispute between China…


Uber agrees to buys electric cycle-sharing startup JUMP Bikes

SAN FRANCISCO, April 9 — Ride-hailing company Uber Technologies Inc said today it has agreed to buy electric bicycle service JUMP Bikes, allowing Uber to offer US passengers an alternative to cars and further consolidating the crowded…


Measures in manifestos will give near-term boost to consumption: Moody’s

PETALING JAYA: Barisan Nasional (BN) and Pakatan Harapan’s manifestos for the 14th general election (GE14) are unlikely to have material impact on Malaysia’s economy although they are expected to boost the country’s consumption over the near term.

In a statement today, Moody’s Investors Service assistant vice-president and analyst Anushka Shah said this is due to the backdrop of Malaysia’s export-driven growth as well as risks to inflation.

“Ahead of elections, BN and the key opposition Pakatan Harapan have both unveiled their manifestos and specific spending programmes targeted at key voter bases. These measures include raising minimum wages, greater cash handouts, relief for Felda settlers, amongst others.”

Anushka said the impact of these programmes on the sovereign credit will depend on how they are funded and whether they have a negative effect by delaying government’s ongoing efforts at fiscal consolidation.

“More generally, our rating assessment takes into consideration broader political risk for all sovereigns. We see political risk as being ‘low’ for Malaysia, based on a moderate-probability low impact scenario,” she added.

In addition, Anushka said, although domestic political risks have increased in recent years, they have not adversely affected policy reform as the government has demonstrated commitment to its fiscal deficit reduction goals through past electoral cycles.

In the manifesto themed “With BN for a Greater Malaysia”, BN promises to give additional 1Malaysia People’s Aid (BR1M) to target groups, a special incentive of RM5,000 for every Felda settler, cap interest rate limits lower and credit card late payments and reduce broadband subscription costs by 50%.

The manifesto also promised to eliminate price differences for Peninsular Malaysia and Sabah-Sarawak.

Meanwhile, Pakatan Harapan plans to increase the current minimum wage to RM1,500, and to ensure the rates are standardised between Peninsular Malaysia and Sabah and Sarawak.

The coalition also pledged to delay National Higher Education Loan Fund (PTPTN) repayments until a borrower obtains a monthly salary of RM4,000, and provide tax incentives for employers to help pay their employee PTPTN loans without a salary deduction.

Socio-Economic Research Centre (SERC) executive director Lee Heng Guie, commenting on BN’s manifesto, said it is all important that fiscal consolidation stays its course despite the back-of-the-envelope calculation of RM5.6 billion extra spending it will incur.

“I would believe that they will look into the potential higher revenue coming from oil, maybe GST (Goods and Services Tax) collection; this should be able to keep the additional spending but most importantly, you must not derail from the overall fiscal consolidation. That’s important,” he told reporters at a briefing on SERC’s quarterly economy tracker today.

Based on a rough calculation, the government would need an additional RM4.2 billion to pay for the higher BR1M promised as well as a new category of recipients, while the salary increments for civil servants would cost RM1.4 billion, totalling RM5.6 billion extra.

The government has targeted a fiscal deficit of 2.8% of gross domestic product this year.

Commenting on BR1M in particular Lee said the government must look into how best to utilise the programme as it is a short-term relief for the vulnerable groups and will become a big commitment if the government continues to widen the scope.

“I’m happy to note that in the manifesto they did mention they may want to refine the BR1M mechanism in terms of conditionality tied with training. That is the right path. You must empower and enhance the capacity of the people who are receiving BR1M,” he added, reiterating Bank Negara Malaysia’s comments on working out a system to slowly exit from cash payouts under BR1M.


Splash sues Syabas, claims RM4.22b in outstanding receivables

PETALING JAYA: Gamuda Bhd’s indirect 40% associate company Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) is suing Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) for RM4.22 billion in outstanding receivables owing to Splash, excluding interest and costs, ahead of the outcome in the Selangor water restructuring saga.

“Splash will commence legal proceedings against Syabas for all outstanding receivables owing by Syabas to Splash,” Gamuda said in a stock exchange filing yoday.

In March, Gamuda received four legal suits filed by Tenaga Nasional Bhd (TNB) against Gamuda’s 80% owned subsidiary Gamuda Water Sdn Bhd for failure to pay electricity bills. In addition, it received two third party notices by Splash from Sungai Harmoni Sdn Bhd in respect of the suits filed by TNB against Sg Harmoni, also for failure to pay electricity bills.

Splash’s suit will not have any significant financial and operational impact on the Gamuda group for the financial year ending July 31, 2018. The Gamuda group will include its share of interest on the outstanding sum in its financial statements, as and when Splash is awarded the interest on the outstanding sum.

Gamuda said it will make the necessary announcements to Bursa Malaysia Securities as and when there are material developments.

“However, updates on Splash’s suit including hearing dates (if applicable) will be disclosed in the quarterly results of the company,” it said.

In its latest annual report, Gamuda said the delay in the recoverability of amount due from Syabas was primarily due to the delay in the finalisation of the water restructuring initiatives.

“The settlement of such indebtedness is expected to take place only after the state government of Selangor has completed the consolidation of all water assets,” it said.

Gamuda added that the outcome of the water industry restructuring initiatives can only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group. The restructuring initiatives may develop in ways not initially expected.

Last week, Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Johnity Ongkili said the federal government will either invoke Section 114 of the Water Services Industry Act 2006 to take over water management in Selangor or extend/ terminate Selangor’s water industry restructuring agreement, if a deal is not reached by July 2018.

On Bursa Malaysia today, Gamuda rose 0.59% to RM5.12 with 7.09 million shares done.


HSBC to expand further in China, cut red tape under new management team

LONDON, April 9 — HSBC will seek to cut internal bureaucracy and expand investment in China’s southern region to the rest of the country, executives at the bank said today, in the first hints of the strategy to be pursued by its new leadership…


It’s time to switch focus to big-cap stocks

PETALING JAYA: Kenanga Research believes it is time to switch focus to big-cap stocks as the current sentiment is not in favour of mid- and small-cap stocks.

This is in view of the weak yet volatile second quarter as the general election looms, with lacklustre trading volume and market interest ahead of the Muslim fasting month in May.

The research house advised investors to go for stocks with resilient earnings as well as heavily bashed-down counters given that buying opportunities could have emerged as valuations for these stocks have reached or fast approach their respective trough valuations.

Kenanga Research also highlighted that the current derating process for mid- and small-cap stocks is likely to continue in the months ahead as valuations have yet to fall to the lower end of their historical ranges.

Nonetheless, the research house said the buying momentum for the FBM KLCI seems sustainable as per its accumulated volume-price study, which suggests that bigger-cap stocks could be relatively strong and outperform mid- and small-cap stocks.

“Timing wise, the ideal ‘buy on weakness’ zone is below 1,830 points,” it added.

The FBM KLCI ended 12.7 points or 0.7% higher today following the dissolution of Parliament last Saturday to pave the way for the 14th general election. Gainers led losers by 702 to 249 on volume of 2.22 billion shares valued at RM2.1 billion.

The FBM Small Cap Index and FBM Mid 70 Index gained 314.36 points or 2.3% and 149.54 points or 1% to close at 14,222.52 and 15,317.45, respectively.

The ringgit, meanwhile, strengthened 0.1% to 3.8675 against US dollar as at 5pm today.


SERC raises 2018 GDP growth forecast to 5.5%

KUALA LUMPUR: The Socio-Economic Research Centre (SERC) has revised its 2018 gross domestic product (GDP) growth forecast to 5.5% from 5.1% previously, on firmer domestic demand.

“Firstly, why I revised from 5.1% to 5.5%, is mainly to reflect a firmer domestic demand. On the consumption side, I also factored in the budget measures that are likely to see more improvement in spending. I would also expect sentiment on the consumer side to start to slowly improve,” said SERC executive director Lee Heng Guie.

He said it would take a while for the consumer sentiments index (CSI) to cross the 100 point mark (82.6 in Q4 2017) but noted that consumer spending numbers still surprise on the upside every quarter last year despite CSI being below 100.

Lee said consumer spending defied expectations in an environment of rising cost of living and inflation as well as cautious consumer sentiment.

He added that the promises pledged by Barisan Nasional in its manifesto, such as the doubling of 1Malaysia People’s Aid (BR1M) and the one-off increment for civil servants, could eventually translate into higher consumer spending, which SERC has not factored into its revised GDP growth.

Speaking to reporters at SERC’s quarterly economy tracker briefing today, Lee said real GDP growth in the first half of 2018 is estimated to average 5.6% before easing to 5.4% in the second half of 2018.

SERC’s preliminary estimates indicate real GDP to expand by 5.6% in Q1 2018, 5.7% in Q2 2018, 5.5% in Q3 2018 and 5.4% in Q4 2018.

He said domestic demand will continue to be the key driver of growth with sustained private consumption forecasted at 6.9% this year, and continued expansion in private fixed investment forecasted at 8.3% this year.

Meanwhile, business sentiment remained relatively soft in recent quarters and with an imminent 14th General Election, some cautiousness in investors’ sentiment would prevail on lingering uncertainties pertaining to the outcome of the election.

Lee said the external sector is expected to contribute moderately to overall GDP growth as exports are estimated to grow at a moderate pace, partly challenged by high base effects and diminishing exchange rate revaluation gains.

In addition, he said Trump’s trade policy wild card could put global trade growth at risk. SERC projects a 7.5% gross export growth this year.

Inflation rate is expected to range from 2% to 3% this year, after hitting a nine-year high of 3.7% in 2017 since 2008. Overall price level is expected to increase at a slower pace this year, partly due to technical high base effects, reflecting a markedly slowdown in fuel prices that led to lower prices of transportation as well as moderate increase in food prices.

The 2-3% inflation rate is a downward revision from 3-3.5% previously, with potential upside risks being fuel price, utility cost, wage growth and firm demand fueling demand inflation.

SERC’s estimate of the ringgit is RM3.80 to RM3.90 at end-2018 with a fair value of RM3.60 to RM3.70.


SERC raises GDP growth forecast

KUALA LUMPUR: The Socio-Economic Research Centre (SERC) has revised its 2018 gross domestic product (GDP) growth forecast to 5.5% from 5.1% previously, on firmer domestic demand.

“Firstly, why I revised from 5.1% to 5.5%, is mainly to reflect a firmer domestic demand. On the consumption side, I also factored in the budget measures that are likely to see more improvement in spending. I would also expect sentiment on the consumer side to start to slowly improve,” said SERC executive director Lee Heng Guie.

He said it would take a while for the consumer sentiments index (CSI) to cross the 100 point mark (82.6 in Q4 2017) but noted that consumer spending numbers still surprise on the upside every quarter last year despite CSI being below 100.

Lee said consumer spending defied expectations in an environment of rising cost of living and inflation as well as cautious consumer sentiment.

He added that the promises pledged by Barisan Nasional in its manifesto, such as the doubling of 1Malaysia People’s Aid (BR1M) and the one-off increment for civil servants, could eventually translate into higher consumer spending, which SERC has not factored into its revised GDP growth.

Speaking to reporters at SERC’s quarterly economy tracker briefing today, Lee said real GDP growth in the first half of 2018 is estimated to average 5.6% before easing to 5.4% in the second half of 2018.

SERC’s preliminary estimates indicate real GDP to expand by 5.6% in Q1 2018, 5.7% in Q2 2018, 5.5% in Q3 2018 and 5.4% in Q4 2018.

He said domestic demand will continue to be the key driver of growth with sustained private consumption forecasted at 6.9% this year, and continued expansion in private fixed investment forecasted at 8.3% this year.

Meanwhile, business sentiment remained relatively soft in recent quarters and with an imminent 14th General Election, some cautiousness in investors’ sentiment would prevail on lingering uncertainties pertaining to the outcome of the election.

Lee said the external sector is expected to contribute moderately to overall GDP growth as exports are estimated to grow at a moderate pace, partly challenged by high base effects and diminishing exchange rate revaluation gains.

In addition, he said Trump’s trade policy wild card could put global trade growth at risk. SERC projects a 7.5% gross export growth this year.

Inflation rate is expected to range from 2% to 3% this year, after hitting a nine-year high of 3.7% in 2017 since 2008. Overall price level is expected to increase at a slower pace this year, partly due to technical high base effects, reflecting a markedly slowdown in fuel prices that led to lower prices of transportation as well as moderate increase in food prices.

The 2-3% inflation rate is a downward revision from 3-3.5% previously, with potential upside risks being fuel price, utility cost, wage growth and firm demand fueling demand inflation.

SERC’s estimate of the ringgit is RM3.80 to RM3.90 at end-2018 with a fair value of RM3.60 to RM3.70.


Kumpulan Perangsang Selangor to produce carton boxes with Chinese firm

PETALING JAYA: Kumpulan Perangsang Selangor Bhd’s (KPS) 99% subsidiary Century Bond Bhd (CBB) has entered a joint venture (JV) with China’s Honda Printing Holdings Ltd to produce offset carton boxes for the manufacturing sector at an investment cost of RM2.87 million.

CBB’s wholly owned subsidiary Pro Pulp Packages Sdn Bhd and Honda Printing will each hold 60% and 40% equity interest in the JV known as Imej Harmoni Sdn Bhd, according to a statement by KPS.

CBB manufactures a wide array of packaging solutions including carton boxes and the JV will enable it to extend its value chain further into offset carton boxes, where the outer layer of the box is laminated by a printed sheet to provide finer and more vibrant printing.

Established in the 1995, Honda Printing is involved in printing, packaging and design solutions. It serves numerous multinational clients in the manufacturing industry across China, Malaysia, Vietnam and the US.

KPS said the factory operations for the JV will be located in Johor Baru with a production capacity of 16 million pieces per year. It is expected to be operational within this quarter.

CBB was the largest contributor to KPS’ revenue last year with RM174.1 million in sales, representing 48% of the group’s total revenue.

KPS shares gained 2 sen or 1.6% to close at RM1.29 today on some 37,600 shares traded.