Thursday, May 17th, 2018


May says UK will leave customs union, to offer Ireland backstop

SOFIA, May 17 — Prime Minister Theresa May said today the UK would leave the EU customs union after Brexit but a source said London was considering a backstop plan that would apply the bloc’s external tariffs beyond December 2020. Asked about…

US, China launch trade talks to avert tariff war, economic damage

WASHINGTON, May 17 — The United States and China launch a second round of trade talks today to try to avert a damaging tariff war, with the Trump administration demanding a US$200 billion (RM784.41 billion) cut in China’s US trade surplus and…

Singapore Airlines’ full-year profit rises to seven-year high

SINGAPORE, May 17 — Singapore Airlines (SIA) posted a profit of S$893 million (RM2.6 billion) in the financial year ended March 31 — the highest since 2011, and a 148-per-cent increase from a year ago. In a press release issued, SIA said the…

Bank Negara may revise 2018 economic growth forecast

KUALA LUMPUR: Bank Negara Malaysia (BNM) said today a revision of its forecast for the country's 2018 gross domestic product (GDP) growth may be on the cards once details of the new set of economic initiatives are released by the Council of Eminent Persons.

“Most of the initiatives are being discussed right now. Once we've got them, we will definitely assess them and if there's a need for a change in the GDP forecast, we will announce it together with the finance minister,” BNM governor Tan Sri Muhammad Ibrahim told reporters at a briefing on Malaysia's economic performance in the first quarter of this yea.

He said the central bank has met with the council and has provided some staff on secondment as well as resources.

“The economy and the banking system are very strong at this point in time. So if there's any bold measures that we need to administer, this is the time. This is the window of opportunity we should seize so that our economy will become stronger,” he added.

Muhammad announced that Malaysia's economy grew 5.4% year on year in the first quarter ended March 31, 2018 (1Q 2018). The economy grew 1.4% on a quarter-on-quarter seasonally adjusted basis, compared with 1% in the last quarter of 2017.

In 1Q 2018, growth on the demand side was underpinned by private sector spending and strong support from net exports while on the supply side, services and manufacturing sectors remained the key drivers of growth.

According to BNM's quarterly bulletin, private investment moderated to 0.5% from 9.2% in 4Q 2017, weighed down by lower capital spending in structures, particularly in residential and commercial properties, and machinery and equipment.

“We expect that to improve as we move forward. If you look at business sentiment, it is still positive and with the new policies expected and initiatives from the report of the Council of Eminent Persons, we expect business sentiment to improve as we move forward. We have to wait, it's too early for us to make any comments,” said Muhammad.

Headline inflation declined to 1.8%, reflecting the smaller contribution of domestic fuel prices due to the smaller increase in global oil prices and a stronger ringgit exchange rate. Core inflation fell to 1.9% in the quarter.

Muhammad said the changes to the Goods and Services Tax (GST) would likely affect inflation but, at this stage, it is too early to calculate the extent of the impact.

“The numbers that we've got for 1Q 2018 are a bit outside our range of 2-3%. With new information coming in, we will look at it again and, if need be, we will revise the inflation rate.

“Our expectation is that those goods and services where GST is imposed, (prices) should decline. It's very important that businesses pass this benefit to consumers at large. On top of that, the authorities should ensure that enforcement is being done to make sure consumers benefit from the reduction of GST from 6% to 0%,” he added.

The current account surplus widened to RM15 billion in Q1 2018 or 4.5% of gross national income due to a higher goods surplus and lower services deficit. Muhammad said this was the highest quarterly current account surplus since 2Q 2014 when it reached RM15.3 billion.

The ringgit continued to strengthen during the quarter, outperforming regional currencies and extending gains in 2017. Muhammad said the ringgit has stabilised and returned to pre-election levels, after a few hours of knee-jerk reaction on Monday.

“There's a lot of noise in the short term. In the medium and long term it should be back. The ringgit should reflect economic fundamentals,” he said.

IHH Healthcare: Count us in if there is new bidding process for India’s Fortis

PETALING JAYA: IHH Healthcare Bhd said today it has confirmed its interest in participating in a new bid process for India's Fortis Healthcare Ltd, should it be called, in the wake of a revised offer from India's Manipal Hospitals.

Manipal in its third revised offer for Fortis, is offering to infuse 2,100 crore rupees at 180 rupees (RM10.55) a share through a preferential allotment, from 160 rupees a share in the previous offer, increasing the value of Fortis to 9,403 crore rupees compared with 8,358 crore rupees earlier.

A week ago, India's cash-strapped Fortis Healthcare Ltd board announced that it had accepted an investment offer from Hero Enterprise Investment Office and Burman Family Office that proposed to invest 18 billion rupees in the hospital chain.

“If there is indeed a new bid process that the board is proposing to initiate, we would like to participate in such a process and request that we be kept informed of any developments. We fully respect any process that is run by the board and reiterate that we wish to engage with the board and the shareholders of Fortis in identifying a mutually-beneficial and optimal solution,” IHH managing director and CEO Dr Tan See Leng said in a letter today.

In light of the expiry of the enhanced revised proposal on May 15, 2018, IHH today issued a letter to the board of Fortis extending the acceptance period of the enhanced revised proposal until 11.59 pm on May 29, 2018.

On May 1, IHH made a revised offer to Fortis to reiterate its seriousness and commitment to an investment in Fortis.

In the revised offer, IHH's total allocation for the bid was 40 billion rupees, with a 6.5 billion rupee immediate equity infusion at 175 rupees per share, implying that IHH will take up a 6.7% stake, with the right to appoint two directors to the board of Fortis. The subsequent equity infusion of up to 33.5 billion rupees at a capped price of 175 rupees per share is non-binding and is subject to due diligence.

On Bursa Malaysia today, IHH was up one sen to RM6.12, on volume of 7.57 million shares.

Wall Street slips as Cisco drags, bond yields rise

NEW YORK, May 17 — Wall Street’s main indexes dropped today as US bond yields climbed to a seven-year high and Cisco’s forecast disappointed, while looming Sino-US trade talks added to the jitters. Shares of Cisco fell 3.6 per cent and were…

WSJ: Wells Fargo employees altered business customers’ info

NEW YORK, May 17 — Some employees in a Wells Fargo & Co unit that handles business banking improperly changed information on documents related to corporate customers, the Wall Street Journal reported today, citing people familiar with the…

Impact on banks from UK’s vote to leave the EU

LONDON, May 17 — Thousands of banking jobs could move out of Britain as finance companies look to set up regulated subsidiaries in European Union countries to be able to sell products across the bloc once Britain leaves in 2019. The total number…

Takeda CEO prescribes surgical R&D cuts after US$62b Shire deal

LONDON, May 17 — For Christophe Weber, the boss of Japan’s Takeda Pharmaceutical, securing a US$62 billion (RM245.9 billion) deal last week to buy drugmaker Shire at the fifth time of asking was the easy bit. Now he has to steer what will be one…

The last 10 days of GST – 8 things that businesses should do immediately

THE government has announced – and made the necessary legal changes – to reduce the GST rate from 6% to 0% on all goods and services supplied effective June 1. In practical terms, this means that May 31 is the last day of GST in Malaysia.

With only 10 working days left, here are the 8 things businesses should do immediately:

1. Make system changes immediately to ensure supplies made on or after June 1 are subject to zero GST. This may be as simple as applying a different tax code to the sales items or changing the tax rate for a particular to code, or may require sophisticated customisation – depending on the nature of business and its systems.

2 .Assess the short-term impact on demand and financial. Consumers may want to defer purchase of certain goods and services until June 1. Hence, businesses should relook into the financial budgets and operational schedules (such as production schedule) for the following weeks, and make the necessary revisions.

3. Revise prices accordingly. The Finance Ministry’s media release states that businesses should comply with the Price Control and Anti-Profiteering Act 2011. The Act provides that it is an offence to make “unreasonably high profit” – as defined by regulations (which the minister may prescribe without going through the parliamentary process). The scope of the present regulation that prescribes the mechanism to determine “unreasonably high profit” is confined to household goods and food and beverages, but the scope may be easily expanded.

4. Review existing contracts where prices were agreed inclusive of GST but the supply (wholly or partially) would be made on or after June 1. Section 67 of the GST Act provides for the contract value to be automatically varied, unless the contract expressly state otherwise.

5. Expedite processing of tax invoices received from vendors. If there is any tax invoice yet to be posted in the payables system, swift processing of the tax invoice by May 31 would avoid any potential difficulty in claiming input tax credit thereafter.

6. Expedite issuance of tax invoices for goods delivered or services performed until May 31. This will minimise transitional issues, and allow customers to claim input tax credit wherever applicable.

7. Expedite issuance of credit notes. If you have already issued tax invoice for a supply but subsequently the value of the supply is required to be adjusted – for example due to goods returned, faulty service or early payment discount – it is advisable that the credit noted is issued by May 31 to avoid any potential uncertainty.

8. Avoid receiving advances before June 1 for any goods that would be delivered or service that would be rendered on or after June 1.

Unwinding GST does not require as much effort as implementing GST but there are quite a bit of preparation to be made within the next 10 working days. Also, remember that the GST Act has not been repealed. As such, businesses must submit GST returns and make GST payments to Customs as per the usual due dates unless there’s further legislative change.

Thenesh Kannaa is author of Master GST Guide and a partner at TraTax, a firm of independent tax advisors.