Tuesday, May 22nd, 2018


Dollar rally pauses as focus turns to Fed minutes

NEW YORK, May 22 — The dollar retreated today after six straight days of gains, as US Treasury yields dipped and investors looked for fresh incentives to buy the currency in the wake of its nearly 7 per cent rally since mid-February. The…

US consumers are repaying cell-phone debt before making car payment

NEW YORK, May 22 — US consumers are more devoted to their mobile phones than their automobiles. The sea change has taken place over the last few years as mobile devices become an integral tool not just for communication with loved ones or…

BP to cut 3pc of upstream jobs by year-end

LONDON, May 22 — British oil giant BP Plc said it plans to cut 3 per cent of jobs in exploration and production, as part of a restructuring of its global upstream business to make the division more efficient and competitive. A BP spokesman said…

Sales & Services Tax will be back this year – at unchanged 10%

PUTRAJAYA: The Sales and Services Tax (SST) will be reintroduced this year at an unchanged rate of 10%.

In his first press conference as the Finance Minister today, Lim Guan Eng said the Goods and Services Tax (GST) will definitely be replaced by SST this year.

“We want to replace the GST with SST as soon as possible. It will definitely be done by this year but let us work it out thoroughly before we give an exact date,” he told reporters today.

SST was at 10% before it was replaced by GST in April 2015. Lim said SST will be reintroduced at the same rate as per Pakatan Harapan's manifesto and any changes will be announced.

Commenting on Moody's statement about revenue loss from the removal of GST, he said the ministry is looking at several options and should be able to come to a reasonable exercise that would ensure a healthy fiscal position.

Moody's said in a statement today that if SST is introduced in July, the revenue loss would be narrowed to 1% of gross domestic product for 2018.

Lim said the ministry will decide on the exercise after having a full and accurate view of the nation's actual financial position.

He also confirmed that the nation's debt exceeded RM1 trillion as announced by Prime Minister Tun Dr Mahathir Mohamad.

Lim said the relevant departments will be able to start consolidating their numbers and accounts now that certain “red files” will be made available to the Treasury and the Auditor-General.

After the consolidation of the accounts, the ministry will decide whether it needs to review Budget 2018. The ministry is starting the process of preparing Budget 2019.

On whether the fiscal deficit target of 2.8% for 2018 remains, Lim said: “We'll see. What is important is to maintain financial health by ensuring our current account balance remains in surplus. We feel that there will be some pain we have to go through on a temporary basis but on the long term it is healthy if we can get our finances cleaned up.

“The fundamentals of the economy remain strong. I think what is important is to clean up the mess that has been left behind.”

AirAsia X net profit up fourfold in first quarter

PETALING JAYA: Low-cost, long-haul carrier AirAsia X Bhd saw a more than fourfold jump in net profit in the first quarter ended March 31, 2018 to RM41.5 million from RM10.34 million in the same quarter a year ago.

Revenue for the period under review rose 7.2% to RM1.27 billion from RM1.18 billion on the back of a 13% increase in passenger volume.

Despite a slight reduction in the average fare of 3% compared with the same quarter last year, the airline maintained its load factor at 84% in addition to delivering an additional 231,855-seat capacity, representing a year-on-year increase of 14%.

“The company recognises the challenges posed by the recent hike in fuel prices, and best mitigative efforts are being put forth through the boost in ancillary and capacity numbers. The company is confident of presenting the results from these measure during the third and fourth quarters of the financial year,” AirAsia X said on its prospects.

It noted that based on the current forward booking trend, forward loads are trending better than in the previous year.

“Barring any unforeseen circumstances, including but not limited to terrorist attacks, natural disasters, epidemics, economic downturn, fuel price hike and fluctuation in foreign currencies against the ringgit, the company expects its prospects to remain positive,” it added.

On Bursa Malaysia today, AirAsia gained 1.33% to 38 sen on volume of 10.76 million shares.

Over US$40m of fuel stolen from Shell refinery, Singapore court docs show

SINGAPORE, May 22 — Singapore authorities have levied new charges against a group of fuel thieves operating at Royal Dutch Shell’s oil refinery in the city-state, raising the value of the stolen fuel to over US$40 million (RM158.7 million) from…

Moody’s: Replacing GST with SST will impact govt revenue

PETALING JAYA: The abolishment of the Goods and Services Tax (GST) and the reinstatement of the Sales and Services Tax (SST) might translate into a 1% revenue loss of Malaysia's gross domestic product (GDP) assuming that the new tax system comes into effect in July, according to Moody's Investors Service.

“Assuming a stable share relative to GDP, and taking into account seasonal patterns, we estimate that the revenue loss from the voiding of the GST at around 1.9% of GDP this year. We estimate that if the SST, which yielded revenue of around 1.6% of GDP before the GST replaced it, takes effect in July, the revenue loss would narrow to 1.0% of GDP for this year,” the rating agency said in a report yesterday.

Moody's stressed that unless the government is able to cushion the revenue loss with offsetting measures in the next one to two years, the removal of GST may have a negative effect on revenue, despite crude oil revenue serving as a buffer.

On May 18, Brent crude oil prices trended at US$78.50 per barrel which was above Budget 2018 price assumption of US$52 (RM206). If oil prices average US$70 this year, revenue gain is projected to be at about 0.4% of GDP, bringing net revenue loss to 0.6% of GDP.

“However, higher oil prices are not a permanent substitute for GST, and are not a reliable offset to lost revenue given the volatility of prices,” Moody's opined.
Beyond 2018, it said the reintroduction of the SST will create a revenue shortfall of 1.7% of GDP if the GST remains at zero.

Moody's reiterated that in the absence of other effective offsetting fiscal measures, the GST removal is credit negative for the sovereign because it increases the government's reliance on oil-related revenue and narrows the tax base, thus straining fiscal strength.

Adding that Malaysia's fiscal strength is already a drag to its credit profile, the rating agency said reforms on expenditure such as the reintroduction of fuel subsidies and savings from wastages and corruption of RM20 billion will play a role in the ultimate fiscal reform.

Malaysia's debt-to-GDP ratio stood at 50.7% as at end-2017.

Separately, Malaysian Rating Corp Bhd (MARC) said the gap between the amount of SST to be collected in the near future and the abolished GST would not be as large as expected due to the larger number of taxpayers.

It added that short-term measures to be undertaken to fill the revenue gap including reducing leakages and reprioritising projects when utilising its operating expenditure, as well as higher commodity prices (particularly from oil and oil-related products), could be the additional revenue streams.

MARC, which maintained its GDP growth forecast at 5.3%, expects the repealing of GST to be neutral on private consumption although there may be a temporary uplift in consumer sentiments, as the actual spending trend would depend on the impact of GST removal on general prices.

Wall Street gains as US-China trade talks gather pace

NEW YORK, May 22 — US stocks rose today, adding to gains from a day earlier, as the United States and China made progress on reducing trade tensions after agreeing to put their differences on hold. Washington neared a deal to lift its ban on US…

Destini to expand tubular running services to Pakistan

KUALA LUMPUR: With the optimism of a potential increase in oil and gas activities resulting from the recent rise in oil prices, Destini Bhd received a letter of award to extend its tubular running services to Pakistan for US$8 million (RM31.76 million).

The letter of award names Destini's wholly-owned subsidiary Destini Oil Services Sdn Bhd (DOS) as a technical partner for tubular running services for Pakistan-based Lyallpur Oil Tool Pvt Ltd (LOT). LOT is a downhole drilling company that has exposure in the Middle East and North Africa.

In accordance with the letter of award, DOS will provide specialised oilfield equipment and experienced expatriate personnel for LOT to execute tubular running services in Pakistan for two years with an option to extend for another year.

Destini president and group CEO Datuk Rozabil Abdul Rahman said that once work begins, the group's tubular running services in Pakistan will contribute positively to the group's earnings during the contract period.

On Bursa Malaysia today, Destini fell 6.3% to 22.5 sen on volume of 7.7 million shares.

Vehicle sales up 10% in April from a year ago

PETALING JAYA: Total vehicle sales in April 2018 increased 10.2% or 4,343 units to 47,089 units, compared with 42,746 units a year ago, according to the Malaysian Automotive Association (MAA).

On a month-on-month basis, April saw a decline of 5.8% or 2,896 units as consumers adopted a wait-and-see attitude due to the general elections.

Meanwhile, the association said vehicle sales in May are expected to increase, with many car companies announcing zero-rated Goods and Services Tax (GST) prices following the government's move to abolish the tax on June 1. This will be boosted by promotional campaigns for Hari Raya Aidilfitri.