Sunday, June 17th, 2018

 

Ringgit likely to slip further against US dollar

PETALING JAYA: It is highly likely that ringgit, which was trending at RM3.9845 to the US dollar last Thursday, to weaken further against the greenback and trade at below RM4.00 in anticipation of more rate increases in the US this year.

FXTM global head of currency strategy & market research Jameel Ahmad told SunBiz that while the US rate hike last week may not have had much impact on the local unit as it was already priced in, the US Federal Reserve's (Fed) hawkish tone might weigh on buying sentiment for the ringgit.

He said this is due to expected increase in demand for the greenback in the medium term after the Fed indicated that there are two more rate increases to come this year.

“(Also) due to persistent concerns over emerging market sentiment, we can't rule out the likelihood of future potential losses for the ringgit. We are only marginally away from the ringgit trading back at RM4 against the dollar and unless there is profit taking on the greenback, the projection is that the ringgit is at risk to further losses,” he added.

Last Wednesday, the Fed raised the interest rate by 0.25% to 1.75% to 2%, the highest since the global financial crisis in 2008.

Jameel said the worst-case scenario for the ringgit at this point would be that there is a period of risk aversion in the financial markets, where investors become less attracted towards emerging market currencies and the persistent buying appetite towards the dollar leads to the likelihood that the ringgit falls back below RM4.00.

Kenanga Research, meanwhile, has revised downwards its year-end ringgit projection to RM4.05 from RM3.90. In the near term, it expects the ringgit to hover between RM4.05 and RM4.10 and weaken against other major currencies.

The research house said Bank Negara Malaysia is expected to adopt an accommodative monetary policy stance by maintaining the Overnight Policy Rate(OPR) at 3.25% for the remainder of this year and next year, in a bid to ensure capital market stabilitity and liquidity as well as to support growth.

“On the home front, the biggest risk to the monetary policy outlook is that a post-election sharp decline in investment would augment an economic slowdown. In fact, Malaysia's capital market has been experiencing large outflows of funds since the surprise outcome of the general election in early May as well as the current policy changes and measures brought by the new administration led by Pakatan Harapan government; mainly the removal of Goods and Services Tax rate and scrutinising key infrastructure projects,” it said.

Meanwhile, Malaysian Institute of Economic Research senior research fellow Dr Shankaran Nambiar said with the domestic situation continuing to be on uneven ground as Malaysia grapples with the effect and damage from the previous administration, coupled with the impending announcement of the full Cabinet of ministers, the fiscal policy outlook still remains uncertain.

The unresolved uncertainties, he said, have affected sentiment of foreign investors.

“The government has more domestic institutional reforms to carry out. It will have little time at the present moment to consider the feelings of rating agencies or that of foreign investors. Under these circumstances, it may not be surprising if the ringgit slips a couple of notches more before it reaches flatter ground,” Shankaran said, adding that fund outflows are likely to continue with the subsequent rate increases in the US.


17/06/2018 23:03:19


New cryptocurrency player SIM Chain draws US$30m from China investors since June 4 launch

KUALA LUMPUR: New cryptocurrency firm SIM Chain International has garnered US$30 million (RM120 million) in cryptocurrency investment from 100 mainland China business partners in two weeks since the company was established on June 4, 2018.

SIM Chain is a subsidiary of Koperasi Blue Ocean 1 Nation Kuala Lumpur Bhd, whose principal activities include movie production, multi-level marketing, crowd funding, murabaha & ijara' fund, real estate, tourism & education, Ar-Rahnu (pawnshop), fixed deposit, laundry, catering, plantation/farming.

SIM Chain CEO Chia Kheng Choon said the proceeds will be reinvested in over 100 different industries such as hotel, plantation, hospital, tourism & travel, and education in China and Malaysia.

He said the company is confident of its target to have 1,000 strategic partners worldwide within three months to explore investment opportunities in the industries.

“(The legality of) cryptocurrency is subjective. It's not legal internationally, but it's also not illegal,” Chia told SunBiz at SIM Chain's dinner with its Chinese business partners here last Thursday.

Chia vouched for SIM Chain's credibility, explaining that it is a legitimate and “proper” business in Malaysia, but noted that it is similar to controversial MBI Group International.

Chia said its proprietary digital currency is akin to bitcoin and is now transacted in China and soon internationally.

SIM Chain is also positive on its prospects on the back of growing popularity of cryptocurrencies. “The Chinese are willing to take risks and they have this mindset, so it enables them to make millions of dollars within two to five years,” said Chia.


Malaysia power shift hits China infrastructure drive

KUALA LUMPUR: Malaysia was once a loyal partner in China's globe-spanning infrastructure drive but a new government is now pledging to review Beijing-backed projects, threatening key links in the much-vaunted initiative.

Kuala Lumpur's previous regime, led by scandal-mired Datuk Seri Najib Abdul Razak, had warm ties with China and signed a string of deals for Beijing-funded projects, including a major rail link and a deep-sea port. But the long-ruling coalition was unexpectedly turfed out of power last month by voters disgusted at allegations of corruption and angered at rising living costs.

The new government, led by political heavyweight Tun Dr Mahathir Mohamad, has pledged to review Chinese deals seen as dubious, calling into question Malaysia's status as one of Beijing's most cooperative partners in its infrastructure push.

China's ambitious initiative to revive ancient Silk Road trading routes with a global network of ports, roads and railways – dubbed “One Belt, One Road” – was launched in 2013 and is the economic crown jewel of President Xi Jinping's presidency.

Malaysia, along with Beijing ally Cambodia, were seen as bright spots in Southeast Asia, with projects in other countries often facing problems, from land acquisition to drawn-out negotiations with governments.

“Malaysia under Najib moved quickly to approve and implement projects,” Murray Hiebert, a senior associate from think-tank the Center for Strategic and International Studies, told AFP.

Chinese foreign direct investment into Malaysia stood at just 0.8% of total net FDI inflows in 2008, but that figure had risen to 14.4% by 2016, according to a study from Singapore's ISEAS-Yusof Ishak Institute.

However, Hiebert said, it was “widely assumed” that Malaysia was striking quick deals with China in the hope of getting help to cover debts from sovereign wealth fund 1Malaysia Development Bhd (1MDB).

Najib and his cronies were accused of stealing huge sums of public money from the investment vehicle in a massive fraud. Public disgust at the allegations – denied by Najib and 1MDB – helped topple his government.

Malaysia's first change of government in six decades appears to have already unsettled Beijing's plans in the country.

Dr Mahathir has announced a planned high-speed rail link between Kuala Lumpur and neighbouring Singapore has been postponed as he seeks to reduce the country's huge national debt.

The project was in its early stages and had not yet received any Chinese funding as part of “One Belt, One Road”. But Chinese companies were favoured to build part of the line, which would have constituted a link in a high-speed route from China's Yunnan province to trading hub Singapore, along which Chinese goods could have been transported for export.

Work has already started in Malaysia on another line seen as part of that route, and which had received Chinese funding – the US$14 billion (RM55 billion) East Coast Rail Link.

Mahathir has said that agreement is now being renegotiated.

Other Chinese-funded initiatives include a deep-sea port in Malacca, near important shipping routes, and an enormous industrial park. It is not clear yet which projects will be changed or cancelled but experts believe axing some will be positive.

Alex Holmes, Asia economist for Capital Economics, backed cancelling some initiatives, citing “Malaysia's weak fiscal position and that some of the projects are of dubious economic value”.

The Chinese foreign ministry did not respond to request for comment. But a recent commentary in China's Global Times, a nationalist state-run tabloid, warned Mahathir if he damaged the interests of Chinese companies, they had the right to seek compensation . – AFP


Bursa trading velocity profoundly low during World Cup

PETALING JAYA: The trading velocity in Malaysia during the 2018 World Cup is expected to be subdued not just because of this event but also due to the festive season, according to MIDF Research.

“We do not expect the World Cup event to change the fundamentals of all stocks under our coverage. Hence, we maintain our FBM KLCI year-end 2018 target of 1,800 points,” MIDF said.

Based on MIDF’s observations in the year before, during and after the World Cup, the velocity in the Malaysian market is profoundly lower during the World Cup compared to the years before and after the World Cup. For example, the average velocity during the 2014 World Cup stood at 30% compared to 36% and 26% in 2013 and 2015 respectively. This was the same case for the 2010 World Cup where the average velocity during the event was at 28%, lower than 49% and 32% in 2009 and 2011 respectively.

Yet, the research house said this would provide an opportune time for investors to have a relook at their portfolio of stocks to assess the performance of each stock in the portfolio, while at the same time conduct screening in search of undervalued stocks to add to their portfolio.

“Markets in the emerging economies, including Malaysia, are facing headwinds from geopolitical events and outflow of foreign funds, which had affected their year-to-date performance. Therefore, investors could take a look at stocks with strong fundamentals and significant price upside, and companies with good dividend yields.”

MIDF’s observation shows that two stock markets outperformed during World Cup period with another five underperformed. The outperformers are Shanghai Stock Exchange Composite Index and the Hang Seng Index for Hong Kong. The underperformers are the FTSE 100 Index (UKX) for the UK, CAC 40 Index for France, DAX Index for Germany, Topix Index for Japan and FBM KLCI. The range of performance are from -2.16% to +4.24%.

“For FBM KLCI, average market return during World Cup period is -2.16%. However, average market return one year before World Cup period is -0.69%. Hence, the market return remains negative during World Cup period although it underperforms the previous year return by -1.47%. In the latest data for World Cup 2014, FBM KLCI return was +0.50% as compared to same period in 2013 return of +0.59%.”

It said among the seven countries that it tracked, only four countries had seen increases in its value traded – the UK, France, Germany and Japan. Meanwhile, China, Hong Kong and Malaysia underperformed during the period of the World Cup.

As for volume traded, five out of seven had smaller volume traded in their stock market when the World Cup was held, which are France, Germany, China, Hong Kong and Malaysia.

Out of the eight sectors tracked, five outperformed during World Cup period while another three underperformed. The outperformers are construction, consumer, property, industrial products and technology. The underperformers are trading and services, plantation and finance. The range of performance during the World Cup is between -2.55% and -0.46%.


Orkid Cosmetics in talks with angel investors, eyes foreign markets

PETALING JAYA: Orkid Cosmetics plans to raise RM250,000-RM500,000 in its pre-seed round this year to scale up the one-year-old business, including bringing in more products and entering two to three new markets in India, the UK and the US.

Founder Raeesa Syahirah (pix) said it is in talks with a few angel investors to grow the business and is still exploring opportunities.

She said in the past one year, it tested the market to better understand its target market, bestselling products, and had accumulated the relevant data to further grow its business. About 80% of its sales are generated online, with the majority from Malaysia.

“Now that we're sure of our customers, we have a clear direction of where we're going. What we need to do now is scale it,” she told SunBiz recently.

Orkid Cosmetics products are halal-certified by The Department of Islamic Development Malaysia, vegan (no animal by-products) and cruelty-free (no animal testing). Its products are made in Malaysia, with imported ingredients from Japan and Europe.

The brand, with its core matte-suede liquid lipsticks, has over 1,000 customers now and has made its way to Singapore, Bangladesh and the UAE through the online platform. It is also retailing in Play Up Advance in Malaysia and The Min List in Singapore. It sells about 500 lipsticks a month, with each lipstick retailing at RM45.

“We have a retention rate of 30%. We see more and more orders, especially now that we have wholesalers. We're not just focusing on B2C (business-to-consumer) but also B2B (business-to-consumer),” said Raeesa.

The 28-year-old started Orkid Cosmetics in Feb 14, 2017 with a capital of RM50,000, noting that the business is already profitable today. Raeesa said the idea for Orkid came as she was looking for another venture to go into, having had the experience in running three startups and securing investments worth over RM1 million.

“I noticed the availability of grants for halal products. I researched on the halal market and saw a gap in halal cosmetics for young millenials. I like the concept of halal, because a lot of people are looking for organic, vegan products.

“Halal is always at the back of my mind and I like beauty and wanted a product which has nice colours, safe, fun… and that's how I started Orkid,” said Raeesa.

She said Orkid Cosmetics' target market is modern women aged 18-35 who are creative and conscious.

Moving forward, she said the cosmetic line wants to come out with more lipsticks, tints, lip balms and in the third quarter this year launch mascaras, eyeliners and eyeshadows.

“With the growing demand of halal, organic and conscious customers, we feel that there's a space for us to tap into and fill in the market gap,” said Raeesa.


Orkid Cosmetics set to bloom

PETALING JAYA: Orkid Cosmetics plans to raise RM250,000-RM500,000 in its pre-seed round this year to scale up the one-year-old business, including bringing in more products and entering two to three new markets in India, the UK and the US.

Founder Raeesa Syahirah said it is in talks with a few angel investors to grow the business and is still exploring opportunities.

She said in the past one year, it tested the market to better understand its target market, bestselling products, and had accumulated the relevant data to further grow its business. About 80% of its sales are generated online, with the majority from Malaysia.

“Now that we’re sure of our customers, we have a clear direction of where we’re going. What we need to do now is scale it,” she told SunBiz recently.

Orkid Cosmetics products are halal-certified by The Department of Islamic Development Malaysia, vegan (no animal by-products) and cruelty-free (no animal testing). Its products are made in Malaysia, with imported ingredients from Japan and Europe.

The brand, with its core matte-suede liquid lipsticks, has over 1,000 customers now and has made its way to Singapore, Bangladesh and the UAE through the online platform. It is also retailing in Play Up Advance in Malaysia and The Min List in Singapore. It sells about 500 lipsticks a month, with each lipstick retailing at RM45.

“We have a retention rate of 30%. We see more and more orders, especially now that we have wholesalers. We’re not just focusing on B2C (business-to-consumer) but also B2B (business-to-consumer),” said Raeesa.

The 28-year-old started Orkid Cosmetics in Feb 14, 2017 with a capital of RM50,000, noting that the business is already profitable today. Raeesa said the idea for Orkid came as she was looking for another venture to go into, having had the experience in running three startups and securing investments worth over RM1 million.

“I noticed the availability of grants for halal products. I researched on the halal market and saw a gap in halal cosmetics for young millenials. I like the concept of halal, because a lot of people are looking for organic, vegan products.

“Halal is always at the back of my mind and I like beauty and wanted a product which has nice colours, safe, fun… and that’s how I started Orkid,” said Raeesa.

She said Orkid Cosmetics’ target market is modern women aged 18-35 who are creative and conscious.

Moving forward, she said the cosmetic line wants to come out with more lipsticks, tints, lip balms and in the third quarter this year launch mascaras, eyeliners and eyeshadows.

“With the growing demand of halal, organic and conscious customers, we feel that there’s a space for us to tap into and fill in the market gap,” said Raeesa.


eBay’s new platform a hit with local businesses

KUALA LUMPUR: Global e-commerce platform, eBay, which launched its “Go Global with eBay” initiative almost a year ago, has managed to attract more than 3,500 Malaysian businesses. Head of Seller Growth (SEA Cross Border Trade) Wong Mei Inn said eBay was focused on offering localised seller support to catalyse the growth of cross-border trade in the country.

“Efforts in Malaysia are being localised across Asean with a strong focus on Thailand, Singapore and Indonesia,” she said in an e-mail interview with Bernama.

Wong pointed that sellers eligible for the Managed Account Programme could manage their goods more efficiently with access to overseas warehouses, on top of collaboration with carriers and third-party providers via eBay.

“Our focus on increasing the sales growth in Malaysia is to enable the local entrepreneurs to go global.

“We provide them with access to foreign markets with low entry barriers to enable these entrepreneurs to grow their businesses and generate revenue,” she explained.

Wong emphasised that the aim was to leverage on the top three export destinations for Malaysian sellers, which are the United States, Australia and the United Kingdom, in order for them to expand their businesses and in turn contribute to the country’s sales growth.

She said the US remained as the top export destination for businesses based in Malaysia, with 55% of Malaysian sellers exporting there.

“The ongoing strength of the US dollar continues to provide good momentum for Malaysia’s eBay exporters, given its position as eBay’s largest market,” she said.

The retail export opportunity on eBay, she noted, was very accessible to Malaysian small and medium enterprises (SMEs) and businesses compared with the more traditional export industries.

“Malaysian businesses not only have the opportunity to grow their business further with the local market. Being on eBay enables them to tap into eBay’s global market – accessed by 170 million active buyers worldwide buying items from over one billion listings in our marketplace,” she said.

With this, eBay could help Malaysian SMEs expand their business opportunities bringing their ventures to the next level of growth, Wong said.

She said as a one-stop solution for internet retail, eBay was a global platform with local players in mind.

Thus eBay takes a strong stance against online piracy and the sale and distribution of counterfeit goods and products that infringe on individuals’ intellectual property (IP) rights.

“We created a Verified Rights Owner programme allowing owners of IP rights and their authorised representatives to report eBay listings that may infringe on those rights,” she explained.


Local transport sector faces headwinds

PETALING JAYA: AmInvestment Bank, which is neutral on the transportation sector over the next 12 months, is mindful of various headwinds in the sector such as the increased regulatory risk on the back of the change in the political landscape following the 14th general election (GE14), potential dial-back of certain major initiatives by the preceding administration and rising fuel costs.

The research house, however, noted that there are plenty of opportunities in store for players, particularly, in the tourism and e-commerce space.

It finds the projection by Tourism Malaysia, which estimated Malaysia’s tourist arrivals to surge by a whopping 28% to 33.1 million in 2018 from 25.9 million in 2017, and will hit 36 million in 2020, a tad optimistic given that the numbers had stagnated at about 26 million over the last three years.

“Nonetheless, we do agree that the trend for tourist arrivals in coming years is upwards, as Malaysia is slated to host a series of high profile international events. Low-cost carrier AirAsia and airport operator Malaysia Airports are the main beneficiaries of the growing tourist arrivals,” it said.

The rapidly expanding e-commerce sector, particularly, online shopping, has created huge opportunities for parcel delivery service providers such as Pos Malaysia. Malaysia’s presence in the regional and global e-commerce market is on the cusp of a quantum leap, driven by the Alibaba-backed Digital Free Trade Zone (DFTZ) project in the KLIA Aeropolis.

“Apart from Malaysia Airports (the landowner and developer of the KL Aeropolis), we believe local logistics players (including warehouse operators) are poised to garner a slice of action in the physical zone of the DTFZ.”

On the other hand, AmInvestment Bank said regulated businesses may face a higher regulatory risk, as the new administration strives for better deals for the rakyat, as promised in its election manifesto. Under these circumstances, it is unlikely, for instance, for airport operator Malaysia Airports to secure an upward revision in passenger service charges.

Also, there are concerns if the DFTZ project will go ahead as planned. All China-Malaysia deals signed in recent years will now come under scrutiny.

Meanwhile, it said transshipment seaport operator Westports will still feel the negative impact from the recent reorganisation of the global shipping alliance, resulting in the diversion of transshipment cargo volumes to Singapore.

“On a brighter note, we expect gateway cargo volumes to continue to grow in coming years, thanks to Malaysia’s robust exports and imports. Meanwhile, Bintulu Port will be weighed down by start-up costs at its newly completed Samalaju Industrial Port.”

AmInvestment Bank’s top pick for the transport sector is AirAsia Group Bhd.

“AirAsia is a good proxy to the growing low-cost air travel market in the region, underpinned by rising per capita incomes and a young demographic. Its strong market presence enables it to compete effectively against its rivals. It has struck a chord with investors with its plans to monetise some of its auxiliary businesses.”


Russia, Saudi Arabia want Opec to increase output

MOSCOW: Russia and Saudi Arabia will ask Organisation of the Petroleum Exporting Countries (Opec) to hike production by 1.5 million barrels a day in the third quarter of 2018, Russian Energy Minister Alexander Novak said on Saturday.

Opec and Russia decided together in 2016 to cut their supply in order to push prices up following a crash induced by a global crude production glut.

An oil production shortfall in Iran and Venezuela has changed the scenario for the two countries and members of the oil cartel.

Novak said Moscow and Riyadh “propose increasing production in the third quarter by 1.5 (million bpd),” according to RIA Novosti news agency.

“We are only proposing this for the third quarter. In September we will review the situation in the market and decide the future course.”

Since 2017, an Opec agreement on production cuts has allowed oil prices to rise but there are fears that renewed American sanctions on Iran and a fall in output in crisis-hit Venezuela could disrupt supply. – AFP