Monday, August 6th, 2018


Bitcoin declines below US$7,000, leading cryptocurrency retreat

LONDON, Aug 6 — Bitcoin slipped below US$7,000 (RM28,556) to its lowest level in three weeks, as seemingly positive sentiment surrounding the largest virtual currency soured over the weekend. The digital token fell as much as 6 per cent to trade…

Buffett’s US$111b cash pile intensifies buyback debate

NEW YORK, Aug 6 — Warren Buffett’s Berkshire Hathaway Inc gave him more leeway to make stock buybacks last month. Now, after the company said its cash pile has swelled to US$111 billion (RM452.8 billion), some investors are wondering when they…

US sees sanctions having significant impact on Iran economy, say US officials

WASHINGTON, Aug 6 — The Trump administration will aggressively enforce economic sanctions that is it re-imposing on Iran this week and expects the measures to have a significant impact on the Iranian economy, senior US administration officials…

WSJ: Facebook asks US banks for financial info to boost user engagement

NEW YORK, Aug 6 — Facebook Inc has asked large US banks to share detailed financial information about their customers, as part of an effort to offer new services to users, The Wall Street Journal reported TODAY, citing people familiar with the…

Wall St flat on trade worries, mixed results

NEW YORK, Aug 6 — US stock indexes were little changed today as investors weighed an escalating trade dispute between the United States and China, and a mixed bag of corporate results. China proposed a set of differentiated tariffs on US$60…

Asian stocks ‘unstable’, yuan struggles

HONG KONG: Asian markets were mixed today with early gains pared by continuing concerns about the brewing China-US trade war, while the yuan struggled to maintain momentum after the Chinese central bank moved to support the unit.

Traders started the day on an upbeat note, tracking their New York and European counterparts following recent painful losses.

The gains came as data on Friday showed that while the US economy saw a slowdown in jobs creation in July, the pace of hiring remained strong over the past three months.

The report also showed wage growth remained tepid, helping ease worries about an overheating economy.

The result provided some much-needed cheer to markets, which brushed off a warning from Beijing that it would impose new tariffs on US$60 billion (RM244.7 billion) worth of US goods if Washington pushes ahead with levies on US$200 billion of Chinese imports.

However, while reports said unofficial talks have been held between Beijing and Washington, trade tensions continue to rise, with a top White House adviser calling China a bad bet and saying its economy – the world’s second biggest – was struggling.

By the end of trade today Tokyo was 0.1% lower, reversing a morning rally, while Shanghai tumbled 1.3%. Seoul dipped 0.1%.

Hong Kong closed up 0.5% but well off the gains of more than 1% seen soon after the open.

Sydney added 0.6%, Singapore gained 0.8% and Taipei was 0.1% higher. Manila and Bangkok were flat while Jakarta jumped more than 1% despite an earthquake that rattled the island of Lombok and killed dozens of people.

“Caution about further escalation in US-China trade frictions is still strong,” Yoshihiro Ito, chief strategist at Okasan Online Securities, said in a commentary.

The yuan’s early gains petered out, having made small gains Friday after the People’s Bank of China (PBoC) unveiled measures making it harder to bet against the currency, which has suffered steep losses in the past two months.

The unit, which is wallowing around lows not seen for more than a year, bounced back soon after the announcement. It extended the gains this morning before going into reverse.

The bank’s measure was similar to a move when the currency went into freefall following a devaluation three years ago that rattled global markets.

However, analysts were lukewarm on the move. Some said it indicated Chinese leaders were growing increasingly worried about the unit’s depreciation.

“The yuan kept falling when China did this last time in 2015, so I don’t think the PBoC’s move will significantly change the market tone,” Hao Hong, chief strategist at Bocom International Holdings, told Bloomberg News.

“No matter what happened over the weekend, the weakness in Chinese stocks may continue. The trade war is nowhere near its end and China’s economy is slowing down, so why would the trend reverse?”

In other forex trading, the pound was fighting to recover from Friday’s sell-off after Bank of England boss Mark Carney warned that the chance of leaving the EU without a proper deal was “uncomfortably high” and “highly undesirable”.

While he said such a situation was still unlikely compared with other outcomes, the comments come as leaders on both sides are struggling to reach a compromise with just months to go before Britain is due to formally exit.

The remarks sent sterling tumbling, with an interest rate rise last week unable to provide any support. – AFP

PRG GEM-listed unit warns of decline in earnings

PETALING JAYA: PRG Holdings Bhd’s 75%-owned subsidiary Furniweb Holdings Limited, which is listed on the GEM of the Stock Exchange of Hong Kong Limited (HKEX), issued a profit warning for a 75% decline in Furniweb’s net profit in the six months ended June 30 as compared with that for the corresponding period in 2017.

The board believes that Furniweb’s profitability for the period was mainly affected by the decrease in sales volume as certain major customers were still developing new products and thus reduced their orders for existing products, while other customers reduced procurement due to the depreciation of their local currencies against the US dollar (USD).

Its profitability was also affected by the decrease in the group’s revenue reported in the ringgit which appreciated against USD, its major sales denomination currency; increase in cost of sales – mainly raw material prices, which had not been passed on to customers; lower production volume as compared to the same period in the preceding year increased the weighing of fixed overheads over total cost of sales; and additional corporate expenses incurred during the period.

Furniweb said the information is based on the preliminary assessment by the board, mainly with reference to information currently available, as such, the actual financial results of the group for the period may be different from what is disclosed.

“Shareholders and potential investors are advised to read carefully the interim results announcement of the company for the period, which is expected to be published in or around mid-August 2018. Shareholders and potential investors are advised to exercise caution when dealing in the shares of the company,” Furniweb said.

‘Gamuda should accept Splash offer’

PETALING JAYA: Despite the lower than expected valuation, Gamuda Bhd should consider accepting the latest offer from the Selangor government for Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) as it is more reasonable compared with the previous offers, according to analysts.

Kenanga Research expected an offer price of RM3.1 billion to RM3.5 billion, which represents 0.9 to 1.0 times its book value. This compares with the offer price of RM2.55 billion from Air Selangor last Friday, representing a 26% discount to Splash’s net book value of RM3.5 billion as of December 2017.

Gamuda and Kumpulan Perangsang Selangor Bhd shares reacted negatively to the Splash offer, declining as much as 5.4% and 6.3% to RM3.67 and RM1.78 respectively today. At market close, the stocks fell 4.1% and 5.8% to RM3.72 and RM1.79.

Kenanga Research said the decision to take up the offer should also take into account Splash’s ballooning receivables that is long overdue, especially when the current offer is much more reasonable compared with the previous one.

“If the deal goes through, we can expect net gearing of 0.55 times as of Q3’18 to come off to 0.42 times. However, we believe that the possibility for a special dividend is slim as management might conserve cash for future projects.”

AmInvestment Bank believes Gamuda will accept the offer as it realises that the water production concession held by Splash is no longer sustainable.

“This is because water distributor Syabas, the sole off-taker for the treated water it produces, has not been able to settle the amounts billed by Splash due to its inability to raise tariffs despite rising costs (including the bulk water supply rate).

Syabas also has not been able to embark on initiatives to reduce non-revenue water due to the lack of funding.”

AmInvestment Bank has cut Gamuda’s FY18-FY19 earnings forecasts by 11% each to reflect the share of profits foregone from its 40% stake in Splash, partially mitigated by interest savings from the RM1.02 billion disposal proceeds.

It also trimmed Gamuda’s fair value by 3% to RM3.36 from RM3.58, but maintained a “hold” call.

Kenanga Research is keeping an “outperform” call on Gamuda with an unchanged target price of RM4.35, but it will be lowered to RM4.30 should Gamuda choose to accept the offer.

It said the decision to accept the offer will also have a negative impact on Gamuda’s FY19 earnings due to incurring losses of over RM300 million from the disposal (excluding loss of future income from Splash) coupled with RM100 million of core earnings contribution from Splash.

AmBank Research expects stronger GDP in Q2

PETALING JAYA: Malaysia’s gross domestic product (GDP) is anticipated to grow at a much stronger pace in the second quarter 2018 (Q2’18), underpinned by stronger exports and imports, according to AmBank Research.

In a note today, the research house said it expects the Q2’18 GDP to grow around 5.6%-5.8% compared with 5.4% in Q1’18.

It said this is given that both imports and exports having grown faster in Q2, expanding by 8.1% and 8.3% respectively compared with Q1, added with improving manufacturing outlook based on purchasing managers’ index (PMI) data.

AmBank Group said based on the recent data, pending the industrial production data, its preliminary estimation shows a reading of 5.6% for Q2 GDP.

“Looking ahead in 2018, we noticed some optimism outlined by manufacturers though new orders remained weak partly due to the weaker ringgit. With higher output, firms increased their payrolls,” it noted.

Added with moderate inflation plus the holiday tax, it said these will bode well for private consumption and business activities, apart from the pickup in investment activities.

Nevertheless, AmBank Research said it expects domestic policy uncertainties would remain an issue.

“Still, we feel the economy should be able to register a growth of around 5.5% in 2018, which is our base case with the lower end at 5.3%.

“In our view, the challenge will be in 2019, underpinned by global issues such as a trade war, currency war, debt crisis and global monetary tightening while on the local front, it will be policy certainties. Thus, we project 2019 GDP at 5%,” it said.

Trade surplus in June shrank RM3.9 billion to RM6 billion from May’s reading of RM9.9 billion, which is the lowest trade surplus reading since May 2017, mainly due to a surge in imports.

Imports in June jumped 14.9% year-on-year (y-o-y) from a mere 0.1% y-o-y in May, bringing the Q2 average to 8.1% y-o-y against -0.3% y-o-y in Q1. The strong imports came from productive components such as capital equipment as well as intermediate goods.

“These import components are positive drivers for the GDP, suggesting the Q2 GDP momentum should be strong.

“Besides, exports also grew better in June by 7.6% y-o-y from 3.4% y-o-y in May, bringing the Q2 average to 8.3% y-o-y, which is higher than 6% y-o-y in Q1. It too should support the Q2 GDP performance more solidly,” it added.

RAM sees CPO prices at RM2,200-2,400 in second half

PETALING JAYA: RAM Ratings expects crude palm oil (CPO) prices to be sustained between RM2,200 and RM2,400 per metric ton (MT) in the second half of the year, on the back of demand support from biodiesel and the possibility that domestic production growth may not be as strong as anticipated.

“The increase in Indian import duties on rival soybean oil (SBO) in June 2018 is also expected to reverse the downtrend in palm oil exports for Malaysia and Indonesia,” it said in a statement today.

CPO prices averaged RM2,421 per MT in the first half of 2018 (H1’18) , coming in at the lower end of the rating agency’s forecasted band of RM2,400-RM2,600 per MT.

“Prices have dipped to about RM2,100/MT of late amid soft demand, the pick-up in CPO output and concerns over the trade war between the US and China.”

For the full year of 2018, CPO prices are projected to be at the lower end of its projection of RM2,300 to RM2,500 per MT.

RAM said after four months of growth, Malaysia’s CPO output contracted in May and June, likely attributable to slower productivity during the fasting month and Hari Raya holidays.

Overall local production was up 2% to 8.92 million MT in H1’18 and this modest pace is likely to continue through the rest of the year. Indonesia retained its strong growth trend, with output rising 24% year-on-year (y-o-y) to 18.37 million MT in the first five months of 2018.

On the demand front, the rating agency said Malaysia’s export performance declined in May and June, weighed down by the steep hike in Indian import duties on palm products effective March 1 and Malaysia’s reinstatement of export taxes on CPO in May.

“Even so, overall exports still went up 5% y-o-y in H1’18. Elsewhere, Indonesian exports of palm oil slipped 6% y-o-y in the first five months of 2018 amid weaker demand from India and the European Union. The increase in India’s import duties on soft oils – including SBO – effective June 14 is expected to reverse the downtrend in exports for both countries.”

As at end-June 2018, the level of Malaysian palm oil inventory stood at 2.19 million MT, a huge jump of 43% from a year earlier following the El Nino weather phenomenon.

The US Department of Agriculture expects global supply of vegetable oils to advance 5% in 2017/2018, and 3% in 2018/2019. Production of SBO is estimated to rise a respective 3% and 4%, posing stiff competition within the global market for vegetable oils.

On a brighter note, the recent large price premium of over US$200/MT for SBO against CPO may encourage a switch to the latter.