Tuesday, September 4th, 2018

 

US stocks fall on continued trade angst

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NEW YORK, Sept 4 ― Wall Street stocks fell early today on lingering trade uncertainty at the start of a heavy news week that includes US jobs data. About 30 minutes into trading, the Dow Jones Industrial Average was down 0.4 per cent to 25,850.37. The broad-based S&P 500 dropped 0.3 per cent to 2,892.67, while the tech-rich Nasdaq Composite Index dropped 0.5 per cent to 8,069.59. Investors were eyeing the latest in the ongoing trade fight between the US and Canada after President Donald Trump again threatened over theRead More


Miti: Chinese companies keen to relocate to Malaysia amid US trade war

KUALA LUMPUR, Sept 4 ― Companies from China have expressed interest in relocating to Malaysia following the continuous trade tensions between the country and the United States.  Ministry of International Trade and Industry…


IJM Corp, Pesona Metro, Borneo Aqua, Ark Resources, Sapura Energy and UEM Edgenta

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KUALA LUMPUR (Sept 4): Based on corporate announcements and news flow today, companies that may be in focus tomorrow (Sept 5) may include the following: IJM Corp Bhd, Pesona Metro Holdings Bhd, Borneo Aqua Harvest Bhd, Ark Resources Bhd, Sapura Energy Bhd and UEM Edgenta Bhd IJM Corp Bhd has bagged a contract worth RM505 million to construct and complete the superstructure works of Affin Bank Bhd’s new 47-storey corporate headquarters at the upcoming international financial district Tun Razak Exchange (TRX). The new project, which is expected to be completed byRead More


Standard Chartered tips ringgit to outperform Asian peers

KUALA LUMPUR: Standard Chartered Bank (StanChart) has lowered its 2018 gross domestic product (GDP) growth forecast for Malaysia to 4.8% from 5.3% projected earlier due to slower-than-expected expansion in the first half of the year and on trade concerns, but is optimistic on the ringgit's performance going forward.

Its foreign exchange strategist for Asean and South Asia, Divya Devesh, said the ringgit is expected to continue to be an outperformer, supported by the fact that the currency is undervalued, and higher oil prices that will drive it.

“Looking at the year-to-date performance across Asia, the ringgit is the second best performing currency after the Thai baht. The ringgit has clearly outperformed its peers in Asia, and more broadly in emerging markets. We think that's going to continue,” he said at the “Global Research Briefing H2 Update” here today.

Based on its in-house valuation of currencies, the ringgit is the second most undervalued currency across emerging markets after the Turkish lira.

“Ringgit is still quite attractive from a valuation standpoint for foreign investors. We're now seeing more investors invest in Malaysian bonds. In July, for example, there were net inflows into Malaysian bonds after three months of outflow.”

It projected the ringgit to trade at RM4.0 against the US dollar by end of 2018 and RM4.1 by end of 2019.

“Domestically, there are lots of supportive factors for the ringgit. The external environment is still unfavourable for emerging markets, hence we're not projecting a sharp appreciation of the ringgit. We're still looking at relatively range-bound performance for dollar-ringgit over the next 12-15 months,” Divya explained.

He also said the impact of global quantitative tightening on the ringgit will be limited and Malaysia will be insulated even in a tightened liquidity environment, given that foreign investors have been underweight on Malaysia and have reduced their positioning in Malaysia significantly from bonds or equities; while the spotlight is going to be on economies and currencies that have twin deficits (fiscal and current account deficits) like India, Indonesia and the Philippines.

Meanwhile, StanChart's chief economist for Asean and South Asia, Edward Lee, said Malaysia is among the top three countries in Asia most affected by the US-China trade war on an indirect exposure basis, adding that Malaysia's trade surplus could be narrower as a result.

“If US goes ahead with a 25% tariff on the next US$200 billion (worth of Chinese goods) and you add in the previous 25% tariff on US$50 billion (worth of Chinese goods), the potential impact on China's growth is 0.6 percentage point, which is massive. The 0.6 ppt translates to an impact of 0.3% of Malaysia's GDP,” Lee estimated.

The bank's thematic research head, Madhur Jha, said there is a possibilty of a positive outcome from the US-China trade war that will see China quickening the pace of liberalisation of its economy, which will benefit Malaysia.

She said commodity prices tend to move in tandem with oil prices, so when oil prices rise, the prices of commodity products also rise. Malaysia as a net commodity exporter will see better revenue and a better growth profile. The oil price is expected to stabilise at around US$70 a barrel this year.


U Mobile inks RM1 billion credit facility with UOB Malaysia

KUALA LUMPUR: U Mobile Sdn Bhd has inked a three-year RM1 billion term loan credit facility with United Overseas Bank (Malaysia) Bhd (UOB Malaysia) to fund its various capital expenditure programmes, including the company's network expansion and enhancement goals across the country.

U Mobile CEO Wong Heang Tuck said the RM1 billion credit facility agreement is one of the largest to be signed in this country to date and this reflects the bank's vote of confidence in U Mobile's credit quality and business fundamentals.

“The fresh injection also means we are able to expedite our network strategy and customers will soon enjoy much better experience throughout the whole of Malaysia.”

He added that the agreement, apart from enabling U Mobile to build a financial track record, affirms the company's position as a credible challenger in the telco landscape.

Over the past few years, the company has enjoyed traction in the industry and its subscriber base crossed the 6 million mark at the end of last year.

U Mobile's rising popularity in Malaysia also enabled the telco to become ebitda (earnings before interest, tax, depreciation & amortisation) positive mid last year, highlighting the company's improving financial health.

As at Dec 31, 2017, U Mobile's shareholders have invested over RM4 billion in the business. With the RM1 billion loan from the commercial bank, U Mobile would be investing over RM5 billion in its network infrastructure, aggressively expanding its network footprint nationwide as well as enhancing customers' mobile experience.

The investment will also accelerate the telco's growth ambitions, reinforcing its position as a serious industry contender. The network infrastructure upgrade is also a critical foundation to U Mobile's expanding suite of mobile digital services, which spans from telco-assurance to payments.


Corporate earnings in Q2 ‘show some semblance of improvement’

PETALING JAYA: PublicInvest Research said the second-quarter's earnings report card showed some semblance of improvement following the previous quarter's letdown, but the uptick may not be structural in nature.

Positive surprises were evident in the auto and healthcare sectors, while the bleeding in the oil and gas sector seems to have abated. Manufacturing, however, remains a disappointment and airlines also surprised on the downside.

“Of some encouragement is the fact that none of the market-moving economic-defining sectors showed any significant worse for wear,” it said in a research note today.

For PublicInvest Research, the current quarter's earnings hits (above and/or in line) are at 68:32%, versus 60:40% in the first quarter.

With most of the current misses still cost-related, the research house has lowered its expectations again.

“The one encouragement, if any, is that sales trends for most still remain intact albeit muted, while upward revisions are rising slightly.”

As the market is fairly valued currently, PublicInvest Research is maintaining the 2018 year-end target for the FBM KLCI at 1,790 points.

On whether there is a further upside to the market, the research house said the earnings growth assumptions for 2018, 2019 and 2020 are 3.2%, 5.9% and 6.5%, respectively.

“On this score, we are suggesting a preliminary year-end 2019 FBM KLCI target of 1,900 points, though many odds could be stacked against its favour.”

PublicInvest Research is maintaining an “overweight” stance on the oil and gas and manufacturing sectors despite weakness seen in earnings. It also suggests selective exposure in the banking sector.

The research house continues to see value in the small- and mid-cap space, and retain most of its suggested picks despite year-to-date underperformances of some companies as it believes the current share price weaknesses are overdone.

“AMMB Holdings, Hibiscus Petroleum, Mega First, N2N Connect, Perak Transit continue to make up the core holdings in our suggested picks, in addition to CIMB Group and Tenaga Nasional. Ta Ann Holdings is newly included.”

MIDF Research noted that the aggregate reported earnings of FBM KLCI 30 constituents totalled RM11.42 billion in Q2, down 31.2% quarter on quarter and 27.4% year on year.

However, more pertinently, the aggregate normalised sequential growth was positive at +2.7% quarter on quarter while the normalised on-year number posted a much smaller negative at -3.2% year on year.

Within MIDF Research’s universe, merely 3% of stocks under coverage reported higher than expected earnings. Of the rest, 39% posted earnings that were lower than expected versus 58% which came within expectations.

It has trimmed the aggregate FY18 earnings estimate and FY2019 earnings forecast of the FBM KLCI constituents under its coverage by -0.2% to RM55 billion and 0.8% to RM57.2 billion, respectively.
MIDF Research is maintaining its end-2018 FBM KLCI target at 1,800 points.


US stocks fall on continued trade angst

NEW YORK, Sept 4 ― Wall Street stocks fell early today on lingering trade uncertainty at the start of a heavy news week that includes US jobs data. About 30 minutes into trading, the Dow Jones Industrial Average was down 0.4 per cent to 25,850.37….



10 years after Lehman’s collapse, crisis mode is new normal for central banks

FRANKFURT AM MAIN: The collapse of US investment giant Lehman Brothers 10 years ago forced central banks to take unprecedented steps to help rescue the global economy, thrusting them into uncharted territory they are still navigating.

Acting as firefighters-in-chief, central banks pushed the boundaries of their mandates by deploying a range of unusual tools that have, for better or worse, become the new normal.

“We underestimated the crucial role they would have to play in case of serious financial instability,” said Eric Dor, director of economic studies at France’s IESEG management school.

But after years of ultra-low interest rates and floods of cheap money, central bankers around the world are grappling with the next hurdle: how to ease out of crisis mode without jeopardising the recovery.

“This is an extremely big challenge,” said ING Diba bank analyst Carsten Brzeski.

The delicate balancing act has been complicated by “uncertainties” on the horizon, he added, as US President Donald Trump’s trade rows and growing geopolitical risks shade the economic outlook.

And although the US Federal Reserve, European Central Bank, Bank of England (BoE) and Bank of Japan (BoJ) all sprung into action together in 2008, the road back to monetary policy normalisation is one each must walk on their own.

Central banks are generally tasked with lowering or raising interest rates to achieve price stability.

But when access to credit dried up after the Lehman collapse, they had to think outside the box.

First, they slashed interest rates to record-low and even negative levels. Next, they flooded the financial system with cash.

They offered cheap loans to banks and began massively buying up government and corporate bonds in a stimulus scheme known as “quantitative easing” (QE), hoping to encourage lending and stimulate spending.

Critics complain that the drastic measures have hurt savers and distorted bond markets, but supporters say they underpinned the global return to growth.

“Central banks can take a big chunk of credit for mastering the crisis,” said Brzeski. “Even if it was a lot of learning by doing.”

One memorable misstep, he said, was the ECB’s ill-advised rate rises in 2011 despite a festering eurozone debt crisis.

But the Frankfurt institution quickly corrected course and its chief Mario Draghi later famously promised the ECB would do “whatever it takes to preserve the euro”.

With the interventionist genie out of the bottle, analysts say there’s no going back for central banks.

Draghi himself acknowledged in June that even as the bank readies to wind down its bond purchases in December, QE has become a “normal instrument” in the ECB “toolbox”, ready to be picked up again when necessary.

The key question for central banks now is when, and how exactly, to unwind their extraordinary stimulus to ensure they have ammunition left when the next downturn hits, without spooking the markets today.

Many governments, companies and investors have come to rely on the central banks’ easy money to service their debts – and any abrupt U-turn could plant the seeds for a fresh crisis.

Another headache is that despite robust growth and strong labour markets, inflation remains puzzlingly low in advanced economies.

IESEG’s Dor likened central banks’ efforts to hit an inflation target of around to 2% to “Don Quixote fighting windmills”, echoing observers who say factors outside the banks’ control, like digitalisation, are to blame.

The ECB has nevertheless said it is confident inflation is headed in the right direction as eurozone wages creep up, bolstering its decision to scale back QE – while signalling that interest rates won’t rise until well into 2019.

But if the ECB does eventually meet its inflation goal, Berenberg economist Holger Schmieding said it will mainly be because of stimulus “far beyond” anything seen before, and it’s unclear what will happen once the medicine is withdrawn.

Commerzbank analyst Joerg Kraemer warned that although banks had been forced by regulators to become more resilient since 2008, the risk of new bubbles was real.

“Both public and private debt levels in the eurozone remain high,” he said, fuelled by the ECB’s easy access to credit.

To date only the Fed has ended QE and started steadily raising rates, leading the way in monetary tightening – despite some grumbling from Trump.

In England, the BoE recently lifted rates for only the second time since the crisis. But its QE scheme remains in place as Brexit worries loom.

Treading equally cautiously, the BoJ has held rates steady and made only minor tweaks to its asset purchasing programme.

“The Fed wants to use the good economic times to normalise monetary policy,” Brzeski summed up.

Other central banks, he said, “are sceptical that these are good times”. – AFP


10 years on, crisis mode is new normal for central banks

FRANKFURT AM MAIN: The collapse of US investment giant Lehman Brothers 10 years ago forced central banks to take unprecedented steps to help rescue the global economy, thrusting them into uncharted territory they are still navigating.

Acting as firefighters-in-chief, central banks pushed the boundaries of their mandates by deploying a range of unusual tools that have, for better or worse, become the new normal.

“We underestimated the crucial role they would have to play in case of serious financial instability,” said Eric Dor, director of economic studies at France’s IESEG management school.

But after years of ultra-low interest rates and floods of cheap money, central bankers around the world are grappling with the next hurdle: how to ease out of crisis mode without jeopardising the recovery.

“This is an extremely big challenge,” said ING Diba bank analyst Carsten Brzeski.

The delicate balancing act has been complicated by “uncertainties” on the horizon, he added, as US President Donald Trump’s trade rows and growing geopolitical risks shade the economic outlook.

And although the US Federal Reserve, European Central Bank, Bank of England (BoE) and Bank of Japan (BoJ) all sprung into action together in 2008, the road back to monetary policy normalisation is one each must walk on their own.

Central banks are generally tasked with lowering or raising interest rates to achieve price stability.

But when access to credit dried up after the Lehman collapse, they had to think outside the box.

First, they slashed interest rates to record-low and even negative levels. Next, they flooded the financial system with cash.

They offered cheap loans to banks and began massively buying up government and corporate bonds in a stimulus scheme known as “quantitative easing” (QE), hoping to encourage lending and stimulate spending.

Critics complain that the drastic measures have hurt savers and distorted bond markets, but supporters say they underpinned the global return to growth.

“Central banks can take a big chunk of credit for mastering the crisis,” said Brzeski. “Even if it was a lot of learning by doing.”

One memorable misstep, he said, was the ECB’s ill-advised rate rises in 2011 despite a festering eurozone debt crisis.

But the Frankfurt institution quickly corrected course and its chief Mario Draghi later famously promised the ECB would do “whatever it takes to preserve the euro”.

With the interventionist genie out of the bottle, analysts say there’s no going back for central banks.

Draghi himself acknowledged in June that even as the bank readies to wind down its bond purchases in December, QE has become a “normal instrument” in the ECB “toolbox”, ready to be picked up again when necessary.

The key question for central banks now is when, and how exactly, to unwind their extraordinary stimulus to ensure they have ammunition left when the next downturn hits, without spooking the markets today.

Many governments, companies and investors have come to rely on the central banks’ easy money to service their debts – and any abrupt U-turn could plant the seeds for a fresh crisis.

Another headache is that despite robust growth and strong labour markets, inflation remains puzzlingly low in advanced economies.

IESEG’s Dor likened central banks’ efforts to hit an inflation target of around to 2% to “Don Quixote fighting windmills”, echoing observers who say factors outside the banks’ control, like digitalisation, are to blame.

The ECB has nevertheless said it is confident inflation is headed in the right direction as eurozone wages creep up, bolstering its decision to scale back QE – while signalling that interest rates won’t rise until well into 2019.

But if the ECB does eventually meet its inflation goal, Berenberg economist Holger Schmieding said it will mainly be because of stimulus “far beyond” anything seen before, and it’s unclear what will happen once the medicine is withdrawn.

Commerzbank analyst Joerg Kraemer warned that although banks had been forced by regulators to become more resilient since 2008, the risk of new bubbles was real.

“Both public and private debt levels in the eurozone remain high,” he said, fuelled by the ECB’s easy access to credit.

To date only the Fed has ended QE and started steadily raising rates, leading the way in monetary tightening – despite some grumbling from Trump.

In England, the BoE recently lifted rates for only the second time since the crisis. But its QE scheme remains in place as Brexit worries loom.

Treading equally cautiously, the BoJ has held rates steady and made only minor tweaks to its asset purchasing programme.

“The Fed wants to use the good economic times to normalise monetary policy,” Brzeski summed up.

Other central banks, he said, “are sceptical that these are good times”. – AFP