Wednesday, September 26th, 2018
LONDON, Sept 26 ― The pound slipped today as investors remained cautious about negotiations between Britain and the EU on a Brexit deal and as broader currency markets waited for an expected Federal Reserve interest rate hike later in the day….
NEW YORK, Sept 26 ― Canadian Prime Minister Justin Trudeau today said he would not be rushed into renewing Nafta and indicated it was possible the three member nations might fail to conclude a new pact. The top US negotiator today complained…
PETALING JAYA: The oversupply issue in the property market continues to persist with the number of unsold housing units rising to 146,196 units as at the end of the first quarter of 2018, according to Bank Negara Malaysia (BNM).
More than 80% of unsold units were priced above RM250,000 each.
The central bank said in its “Financial Stability Review – First Half 2018” that excess supply of office space and shopping complexes is also expected to persist as vacancy rates deteriorated further in the first quarter of 2018.
“Nevertheless, sustained demand for affordable housing, particularly from first-time home buyers and prudent underwriting practice in lending to the property market and related sectors are expected to mitigate risks of a broad based price correction.”
BNM said risks from household sector exposures continue to be mitigated by prudent underwriting and loan affordability assessments by financial institutions and sound risk management practices.
It noted that new household borrowings remained of high quality as about three-quarters of new loans approved were to borrowers with debt service ratios (DSR) of less than 60%.
“Overall household debt accumulation has also been on a more sustainable path relative to income growth, as a result of the cross-cutting measures that have been implemented since 2010. The ratio of household debt-to-GDP continued to moderate and currently stands at 83.8% in the 2Q 2018 (2017: 84.2%).”
BNM said the latest stress tests affirm that the Malaysian financial system is expected to remain resilient under severe macroeconomic and financial strains with financial institutions maintaining capital buffers in excess of regulatory minima even under adverse scenarios.
Financial institutions currently maintain excess total capital buffers of RM135.9 billion.
The central bank said liquidity and funding conditions remained conducive to support financial intermediation throughout the first half of 2018 as excess liquidity maintained by the banking system currently stands at RM156.2 billion.
“Continued efforts by banks to diversify their funding base to include more stable medium-term debt instruments coupled with existing buffers of high quality liquid assets well above the minimum liquidity coverage ratio (LCR) requirement further bolster banks’ resilience to liquidity and funding-related stresses moving forward.”
The central bank said the overall banking system continues to be underpinned by strong capitalisation, a sound credit portfolio and prudent levels of provisioning.
“The financial performance of the banking system in the first half of 2018 was strong with margins improving as banks benefited from continued efficiency gains and improved asset quality.”
Overall total impaired loans (net of individual impairment provisions) contracted 10% to RM16 billion or 1% of total net loans, while annual returns on assets and equity were stable at 1.5% and 13.3%.
“Banks’ earnings performance is expected to be sustained amid continued efforts to enhance operational efficiency.”
Meanwhile, the financial position of Malaysian non-financial corporations (NFCs) remained sound during the first half of the year. Aggregate leverage of NFCs increased at a moderate pace but firms continue to maintain healthy financials with their debt servicing capacity remaining above prudent thresholds (interest coverage ratio of 8.2 times).
PUTRAJAYA: Maybank Asset Management Group chairman Dr Hasnita Hashim (pix) has been appointed chairman of Majlis Amanah Rakyat (Mara) with effect from Oct 1.
In a statement today, the Prime Minister's Department said Hasnita, who holds a PhD in Nuclear Physics from Oxford University, has 26 years of experience in global finance.
“She began her career as an actuary with Coopers & Lybrand Deloitte, London and was also a member of the Institute of Actuaries.
“Currently, she is Maybank Asset Management Group chairman and also a Maybank Banking Bhd board of directors member,” said the statement.
Hasnita was previously the CEO of Guidance Investments, a subsidiary of Guidance Financial Group.
Meanwhile, the Prime Minister's Department also announced the appointment of six new Mara Council members, including Universiti Sains Islam Malaysia Rector Prof Tan Sri Dzulkifli Abdul Razak, Malaysian Aviation Commission CEO Dr Nungsari Ahmad Radhi and Mydin Mohamed Holdings Bhd managing director Datuk Wira Dr Ameer Ali Mydin.
The other new council members are Mayban Life Assurance Bhd chairman Datuk Syed Tamin Ansari Syed Mohamed, former CEO of Proton Holdings Tengku Tan Sri Mahaleel Tengku Ariff and Allianz Malaysia Bhd CEO Zakri Khir. – Bernama
MANILA: Developing Asia could grow more slowly than previously thought next year as the US-China trade war inflicts damage on the region's export-reliant economies, the Asian Development Bank (ADB) said today.
Tightening global liquidity could also weigh on business activity by pushing up borrowing costs, while capital outflows are also a risk.
The Manila-based institution kept its 2018 economic growth estimate for the region at 6.0% in an update of its Asian Development Outlook. But it trimmed next year's forecast to 5.8% from 5.9%.
“Downside risks to the outlook are intensifying,” said ADB chief economist Yasuyuki Sawada, pointing to the potential impact of US-Sino trade tensions on regional supply chains and the risk of sudden capital outflows if the Federal Reserve raises interest rates even more quickly.
The ADB's 5.8% growth estimate for 2019 would be the slowest for the region since 2001, when it expanded 4.9%.
The report covers 45 countries in the Asia-Pacific.
The ADB's latest forecasts did not reflect fresh tariffs that the US and China imposed on each other's goods on Monday.
Sawada said the additional duties would not significantly change ADB's growth forecasts, but added the “escalating” trade conflict must be closely monitored.
China's economy is expected to grow 6.3% in 2019, the ADB said, slower than its 6.4% forecast in July and weaker than its 6.6% growth estimate for 2018, which was unchanged from its previous projection.
Domestic consumption in China “seems to be quite robust and supporting 6.6% growth this year”, Sawada told a media briefing.
“But admittedly we don't know (how) the further escalation of the trade dispute may directly affect consumer sentiment,” he added.
Beijing has set a growth target of around 6.5% this year, the same as last year, which it handily beat with an expansion of 6.9%.
Chinese authorities have pledged they can still meet the 2018 target, and have started to roll out growth boosting measures as the trade war threatens to put further pressure on the already cooling economy.
For Southeast Asia, moderating export growth, quickening inflation, net capital outflows and a worsening balance of payments have dimmed the outlook, with growth this year projected to slow to 5.1% from the July forecast of 5.2%.
“Policy makers have at their disposal an array of policy tools with which to manage pockets of vulnerability and maintain stability, but they must be applied carefully,” Sawada said.
Inflation across the region is expected to remain under control, helped by country-specific factors like moderate food price inflation in India and China and fuel subsidies in Indonesia and Malaysia, the ADB said.
Sawada said Asian governments have “enough policy space to handle” shocks and pressure from currency depreciations.
The ADB lowered its 2018 economic growth forecast for Vietnam to 6.9% from 7.1% projected previously, partly due to the ongoing trade friction between the US and China.
Vietnam, one of the fastest growing economies in Asia, has an open economy that is heavily reliant on exports, while the US and China are among its biggest trade partners.
ADB lowered its growth forecast as the ongoing trade tension between the US and China could have a spillover impact on Vietnam. However, the ADB outlook is still higher than the Vietnamese government's target of 6.7%. – Reuters
KUALA LUMPUR: Proactive measures must be enhanced to handle a possible protracted trade conflicts, as it would have “very serious” implications on open economies including Malaysia, according to former senior United Nations official and economist Professor Jomo Kwame Sundaram.
Jomo, who presented the findings of the new United Nations Conference on Trade and Development 2018 report today, cited three main issues pointed by the annual report, namely the likelihood of prolonged trade conflicts, possible financial crisis and to gain from the new digital technologies.
“Malaysia has to prepare for this (trade conflicts) not by simply signing up for trade agreements which do not give us much advantage but instead take proactive measures to promote new areas of investment and try to take advantage of the manner in which this trade conflict are being developed.
“This is because the focus of the US administration is on bilateral (trade relations) and we are not involved in those bilateral relations. So there are opportunities for us,” he said.
The report stated that, whether or not they amount to a trade war, the recent rounds of tariff hikes would disrupt a trading system drawn increasingly around value chains, although trade growth this year is likely to be similar to 2017.
However, the consequences of any serious escalation could, through heightened uncertainty and reduced investment, bring more damaging impacts in the medium term, and these could be particularly serious for countries already facing financial distress.
“With the change in international monetary policies, particularly the flow of funds going into the US because interest rates are going up, many emerging markets will be under a great deal of stress and will be much more vulnerable to financial crisis, especially in the areas where there is asset price bubble, such as property bubble which is financed by debt,” Jomo added.
Therefore, he said the government and authorities need to be prudent and continue imposing unpopular decisions to reduce the country’s vulnerability to such crisis.
Asked whether there are indications that Malaysia is headed towards a recession, Jomo said he did not think so but the country will be more vulnerable if it did not manage its economy cautiously.
“If we were not more careful or more prudent, the likelihood of a financial crisis probably due to external origins would be greater,” he added.
On digitalisation, Jomo stressed that the government needs to come out with “appropriate policies” to benefit from the further development of digital economy.
“We cannot just expect that the development of the digital economy will benefit all of us because the recent trends have indicated otherwise. We should learn from the recent EU restrictions on Google and how they may be relevant to economy.
“We also think that we are getting a good deal by giving up precious data for free in exchange for services of the big digital monopolies… (most do not know that) these data is being used to enhance profits for the already big players mainly in the US – also in the East,” he added.
PETALING JAYA: The implementation of the inheritance tax and capital gains tax will have more drawbacks than benefits, said the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM).
The association strongly opposes the imposition of such taxes, saying that these taxes would cause capital outflows while stifling the Malaysian entrepreneurs’ spirit of creating wealth and corporate elites’ desire to innovate and prosper.
“In our opinion, these taxes would dampen economic growth in many ways: stifle the growth expansion of small and medium enterprises (SMEs) and family business, discourage capital formation and savings as well as induce corporates and investors to move their assets and investments abroad.
“As in the case of capital gains tax, it increases the marginal cost of investing in Malaysia as foreign investors already marginalised Malaysia equities,” it said in a statement today.
ACCCIM said overall, these taxes will result in subdued market environment, which is not conducive to attract the inflows of private capital and foreign direct investments that are needed to drive Malaysia’s economic growth and capital market development.
On the 2019 Budget, ACCCIM has submitted its proposals, which include the staggered reduction in the corporate income tax rate to 18% and a lower tax rate for SMEs of 15% for the first RM2 million chargeable income.
It also urged the government to consider raising personal tax relief for individuals to RM10,000 from RM9,000; ease the burden of low and middle-income households through the lowering of personal income tax rate; and enhance the competitiveness of all economic sectors and stimulate domestic consumer spending.
It said that the government must continue to create and enhance a business-friendly environment to support domestic businesses and attract foreign investment.
“We believe that through enhancing corporates’ competitiveness, flourishing their growth and profits, more revenue will be collected by the government instead of widening the tax base or increasing any tax rate to increase the government revenue.
“We view this as a long-term strategic policy to create a win-win situation for both the government and private sectors,” it added.
PETALING JAYA: The Malaysian National Shippers’ Council (MNSC) has urged the government to set up a Malaysian Maritime Commission (Marcom) for the maritime transport sector.
While it welcomes the government’s move to set up the Malaysian Shipping and Maritime Council and the Malaysian Aviation Council, MNSC said that any council which has no enforcement capacity may not be able to support the demands of the maritime sector.
“Therefore, we call upon the government to set up Marcom, an independent enforcement agency to regulate service providers, charges and unfair practices in maritime transport sector,” it said in a statement today, adding that the council would complement efforts of the Malaysian Shipping and Maritime Council.
MNSC said it had previously highlighted at numerous forums, the increases in various ancillary port charges imposed unilaterally by service providers which are not regulated by the government.
It said that the increases, which include depot gate charges, collection of deposits by shipping lines and non vessel operating common carriers, terminal handling charges and haulage tariffs, have eroded the competitiveness of Malaysian exports.
It noted the lack of a commission to regulate service providers, rates and charges for the marine transportation, unlike the aviation industry which is regulated by the Malaysian Aviation Commission.
PETALING JAYA, Sept 26 ― The Digital Finance Innovation Hub was launched in Kuala Lumpur today to support financial inclusion of Malaysia’s middle and low income group. United Nations Capital Development Fund (UNCDF) said in a statement that the…