Thursday, October 11th, 2018


US business group says Trump China tariffs cost US$1.4b a month

WASHINGTON, Oct 11 — A coalition of US business groups fighting President Donald Trump’s trade tariffs has launched an advertisement aimed at telling voters ahead of the midterm elections that the measures are costing American businesses and…

Trump says Fed ‘making a big mistake’ by being too aggressive

WASHINGTON, Oct 11 — President Donald Trump renewed his attacks on the US central bank today, saying it was “too aggressive” in raising interest rates. “I think they’re making a big mistake,” Trump said during a broadcast of Fox &…

Cloudy outlook for local stocks in short term

PETALING JAYA: The local stock market saw heavy selling pressure again today, tumbling as much as 52.2 points or 3% to a low of 1,682.98 points at one point amid a regional sell-off following the rout on Wall Street overnight, before closing 26.69 points weaker at 1,708.49.

Coupled with the loss of 38.97 points on Wednesday, the FBM KLCI has nosedived 65.66 points or 3.7% in the past two days, wiping off RM62.06 billion in market capitalisation.

Today's trading volume stood at 3.1 billion shares valued at RM3.7 billion. Market breadth was negative with only 233 gainers against 805 losers.

Among the biggest decliners were United Plantations Bhd, Nestle (Malaysia) Bhd, Heineken Malaysia Bhd and Carlsberg Brewery Malaysia Bhd, which dropped RM1.08, RM1.00, 94 sen and 64 sen to RM26.58, RM145.00, RM18.96 and RM18.80, respectively.

The construction index, however bucked the trend with a rise of 2.14%. Gamuda Bhd was among the top gainers, closing 23 sen or 11.1% higher at RM2.30.

On the currency front, the ringgit weakened 0.14% to 4.1590 against US dollar as at 5pm today.

Meanwhile, Asian stock markets fell sharply on fears over US interest rate increases and heightened trade war, with China's Shenzhen and Shanghai stock exchanges slumping 6.45% and 5.22%, respectively, to their the lowest levels in four years.

The Taiwan market sank 6.31%, its largest one-day loss in history. Elsewhere, the Korean, Japanese and Hong Kong markets skidded 4.44%, 3.89% and 3.54%.

The outlook for the local bourse is expected to be gloomy in the short term as foreign selling could intensify on the pullback of global liquidity, say analysts.

JF Apex Securities head of research Lee Chung Cheng told SunBiz that Bursa Malaysia will see challenging times in the short term. Apart from external headwinds, the retendering of underground works for the MRT2 project and the possible introduction of new taxes such as inheritance tax, soda tax and capital gains tax are negative to the market.

Due to the uncertainties, he said foreign selling is expected to persist, albeit at a slower pace.

Lee said the immediate support for the FBM KLCI is 1,700 points, while the next would be 1,660 points.

Inter-Pacific Research Sdn Bhd head of research Pong Teng Siew said the downward trend in the Malaysian market began in April, where the peak of 1,895 points was recorded ahead of the May 9 general election.

“Concurrently, global liquidity also peaked around the same time. We can't say it is the end of the US bull market, but it is getting possible as it failed to reclaim the recent highs.”

MIDF head of equity strategy Syed Muhammed Kifni Syed Kamaruddin concurred, saying that the US stock market is only at the beginning of a cyclic pullback and there could be further downside in prices.

“We believe there is a heightened likelihood of an impending short-term cyclic pullback in the US equity (during the coming months, as early as in October) which empirically would drag down other world's bourses alongside,” he said in a research note today.

Pong is cautious on the market outlook as local funds may join hands in selling equities if foreign buying does not pick up.
“The KLCI is still unable to make new highs, It is now about 200 points lower than the peak of 1,895 points in April 2018.”

Syed Muhammed Kifni expects Budget 2019 and the 11th Malaysia Plan mid-term review could help buoy market sentiment and equity valuation with fresh orientation and interesting new or altered measures.

“Furthermore, another possible upside impetus for the local bourse in the final quarter may emanate from the prospect of a technical rebound in the recently battered emerging market equities.”

He reiterated the FBM KLCI year-end target at 1,800 points which equates to a price-to-earnings ratio of 16.6 times. For end 2019, the target is 1,900 points.

Awer warns of higher tariffs if utility companies take over infrastructure development

PETALING JAYA: The Association of Water and Energy Research Malaysia (Awer) has warned that imposing the cost for utility infrastructure in housing projects on utility companies will ultimately result in higher tariffs for consumers with additional capital expenditure (capex), along with a more frequent review of tariffs.

Awer president S. Piarapakaran pointed out that the tariffs collected by utility companies are not enough to cover the capex, as tariffs are currently based on the infrastructure that has already been set up. Currently the rates cover the maintenance of the utility.

“When developers pass the compliance costs to utility companies, the utility companies will have to incur additional capex and this is the cost that will be passed on to the tariff. When developers don't want to pay and they push it to the utility companies (to bear the compliance costs), consumers will have to absorb this cost in the form of a tariff increase,” he told SunBiz.

In such a case, Piaparakan said, this will backfire on the tariff-setting of utilities, as utility companies will have to bear the compliance costs, whether or not the housing project is completed, subsequently causing cost fluctuation every six months.

“That's why the compliance costs are passed to the developers because when you take this costs, you need to complete it (the housing project). I don't think it's fair if the government listens to one side of the story. If the developers want to develop an area, they need to take full responsibility of it,” he explained.

Earlier this week, Housing and Local Government Minister Zuraida Kamaruddin said she wants utility companies to bear the costs for constructing their own utility base in housing areas so that it reduces the cost for developers in an effort to push for lower house prices.
“At the ministerial level, principally, they (the respective ministries) have agreed to take up the costs,” she said.

Developers of affordable housing are expected see a reduction in their compliance costs by 2019, including for utility, water and telecommunications, if the affordable housing policy is approved by the Cabinet.

Citing an example, Piarapakaran said for electricity, the only cost being passed through every six months is the generation cost due to different types of fuel being used, with rising fuel costs or savings being passed on to consumers.

“If we were to accommodate the requests by Rehda, which means for the distribution part, we will need to pass through the costs every six months, because there is going to be new infrastructure being built every six months. All the utility companies will bear this additional capex that is going to directly impact tariffs. Is the government ready to review tariffs every six months?” he asked, adding that the government has indicated its stance to do away with tariff reviews.

Piarapakaran said the tariffs for electricity are currently reviewed every three years and for water every three years in the first few cycles.

Ekuiti Nasional exits cross-border mobile transaction firm Tranglo for RM114.9m

PETALING JAYA: Ekuiti Nasional Bhd (Ekuinas) has disposed of its 60% stake in mobile transaction gateway services provider Tranglo Sdn Bhd to Hong Kong-based TNG FinTech Group Inc for RM114.9 million, three years after acquiring the interest for RM54 million.

This translates to an internal rate of return of 26.8% and money multiple of 1.96 times the capital invested. This is Ekuinas' ninth divestment, which brings its total realisation proceeds to more than RM2.0 billion.

“The selection of TNG was made after a rigorous sale process that attracted global interest from several parties. It was done on a merit-based process, where capability, resource and alignment with management's vision were equally as important as price.

“We want to ensure that the next partner will further catalyse the business. As such, it is important that the buyer has the necessary expertise, experience and capabilities to not only continue operating the business but, more importantly, is equipped with the resources to develop and push the business further,” said Ekuinas CEO Syed Yasir Arafat Syed Abd Kadir.

In a statement today, Ekuinas said the decision was based on several considerations which include identifying a strategic partner that would be able to push the business into its next phase of growth.

Tranglo is a leading cross-border mobile transaction gateway company that facilitates airtime transfer and money remittance transactions which currently offers its services in most of the global corridors including the Southeast Asian countries, Hong Kong and China.

“Our longstanding relationship with Malaysian and global telecommunication and remittance companies have underpinned our growth trajectory and will continue to be a key factor in our forward strategy. Tranglo's business relationship with TNG has grown over the years in partnership with Ekuinas.

We believe that this development is a positive step towards pushing our business further in cross-border money remittance,” said Tranglo executive director and chief strategy officer Sia Hui Chek.

US stocks edge higher after tepid inflation data

NEW YORK, Oct 11 — Wall Street stocks rose modestly early today as benign US inflation data mitigated investor worries about higher interest rates that helped prompt the prior session’s rout. About 25 minutes into trading, the Dow Jones…

Trump says he could do ‘a lot more’ on China trade, reports Fox

WASHINGTON, Oct 11 — US President Donald Trump warned today there was much more he could do that would hurt China’s economy further, showing no signs of backing off an escalating trade war with Beijing. Trump imposed tariffs on nearly US$200…

Post-Brexit trade deals unlikely to help UK economy much, says official budget forecaster

LONDON, Oct 11 — Britain’s plan to strike trade deals around the world, a key plank of the government’s strategy for life outside the European Union, is unlikely to help the economy much, the country’s official budget forecaster said today….

Residential property overhang worsens

KAJANG: The overhang status of residential properties in Malaysia worsened in the first half of 2018 (1H 2018), with 29,227 units worth RM17.24 billion, reflecting a year-on-year increase of 18.1% and 10.2% in volume and value respectively.

According to the Property Market Report for First Half 2018 published by the Valuation and Property Services Department (JPPH), the majority of overhang properties were condominiums and apartments priced between RM500,000 and RM1 million.

“Condominiums and apartments contributed the most to the overhang status with 11,602 units representing 39.7% of the total overhang,” said JPPH director-general Nordin Daharom.

Speaking to reporters at the launch of the report today, Nordin said Johor remained the state with the highest number of overhang units with 5,988 units or 20.5% of the total overhang. The overhang in Johor stood at 3,803 units a year ago.

This is followed by Selangor at 4,694 units and Penang at 3,958 units. A year ago, the overhang in these two states stood at 3,664 units and 2,041 units respectively. Kuala Lumpur’s residential overhang stood at 2,350 units compared with 746 units a year ago.

For small office home office (Soho) and serviced apartments, the overhang jumped by 84.4% to 12,771 units from 6,927 units a year ago while industrial properties saw a 2.2% increase in overhang units to 1,021 units from 999 units a year ago.

Shops were the only sub-sector that saw an improvement in overhang status with a 4.4% reduction in overhang to 4,348 units from 4,546 units a year ago.

The residential sub-sector continued to drive the overall market with 62.8% market share and 46.7% in value. However, this sub-sector recorded a 0.8% drop in volume to 94,202 units from 94,969 units a year ago while value fell 3.6% to RM31.66 billion from RM32.48 billion a year ago.

The number of new residential launches declined 7.1% to 37,723 units from 40,615 units a year ago while sales performance was low at 19.2% compared with 22.4% a year ago.

The house price index rose to 189.5 points in the second quarter of 2018 from 186.3 points a year ago, with the average price rising 1.7% to RM408,774 from RM401,905 a year ago.

Overall, the property market recorded a 2.4% drop in volume of transactions to 149,889 units from 153,526 units a year ago, while value of transactions fell 0.1% to RM67.74 billion from RM67.83 billion a year ago.

In terms of loans, applications and approvals for residential properties fell 3.1% and 0.2% respectively year-on-year. However, loan applications and approvals for non-residential properties increased by 14.2% and 6.6% respectively.

Note that commercial and industrial were the only two sub-sectors that bucked the trend, with 3.5% and 3.8% increase in volume of transactions respectively during the period.

Despite the improvement in the commercial sub-sector, Nordin noted that the occupancy rate of the office and retail sectors fell to 82.8% and 79.9% respectively, from 83.3% and 79.9% respectively a year ago.

As at end-June, existing office space stood at 21.62 million sq m from 2,502 buildings while incoming supply stood at 68 buildings with 2.48 million sq m of space.

“I must emphasise that both issues, residential overhang and commercial space vacancy are pertinent issues that must be addressed by all parties, particularly local authorities and property developers. Both must exercise due diligence before arriving at development decision to avoid oversupply situation,” said Nordin.

Based on preliminary data from the third quarter of 2018, he said the property market is expected to stabilise in the second half of the year, with minimal movement of less than 1%.

Port of Tanjung Pelepas eyes 9m TEUs this year

TANJUNG PELEPAS: The consolidation of international shipping lines will help Port of Tanjung Pelepas Sdn Bhd (PTP) achieve a 5% increase in total throughput volume to 9 million twenty-foot equivalent units (TEUs) from the 8.4 million registered last year.

When asked about the recent wave of the consolidation of shipping lines, with Maersk Line buying out Hamburg Sud, the trans-shipment port’s CEO Marco Neelsen said it has resulted in movement of operation hubs from East Asia to PTP.

“At the moment it is positive but on the other hand my customers’ landscape is changing, so I have to be always alert and watch how it continues … but we cannot be complacent. We are watching the entire industry,” he added.

As at end of September, PTP’s total container throughput stood at 6.6 million TEUs. Neelsen is confident that the 9 million TEUs will be achievable given the fourth quarter of the year being the busiest of the year, predominantly due to the Christmas season which will see cargo moving to Europe.

On another note, PTP, which is a unit of MMC Group, has obtained approvals to develop the third phase of its Free Zone which will cover 168 acres and is expected to start physical works in 2½ years’ time.

Neelsen said PTP is actively working on the development given the increased demand.

Thus far, RM2.4 billion has been invested in the free zone which has warehousing and logistics facilities and export-driven light to medium manufacturing hubs. The free zone covers 1,586 acres.

One of the prominent occupants of the free zone is Volkswagen which has its regional parts and distribution centre there.

PTP is also optimising its efficiency by purchasing new equipment and system.

On the neighbouring Singapore port, Neelsen said while the island’s port is a competition on the seafront, it works as a complement when it comes to land given the scarcity of it in Singapore.

He was referring to free zone, logistics and warehousing facilities.

“The idea is to say when companies have to leave Singapore for various reasons and predominantly space. We rather have them in Johor than elsewhere because that still gives opportunity for companies to (let their) regional headquarters and research and development stay in Singapore and the production in Johor, which can be reached by car in one hour,” he explained, adding that PTP has been engaging with counterparts across the straits.

Meanwhile, Neelsen noted that the US-China trade war has its benefits on Malaysia with it being a logistics hub while for PTP the challenges are limited because transit is limited.

“I don’t think cargo will be re-routed away from Malaysia because of trade war. It could be the other way, where cargo can be re-routed into Malaysia because of circumstances,” he added.