Tuesday, October 30th, 2018

 

US stocks ride higher on trade optimism

KUALA LUMPUR, Oct 30 — US stocks rose today, helped by a rebound in technology stocks after a volatile few sessions on Wall Street, amid optimism over the US-China trade dispute and some upbeat earnings reports. All the 11 major S&P sectors…


Consolidated blueprint for social well-being needed: EPF CEO

KUALA LUMPUR: There is a need for the government to set up a consolidated blueprint for social well-being in Malaysia, as the RM24 billion spent annually by the government in terms of social benefits administration has not been effective.

Speaking to reporters on the sidelines of the launch of a case study by the World Bank on the Employees Provident Fund (EPF), the latter's CEO, Tunku Alizakri Alias, said currently there are several such programmes under multiple ministries which are dealing with different stakeholders.

This, he said, has not been effective because of the absence of a single plan.

“With a single plan I think we can do it much more efficiently and effectively and targeting people who really need help.

“We (the government) spend about RM24 billion a year in terms of social security administration but it has hardly made a dent in terms of Gini coefficient …” he added.

Gini coefficient gauges economic inequality, measuring income distribution or, less commonly, wealth distribution among a population.

Social security programmes include cost of living aid and benefits programmes for school children, farmers, fishermen among others.

EPF has also been lobbying for the formation of the plan with the government, which also happens to be the retirement fund's Budget 2019 wishlist.

Tunku Alizakri said there are positive indications from the government on the matter.

“We have spoken to the government and we seen some positive signs. We hope the government listens to us and hear the big issue – fundamental issues that we need to correct if we want to ensure a better Malaysia. Money alone is never enough – the high cost of living and challenges in urban centres will drag retirement savings,” he explained.

On another note, Tunku Alizakri said EPF is focusing on coming up with initiatives which are relevant to young people and players in the informal sector to make sure that EPF appeals as the best option for potential contributors.

“We have a voluntary scheme – they can put in up to a maximum RM60,000 per year. There are avenues in place for our people to have some form of retirement savings but most important is the education – do we put enough effort to ensure our young people know the needs of protecting their future? For young people, the earlier they start, the better it is, because of the compounding power,” he added.

He noted that the Generation Y and Z are major contributors to the fund.

On EPF's investments, Tunku Alizakri said the bulk of its investments are in Asia, and that like other fund managers, the US-China trade war is having an impact.

“Our investments are in 40 countries. We are very cognisant of geopolitical risks that are happening. We are keeping an eye on them. We have seen in the last two weeks the global and domestic markets have not been performing very well,” he added.


Sime Darby acquiring Australia’s Heavy Maintenance Group for A$58 million

PETALING JAYA: Sime Darby Bhd is acquiring the entire stake in Heavy Maintenance Group Pty Ltd (HMG) for A$58 million (RM172 million) on a cash-free and debt-free basis.

The group told Bursa Malaysia that its indirect wholly owned subsidiary Sime Darby Allied Operations Pty Ltd had entered into a conditional share purchase agreement with Pemba Capital Partners Fund I Partnership LP and other minority interests for the acquisition.

The acquisition will be financed with external borrowings.
HMG is a specialist provider in the manufacture, refurbishment and surface finishing of equipment components to its customers in Australia and the Asia Pacific.

Operating from a large state-of-the-art facility in Brisbane, Australia, HMG services the mining, oil and gas and other heavy industries which require the manufacturing or refurbishment of hydraulic cylinders, sophisticated engineering and protective surface finishing coating.

Sime Darby Industrial Australia director Dean Mehmet said HMG would complement and add capacity to Austchrome, its existing cylinder refurbishment and chroming business in Mackay.

“The acquisition of HMG builds geographic coverage by combining our Mackay capability with those of the HMG facility in Brisbane. We are very pleased to have retained HMG's strong management team and look forward to working with HMG to continue building its leadership in the mining cylinder refurbishment market as well as drive growth in the oil and gas sector.”

Sime Darby expects to complete the transaction by the end of 2018, subject to approval from the Foreign Investment Review Board of Australia.

Sime Darby's stock closed 4 sen or 1.9% higher at RM2.20 on 10.65 million shares done today.


Subsidy for house buyers not a long-term solution: Asli

KUALA LUMPUR: Subsidy for house buyers may help to address the country’s property glut in the short term, but it is not a solution for the long term, which can eventually bottleneck and cause unnecessary inflation of house prices, according to the Asian Strategy & Leadership Institute’s (Asli) Centre for Public Policy Studies (CPPS).

CPPS senior policy analyst Jarren Tam said historically, Malaysia has leaned towards a supply-driven housing policy, which means that the government focuses on factors such as cost reduction, provision of cheap foreign labour, subsidies to suppliers for technology adoption and credit market leniency for loans.

“But we often neglect the demand (buyer) side, and a common approach to housing policy is subsidy. They use subsidy to help buyers to tackle the downpayment and interest rates. But subsidy is administratively expensive to implement because you have to allocate a large amount of money to many people considering that Malaysia’s income level is so low now.

“It’s also discriminating if you only help those with a household income below RM3,000. How about those earning RM3,000 to RM4,000? There are not enough funds to subsidise all of them,” Tam told SunBiz at the Asli-CPPS Thought Leadership Series on Housing Policy roundtable discussion today.

Institute for Democracy and Economic Affairs senior fellow Carmelo Ferlito said credit expansion will alter the structure of property prices and injecting credit gives the conception that the house prices are lower than what they actually are.

“Further credit injection can inflate the bubble… declining transaction is necessary and obvious but by injecting credit you will avoid prices to follow the downward movement of transaction. This is dangerous,” said Ferlito.

He added that the household debt to gross domestic product in Malaysia is also particularly high and by injecting further credit it is going to put the rakyat at risk of a financial collapse driven by difficulties in the property market.

More than a subsidy problem, he said Malaysians need to instil the good old habit of saving and having a lifestyle that is proportioned to one’s income.

“If consumer preferences are shifting towards short term consumption rather than long term investments, we’ve to explain to people that they can’t have both. Subsidising, as credit injection, further enhances the mentality of wanting both short term consumption and long term investments. That simply can’t fit,” said Ferlito.

Nawawi Tie Leung Property Consultants executive director Saleha Yusoff concurred, adding that subsidy will not solve the problem in the market.

“If you ask any developers, the government has already put their share in the construction cost. If the house is RM120,000, likely a high percentage comes from the government, so the subsidy is already in the construction costs. What more subsidy do we need to give to the buyers to sustain these affordable housing development?” she questioned.

National Housing Department principal assistant director Ahmad Zafwan Sulaiman said the government is reviewing the subsidies for house buyers as Malaysia is saddled with its debt issues.

“We’re collaborating with Bank Negara Malaysia to come up with a new financing scheme to increase the accessibility of the M40 and B40 segments to loan and own a house,” said Zafwan, adding that Friday’s Budget announcement will reveal if this programme will be launched.

Currently, he said some developers are collaborating with the government via public-private partnership programs such as the Civil Servant Housing Project (PPAM) providing cross subsidies in a win-win situation for developers and buyers.


Subsidy for buyers not a feasible solution: Asli

KUALA LUMPUR: Subsidy for house buyers may help to address the country’s property glut in the short term, but it is not a solution for the long term, which can eventually bottleneck and cause unnecessary inflation of house prices, according to the Asian Strategy & Leadership Institute’s (Asli) Centre for Public Policy Studies (CPPS).

CPPS senior policy analyst Jarren Tam said historically, Malaysia has leaned towards a supply-driven housing policy, which means that the government focuses on factors such as cost reduction, provision of cheap foreign labour, subsidies to suppliers for technology adoption and credit market leniency for loans.

“But we often neglect the demand (buyer) side, and a common approach to housing policy is subsidy. They use subsidy to help buyers to tackle the downpayment and interest rates. But subsidy is administratively expensive to implement because you have to allocate a large amount of money to many people considering that Malaysia’s income level is so low now.

“It’s also discriminating if you only help those with a household income below RM3,000. How about those earning RM3,000 to RM4,000? There are not enough funds to subsidise all of them,” Tam told SunBiz at the Asli-CPPS Thought Leadership Series on Housing Policy roundtable discussion today.

Institute for Democracy and Economic Affairs senior fellow Carmelo Ferlito said credit expansion will alter the structure of property prices and injecting credit gives the conception that the house prices are lower than what they actually are.

“Further credit injection can inflate the bubble… declining transaction is necessary and obvious but by injecting credit you will avoid prices to follow the downward movement of transaction. This is dangerous,” said Ferlito.

He added that the household debt to gross domestic product in Malaysia is also particularly high and by injecting further credit it is going to put the rakyat at risk of a financial collapse driven by difficulties in the property market.

More than a subsidy problem, he said Malaysians need to instil the good old habit of saving and having a lifestyle that is proportioned to one’s income.

“If consumer preferences are shifting towards short term consumption rather than long term investments, we’ve to explain to people that they can’t have both. Subsidising, as credit injection, further enhances the mentality of wanting both short term consumption and long term investments. That simply can’t fit,” said Ferlito.

Nawawi Tie Leung Property Consultants executive director Saleha Yusoff concurred, adding that subsidy will not solve the problem in the market.

“If you ask any developers, the government has already put their share in the construction cost. If the house is RM120,000, likely a high percentage comes from the government, so the subsidy is already in the construction costs. What more subsidy do we need to give to the buyers to sustain these affordable housing development?” she questioned.

National Housing Department principal assistant director Ahmad Zafwan Sulaiman said the government is reviewing the subsidies for house buyers as Malaysia is saddled with its debt issues.

“We’re collaborating with Bank Negara Malaysia to come up with a new financing scheme to increase the accessibility of the M40 and B40 segments to loan and own a house,” said Zafwan, adding that Friday’s Budget announcement will reveal if this programme will be launched.

Currently, he said some developers are collaborating with the government via public-private partnership programs such as the Civil Servant Housing Project (PPAM) providing cross subsidies in a win-win situation for developers and buyers.


‘Expect structural changes in revenue, spending in Budget 2019’

KUALA LUMPUR: As guided by the mid-term review of 11th Malaysian Plan, the fiscal policy approach of the new government will see significant structural changes in terms of revenue and expenditure, with heavier weightage on development expenditure, particularly on social services or rakyat-oriented projects, according to MIDF Research.

The research house said broadening tax base is among key important highlights in Budget 2019 in order to cover the loss of revenue from GST.

It cautioned that the rebound in petroleum tax revenue may not be sustainable, particularly in the current challenging environment amid volatility in global energy prices and heighten trade tension.

On operating expenditure, it expects an increase in subsidies and restructuring in other components of the expenditure.

Nevertheless, MIDF Research said total government revenue is estimated to grow at reasonable pace of 4% to 6% per annum in the next three years, underpinned by steady domestic demand, stable job market and solid economic fundamentals.

With better government revenue, lower development expenditure and moderating economic growth, it forecasts the budget deficit to hit 2.8% this year and 2019.

“The Malaysian government is still steadfast with the fiscal consolidation plan and our budget deficit has been on a gradual decline since 2009, from the height of 6.7% to 3.1% in 2017.”

Meanwhile, AMMB Holdings Bhd group CEO Datuk Sulaiman Mohd Tahir expects Malaysia’s fiscal deficit to see a “one-off” spike in 2019, but it should ease in 2020 on the back of prudent management – greater levels of transparency and governance combined with increasing focus on economic growth.

Given the economy is set to be led by the private sector, he expects the government to create a more flexible and open business environment alongside the simplification and streamlining of systems, processes and regulations to set up businesses.

The government is also expected to revisit tax exemptions, credits and allowances in order to determine its effectiveness.

Sulaiman is calling for a special fund to be established to hold a portion of RM2.5 billion collected annually in foreign workers’ levies. This fund he said can be utilised to support automation and technology upgrading.

He hopes that Budget 2019 will incorporate initiatives that will accelerate the growth of the digital economy.

“With digital tax expected to be introduced in Budget 2019, we will be the second country in Southeast Asia after Singapore to introduce such a tax. By regulating the tech industry, it allows the authorities to look forward to a new stream of revenue while tech companies will increase their reported earnings.”

In a bid to tackle rising urban cost of living, Sulaiman suggested a fixed nominal monthly fee for unlimited rides on public transport facilities and “social housing” measures which will motivate and empower the urban poor to buy and own properties below RM100,000 which they are currently renting from third parties.

He added that the Home Ownership Campaign, which was introduced in 1998 and 1999 on the back of property oversupply in the aftermath of the Asian Financial crisis, can be relooked at as one of the potential measures.

This entails the provision of incentives including exemption of stamp duties, lower financing costs, lower legal fees for sale and purchase agreements and loan agreements as well as other charge documents.


Mexter to build RM558m Wellness Valley in Pahang

PETALING JAYA: Mexter Technology Bhd, which is already in the healthcare services industry, proposes to make the sector one of its core businesses following plans to develop the LYC Wellness Valley, in Genting Sempah, Pahang with an estimated gross development value of RM558.53 million.

In line with the diversification, the group also proposes a name change to LYC Healthcare Bhd.

Mexter told Bursa Malaysia that the diversification includes the provision of consultancy and project management services for the development, construction and sale of integrated healthcare and wellness development.

Besides becoming a healthcare service provider, including but not limited to managing and operating the Wellness Related Hub, it will also be involved in the provision of retirement home and aged care facilities and services.

Today, Mexter’s 70%-owned subsidiary LYC Living Sdn Bhd entered into a conditional consultancy and project management agreement with LYC Venture Sdn Bhd to develop 10-acre land into a medical, healthcare related and wellness community known as LYC Wellness Valley.

LYC Wellness Valley is expected to be carried out over a period of six years. The development is estimated to commence in 2019 and to be completed by 2025.

Currently Mexter and its subsidiaries are involved in provision of mother and child care related services; research and development and provision of e-manufacturing solutions and information technology outsourcing service, dealers of computers and its related products; and related engineering services.

It anticipates that the proposed diversification may contribute 25% or more of the net profits of the group in the future. An EGM will be held to seek shareholders’ approval.


Ringgit displays resilience amid volatile conditions

PETALING JAYA: The ringgit has performed with resilience in a highly volatile October despite an overwhelming number of emerging market currencies facing weakness due to continued global stock market volatility and external uncertainties.

FXTM global head of currency strategy and market research Jameel Ahmad said stronger fiscal finances compared to other emerging markets, a relatively strong economy at a time of multiple external uncertainties and US interest rate expectations being priced in to a large degree are a few of the different reasons behind why the ringgit is performing more resilient than its emerging market counterparts.

At the time of writing, he said only four emerging market currencies have strengthened against the US dollar in October, which are the Argentine peso, Turkish lira, Brazilian real and Philippine peso.

“By comparison, the ringgit performed very well and has only weakened by 1.03% at time of writing. This actually means that the ringgit is the seventh best performing emerging market currency out of the 24 ranked in the Bloomberg terminal.”

He pointed out that the reasons for weakness in the ringgit are not isolated to Malaysia, and are very common across emerging markets globally. Investors are concerned about a number of different global market uncertainties, including stock market pressures, political risks and geopolitical tensions that are all combining to reduce the overall investor appetite to take on risk in their portfolios.

“This means they are not attracted to emerging market assets, which is also why the ringgit has performed on a slight negative note in October.

“If you look at the larger picture and compare the performance of the ringgit against other emerging market currencies you will see that the ringgit actually performed with resilience this month,” explained Jameel.

He highlighted that the losses in the ringgit are a distance away from the losses seen in regional counterparts, and a very long distance away from the 3.2% losses in the South African rand and above 6% in both the Mexican peso and Colombian peso.

Today, the local note closed marginally lower to 4.18 against a strengthening dollar.


‘Scandalicious Malaysia’ injects mirth into financial crime conference

KUALA LUMPUR: The annual International Conference on Financial Crime and Terrorism Financing (IFCTF) broke with tradition today, featuring Allan Perera and Indi Nadarajah of Comedy Court fame performing a 30-minute skit for over 1,000 delegates registered for the event.

Entitled “Scandalicious Malaysia”, the 10th edition of the conference saw the duo performing live as the members of Parliament post-election.

Both of the characters were seen discussing Malaysia’s current most talked-about issues such as corruption, budget allocations and expletives used during parliament session.

In his opening remarks, the Compliance Officers’ Networking Group (CONG) organising chairman and chairman V. Maslamani said that the new feature was added to IFCTF 2018 to keep participants alert and attentive.

The conference, themed The Rising Voice of Compliance – Towards Greater Governance and Transparency, is jointly organised by the Asian Institute of Finance (AIF) and the CONG and fully supported by Bank Negara Malaysia and Securities Commission Malaysia.

The IFCTF is designed to explore topics on current events and new trends in financial crime and terrorism financing areas and practicable approaches within the realm of compliance.

Over 40 speakers and experts will be sharing the cross-border solutions in combating financial crime and terrorism financing.

The speakers include the US Department of Justice, Malaysia Anti-Corruption Commission, Federal Bureau of Investigation, Royal Malaysia Police as well as 1Malaysia Development Bhd whistleblower Andre Xavier Justo.


Coastal Contracts awarded US$4.35m in arbitration petition

PETALING JAYA: A tribunal has ordered respondents proven of committing a breach of a memorandum of understanding (MoU) to pay Coastal Contracts Bhd US$4.35 million (RM18 million).

Coastal said the US$4.35 million consists of the outstanding deposit US$3.85 million and interest in the amount of US$502,922.

“In the meantime, proceedings to implement and thereafter to enforce the arbitral award issued in favour of Coastal remain ongoing,” the group said.

Coastal commenced arbitration on Dec 15, 2017 against an individual and a company (sellers), a company (company) and two individuals (guarantors), to claim the deposit in full, plus interest and costs, for breach of a MoU signed between Coastal, the sellers and the company, and breach of two deeds of personal guarantee executed by the guarantors in favour of Coastal.

To recap, Coastal lodged a US$6 million refundable deposit with the sellers and/or the company on Aug 9, 2016.

The MoU was terminated on Oct 28, 2016 and following such termination, the sellers and/or the company were obliged to refund to Coastal the deposit in full, while the guarantors were to guarantee the refund.

However the respondents failed to fully refund Coastal the deposit, with an outstanding of US$3.85 million due and owing to Coastal, excluding interest and costs.