Tuesday, November 6th, 2018


Wall Street to open slightly lower as US elections kick off

NEW YORK, Nov 6 — US stocks were on track to open slightly lower today, as investors awaited the outcome of US midterm elections that could shape the future of Donald Trump’s presidency and test his tax and trade policies. The cautious mood set…

India aims to sign pact with Iran for oil payments in rupees, say sources

NEW DELHI, Nov 6 — India aims to sign an initial agreement with Iran this month to settle all their oil trade in rupees through India’s UCO Bank, two Indian government sources said. “We have to do some paper work. It should be signed as early…

Report: Foxconn may import workers for US plant

NEW YORK, Nov 6 — Taiwan-based electronics manufacturer Foxconn is struggling to find enough skilled workers for its planned facility in Wisconsin and may bring in personnel from China, the Wall Street Journal reported today. The report said…

Equities slip as Americans vote

LONDON, Nov 6 — Stock markets on both sides of the Atlantic slid today on trepidation over US midterm elections seen as a referendum on Donald Trump’s presidency, dealers said. The toll on share prices was, however, limited, with key European…

New taxes in Budget 2019 add little to govt coffers: MARC

PETALING JAYA: The new taxes proposed in Budget 2019, such as tax on imported services, real property gains tax (RPGT) and departure levy, are seen to contribute insignificantly to the government's revenue, according to Malaysian Rating Corp Bhd (MARC).

The new revenue-generating measures were meant to buffer government coffers against the drop in income following the abolishment of the goods and services tax.

The rating agency said in a report that it believes the new tax measures are not too robust and will not have an adverse impact on private consumption and business spending.

“Having said that, their contribution to overall revenue will not be too significant. This is reflected in the projected tax revenue growth of only 0.8% in 2019, which is well below the annual pace recorded between 2010 and 2018 (6% on a compound annual growth rate basis),” it said.

The overall revenue projection for 2019, however, is boosted by a one-off special dividend by Petroliam Nasional Bhd (Petronas) of RM30 billion, it added.

As contributions from the new taxes will take time to fully materialise, MARC said it expects the government to temporarily rely on oil-related income especially at a time when crude oil prices are relatively high.

Moving forward, it expects the government to continue seeking other avenues to broaden its revenue base.

Meanwhile, MARC said the notable increase in budget deficit projections is in line with its estimates of 3.5% to 3.8% for 2018 and 3.4% in 2019.
It opined that the deficit target of 3% of gross domestic product (GDP) is achievable by 2020 if average crude oil prices remain above US$60 per barrel and real GDP growth remains on its trajectory of 4.5%–5.5% in the next two years.

However, in the longer term, MARC said, the budget deficit trajectory will hinge on the continuing prudent management of operating expenditure (opex) and additional sustainable income streams that the government could introduce.

According to the Ministry of Finance's Medium-Term Fiscal Framework, government revenue will continue to surpass opex, leaving an average positive balance of roughly RM4.3 billion a year.

“Hence, the budget deficit is anticipated to trend down to 2.8% in 2021. This target looks realistic in our view,” MARC added.

Apart from that, MARC said it expects that Malaysia's medium-term financial liabilities will also hinge on the government's decision to fulfill its election pledge to abolish tolls.

Meanwhile, other measures in Budget 2019, such as those for the capital market, will further assist funding needs and are positive for the overall economy. These include double tax deduction incentives for additional expenditure incurred on the issuance of sukuk under the principles of Ijarah and Wakalah, as well as that incurred on the issuance of retail bonds and sukuk which have been extended for three years.

Overall, MARC opined that Budget 2019 broadly meets the competing needs of fiscal consolidation while attempting to address the aspirations of the people.

Research house warns of potential systemic risk from property crowdfunding

PETALING JAYA: Although the property crowdfunding measure, dubbed FundMyHome scheme, could provide some near-term boost to the market, Kenanga Research said the scale of how this will be implemented will determine the longer-term health of the sector and potentially create a systemic risk in the property and banking sectors.

This, in turn, will have an impact on the local economy.

Kenanga Research believes that many developers will be supportive of this initiative as it is an alternative source of end-financing for buyers.

“A more preferred approach is if this scheme is to fund government-backed affordable housing projects and only on selective ones as well,” it said in a research note.

RHB Research, however, said it was unsure of the effectiveness of this crowdfunding platform as some of the developers it spoke to did not have the relevant products (that is, units priced below RM500,000) to be sold under this system while some were reluctant to sacrifice profit margins. Consequently, many may not be willing to put up their marketable products for sale under this platform.

Under FundMyHome, first-time buyers need pay only 20% of the property price and the balance is contributed by participating institutions, which get a share of future profits should the house value appreciate.

Meanwhile, analysts expect property sales to slow down in the fourth quarter as buyers may take on a wait-and-see approach to take advantage of the stamp duty waiver, while the upcoming property crowdfunding could be the swing factor the sector needs.

However, Maybank IB Research noted that stamp duty exemption for first-time home buyers for properties priced between RM300,000 and RM1 million from Jan 1, 2019 to June 30, 2019 should stir some buying interest in properties in the first half of 2019.

This is because most developers are already giving more than 10% discount on unsold stocks and absorbing the stamp duties for their buyers, hence the waiver should help to improve developers' margins in first-half 2019.

Developers that could benefit from Budget 2019 are mainly those with high exposure to property products priced below RM500,000, such as Mah Sing, Matrix Concepts, Tambun Indah and – to a certain extent – UOA Development and Hua Yang.

SC to review market guidelines to facilitate property crowdfunding platforms

KUALA LUMPUR: The Securities Commission Malaysia (SC) will be reviewing the details of the proposed structure and its guidelines on recognised markets (RMO guidelines) to facilitate the establishment of property crowdfunding platforms as announced in Budget 2019.

“SC is supportive of innovative ideas that tap on the transformative power of technology to democratise investments, allowing more financing options for Malaysians to buy their first homes and enhance their socio-economic well-being. The framework will balance promoting innovation with ensuring proper safeguards to protect the integrity of the scheme and investors' interest,” SC said in a statement.

To ensure proper governance of this alternative home ownership financing scheme, platform operators are required to register with the SC and fulfill eligibility, transparency and financial requirements.

“The property crowdfunding framework is expected to come into effect in the first quarter of 2019. As part of our process, the SC will engage the relevant stakeholders through industry consultations prior to issuing the regulations.”

Dollar inches up before midterm elections

LONDON, Nov 6 — The dollar edged up today but its gains were limited by investor caution about the US midterm elections and any fallout for the world’s largest economy. The greenback has outperformed most major currencies this year, benefiting…

Russia’s Rosneft nearly triples Q3 net income

MOSCOW, Nov 6 — Russia’s largest oil producer Rosneft said today that its third-quarter net income nearly tripled year-on-year thanks to higher prices and production. The Russian giant chalked up the higher income to a positive exchange rate and…

Malaysia’s September trade surplus climbs to 10-year high

PETALING JAYA: Malaysia’s exports rebounded by 6.7% year on year (yoy) in September 2018 to RM83 billion after a dip of 0.3% in the previous month, boosting the trade surplus to a 10-year high of RM15.3 billion, the Statistics Department said.

The surplus represents an 85.9% jump compared with the same month last year.

Imports, however, registered a decrease of 2.7% yoy to RM67.8 billion. This was the second lowest import value in 2018.

Total trade, which was valued at RM150.8 billion, increased RM3.3 billion or 2.3% in September 2018.

The export growth was contributed by expansion in exports to Hong Kong, Taiwan, Singapore, Australia and South Korea. Lower imports were mainly from India, South Korea, Vietnam, the United Arab Emirates and the European Union.

The main products which contributed to the expansion in exports were electrical & electronic products (+6.5%); refined petroleum products (+20.5%); crude petroleum (+54.5%) and liquefied natural gas (+1.8%).

However, declines were recorded for palm oil and palm oil-based products (-11.5%); timber and timber-based products (-0.4%) and natural rubber (-1.9%).

The lower imports by “end-use” were mainly attributed to intermediate goods, capital goods, and consumption goods.

MIDF Research said export growth for Q3 averaged 5.3% yoy, moderated from 8.4%yoy in Q2. It was the lowest gain in seven quarters.

Looking at the final quarter of 2018, it expects exports to perform better than in the earlier three quarters.

“Amid higher base effects and signs of easing key global indicators, we foresee exports to expand by 7.3% this year (18.9% in 2017). This is supported by lower exports growth for the first nine months which registered at 6.5% compared to double-digit growth of 21.6% in the same period last year.

“The moderating pace is consistent with gradual rise in global commodity prices, expectation of slight slowdown in overall business performance on top of the heating Sino-US trade conflict.”