Tuesday, December 4th, 2018


Wall Street opens lower as Trump says trade talks may be ‘extended’

NEW YORK, Dec 4 — Wall Street fell at today’s start of trading as investors took a more sceptical view of the new US-China trade truce but President Donald Trump held out hope talks could be extended. Bond yields also pointed to possible…

Trump holds out possible extension on 90-day China trade truce

WASHINGTON, Dec 4 — US President Donald Trump today held out the possibility of an extension of the 90-day trade truce he and Chinese President Xi Jinping agreed on over the weekend that would freeze tariffs while a broader deal is negotiated….

CFM shareholders advised to reject revised offer

PETALING JAYA: A day after Tan Sri Datuk Tan Hua Choon (pix) upped his offer for Computer Forms (Malaysia) Bhd (CFM) to RM1.35 a share, the independent adviser, Maybank Investment Bhd, maintained that the new offer is not fair and not reasonable, and shareholders reject it.

The revised offer price represents a discount of RM0.69 or 33.82% to the fair value of the company of RM2.04 per CFM share.

The board of directors of the company concurred with the recommendation of the adviser. The revised offer is open for acceptance until 5pm, on Tuesday, Dec 18.

An earlier offer of RM1.25 a share, was RM0.79 or 38.73% lower than the estimated fair value per CFM Share. The revised offer represents a 6.29% premium to Tuesday’s closing price of RM1.27.

Tan’s offer for CFM is to increase his shareholding in the company to have better management of the CFM Group’s business which include strategy and operational planning and implementation.

The move is to allow Tan to undertake a detailed review and evaluation of the CFM Group’s operations which had recorded a loss after tax of RM1.16 million, RM0.51 million and RM2.41 million for the past three financial years, and drive the future business direction of the CFM Group.

Tan has no definitive business plans or strategies to turnaround the CsFM Group at this juncture and plans to maintain the listing status of the company.

Trade war to hit local exports harder in 2019

KUALA LUMPUR: The knock-on impact of the US-China trade war on Malaysia’s exports will be felt more strongly in 2019, resulting in a trimmed economic growth forecast for the country next year, according to global accounting institute ICAEW economic advisor Sian Fenner.

ICAEW anticipates Malaysia’s gross domestic product (GDP) growth to ease to 4.5% next year, from 4.8% in 2018 as a result of the ongoing trade conflict and tighter global monetary conditions.

“(Malaysia’s) exports have been quite resilient this year despite the trade conflict, but going into 2019, we are expecting more of the knock-on impact on the Malaysian exports,” Fenner told reporters after presenting the latest ICAEW report “Economic insight: South-East Asia” today.

“In line with our simulation of US-China tariffs, we expect economies with the closest ties to China to experience the hardest hit in a trade war, whether through direct or indirect export,” she added, noting Malaysia’s total exports to China accounting for 10.7% of the GDP last year.

Additionally, Fenner said despite any temporary boost to exports, the cooling Chinese import demand and trade protectionism are projected to weigh on the country’s exports, but domestic demand in Malaysia will provide some relief, albeit some of the factors underpinning the strong growth in household spending seen in 2018 are set to fade.

“Higher inflation (due to Goods and Services Tax abolishment) and tightening of policy rates, as well as financial stability considerations, arising from higher US interest rates are also likely to moderate demand,” she added.

On fiscal profile, Fenner expects the fiscal deficit to come in at 3.5% of GDP next year, slightly higher than the government’s target of 3.4%, reflecting a more cautious outlook for GDP growth over 2019-2020, and a likely delayed effect of a potential boost to revenues from new taxes announced in Budget 2019.

Nonetheless, ICAEW expects Malaysia to maintain its credit rating, supported by the government’s efforts to restore public finances and debt, in terms of the fiscal deficit over the medium term.

Other factors that support Malaysia’s positive credit ratings include lower interest rate payments as a share of revenue following Japan’s announcement to support Malaysia’s ¥200 billion yen (RM7.3 billion) “samurai bond” issuance, improved transparency and governance standards.

Meanwhile, Deputy Minister of International Trade and Industry Dr Ong Kian Ming, who is also a panel member at the programme, said the country’s export was not negatively impacted by the US-China trade war, but noted that there have been some reductions in imports.

Hibiscus to plough RM194.5m on two oilfields

PETALING JAYA: Hibiscus Petroleum Bhd, which has earmarked about RM194.5 million for its oilfields in the Anasuria Cluster and North Sabah, has deferred development of its Australian asset until it secures more capital.

The group deems the West Seahorse field in Australia, as its most expensive asset to develop, due to its unit operating cost which is more or less twice the cost of Anasuria or North Sabah.

The cost to develop the asset is expected to range between US$50 million (RM206 million) and US$100 million (RM413 million).

The board which is expected to discuss on the means of raising capital for the Australian asset in the next few months, would take on a cautious approach, as capital raising is not particularly attractive when oil prices are volatile.

“We haven’t decided (on Australia yet). Right now we have a certain amount of money which we are ploughing into places where we will get the biggest benefits,” said the group’s managing director Kenneth Gerard Pereira at a media briefing today.

As at Sept 30, Hibiscus had a cash pile of RM288.13 million. In addition to securing capital, Hibiscus is also looking at ways of bringing the cost of development down.

“So we will probably spend in Anasuria something in the range of US$30 million. That is not yet sanctioned by the board but that is what seems to be the plan,” Pereira said.

The RM70 million allocation for North Sabah Production Sharing Contract is for the St Joseph Infill Drilling project being undertaken with Petronas Carigali Sdn Bhd on a joint venture basis, which has been sanctioned by its board.

The total capital commitment for the project, which received the approval of Petroliam Nasional Bhd in August, is anticipated to be about RM142.5 million. This will be equally shared by both partners.

Pereira said any additional funding requirement for the Anasuria and North Sabah will depend on oil prices.

On acquiring more assets, he said the group is always on the lookout but nothing has materialised so far. He added that the group will continue to scout for assets within the areas it is currently operating in.

Hibiscus, which has managed to keep operating expenditure per barrel of oil (opex/boe) at below US$20, said it will have to tighten its belt and keep cost as low as possible if oil prices go down to below US$40.

The group is also looking to step up production to 10,000 to 12,000 barrels per day (bbls/day) in 2019 from the current 9,000 bbls/day.

Asia shares slump amid trade truce doubts

SHANGHAI: Asian shares fell today as relief over a pause in escalation of the trade war between the US and China gave way to doubt over the two countries’ ability to resolve differences.

Adding to market worries, an inversion at the short end of the US yield curve raised the spectre of a possible US recession. The sell-off appeared likely to extend into European trading, with spreadbetters expecting London’s FTSE 100 to fall 0.2% at the open, and both Frankfurt’s DAX and Paris’ CAC 40 to fall 0.4%.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.3% lower. Australia shares gave up 1% for the day and Seoul’s Kospi ended 0.8% lower.

Japan’s Nikkei stock index tumbled, closing 2.4% lower on profit taking and as foreign investors and hedge funds reduced their positions on risky assets.

But Chinese blue-chip shares in Shenzhen and Shanghai added 0.2% after struggling to break into positive territory for much of the day.

The temporary freeze on further hostilities in the trade war between the United States and China had sparked a global rally in equity markets on Monday, pushing MSCI’s all-country world index up 1.3%.

But even before the trading day ended, major US indexes pulled back from intraday highs on scepticism that Washington and Beijing can resolve their deep-seated differences in the three-month negotiating window that was agreed, after which tariffs could escalate again.

“It seems that more details and signs of progress will be needed if the initial trade truce warm fuzzy feeling is to be sustained,“ National Australia Bank analysts said in a note to clients.

Already, there was confusion over when the 90-day period would start. A White House official said it started on Dec1, while earlier, White House economic adviser Larry Kudlow told reporters it would start on Jan 1.

Moreover, none of the commitments that US officials said had been given by China, including reducing its 40% tariffs on autos, were agreed to in writing.

Ipmuda claiming RM2.97m from Ikhmas Jaya

PETALING JAYA: Ipmuda Bhd is claiming RM2.97 million from Ikhmas Jaya Group Bhd and its wholly owned subsidiary Ikhmas Jaya Sdn Bhd (IJSB) for failure to pay for the goods delivered.

The claim sum consists of principal amount of RM2.35 million and interest of RM627,153.

Ikhmas Jaya told Bursa Malaysia that the group and IJSB had been served a writ of summons and statement of claim dated Nov 30 by the solicitors of Ipmuda.

However, it believes the legal action will not have any material financial and operational impact for the financial year ending Dec 31, 2018.

Ikhmas Jaya and IJSB will appoint solicitors to defend the action and take all the necessary steps to ensure their rights are protected.

France to ‘cut spending’ despite fuel tax freeze

BRUSSELS, Dec 4 — Finance Minister Bruno Le Maire said today that France would stick to its EU commitments to slash public spending, despite a decision to suspend a fuel tax to quell fierce protests. “There is a course set by the French…

CIMB advances digital ambition in Vietnam

HO CHI MINH: CIMB Bank (Vietnam) Limited today unveiled its first Digital Lounge in Ho Chi Minh City and launched its Octo by CIMB mobile banking app for consumers.

Ho Chi Minh City hosts CIMB Bank Vietnam’s first branch presence following the establishment of its headquarters in Hanoi in 2016. The launch also marks the beginning of CIMB Vietnam’s digital banking proposition, inaugurated by Octo which offers fast, secure and convenient 24/7 mobile banking.

CIMB Group CEO Tengku Datuk Seri Zafrul Aziz said the launch of its inaugural lounge and Octo in Vietnam not only demonstrates its long term commitment to the Vietnamese market but also its ambition to continue contributing to the growth and development of Asean.

“As one of the region’s fastest growing markets, with macroeconomic stability, a strong entrepreneurial culture, and a high proportion of young mobile-centric population, Vietnam is well-poised to contribute significantly to Asean’s economic development. With CIMB’s strong Asean network, in-house financial expertise and accomplished partners, we are confident that we have entered Vietnam at the right time to start developing ecosystems that deliver, not just great banking products and services, but also other offerings that add real value to the CIMB customer experience.”

Positive Q3 results unlikely to excite market

PETALING JAYA: Kenanga Research said while the third-quarter reporting season showed some signs of improvement, it is insufficient to excite the market in anticipation of negative earnings revisions despite earnings downgrades since the last two quarters.

The research house has further cut FBM KLCI FY18/FY19 earnings growth estimates to -0.2%/3.5% from 4.2%/1.4%.

“As such, our end-2019 index target is lowered to 1,805 from 1,870 previously, representing FY18/FY19 PER (price-to-earnings ratio) of 15.7 times/14.7 times.”

Kenanga Research highlighted that apart from lower earnings, substantial cuts in some key index constituents’ target prices such as Genting Malaysia, Genting, IHH Healthcare, Telekom and Tenaga have also attributed to the downgrade in index target.

For the third quarter, building materials, media and utilities sectors were the major culprits while construction, consumer and plantation sectors displayed some signs of weakness as well.

PublicInvest Research said positive surprises were seen in the oil and gas sector, driven by stronger revenue recognition, though this was largely anticipated given the stability of crude oil prices at US$60/bbl which would encourage resumption in activity.

It noted that sluggish conditions in the property space are starting to weigh on the sector, as are decidedly weak commodities prices on the plantation sector.

With the telecommunications and gaming sector continuing to come under regulatory pressure, the research house said earnings outlook may also remain challenged amid clouded sentiment.

However, it said a mitigating factor could still be the banking sector, which by all accounts, has exhibited the most stable earnings amongst the key sectors of the economy.

PublicInvest’s earnings growth assumptions for 2018, 2019 and 2020 are 0.4% 1.5% and 6.4%, respectively.

“On this note, we think the optimistic levels the FBM KLCI could trade toward in 2019 range between 1,750 and 1,800 points.”

Overall, the research house still sees trading opportunities in the market with an “overweight” stance on the oil and gas and manufacturing sectors despite weakness seen in earning It also suggests selective exposure in the banking sector.

It also sees value in the small and mid-cap space despite the pronounced weakness seen this year, and think some of these stocks are poised for rebounds underpinned by their unchanged fundamentals.

Commenting on the short-term market outlook, Kenanga said despite recent corrections, the KLCI is still trading at a premium against its regional peers.

The research house noted that as the forward PER valuation premium of KLCI over selected regional peers was recorded at 19.8%, which is at the higher end of its historical range, it could limit potential foreign equity inflow.

“In fact, as of end-Nov 2018, we saw total net foreign equity outflows of RM2.1 billion and RM10.7 billion, respectively, since end-Sep 2018 and end-Dec 2017.”

The KLCI closed 4.73 points or 0.28% lower at 1,694.99 points today.