Monday, December 10th, 2018

 

Heaviest selling of Malaysian bonds by foreign funds in five months

PETALING JAYA: Foreign investors returned as net sellers of Malaysia’s debt securities in November with total foreign holdings declining by RM5.2 billion, after a short-lived increase of RM7.8 billion in the previous month, according to Kenanga Research.

It marked a fall of 2.7% month on month, the quickest pace since June 2018.

Consequently, the share of total foreign holdings of Malaysia’s debt inched lower to 13.5% from 14% in October.

The bulk of November’s decline was accounted by a net decline of Malaysian Government Securities (MGS) by RM5.4 billion (Oct: +RM4.7 billion), pulling down foreign holdings share of total MGS to 38.8% (Oct: 40.7%), as well as by a net decline of private debt securities (PDS) by RM300 million (Oct: +RM1.4 billion), slightly tilting the foreign holdings share of total PDS down to 2.1% (Oct: 2.2%).

Year to date, total net foreign bond holdings fell by RM19.6 billion.

Kenanga Research expects the outflow of portfolio funds to persist going into next year as there is a total of US$11.1 billion debt maturity in Q4’18 compared with US$6.4 billion in Q3’18, and as risk-averse sentiments remain in relation to trade war uncertainties, despite the announcement of 90-day new-tariff ceasefire by US President Donald Trump, as investors await further concrete resolutions to be put forward.

It said the sell-off occurred against a backdrop of financial market turmoil amid trade war jitters, tumbling global oil prices and Federal Reserve interest rate increases, albeit likely to happen at a more gradual pace and less frequent going forward.

“Based on our observation, the bond portfolio flow trend largely correlates with Fedspeak or the language of the US Federal Reserve. Apart from economic indicators, namely the less convincing job creation numbers in November, dovish statements of key Fed officials, including chairman Jerome Powell’s remark that the current benchmark interest rate is ‘just below’ neutral, suggests less aggressive rate hikes by the Fed for next year.”

This, it said, puts into question the three indicative rate hikes for 2019 and one in 2020.

“Nevertheless, a rate hike in December remained within our expectation.”

The US 10-year Treasury note average yield was seen dropping by 7 basis points (bps) to 3.10% in October (Oct: +15 bps), while the benchmark 10-year MGS average yield decreased by 3 bps to 4.11% (Oct: +4 bps). Consequently, the MGS-US Treasury average yield spread widened to 102 bps (Oct: 98 bps).

Kenanga Research expects the ringgit to come under pressure for the rest of the year but Opec’s decision to cut oil production by 1.2 million barrels per day for the first six months of 2019 may provide some support to the currency.

“Hence, we maintain our USD/MYR end-of-year forecast at RM4.15.”

The ringgit weakened 0.16% to 4.1725 against the greenback as at 5pmtoday.

On monetary policy, the research house expects Bank Negara Malaysia to hold the Overnight Policy Rate (OPR) at 3.25%.

“As domestic economic growth is ex-pected to taper off and inflation is expected to remain subdued, we believe BNM will hold the OPR unchanged at 3.25% till year end and potentially next year, in ensuring price stability and to remain supportive of growth,” it said.


US stocks open mixed after last week’s rout

NEW YORK, Dec 10 — Wall Street stocks were mixed early today as US markets sought to recover from last week’s rout amid worries over trade wars and slowing US growth. About 15 minutes into trading, the Dow Jones Industrial Average was down 0.2…


Asian stock markets tumble as investors buffeted by negative issues

HONG KONG: Asian markets sank today as investors juggle a number of negative issues that have fuelled worries about the global outlook.

The China-US trade row, the Huawei crisis, signs of weakness in the Chinese and US economies, and Brexit are among the key matters depressing equities, though there was some upbeat news in Opec’s decision to slash crude production.

On Sunday, China summoned the US ambassador to protest at the arrest of top Huawei executive Meng Wanzhou in Canada last week over allegations of fraud linked to the breaking of Iran sanctions.

An angry China has demanded Washington drop its extradition request, as investors fret that the arrest could throw a spanner in the works of a fragile trade war truce between Beijing and Washington.

“Huawei … will likely remain in the headlines for some time as China continues to pressure both Canada and US to withdraw charges,“ said Stephen Innes, head of Asia-Pacific trade at OANDA.

“It’s more than apparent that US-China tensions are well beyond trade. And when combined with the fact ‘tariffs-limbo’ is likely to extend well into 2019, uncertainty is expected to remain high, and could still explode into a full-blown trade war.”

Still, US Trade Representative Robert Lighthizer said he did not expect the arrest to disrupt the talks.

Lighthizer, the man leading trade negotiations with China, also said he did not expect to see an extension past the March 1 deadline for a deal between the world’s top two economies.

Donald Trump and Xi Jinping agreed at the the G20 this month to a 90-day ceasefire in the multi-billion-dollar tariffs row that will allow officials to find a resolution. A threatened hike in levies on Chinese imports will be imposed if no agreement is reached.

Equity markets, which have been buffeted by the trade row this year – and were hammered by the arrest last week – were down today, tracking heavy losses in New York.

Hong Kong shed 1.4%, while Shanghai fell 0.8%. Tokyo lost 2.1%, with Japanese car giant Nissan diving 2.9% after ousted chairman Carlos Ghosn was charged and faced new allegations for alleged financial misconduct.

Sydney shed 2.3%, while Singapore and Seoul each gave up 1.1%. There were also losses for Manila, Taipei and Wellington.

Adding to investor unease was Chinese data showing growth in exports and imports both slowed in November while factory in-flation eased – indicating demand remains weak.

Also, the trade surplus with the US – a key point of irritation for Trump – ballooned to a record last month despite the imposition of tariffs. – AFP


China court bans iPhone sales in patent dispute, says Qualcomm

WASHINGTON, Dec 10 — A Chinese court ordered a ban in the country on iPhone sales in a patent dispute between US chipmaker Qualcomm and Apple, according to a Qualcomm statement Monday. The statement said the Fuzhou Intermediate People’s Court…


Foreign selling of Malaysian bonds picks up in November

PETALING JAYA: Foreign investors returned as net sellers of Malaysia’s debt securities in November with total foreign holdings declining by RM5.2 billion, after a short-lived increase of RM7.8 billion in the previous month, according to Kenanga Research.

It marked a fall of 2.7% month on month, the quickest pace since June 2018.

Consequently, the share of total foreign holdings of Malaysia’s debt inched lower to 13.5% from 14% in October.

The bulk of November’s decline was accounted by a net decline of Malaysian Government Securities (MGS) by RM5.4 billion (Oct: +RM4.7 billion), pulling down foreign holdings share of total MGS to 38.8% (Oct: 40.7%), as well as by a net decline of private debt securities (PDS) by RM300 million (Oct: +RM1.4 billion), slightly tilting the foreign holdings share of total PDS down to 2.1% (Oct: 2.2%).

Year to date, total net foreign bond holdings fell by RM19.6 billion.

Kenanga Research expects the outflow of portfolio funds to persist going into next year as there is a total of US$11.1 billion debt maturity in Q4’18 compared with US$6.4 billion in Q3’18, and as risk-averse sentiments remain in relation to trade war uncertainties, despite the announcement of 90-day new-tariff ceasefire by US President Donald Trump, as investors await further concrete resolutions to be put forward.

It said the sell-off occurred against a backdrop of financial market turmoil amid trade war jitters, tumbling global oil prices and Federal Reserve interest rate increases, albeit likely to happen at a more gradual pace and less frequent going forward.

“Based on our observation, the bond portfolio flow trend largely correlates with Fedspeak or the language of the US Federal Reserve. Apart from economic indicators, namely the less convincing job creation numbers in November, dovish statements of key Fed officials, including chairman Jerome Powell’s remark that the current benchmark interest rate is ‘just below’ neutral, suggests less aggressive rate hikes by the Fed for next year.”

This, it said, puts into question the three indicative rate hikes for 2019 and one in 2020.

“Nevertheless, a rate hike in December remained within our expectation.”

The US 10-year Treasury note average yield was seen dropping by 7 basis points (bps) to 3.10% in October (Oct: +15 bps), while the benchmark 10-year MGS average yield decreased by 3 bps to 4.11% (Oct: +4 bps). Consequently, the MGS-US Treasury average yield spread widened to 102 bps (Oct: 98 bps).

Kenanga Research expects the ringgit to come under pressure for the rest of the year but Opec’s decision to cut oil production by 1.2 million barrels per day for the first six months of 2019 may provide some support to the currency.

“Hence, we maintain our USD/MYR end-of-year forecast at RM4.15.”

The ringgit weakened 0.16% to 4.1725 against the greenback as at 5pmtoday.

On monetary policy, the research house expects Bank Negara Malaysia to hold the Overnight Policy Rate (OPR) at 3.25%.

“As domestic economic growth is ex-pected to taper off and inflation is expected to remain subdued, we believe BNM will hold the OPR unchanged at 3.25% till year end and potentially next year, in ensuring price stability and to remain supportive of growth,” it said.


Israel becomes member of global watchdog on money laundering

JERUSALEM, Dec 10 — Israel today became a full member of the global financial watchdog on money laundering and terror financing, officials said, after having previously been blacklisted by the organisation. Justice Minister Ayelet Shaked said that…


asianmarkets

HONG KONG: Asian markets sank today as investors juggle a number of negative issues that have fuelled worries about the global outlook.

The China-US trade row, the Huawei crisis, signs of weakness in the Chinese and US economies, and Brexit are among the key matters depressing equities, though there was some upbeat news in Opec’s decision to slash crude production.

On Sunday, China summoned the US ambassador to protest at the arrest of top Huawei executive Meng Wanzhou in Canada last week over allegations of fraud linked to the breaking of Iran sanctions.

An angry China has demanded Washington drop its extradition request, as investors fret that the arrest could throw a spanner in the works of a fragile trade war truce between Beijing and Washington.

“Huawei … will likely remain in the headlines for some time as China continues to pressure both Canada and US to withdraw charges,“ said Stephen Innes, head of Asia-Pacific trade at OANDA.

“It’s more than apparent that US-China tensions are well beyond trade. And when combined with the fact ‘tariffs-limbo’ is likely to extend well into 2019, uncertainty is expected to remain high, and could still explode into a full-blown trade war.”

Still, US Trade Representative Robert Lighthizer said he did not expect the arrest to disrupt the talks.

Lighthizer, the man leading trade negotiations with China, also said he did not expect to see an extension past the March 1 deadline for a deal between the world’s top two economies.

Donald Trump and Xi Jinping agreed at the the G20 this month to a 90-day ceasefire in the multi-billion-dollar tariffs row that will allow officials to find a resolution. A threatened hike in levies on Chinese imports will be imposed if no agreement is reached.

Equity markets, which have been buffeted by the trade row this year – and were hammered by the arrest last week – were down today, tracking heavy losses in New York.

Hong Kong shed 1.4%, while Shanghai fell 0.8%. Tokyo lost 2.1%, with Japanese car giant Nissan diving 2.9% after ousted chairman Carlos Ghosn was charged and faced new allegations for alleged financial misconduct.

Sydney shed 2.3%, while Singapore and Seoul each gave up 1.1%. There were also losses for Manila, Taipei and Wellington.

Adding to investor unease was Chinese data showing growth in exports and imports both slowed in November while factory in-flation eased – indicating demand remains weak.

Also, the trade surplus with the US – a key point of irritation for Trump – ballooned to a record last month despite the imposition of tariffs. – AFP


Top Glove denies mistreatment of migrant workers

PETALING JAYA: Top Glove Corp Bhd has denied mistreatment of its workers, saying that there is absolutely no forced overtime (OT) on its migrant workers.

“Measure to prevent OT in excess of the allowed 104 hours a month have been implemented on a staggered basis across all Top Glove factories between March 2018 and November 2018,” it said in a filing with Bursa Malaysia.

The company said it has progressively invested in more automation for factory operations to reduce the need for manual labour and introduced new changing shift patterns to allow sufficient rest time for workers.

It also regularly conducts training to improve worker efficiency and quality of work.

“By December 2018, workers will not be working in excess of the 104-hour limit as permitted by the labour law,” it added.

Top Glove was responding to a British media report claiming that migrant workers at the firm are subjected to forced labour, forced overtime and debt bondage.

Top Glove said it provides accommodation for its workers, equipped with necessities and facilities while regular recreational activities are organised for workers’ well-being.

Personal protective equipment such as helmets, specialised gloves, ear plugs, masks, goggles according to requirements of the job is provided to workers in the factory. Transportation to and from the workplace is also provided to workers.

“Going forward, Top Glove will continuously improve the working environment of the workers as the well-being of the company’s employees at large continues to be Top Glove’s foremost priority,” it said.

The company also denied deducting worker salaries to pay for recruitment fee on behalf of the agent and that it bears the processing cost in Malaysia comprising levy, visa stamping, medical examination and others.

It said that it will engage with the embassies of the labour source countries to request urgent action on the issue of high recruitment fees.


Encorp’s JV with Sinmah Capital for Bukit Katil project falls through

PETALING JAYA: Encorp Bhd’s plans to develop its Bukit Katil land in Malacca has hit another setback as plans to jointly develop the land with Sinmah Capital Bhd fell through.

In a filing with Bursa Malaysia, Encorp said the conditions precedent (CP) of the joint venture and shareholders agreement (JVSA) dated June 8, 2017 for the proposed joint venture were not fulfilled as of Dec 6, 2018.

The JVSA was entered into between Encorp Bukit Katil Sdn Bhd (EBKSB), Sinmah Development Sdn Bhd (SDSB) and Sinmah Development JV Sdn Bhd (SDJSB) in June last year.

“The CP period for the JVSA has lapsed and has not been extended by EBKSB and SDSB. As such, the JVSA has been rescinded and the parties shall revert to its original position prior to the JVSA,” said Encorp.

The expiry of the JVSA is not expected to have any financial effect on the earnings per share and net assets per share of Encorp.

Under the JVSA, the parties were to jointly develop 77.9 acres of the land into a mixed development comprising a medical college, hospital and residential properties with a gross development value of RM865 million.

SDSB is a wholly-owned unit of Sinmah Capital while SDJSB is a JV company set up to carry out the development project. EBKSB and SDSB held 70% and 30% stake respectively in SDJSB.

To recap, EBKSB had in October 2016 signed three memorandums of understanding (MoUs) with Kean Leng Construction Sdn Bhd, Tiong Nam Logistics Holdings Bhd’s unit Tiong Nam Properties Sdn Bhd and SDSB, to develop 640.9 acres of leasehold land in Bukit Katil.

However, in July last year, the MoU with Kean Leng Construction lapsed and the parties had mutually and amicably agreed not to further extend the validity period of the MoU. A month later, the MoU with Tiong Nam Properties lapsed, with no conclusion reached on the negotiations between the parties.

The MoU with Kean Leng Construction was to develop 49 acres while the MoU with Tiong Nam Properties was to develop 100 acres.

EBKSB is the master developer of the land, which belongs to Federal Land Development Authority (Felda). Felda holds about 67% stake in Encorp via Felda Investment Corp.

Encorp’s share price fell 2.22% or 1 sen to close at 44 sen today with 31,000 shares traded.


Trading blows: Canada next in China’s crosshairs?

BEIJING, Dec 10 — Canada’s arrest of a top executive of Chinese telecom giant Huawei has put the country in the crosshairs of Beijing, which has warned of “grave consequences” over the case. China’s foreign ministry issued the warning…