Tuesday, December 18th, 2018

 

World Bank cuts Malaysia’s 2018 GDP growth forecast again

KUALA LUMPUR: The World Bank has again revised downward its projection for Malaysia’s 2018 gross domestic product (GDP) growth to 4.7% from 4.9% after taking into account factors such the rigorous rationalisation of expenditure by the government and slowdown in private and public investment.

It last cut the country’s GDP growth forecast in October, to 4.9% from 5.4%.

Malaysia’s third quarter GDP growth moderated to 4.4%, bringing about a nine-month expansion of 4.7%.

Despite a moderation in growth, the World Bank believes that the Malaysian economy remains resilient and continues to be anchored by private consumption, although it has been cooling down after the reintroduction of the sales and service tax.

The key drivers for private consumption are stable labour market conditions, cost of living aid and tax refunds payment.

Private investment in the manufacturing and commodity sectors are also expected to be sustained.

Speaking at the launch of the World Bank’s Malaysia Economic Monitor on Realising Human Potential Report today, World Bank Group economist Shakira Teh Sharifuddin said Malaysia’s economic growth is projected to remain flat at 4.7% in 2019, with external factors such as current trade tensions and increased volatility in the financial and commodity markets expected to weigh on the overall economy.

In addition to the escalating trade tensions, monetary normalisation in advanced economies, high dependency on oil revenue and high level of public debt are seen as potential risk for the government.

The percentage of the federal government’s revenue to GDP has seen a steep decline between 2012 and 2018, falling from 21.4% to 16.2%. In 2019, the share of revenue to GDP is expected to be reduced further to 15.1%.

This, Shakira said, leaves the government with limited space to respond to economic shocks.

In the near term, the government is expected to rigorously embark on fiscal consolidation measures with expenditure expected to decline to 18.1% of GDP from the 2018 estimate of 20.3%.

Shakira said that while the introduction of new taxes in the budget is welcomed, the government should relook the incentive mechanisms.

On another note, the World Bank stressed on the need for Malaysia to accelerate the development of its human capital if it wishes to join the ranks of a high-income nation.

While Malaysia, which ranked 55th out of 157 countries in the Human Capital Index, fared well in some areas, there is room for improvement in certain areas, noted the report.

It also states the prevalence of stunting among Malaysian children which affect more than one in five Malaysian children, a key indicator of malnutrition. In the absence of renewed efforts to develop human capital, a child born today in Malaysia will only reach a productivity level of 62%.

In terms of education, the 12.2 years spent by Malaysians in school only equates to the 9.1 years learning outcome of school goers in the highest performing system.


Slim chance of window dressing on Bursa next week

PETALING JAYA: The FBM KLCI is expected to end the year at circa 1,630 points with a slim chance of any window dressing, said Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew.

He does not expect local funds to do any window dressing, which would require a lot of money and may not be successful.

“If there is any window dressing at all, it would only happen in the last few days of the year, maybe one or two days before the year ends. It will be very last minute,” he told SunBiz.

Earlier in May, Pong said that the KLCI could end the year at 1,630 points if stock market earnings performance hold to a growth of about 6%.

“Today we are already at that level. If the earnings growth is worse, it will fall below 1,630 points. Looking at the way things are going, I believe it is likely to go below 1,630 points,” he added.

He said earnings growth are likely to fall below 6% based on third quarter data and growth since then, combined with the likelihood of a sharp drop in the next few days. Based on signals from the market, he expects earnings growth to come in around 4%.

Today, the FBM KLCI opened 13.15 points weaker at 1,628.47 and ended 6.31 points lower at 1,635.31 from yesterday’s close of 1,641.62.

For 2019, Pong said economic performance could be worse than 2018, depending on the government’s spending.

“If the government doesn’t spend because of poor oil prices or poor revenue from taxes or other reasons, things could spiral downwards and negatively affect corporate earnings. The government frequently takes the lead in spending and initiatives for infrastructure. If the government doesn’t spend for development expenditures, the momentum would not be there,” he said.

He said economic growth has to be at least 4% in order to be “healthy”, as a 3-4% growth would mean that there are parts of the economy that are stagnant or contracting.

Meanwhile, Areca Capital Sdn Bhd CEO Danny Wong declined to comment on window dressing activities at end-2018, saying that the short-term outlook is very sentiment-driven.

“Earnings for 2019 may not be as robust as 2018, especially in the second half of 2019,” he said.

However, he noted that Asia is still an engine of growth and maintained his positive outlook on economic growth and corporate earnings for next year.

“Earlier, I expected the third and fourth quarters this year to be better than the first and second quarters but it turned out to be worse. I still maintain my outlook but perhaps it has been delayed till 2019,” he said.

On foreign funds, which saw a large outflow so far this year, Wong expects foreign funds to return next year, for both equities and bonds, driven by 4-5% gross domestic product growth, the attractiveness of the ringgit and low valuations.

“Investors will watch out for countries with twin deficit but fortunately, Malaysia has a current account surplus, which will continue as the government has put on hold mega projects,” he said.

He said the rating agencies are still on hold on Malaysia due to the strong economy, with potential for a rating upgrade next year.


PNB and Maybank in digital tie-up, expect ASNB investments to rise 20% next year

KUALA LUMPUR: Permodalan Nasional Bhd (PNB) and Malayan Banking Bhd (Maybank) expect to see 20% increase in ASNB investments next year with the launch of ASNB e-channels via Maybank’s digital platform today.

The new services enable ASNB customers to make transactions and view their account balances via Maybank’s ATMs and Maybank2u (M2U) in real time, beyond banking hours.

Speaking at the launch ceremony today, Maybank’s head of community financial services Datuk Hamirullah Boorhan said currently, over three million ASNB transactions are conducted over the bank’s counters a year, of which around one million comprise deposits transactions.

“We expect some 50% of these deposit transactions will move to our digital platforms,” he added, noting that the new services will be extended to the Maybank app by end of this year.

In addition to the new services, ASNB and Maybank also announced that by end of this year, small and medium enterprises (SMEs) will be able to transfer funds on behalf of their employees to ASNB via M2U Biz.

“Another new feature that will provide greater convenience to retail customers is the ability to apply for an ASB loan via M2U, which will be made available by the first quarter of 2019,” Hamirullah added.

To date, ASNB has 14 unit trust funds and manages 235.96 billion units in circulation owned by more than 13.74 million account holders.

Meanwhile, Maybank’s group president and CEO Datuk Abdul Farid Alias said the bank is slightly more optimistic on its 2019 outlook as it sees Malaysia’s economy growing at 4.9% next year compared to its 4.8% projection for 2018.

“2019 is going to be another interesting year. It will be slightly better than 2018 as we are quite optimistic about its outlook,” Abdul Farid said.

Abdul Farid said that although there is concern on how the trade numbers will perform going forward due to US-China discussions, he sees that Malaysia is in a comfortable position, noting it could probably see a slightly faster growth compared to 2018.

“FOMC (Federal Open Market Committee) is meeting soon. We are seeing interest rates and dollar rates moving up bit by bit. But people will be able to allocate risks into their investments accordingly,” he added.

Additionally, he said the growth for this year was within the bank’s expectations.

He said the bank’s growth is relative to the growth of the economies where it has a presence including Malaysia, Singapore and Indonesia.


World Bank cuts Malaysia’s 2018 GDP forecast again

KUALA LUMPUR: The World Bank has again revised downward its projection for Malaysia’s 2018 gross domestic product (GDP) to 4.7% from 4.9% after taking into account factors such the rigorous rationalisation of expenditure by the government and slowdown in private and public investment.

It last cut the country’s GDP growth forecast in October, to 4.9% from 5.4%.

Malaysia’s third quarter GDP growth moderated to 4.4%, bringing about a nine-month expansion of 4.7%.

Despite a moderation in growth, the World Bank believes that the Malaysian economy remains resilient and continues to be anchored by private consumption, although it has been cooling down after the reintroduction of the sales and service tax.

The key drivers for private consumption are stable labour market conditions, cost of living aid and tax refunds payment.

Private investment in the manufacturing and commodity sectors are also expected to be sustained.

Speaking at the launch of the World Bank’s Malaysia Economic Monitor on Realising Human Potential Report today, World Bank Group economist Shakira Teh Sharifuddin said Malaysia’s economic growth is projected to remain flat at 4.7% in 2019, with external factors such as current trade tensions and increased volatility in the financial and commodity markets expected to weigh on the overall economy.

In addition to the escalating trade tensions, monetary normalisation in advanced economies, high dependency on oil revenue and high level of public debt are seen as potential risk for the government.

The percentage of the federal government’s revenue to GDP has seen a steep decline between 2012 and 2018, falling from 21.4% to 16.2%. In 2019, the share of revenue to GDP is expected to be reduced further to 15.1%.

This, Shakira said, leaves the government with limited space to respond to economic shocks.

In the near term, the government is expected to rigorously embark on fiscal consolidation measures with expenditure expected to decline to 18.1% of GDP from the 2018 estimate of 20.3%.

Shakira said that while the introduction of new taxes in the budget is welcomed, the government should relook the incentive mechanisms.

On another note, the World Bank stressed on the need for Malaysia to accelerate the development of its human capital if it wishes to join the ranks of a high-income nation.

While Malaysia, which ranked 55th out of 157 countries in the Human Capital Index, fared well in some areas, there is room for improvement in certain areas, noted the report.

It also states the prevalence of stunting among Malaysian children which affect more than one in five Malaysian children, a key indicator of malnutrition. In the absence of renewed efforts to develop human capital, a child born today in Malaysia will only reach a productivity level of 62%.

In terms of education, the 12.2 years spent by Malaysians in school only equates to the 9.1 years learning outcome of school goers in the highest performing system.


CIMB to gain RM200m from stockbroking business transfer

PETALING JAYA: CIMB Group Holdings Bhd is expected to record a gain of disposal of approximately RM200 million from the process of transferring the group’s stockbroking business to its joint venture company with China Galaxy Securities Co Ltd.

This comes after taking into account the premium on the disposal of approximately RM433 million and goodwill attributable to the business.

CIMB said the consideration in connection with the proposed business transfer will be satisfied in cash and it was determined based on the future prospects and net asset value of the in-scope business as at Dec 31, 2015, which amounted to RM565.6 million.

The consideration is subject to closing audit adjustments, if any.

Jupiter Securities, the subsidiary of China Galaxy Securities Co Ltd (CGS)-CIMB Holdings Sdn Bhd, which is the Malaysian joint venture entity, will operate the stockbroking business.

CIMB said in a stock exchange filing that its wholly owned subsidiary CIMB Group Sdn Bhd (CIMBG), China Galaxy’s wholly owned unit China Galaxy International Financial Holdings Ltd (CGI), and CGS-CIMB Holdings Sdn Bhd has inked a share subscription agreement for the subscription of new shares in CGS-CIMB Holdings Sdn Bhd.

The proposed business transfer entails the sale of CIMB Investment Bank Bhd’s cash equities business and 100% equity interest in CIMB Futures Sdn Bhd as well as CIMB Bank Bhd’s equity financing services business and share margin financing granted in connection with the cash equities to Jupiter Securities.

After the completion of the exercise, CIMBG and CGI will hold 50% stake each in the Malaysian JV entity.

The exercises are expected to be completed in the first half of 2019.


SC dismisses Lotte Chemical Titan’s review application

PETALING JAYA: The Securities Commission Malaysia (SC) has maintained its decision to reprimand and impose penalties amounting to RM2.19 million on Lotte Chemical Titan Holding Bhd, its executive directors and advisers.

In a statement today, the SC said it has dismissed the review applications by Lotte Chemical Titan and other relevant parties for their failure to inform the SC of material developments prior to the company’s listing in 2017.

The parties reprimanded by the SC are Lotte Chemical Titan as the issuer, executive directors Lee Dong Woo and Lee Kwan Ho, reporting accountant Ernst & Young (EY) and the principal adviser to Lotte Chemical Titan’s listing exercise Maybank Investment Bank Bhd (Maybank IB).

The SC has also maintained its directive for EY and Maybank IB to conduct a comprehensive review and assessment of their policies and processes related to their roles as reporting accountant and principal adviser respectively.

However, the application to the SC to review the imposition of reprimand by three independent non-executive directors namely Tan Sri Abdul Rahman Mamat, Tan Sri (Dr) Rafiah Salim and Ang Ah Lek were allowed and the reprimand was set aside.

Meanwhile, Lotte Chemical Titan’s non-independent non-executive director Cho Seongtaeg’s further reply in relation to his application for review is still pending.

To recap, the SC reprimanded the fined the company, its two executive directors and EY on July 9, 2018 for failure to inform the SC of material developments prior to the company’s listing.

The SC had also reprimanded and fined Maybank IB for its failure to carry out appropriate due diligence on the company.

The SC imposed a fine of RM560,000 on Lotte Chemical Titan and a fine of RM297,500 on EY while the two executive directors were fined RM441,000 each and Maybank IB was fined RM450,000.


November inflation seen easing to 0.5%

KUALA LUMPUR: Malaysia’s consumer price index (CPI) is expected to rise 0.5% in November from a year earlier, a Reuters poll showed, marginally slower than the previous month amid lower transport prices.

Inflation has been mild since the government removed an unpopular consumption tax in June and reinstated a narrower sales and services tax (SST) three months later.

The annual inflation rate was 0.6% in October. It has been rising after hitting a three-and-a-half year low of 0.2% in August.

Economists expect any pickup in inflation due to the reintroduction of SST to be muted, softened further by the government’s decision to fix pump prices for premium RON95 petrol for the rest of the year.

Last month, Malaysia’s central bank said inflation had been largely benign in the third quarter, but was expected to edge upwards the rest of the year and into 2019.


Felda’s transformation – 31 initiatives in 3 phases

KUALA LUMPUR: The Federal Land Development Authority (Felda), which is undergoing a transformation plan, has identified 31 strategic initiatives to be implemented over three phases.

Each phase will take eight months.

“The first phase is to create momentum and early wins, the second on expanding and growing results, while the third is to deliver and build capabilities.

“Every effort is being made to ensure that these phases can run concurrently to expedite the turnaround,” Felda said in a statement today.

The government agency said among the initiatives being implemented include enhancing the loan management services of settlers to tackle issues raised by the settlers so that a better and more transparent loan management system can be established.

Apart from that, an initiative to address settlers’ land inheritance issue is also being implemented.

“30% of 112,635 settler families are facing inheritance issue while another 58% will face similar issues soon enough considering the rising age of settlers.

“Long-term solutions must be achieved to ensure smooth ownership transfer and the welfare of the settler community as a whole,” it said.

Felda said other initiatives involved the reorganisation of Felda and identifying a long-term sustainability model for the group.

“Some of these initiatives will be finalised after discussions with the government,” it said.

Felda said all 31 strategic initiatives were in line the Strategic Intents approved by its board to meet the aspirations of becoming the nation’s leading plantation manager, ensuring financial sustainability, having talented leadership and attaining community wellbeing sustainably.

“The board has also approved Felda’s budget for 2019, which reflects a reduction of 23% compared with 2018.

“With all the strategic intents accomplished, Felda will stand true to its vision to become the nation’s exemplary developer of a progressive settlement community,” it added.


No legal action against The Guardian, says Top Glove

KUALA LUMPUR: Top Glove Corporation Bhd will not take any legal action against UK-based newspaper The Guardian, which alleged the glove maker had used forced labour.

Executive chairman Tan Sri Lim Wee Chai said: “We are not in the business of suing people. At the moment, we are not taking (legal) action because we don’t want to spend unnecessary resources, time and energy on an unproductive event.

“We are looking forward to do more business rather than fighting with people (The Guardian).”

He was speaking to reporters during a conference call today.

The Guardian had made allegations that Top Glove oppressed thousands of workers, including forcing them to exceed the maximum overtime limit of 104 hours as stipulated in the Employment Act 1955, as well as debt bondage and the confiscation of the workers’ passports.

Lim said Top Glove among others, complied fully with the Malaysian minimum wage policy, while overtime pay is calculated based on labour law and will adhere to the maximum 104 hours of overtime a month.

Recently, Top Glove was named the winner of Malaysia’s Healthiest Workplace Award for the large organisation, by leading insurer AIA Bhd, at the Malaysia’s Healthiest Workplace Summit 2018.


MIDF: FBM KLCI to rebound to 1,830 by end-2019

KUALA LUMPUR: MIDF Research expects the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) to rebound to 1,830 by end-2019, supported by a recovery in corporate earnings.

Head of strategy and quantitative analytics Syed Muhammed Kifni Syed Kamaruddin said corporate earnings for 2019 are expected to grow by 5.8% as compared with 1.96% anticipated for this year.

“We also foresee that there are opportunities for investors to enter the market now, as the current composite index (CI) level is about 150 basis points lower than what we projected by end of 2019,” he told a market outlook media briefing today.

Syed Muhammed said the market price-earnings ratio valuation is also expected to improve to 16.2% from the current level of 15.8%.

With that, along with no further escalation in trade tensions between the United States and China, he said the 1,830 level target should be achievable.

However, he opined that Bursa Malaysia would be trading range-bound next year with profit-taking and performance-chasing activities taking place.

As for end-2018, he said the CI support level would be at 1,600, but it would trade higher should window dressing activities kick in.

On the ringgit, he foresees the local unit to mildly strengthen to RM4 against the US dollar by end-2019 from the current level of about RM4.18.

“This would be backed by the improvement in both crude oil and crude palm oil (CPO) prices,” he said.

He said benchmark Brent Crude was anticipated to trade higher at US$75 per barrel next year from the current level of about US$60 per barrel, following the Organisation of the Petroleum Exporting Countries agreement on a production cut, with the CPO to average at RM2,200 per tonne from the current RM1,960 per tonne.

“Subsequently, this will lead to the return of foreign funds into our markets, as we have seen outflow amounting to RM11 billion as of last week for this year,” he said.

Last year, the local equity market recorded more than RM10 billion of foreign fund inflow.

Commenting on the outlook for fund flows, head of research Mohd Redza Abdul Rahman said it would still boil down to corporate earnings.

“If the earnings are positive, share prices will follow and entice the foreign investors to come in,” he said, adding that Bursa Malaysia is still defensive compared with regional peers.

“This would help investors find shelter here amid the uncertainty,” he added.

According to MIDF Research’s statistics, the KLCI’s gains slid 6.8% between January and last Friday, while the MSCI Asia Pacific Ex-Japan Index fell 15.4% and the MSCI Emerging Markets Index retreated 16% in the same period.