Thursday, January 10th, 2019

 

US-EU trade talks continue as truce holds

WASHINGTON, Jan 10 ― EU Trade Commissioner Cecilia Malmstroem was due to meet with US officials again today as they worked to resolve trade frictions, which resulted in the exchange of billions in tariffs last year. After the first day of talks…


Mass sackings send chill through Cambodian garment factories

PHNOM PENH, Jan 10 ― The termination of about 1,200 staff from garment factories in Cambodia supplying brands including H&M and Marks & Spencer after a mass strike has sent a ripple of fear through the industry, experts said, warning of…


Abu Dhabi's Etihad Airways to cut 50 pilots after big loss last year, sources say

ABU DHABI, Jan 10 ― Etihad Airways plans to cut 50 pilot jobs by end of this month after a significant loss last year, two sources who have seen an internal memo by the airline told Reuters today. The state-owned Gulf carrier has been reviewing…


MIDF, Al Rajhi Malaysia get Bank Negara nod for merger talks

KUALA LUMPUR: Malaysian Industrial Development Finance Bhd (MIDF) is one step closer to merging with Al Rajhi Banking & Investment Corp (Malaysia) Bhd (Al Rajhi Malaysia) after Bank Negara Malay-sia (BNM) granted them the green light to conduct negotiations for a deal.

MIDF said in a statement today that it had received the go-ahead from the central bank for it and its sole shareholder Permodalan Nasional Bhd (PNB) to begin negotiations with Al Rajhi Banking & Investment Corp, Kingdom of Saudi Arabia (Al Rajhi KSA), on a proposed merger with Al Rajhi Malaysia.

The negotiations must be completed within three months from the date of the letter issued by BNM.

“It should be noted that this should not be construed as implying that a final merger agreement will be reached or that BNM has approved the merger. MIDF will have to obtain prior approval from BNM or the Minister of Finance, with the recommendation of BNM, as the case may be, pursuant to the Islamic Financial Services Act 2013 and the Financial Services Act 2013 before entering into any agreement to effect the proposed merger.

“If an agreement is achieved, it will also be subject to various conditions, including all relevant legal requirements and the approval of all regulatory authorities involved, in both Malaysia and Saudi Arabia,” MIDF noted.

“Further announcements on the proposed merger will be made at the appropriate time as negotiations progress. In the meantime, business will continue as usual,” it added.

MIDF group managing director Datuk Charon Mokhzani said in the same statement that the group looks forward to having fruitful discussions with Al Rajhi KSA, and coming to a mutually beneficial outcome.

It was reported last month that MIDF was exploring a merger with Al Rajhi Malaysia as part of its attempt to become a universal Islamic bank.


Google can limit 'right to be forgotten' to EU, says top court adviser

FRANKFURT, Jan 10 ― Google can limit the “right to be forgotten” to internet searches made in the European Union, an adviser to the bloc's top court said today, backing an appeal by the US search giant against a French fine. European Court of…


US weekly jobless claims point to strong labour market

WASHINGTON, Jan 10 ― The number of Americans filing applications for jobless benefits fell more than expected last week, pointing to sustained labour market strength that could further ease concerns about the economy's health. The report from the…


Guan Eng pooh-poohs Nomura’s view on fiscal deficit

PETALING JAYA: Finance Minister Lim Guan Eng (pix) has reiterated that the government is confident of achieving its fiscal deficit target of 3.7% and 3.4% of gross domestic product (GDP) in 2018 and 2019 respectively and pooh-poohed Nomura’s report released on Wednesday.

“I have checked the preliminary financial accounts that were closed last year and the government’s fiscal position is well within the 3.7% of GDP deficit target for 2018,” he said in a statement today.

Nomura’s report warned that Malaysia’s 2018 fiscal deficit could deteriorate to 3.9% of GDP, which Lim said is “simply untrue” as sales and service tax (SST) collections have exceeded the initial projection by 34% at RM5.4 billion compared with the projected figure of RM4 billion.

Lim said the government has been upfront that the fiscal reforms would take three years to complete and more measures are to be announced for 2020, in addition to the measures announced in Budget 2019.

“The government has conveyed the same message on the time required to complete the reforms to various parties, including the top credit rating agencies Fitch Ratings, Moody’s and S&P. All three credit ratings agencies understand the amount of time required to carry out the reforms and, as a result, they have maintained the government’s credit ratings at ‘A3’ or ‘A-’, especially when the current government has been more transparent about its fiscal position and financial obligations than the previous administration,” he explained.

Responding to Nomura’s concern over the widening of the fiscal deficit ratio due to volatile crude oil prices, Lim said apart from the RM30 billion special dividend from Petroliam Nasional Bhd (Petronas) needed to partially finance the payments of unpaid goods and services tax and income tax refunds, the estimated government’s dependence on petroleum income this year is only 19.5%.

This is in contrast to 2009 where petroleum revenue made up of 41.3% of government income, suggesting that it has become less important to public finance.

“Analysts should take the low energy prices within this context, as well as the fact that the government is introducing new measures like the soda tax and the sale of non-core, non-strategic assets that are not accounted for in the fiscal deficit numbers, as highlighted in the 2019 Budget documents available publicly and online. These additional measures will be enough to function as a comfortable buffer if the average Brent crude oil prices hover within the US$50-US$70 per barrel band,” he said.

Lim highlighted that Nomura’s concern over the political stability of the government is misplaced and overdone as it ignores recent developments which indicate political stability in Malaysia.

Nomura said it was hoping for more progress in areas to improve government efficiency, reduce corruption and crony capitalism and potentially roll back or ease the government’s presence in some areas but has only seen some “easier” initiatives such as closing of several government agencies while some agencies have been put under direct parliamentary supervision.

The research house has downgrated Malaysian equities to “underweight” from “neutral” due to what it said were due to poor fundamentals and lack of major expansionary reforms.


MIDF, Al Rajhi Malaysia get Bank Negara’s approval to hold merger talks

KUALA LUMPUR: Malaysian Industrial Development Finance Bhd (MIDF) is one step closer to merging with Al Rajhi Banking & Investment Corp (Malaysia) Bhd (Al Rajhi Malaysia) after Bank Negara Malay-sia (BNM) granted them the green light to conduct negotiations for a deal.

MIDF said in a statement today that it had received the go-ahead from the central bank for it and its sole shareholder Permodalan Nasional Bhd (PNB) to begin negotiations with Al Rajhi Banking & Investment Corp, Kingdom of Saudi Arabia (Al Rajhi KSA), on a proposed merger with Al Rajhi Malaysia.

The negotiations must be completed within three months from the date of the letter issued by BNM.

“It should be noted that this should not be construed as implying that a final merger agreement will be reached or that BNM has approved the merger. MIDF will have to obtain prior approval from BNM or the Minister of Finance, with the recommendation of BNM, as the case may be, pursuant to the Islamic Financial Services Act 2013 and the Financial Services Act 2013 before entering into any agreement to effect the proposed merger.

“If an agreement is achieved, it will also be subject to various conditions, including all relevant legal requirements and the approval of all regulatory authorities involved, in both Malaysia and Saudi Arabia,” MIDF noted.

“Further announcements on the proposed merger will be made at the appropriate time as negotiations progress. In the meantime, business will continue as usual,” it added.

MIDF group managing director Datuk Charon Mokhzani said in the same statement that the group looks forward to having fruitful discussions with Al Rajhi KSA, and coming to a mutually beneficial outcome.

It was reported last month that MIDF was exploring a merger with Al Rajhi Malaysia as part of its attempt to become a universal Islamic bank.


Euro basks at three-month highs as dollar bears charge

LONDON, Jan 10 ― The euro consolidated gains today after posting its biggest daily jump in more than six months, having cleared some key market levels after Fed minutes signaled a more cautious approach towards further rate hikes. With the euro…


Foreign selling of Malaysian debt eases in December

PETALING JAYA: Foreign investors remained as net sellers of Malaysian debt securities in December 2018, but the pace of selling moderated as total foreign holdings dropped only 1.2% month on month to RM184.8 billion, less than the 2.7% decline in the previous month, according to Kenanga Research.

Consequently, the share of total foreign holdings of Malaysia’s debt inched lower to 13.3% (November: 13.5%), marking its lowest share since April 2010.

For 2018, total net foreign bond holdings fell markedly by RM21.9 billion (2017: -RM8.0 billion). The selloff occurred against a backdrop of financial market turmoil amid ongoing trade war concerns, tumbling global oil prices and monetary policy tightening in the US and other advanced economies.

Kenanga Research said December’s fall was largely due to a net decline of Malaysian Government Securities by RM1.5 billion (November: -RM5.4 billion), pulling down foreign holdings share of total MGS to 38.4%, the lowest since November 2011, as well as by a net decline of Malaysian Treasury Bills (MTB) by RM1.2 billion (November: -RM0.1 billion), tilting the foreign holdings share of total MTB down to 60.4%. The moderation has more than offset a net increase of Government Investment Issues (GII) by RM1.0 billion (November: +RM0.2 billion), bringing the foreign holdings share of total GII higher to 5.2%.

Nevertheless, it noted that pullout of funds by foreign investors was less compared to the previous month, given a firmer dovish stance signalled by the US Federal Reserve.

“While the Fed hiked interest rates by 25 basis points (bps) to 2.25%-2.50% at its December Federal Open Market Committee meeting, it has sent a dovish signal to the market by slashing growth, inflation and rate outlook. “

The outflow of portfolio funds is expected to persist this year, according to Kenanga Research, albeit at more moderate pace, due to looming risk averse sentiments in relation to trade war and growth concerns, as the punitive measures enacted thus far started to take a toll on business activities, evidenced by moderation in trade activities of regional and advanced economies and unfavourable manufacturing Purchasing Managers’ Index figures in both the US and China.

“As domestic indicators are pointing towards growth moderation and as inflation is expected to remain benign on the back of subdued global oil prices, we believe Bank Negara Malaysia (BNM) will hold the Overnight Policy Rate (OPR) unchanged at 3.25% in 2019,“ the research house said in a report today.

Nonetheless, if external uncertainty turned for the worse, it said BNM may gradually turn dovish or perhaps cut interest rates to stimulate the economy.

“However, the probability for that to happen is low for now. As for ringgit’s performance, a more cautious Fed is expected to dominate the outlook signalling a weaker dollar and hence a firmer ringgit, supporting our year-end forecast of US dollar/ringgit at RM4.10 (end-2018: 4.13).”