Sunday, January 27th, 2019

 

Chinese New Year to drive sales for businesses

PETALING JAYA: Despite lacklustre consumer sentiment, businesses are gearing up for brisk sales as consumers do their Chinese New Year (CNY) shopping for the much celebrated festival next week, with many businesses citing CNY as an important sales contributing season.

LG Electronics Malaysia general manager of marketing Kong Mun Keen said festive season campaigns, whether CNY or Hari Raya, contributes bigger sales for LG.

“We often see a spike in sales whenever festive seasons are fast approaching,” he told SunBiz, adding that this year, LG Electronics Malaysia has allocated a “substantial amount of budget” for its CNY campaign.

Although only a month into 2019, he said LG Electronics is “on the right track” in terms of sales.

By distinguishing itself with its technology and product experience, Kong said LG’s strategy has always focused on reaching out to all Malaysians, evident through its brand store openings in 2018, where it works with partners to drive new consumer touchpoints.

“Malaysia has always been a priority market, given that LG has secured and maintained a strong position in the home appliances and home entertainment segments here. With our premium and unique positioning coupled with innovative and consumer-centric products line-up, we are confident that there will always be a demand for our products here,” said Kong, adding that it is constantly ensuring that its products can integrate seamlessly into consumers’ lives.

For big-ticket items like cars, Edaran Tan Chong Motor Sdn Bhd (ETCM) executive director Tan Keng Meng expects its CNY sales to be about the same as last year’s or better.

“It’s always CNY and Raya. These are the two peak seasons,” said Tan.

In conjunction with CNY, ETCM added the new imperial red colour to the popular Nissan Serena 2.0L S-Hybrid Premium Highway Star, featuring a two-tone theme. Additionally, ETCM continues the introduction of Nissan X-Trail X-Tremer in passion red and two additional colour options.

Meanwhile, a Uniqlo Malaysia representative said festive periods are traditionally good opportunities for retailers to grow their sales, adding that it continues to experience healthy sales growth this year.

“We believe this is due to our commitment to produce high-quality products at accessible prices while keeping with today’s fashion trends. Customer service is also a top priority to ensure that our customers have the best shopping experience possible.”

As with previous years, it believe that customers are always looking for something new and fresh to start their new year.

“We are bringing many new items to the store for customers to choose. We will also be launching the Uniqlo U collection on Feb 1 for last minute shoppers to get their new year clothes.”

The representative said customers are consistently looking for items that are value for money and Uniqlo is well positioned to meet their needs.

Tohtonku Sdn Bhd head of marketing Vicky Lim said CNY is one of the peak seasons for sales with its back-to-back promotions in December and January.

But instead of spending on CNY promotional campaigns, Lim said, the company, which markets personal care and household products with brands like Follow Me, Nutox and Nanowhite, still focuses on brand communications.

A representative for The Body Shop said although CNY is not its largest festive season sales contributor, it dresses up its stores with decorations that symbolise the blooming of spring and the festive mood of CNY.

“We offer prosperous gifts such as hampers. This year we picked British rose as the main product that appeals to a wider target audience and with its colour of pink, it’s in line with the colour scheme that represents CNY.

“Our staff are also dressed in mandarin Oriental tops and we play both instrumental and vocal music that reminds you of CNY.”


Companies, workers struggle as cracks appear in China’s economy

BEIJING: Cracks are opening in China’s mighty economy: investors are backing away from deals, factories are moving abroad and companies are shedding jobs.

The world’s second-largest economy is losing steam, hitting its slowest growth in almost three decades last year, and flagging further in recent months.

While gross domestic product grew at 6.6% in 2018 – a rate that would be the envy of most nations – China’s efforts to cut its debt mountain have weighed on the economy.

Private businesses in particular face new hurdles as costs rise and financing becomes harder to come by, while the trade war with the United States has not helped.

Here is a look at some of the struggles faced by Chinese companies and people:

Game over for gamers

Feeding China’s addiction to video games seemed an easy bet for Beijing Yixin Technology, a tech startup behind the mobile game Farm Take Home.

The game allows players to harvest wheat, raise chickens and plant apple trees – a bucolic refuge from the pressures of urban China.

But in real life, the tech firm has struggled to find investors.

“In December our company’s funding ran out, we had an investment lined up, but the money never came through,” said chairman Cui Yi. “This month I arranged another investor, then he backed out too. I think we can’t hold out.”

His company is not alone.

Venture capital funding dried up at the end of last year. Total investment in the fourth quarter fell 13% from a year earlier, according to data from Preqin market research.

Policymakers are partly to blame, pushing a war on debt and financial risk that has cut the funding flowing into investment firms, industry insiders say.

Another government diktat halted new video game approvals for months – officially due to youth gaming addiction concerns – sending firms like Beijing Yixin into a deep freeze.

Trade war

Other companies are facing the fallout from the trade war with the United States.

More than a handful of exporters have sought to get around US tariffs by building factories outside China, according to a review of public stock filings.

Others are sending workers home early for Chinese New Year or cutting overtime.

Last month China’s exports fell.

“It has hit our profits,” Harry Shih, manager of Runfine Bearings in eastern Zhejiang province, said of the trade war.

Washington slapped 25% taxes on many types of ball bearings in July. Shih said he had shared the cost increase with his customers, roughly half of whom are from the US.

“Business is going down for most companies including factories. Like me they have the same problems, profits are going down” as costs rise, said Shih.

Job crunch

Official data shows unemployment at a stable rate, rising slightly to 4.9% last month. But independent data paints a different picture.

In October-December advertised tech positions fell by 20% from a year earlier, after declining 51% in the third quarter, according to data from Zhaopin, China’s largest recruitment website and Renmin University.

China’s economy “faces downward pressure, and to some extent this pressure will be transmitted to the job market,” said Meng Wei, a spokeswoman for the National Development and Reform Commission, China’s state planner.

A lawyer who consults on labour disputes, Guo Xuehai of Beijing Zhonghai Law Firm, said, “there are definitely more employees coming for help than before,” but added this was usually the case at this time of the year.


OCBC: Malaysia could restore fiscal health in 3 years

KUALA LUMPUR: Malaysia has a reasonable chance of restoring its fiscal health within three years if the economic growth remains stable with new revenue streams and stable expenditure, according to OCBC Bank chief economist Selena Ling (pix).

“But if you have a case where the global environment is very serious and dire and there is no deal between US and China… then it becomes a very hostile environment for any developing country to operate in,” she told reporters at a press conference last Friday.

She noted that if the global economy remains at a status quo for the rest of the year and crude oil prices stabilise, Malaysia may miss the fiscal deficit target by 0.1-0.2 percentage points.

Having said that, the potential slippage is not expected to be “very severe” that will derail Malaysia off its targets.

“Rating agencies also want to see a multi-year plan. If it’s just a slippage of one year that you can attribute to a lot of external factors, probably the rating agencies will give you a pass. It’s really not a one year story they’re looking for,” she explained.

The government has projected fiscal deficit to ease to 3.4% of gross domestic product (GDP) this year from 3.7% in 2018. It looks to further narrow the fiscal deficit to 3% and 2.8% in 2020 and 2021, respectively.

Ling projects Malaysia to record a full-year GDP growth of 4.4% for 2019 amid slowing global growth and the ongoing external headwinds.

Malaysia’s ringgit, on the other hand, could appreciate to RM4 against the greenback in the event of a weak dollar.

She said the strengthening of the ringgit will have less to do with domestic factors as the slowdown in economic growth is seen as benign, coupled with an unlikely change in the Overnight Policy Rate (OPR).

Another reason that could be supportive of strong ringgit is the risk of the US economy falling into a recession next year.

Meanwhile, Ling expects oil prices to be subdued and could result in a shortfall in government coffers if they remain at the current level of around US$50 per barrel until year-end.

Although Budget 2019 is based on the oil price assumption of US$70 per barrel, she does not see a need to recalibrate the budget at this juncture, but it will exert pressure on seeking new revenue sources.

“As far as the budget revision is concerned, I suspect (it will) not be so soon because the US$70 is a medium-term price target and oil prices have been volatile in the last six months.

“But if you look at the average price, it is relatively stable and maybe for the next budget in October 2019, they (the government) may revise the oil price assumption,” she added.


OPR to be unchanged, but review possible: Analysts

PETALING JAYA: Analysts have maintained their forecasts of an unchanged Overnight Policy Rate (OPR) for 2019, with a possible review of the rate if growth prospects are affected.

“We expect Bank Negara Malaysia (BNM) to remain vigilant during the year, focusing on the development of both the external and domestic fronts. Our base case remains that BNM will hold the policy rate unchanged at 3.25%. However, we have raised the probability for a rate cut by 25-50bps to 40% in 2019, with room to further raise our rate cut probability,” said AmBank Research in its report.

It said that the probability for a rate cut will be governed by issues such as inflation remaining low with a lack of pickup in the underlying inflationary momentum, and growing risks for nominal gross domestic product (GDP) to undershoot and possibly head towards a “nominal recession”.

“Under these circumstances, there is a need to support private consumption given the limited fiscal space. Rate cut seems possible especially with such a wide positive interest rates differential,” it added.

It said that the possibility for a rate cut could happen as early as 2Q 2019, especially if the 1Q 2019 GDP number weakens more than 4Q 2018.

PublicInvest Research also expects OPR to remain steady throughout the year, unless growth prospects dim considerably.

“We think the 4% mark could be the immediate trigger point. The central bank may also review the policy rate should inflation jump significantly due to demand pressures although it is an unlikely prospect at this juncture. OPR, is therefore, forecast to remain unchanged in 2019,” it said.

Commenting on growth outlook, it said that it is “sanguine but cautious” on the near-term outlook as private expenditure may remain encouraging backed by tepid inflation, full employment, steady wages, higher minimum wage and fiscal measures to keep cost of living and business under control (petrol price) while efforts to eradicate wastage and improve efficiency is also positive as it will contribute to the long-term vibrancy of the economy.

As for the ringgit, PublicInvest Research sees the currency averaging between RM4.10 and RM4.20 per US dollar compared with the 2018 average of RM4.02 per US dollar, with an upside risk should trade negotiations turn out to be favourable.

“Ringgit is trailing its fair value and this is caused mostly by external factors. Ringgit’s gyration may get elevated this year due to stresses over trade, and matured economies’ policy steps which may intermittently push volatility higher. Ringgit’s volatility averaged at 1.7% in 2018, an improvement against 2017’s 2% with the highest on record at 13.8% in August 2015,” it said.

Last Thursday, BNM decided to keep the OPR at 3.25% at its Monetary Policy Committee meeting.

BNM said at the current level of the OPR, the degree of monetary accommodativeness is consistent with the intended policy stance.


German power prices need not surge after coal exit, says minister

BERLIN, Jan 27 — German Environment Minister Svenja Schulze said ending the use of coal as an energy source would send a positive signal internationally and need not drive the country’s energy prices higher. Schulze told the Funke Mediengruppe…


Abdul Yazid Kassim named new MRT Corp CEO

PETALING JAYA: Abdul Yazid Kassim (pix) has been appointed as Mass Rapid Transit Corporation Sdn Bhd (MRT Corp) CEO effective February 1, 2019.

This comes after former CEO Datuk Seri Shahril Mokhtar’s contract ended on December 31, 2018.

Finance Minister Lim Guan Eng said in a statement today that Abdul Yazid has vast experience in project management and construction and engineering contracts.

He was a project director of Malakoff Corp Bhd and head of project management office at Zelan Bhd.

He also has 10 years of experience as construction head at Qatar Petroleum.

Lim said among Abdul Yazid’s main responsibilities are managing the MRT2 project to ensure that it is executed within the stipulated cost and time frame.


Suiwah’s founder to take the company private at RM2.80 per share

PETALING JAYA: Suiwah Corp Bhd’s major shareholder Suiwah Holdings Sdn Bhd intends to privatise the group by way of a selective capital reduction (SCR) and repayment exercise.

The proposed SCR entails a capital repayment which is equivalent to a cash amount of RM2.80 per ordinary share each in Suiwah held by the entitled shareholders on an entitlement date to be determined later.

The offer price represents a premium of 28.44% against its five-day volume weighted average price of RM2.18.

Suiwah founder and managing director Datuk Hwang Thean Long, the ultimate offeror for the exercise, together with the parties acting in concert, collectively hold a 30.91% stake in the group.

In a stock exchange filing, Suiwah said it has received a letter from Suiwah Holdings and parties acting in concert, requesting for the group to undertake a SCR and repayment exercise.

The exercise will be funded by internally generated funds and financing facilities.

“The privatisation of Suiwah by way of the proposed SCR would provide greater flexibility to Suiwah in managing and developing the existing businesses of Suiwah without the regulatory restrictions and cost associated with being listed on Bursa Securities,“ it said.

The offer will remain open for the board’s acceptance until Feb 11, 2019.

“The non-interested directors will deliberate on the proposed SCR and upon consultation with an independent adviser to be appointed will decide on the next course of action.”


Mixed emotions in Germany as €500 note bows out

FRANKFURT AM MAIN, Jan 27 — As the ECB takes the final step in phasing out the €500-euro note, few are expected to mourn a bill favoured by criminals but rarely seen in daily life. Except perhaps in cash-loving Germany. From today, central banks…


Businesses struggle as cracks appear in China’s economy

BEIJING, Jan 27 — Cracks are opening in China’s mighty economy: Investors are backing away from deals, factories are moving abroad and companies are shedding jobs. The world’s second-largest economy is losing steam, hitting its slowest growth…


First challenge for Renault’s new chiefs: Ghosn’s payout

PARIS, Jan 27 — Carlos Ghosn may no longer be in the driver’s seat at Renault, but he will remain at the centre of vigorous negotiations in the coming weeks over severance pay potentially worth tens of millions of euros. The French government,…