Wednesday, February 6th, 2019


US, China committed to reaching trade deal by deadline, says Mnuchin

WASHINGTON, Feb 6 — Both sides in the US-China trade negotiations are making a "big commitment" to reach an agreement by the March 1 deadline, US Treasury Secretary Steven Mnuchin said today. President Donald Trump and Chinese leader Xi Jinping…

French PM slams EU's 'bad decision' to reject Alstom-Siemens merger

PARIS, Feb 6 — French Prime Minister Edouard Philippe today slammed the European Union's "bad decision" to reject the proposed merger of the train operations of France's Alstom and Germany's Siemens. "The commission's decision is a bad decision….

US stocks edge lower after Trump address

NEW YORK, Feb 6 — Wall Street stocks fell modestly following mixed earnings and an annual presidential address that was seen as breaking little new ground on economic matters. About 15 minutes into trading, the Dow Jones Industrial Average stood…

European stocks struggle amid Brexit fears and gloomy German data

LONDON, Feb 6 — Europe's stock markets dipped lower today, as investors digested downbeat German economic data and fears continued over the looming threat of a no-deal Brexit. Frankfurt dropped 0.3 per cent as official figures showed that…

RM25b export target for wood-based products achievable: Council

KUALA LUMPUR: The Malaysian Timber Council (MTC) remains optimistic that Malaysia will achieve its RM25 billion export target for wood-based products by 2020 despite a fragile global trade and economy caused by the US-China trade war.

“We believe that the RM25 billion target is still achievable notwithstanding the potential headwinds that may come along the way, for instance Brexit, US-China trade war and other regional conflicts,” MTC CEO Richard Yu (pix) told SunBiz in an exclusive interview recently.

“The good part about the timber and wood industry is that a lot of Malaysian businesses are very innovative, and they respond to changes quite quickly, in terms of adjusting to the changing needs and demands and also the challenges of the industry as well as economy,” he added.

To recap, the Ministry of Plantation Industries and Commodities (MPIC) had in 2017 reduced the wood-based exports target from RM53 billion to RM25 billion due to shortage of raw materials.

Yu said the RM25 billion target is more “realistic”, noting that the previous RM53 billion target was first formulated prior to the 2008 global financial crisis.

“The planning and the formulation of the strategy was before that (the financial crisis). At that point of time, even in terms of the exchange rate was pretty favourable to us from ringgit terms perspective.

“And looking at last year’s numbers, I think to get another incremental of about RM1 billion-RM2 billion for another three years should be quite realistic,” he added.

The timber industry’s contributed RM23.2 billion to the government coffers in 2017, up 4.8% compared to last year’s figures.

As at August 2018, the export figures had reached RM14.57 billion, in which the wooden furniture, plywood, sawn timber, fibreboard and builders’ joinery and carpentry are the main revenue generators for the sector.

However, Yu noted that there is concern raised by the industry players on the potential Chinese products dumping.

“That will obviously have an effect on our exports. But I believe the Ministry of International Trade and Industry is monitoring this issue closely,” he said.

At present, Malaysia exports timber and timber-based products in over 160 countries.

Moving forward, Yu said the country’s commitment in maintaining its forest cover at above 50% will ensure that the timber industry remains sustainable in the long-term.

The MTC was established in January 1992 to facilitate the local industry players and promote the development and growth of the timber industry.

Sugar tax to have minimal impact on F&N’s bottom line

PETALING JAYA: The impeding excise duty on sweetened beverages, starting from April 1, 2019, will have a minimal impact on Fraser & Neave Holdings Bhd’s (F&N) bottom line, according to MIDF Research.

This is due to the lower overall contribution of soft drink segment to the group’s earnings and ongoing reformulation of the sugar content for most of its products to be below 5.0% while maintain the same tastes, the research house said.

However, MIDF Research said despite the challenging domestic market condition in view of competitive price pressures and intensifying competition, it believes that the group’s earnings growth will continue to grow, driven by the continued strong export growth and improved cost efficiency as a result of cost optimisation efforts.

It is maintaining a “neutral” call on F&N with a higher target price of RM33.78 from RM31.54.

Meanwhile, MIDF Research said the group’s normalised earnings for the first quarter of financial year 2019 (1QFY19), which came in higher by 15% to RM122.9 million, accounted for about 28% of the research firm’s and consensus full year FY19 earnings forecast.

Additionally, the research house said, post-transformation exercise, F&B Malaysia segment managed to record third consecutive quarter of positive growth by 33.8% year-on-year to RM154.1 million, albeit at a moderating pace.

The strong performance was mainly due to the earlier Chinese New Year festive sell-in for beverage products coupled with lower discount and favourable input cost for sugar, palm oil and dairy-based commodity.

However, these are partly offset by the higher packaging material costs, it added.

Banks to maintain earnings potential this year: Analysts

PETALING JAYA: Analysts believe that the banking sector will be able to maintain its earnings potential this year, as margin pressure is expected to ease and continued loans growth with stable asset quality.

MIDF Research said while the industry’s loans growth moderated to 5.6% year-on-year (y-o-y) as at December 2018 due to moderation in business loans and loans for the purchase of residential properties, the growth was still slightly above its expectations.

“As for CY19, we expect a moderation in loans growth to 4.7% y-o-y due to the high base effect. We also believe that deposits growth will moderate to 5.3% y-o-y due to lower growth in fixed deposits growth this year,” the research house said in a note.

“This also means that there will be accretion in value for banks’ book value. Hence, we maintain our ‘positive’ view on the sector,” it added.

Overall, MIDF Research said it is cautiously optimistic of the banking sector continuing its solid performance in 2019.

Given the current market conditions, the research house said its top picks for the sector are Maybank, CIMB and Public Bank.

In a separate note, AmBank Research said it expects that the foreign fund inflows into emerging markets would benefit the share prices of the liquid banking stocks as the US Fed rate hike is tapering off.

Therefore, the research house said it maintained its “overweight” stance for the sector with “buy” calls on RHB Bank, Public Bank, Alliance Bank, BIMB Holdings, Maybank as well as MBSB. Its tops picks include Maybank, Public and RHB Bank.

AmBank Research noted that Maybank’s earnings are well diversified and the bank is still recording positive JAWs (a technical term that denotes income growth exceeding that of expenses) with growth in total income outpacing expenses.

It added that Maybank’s net interest margins could also improve further ahead with the lowering of its funding cost as the group releases the excess liquidity built-up in the first half of financial year 2018 (1HFY18).

“Meanwhile, dividend yield for the stock continues to be attractive relative to peers with its high payout ratio while potentially offering investors higher returns with the reinvestment of their dividends into additional shares under the DRS (dividend reinvestment scheme),” it added.

FBM KLCI seen remaining under pressure going into second half

PETALING JAYA: Bursa Malaysia is likely to remain under pressure heading into the second half of 2019 (2H19), where the 126-month cycle is scheduled to find a “bottom”, according to CGS-CIMB head of retail research Kong Seh Siang.

Based on his Elliott Waves model, Kong believes that the FBM KLCI may fall below 1,600 points, 2015 low of 1,503 points or even the 200-month exponential moving average (EMA) of 1,419 points currently.

Kong is also bearish on the FBMEMAS and FBM Small Cap Index this year, even though there may be a fairly decent bounce sometime this year.

However, he is bullish on the outlook for crude palm oil (CPO) price as CPO’s 10-year consolidation could be over and the commodity is at the start of a multi-month rally.

As long as prices remain above the recent swing low of RM1,940 per tonne (which is also its 52-week low), he reckons that the new uptrend may take prices up to the RM2,500-2,800 levels in 2019/2020.

In a longer term, a move beyond RM3,202 would open the door for a rally to new highs, possibly hitting the RM5,000 mark, he added.

His bullish view on CPO price is also broadly in line with the research house fundamental view for CPO price to average RM2,400 per tonne in 2019, an increase of 8% year-on-year.

CGS-CIMB has removed UMW Holdings from its top pick list following the strong share price performance. Its top three picks for Malaysia continue to be Astro Malaysia Holdings Bhd, Dialog Group Bhd and Malaysian Pacific Industries Bhd.

On global markets, Kong believes that the Dow Jones Industrial Average is at its tail-end of its 86-year rally, noting that there are several negative signals present at the moment.

However, he is bullish on the US dollar, and expects the greenback index to climb above the 100.00 mark late this year after a brief pullback in the upcoming months.

For Brent crude oil, he expects prices to stay within the US$55-$70 per barrel band.

In Asia, the Nikkei 225 and Shanghai Composite Index look bearish for the long haul but there is likely a strong bounce for these indices in the middle of the year.

The most bullish index in the region is the Jakarta Composite Index, where a new 52-week high is possible in 2019.

EU to derail train-maker merger, reaping France's fury

BRUSSELS, Feb 6 — The EU's powerful anti-trust sheriff, Margrethe Vestager, is set to veto the merger of the Siemens-Alstom rail businesses today, in defiance of France and Germany. The tie-up, announced to great fanfare in 2017, was hailed as the…

European stock markets slide at open

LONDON, Feb 6 — European stock markets fell at the start of trading today, with London's benchmark FTSE 100 index down 0.3 per cent at 7,157.50 points. In the eurozone, Frankfurt's DAX 30 index slipped 0.3 per cent to 11,178.75 points and the…