Wednesday, March 6th, 2019


US trade deficit hits 10-year high in 2018 on record imports

WASHINGTON, March 6 —  The US trade deficit surged to a 10-year high in 2018, with the politically sensitive shortfall with China hitting a record peak, despite the Trump administration slapping tariffs on a range of imported goods in an…

'We need it now': US farm country pins hopes on China trade deal

WASHINGTON, March 6 — Corn and soybean farmer Lorenda Overman from North Carolina has been selling her crops at a loss and delaying paychecks to her workers since the US trade war with China tanked agriculture prices, and her farm’s debt…

OECD cuts global growth forecast over trade, Brexit uncertainty

PARIS, March 6 — Trade tensions and political uncertainty including Brexit are weighing on the world's economy, the OECD warned today as it again cut its 2019 forecast for global economic growth. The Organisation for Economic Co-operation and…

EU vetoes plan to add Saudi Arabia to money-laundering list

BRUSSELS, March 6 — Envoys from the 28 EU member states today unanimously rejected a proposal by the European Commission to add Saudi Arabia and other nations to the bloc's money-laundering blacklist, European sources said. The ill-fated plan,…

SC green light for 22 digital asset exchanges after March 1

PETALING JAYA: Only 22 out of 43 digital asset exchanges are permitted to continue their operations in Malaysia after March 1 following a review by the Securities Commission Malaysia (SC).

The regulator said in a statement today the 22 digital asset exchanges may continue their operations for a transitional period after March 1 until such period as may be notified by the SC.

“During the transitional period, these platform operators will not be permitted to accept new investors and will only be allowed to facilitate the withdrawal or transfer of client assets with the written instruction of the investor,” it said.

According to the SC, companies which do not submit their application to the SC by March 1 are required to take necessary steps to cease their business and return all clients’ assets by March 15.

The remaining 21 digital asset exchanges that have been removed from the list are not allowed to continue operations after March 1.

“Members of the public should also take note that this notice does not constitute an approval, authorisation or endorsement by the SC of any digital asset platform opera-tors or any digital assets traded on the platforms,” said the regulator.

The SC said the list will be updated regularly and encouraged members of the public to refer to the list when dealing with digital asset exchanges.

The list was updated following the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 that took effect on Jan 15, 2019, following which the SC received numerous queries on the implementation of the order.

The SC subsequently invited and engaged with existing digital asset platform operators and made arrangements to facilitate the operations of these platforms for a transitional period until March 1, 2019, subject to them fulfilling the conditions specified by the SC.

Existing platform operators are required to apply to the SC for authorisation if they intend to operate beyond the transitional period.

Prospective operators can also apply to the SC for authorisation and the SC will evaluate all applications and authorise market operators that fulfil the relevant requirements.

Last December, the SC announced that it will regulate issuances of digital assets via initial coin offerings (ICO) and the trading of digital assets at digital asset exchanges in Malaysia.

However, the central bank reiterated that digital assets, which refer to digital cur-rencies and digital tokens, are not legal tender in Malaysia and advised the public to carefully evaluate the risks associated with dealings in digital assets.

Separately, the SC today published two consultation papers to seek public feedback on the framework for ICOs and property crowdfunding.

An ICO is an alternative fundraising avenue that leverages on distributed ledger technology, including blockchain. It involves the issuance of digital tokens by an issuer who wishes to raise funds for a project or venture.

The consultation paper discusses the proposed framework for, among others, the eligibility of issuers, the need for transparent and adequate disclosures as well as utilisation of proceeds of the ICO.

The second consultation paper on the property crowdfunding framework follows on from Budget 2019, which identified crowdfunding platforms as an avenue to provide an alternative funding source for first-time homebuyers while providing investors access to a new asset class.

The SC is seeking public feedback on the proposed regulatory framework which will, among others, set the eligibility requirements of first-time home buyers, criteria of properties which can be listed on the platform, obligations of platform operators and financing limits.

Asian currencies hurt by stronger dollar, ringgit top loser

BENGALURU: Asian currencies weakened across the board today following gains by the dollar on better-than-expected US data, with the ringgit the biggest loser after central bank comments seen as signalling a dovish tilt.

Robust US economic data, on service industries and new home sales, saw the dollar index gain for a fifth straight session overnight and hover around two-week highs.

The ringgit slid 0.3% to its weakest level in more than two weeks, after investors weighed commentary by Bank Negara Malaysia after its Tuesday policy meeting, where it kept interest rates unchanged as expected.

The central bank outlined risks from unresolved trade tensions, heightened uncertainties on the global and domestic fronts and weakness in commodity-related sectors.

The Philippine peso was little changed at 52.250, following a sharp fall on Tuesday after the announcement of February inflation falling back into the central bank’s target range sparked speculation of policy easing.

Today, incoming Philippine central bank governor Benjamin Diokno said inflation could fall to 2% – the bottom of its target range – as early as the third quarter, supporting the view of many economists that a rate cut could come later this year.

“With the price goal seemingly in hand, it may be time for the BSP to consider the possibility of reducing the reserve requirement ratio in the near term, and eventually lower policy rates to help chase the 7-8% growth target,” ING’s Nicholas Mapa said in a note.

Elsewhere, the Thai baht and Indonesia’s rupiah both weakened 0.2%.

Renewed worries over tensions on the Korean Peninsula weighed on the won, which fell 0.3% to 1,128.9, with some traders saying tensions forced some yuan investors cover their short positions in the greenback.

The yuan, the region’s strongest performer this year, slipped 0.1% to 6.715 per dollar. Investors have regained some of their lost appetite for a currency that shed nearly 6% against the dollar in 2018.

The yuan is expected to trade around current levels in the next year, a Reuters poll showed, on the prospect of an end to the trade war with the United States.

Optimism about a trade deal getting done is largely priced into the yuan-dollar rate already, though there may be a boost for the Chinese currency once a pact is signed, said Stephen Chiu, an FX and rates strategist at China Construction Bank Asia Corp.

On Tuesday, a pledge by China’s state planner to increase the flexibility of the yuan’s exchange rate set off market speculation that a tweak to official wording could mean changes to the country’s tightly managed currency regime.

‘BNM likely to cut key rate at July 9 meeting’

PETALING JAYA: A rate cut is likely to take place during the July 9 Monetary Policy Meeting (MPC) meeting rather than the May 7 meeting by 25 basis points after taking into account of some recent anecdotal evidences of the macro figures that revealed a weak trend, AmBank Research projected.

Bank Negara Malaysia (BNM) left the overnight policy rate (OPR) unchanged at 3.25% during the latest MPC on Tuesday.

However, the research house pointed out that the tone of BNM appears to be “cautious”. The central bank acknowledged that “downside risks from unresolved trade tensions, heightened uncertainties in the global and domestic environment, and prolonged weakness in the commodity-related sectors could further weigh on the domestic growth though the baseline forecast appears to remain on a steady growth path”.

“With BNM having acknowledged the downside risks in the economic and financial environment, and the need to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation, it supports our view for a rate cut to most likely take place during the July 9 MPC meeting,“ AmBank Research said.

PublicInvest Research, meanwhile, opined that the OPR may remain steady unless there is a change in growth dynamics.

“We think 4% and below or 6% and above in growth prospects could be the immediate trigger points for a change in the policy rate. The central bank may also review the policy rate should there be a rise in financial imbalance risks but that prospects appear muted at this juncture due to the limited upside in equity market and housing prices.”

Added with small prospect of demand-driven inflation, OPR, is therefore, forecast to remain unchanged in 2019, PublicInvest said.

Kenanga Research said BNM has toned down its inflation expectation in 2019 even further to “stable”, from “moderately higher” previously and “inflation is projected to increase” end of last year.

Coupled with a fair warning that the global economy is slowing and a dovish US Fed, this may provide justification apart from creating ample room for a rate cut.

“At this juncture, we do not see the need for BNM to do so lest it triggers a bigger capital outflow and unnecessarily weakens the ringgit. Barring a major external shock, we expect the OPR to remain at 3.25% this year,“ said Kenanga.

PublicInvest Research expects the ringgit volatility to improve in 2019, soothed by the US decision to slow down its policy hikes, with a likely end of the trade war also helping.

Banks face rising asset risks as macroeconomic conditions worsen

PETALING JAYA: Malaysian banks’ asset risks will rise in 2019, as business conditions deteriorate for export-oriented sectors, said Moody’s vice-president and senior analyst Simon Chen.

“Profitability will also fall, as revenue growth slows and credit costs rise. Nevertheless, the banks’ capital buffers will further improve, due to slower asset growth; thereby helping the banks withstand the higher asset risks,” he said in a statement today.

The expected weak export-oriented sectors, particularly electronics, construction and real estate, is attributable to a slowdown in global trade and weaker economic growth.

However, Moody’s said this will not result in a sharp increase in impaired loans, with robust domestic consumption and stable employment conditions supporting asset quality.

Systemwide loan growth grew to 5.6% in 2018 from 4.1% in 2017, because of a gradual recovery in loan demand among corporates and households, partially as a consequence of the removal of a goods and services tax.

For 2019, the loan growth rate is expected to fall back to about 4-5% in 2019, as slower economic growth and uncertainty around the new government’s longer-term policy stance suppress loan demand among businesses and households.

Most Malaysian banks rated by Moody’s reported improvements in asset quality and capitalisation in 2018 but profitability was mixed.

Although profitability will weaken this year, the rating agency said capital generation will continue to outpace capital consumption due to weaker loan growth, leading to further rises in capital ratios. At the same time, deposit growth will continue to outpace loan growth as banks prepare for net stable funding ratio implementation.

The impaired loan ratios of most Moody’s rated Malaysian banks fell at the end of 2018 on the back of the slower formation of new impaired loans at home and overseas, loan repayments and write-offs.

N2N to venture into digital asset exchange business

PETALING JAYA: ACE Market-listed N2N Connect Bhd and its substantial shareholder SBI Holdings, Inc are looking to jointly establish and operate a digital asset exchange in the Asia Pacific region.

In a filing with Bursa Malaysia, N2N said it has entered into a memorandum of understanding (MoU) with SBI to set out the general understanding of the two parties’ intended engagement in a joint venture.

The two parties have agreed to form a holding company to cover formation of digital exchanges for all Asia Pacific countries (other than Japan) that will result in both parties holding equal shareholding in each digital exchange.

N2N and SBI will contribute their respective expertise and resources towards the success of the joint venture. The MoU would also enable N2N to invest in SBI’s subsidiary, DigitAEx Limited (Global Max), and SBI to invest in N2N’s subsidiary, Asianext Sdn Bhd.

“N2N and SBI will create a team to agree on the details of the joint venture and enter into definitive agreements,” it said.

SBI is a substantial shareholder of N2N, holding 20.36% shares in the company. It is the holding company of internet financial institutions in Japan, including online securities broker, online retail bank, online retail insurance company, online retail virtual currencies exchange, proprietary trading system operator and margin trading company.

It operates Global Max as the legal entity to be the operator of digital asset exchange for clients in the Asia Pacific region, other than Japan. Global Max is currently in the midst of obtaining a license to engage such business in Hong Kong.

Meanwhile, N2N is principally involved in the research and development of software packages and provision of design, programming and consultancy services and related activities.

It operates Asianext as the legal entity to be the operator of digital asset exchange for clients in Asia Pacific. It is in the midst of applying for a license to engage in such business in Malaysia and has plans to obtain license to engage in such business in other Asia Pacific countries.

N2N’s share price rose 0.56% to close at 90.5 sen today with 373,800 shares traded.

Stone Master, Cosmic Master call off collaboration plans

PETALING JAYA: Practice Note 17 (PN 17) company Stone Master Corp Bhd’s plans to collaborate with Cosmic Master Holdings Sdn Bhd has been called off.

In a filing with Bursa Malaysia, Stone Master said the business collaboration agreement between the two parties have been mutually terminated with immediate effect but did not provide a reason for the termination.

It said the agreement termination does not have material financial effect on the company.

To recap, the two parties signed a business collaboration agreement in November last year, whereby Stone Master was to supply building materials to Cosmic Master for its development projects.

Stone Master is in the business of supplying, laying and installing all types of granite and marble products, ceramic tiles as well as stone and ceramic product related works.

Meanwhile, Cosmic Master is involved in construction works and related activities.

Stone Master had said that the agreement indicates the initiation of the revitalisation of its business and synergistic scheme of recovery, and that the granting of the development projects by Cosmic Master would be an endorsement of the group’s capability to improve and expand its current revenue base.

Stone Master had also indicated that it would be able to address its going concern issue and continue with its existing business following the signing of the agreement.

Last month, it requested a further extension of time of up to July 31 to submit its proposed regularisation plan to Bursa Securities.

Its share price rose 15% to close at 11.5 sen today with 11,000 shares traded.