Wednesday, March 27th, 2019


US stocks flat amid lingering growth worries

NEW YORK, March 27 — Wall Street stocks treaded water early today amid lingering worries about economic growth as data showed a lower US trade deficit in January. About 45 minutes into trading, the Dow Jones Industrial Average was at 25,679.58, up…

Southwest cuts sales outlook as 737 MAX grounding hits US carriers

NEW YORK, March 27 — Southwest Airlines trimmed its revenue estimate today, citing flight cancellations due to the Boeing 737 MAX grounding among key factors dragging on earnings. Southwest, which focuses primarily on travel within the United…

Bank Negara revises 2019 GDP growth forecast lower to 4.3-4.8%

KUALA LUMPUR: Given the persistent external headwinds emanating from, among others, the US-China trade spat and the Brexit deadlock, Bank Negara Malaysia (BNM) sees more downside risks in the domestic economy, projecting a gross domestic product (GDP) growth of 4.3% to 4.8% for 2019.

This is lower than the government’s earlier projection of 4.9% during the tabling of Budget 2019. Last year, the economy grew 4.7%.

Governor Datuk Nor Shamsiah Mohd Yunus said the revised GDP growth projection was due to slower global economic expansion, which has been revised downwards.

At a media briefing today in conjunction with the release of the BNM Annual Report 2018, she said domestic demand will remain the anchor of growth on the back of continued expansion in private sector activity.

However, private consumption growth is expected to moderate to 6.6% this year, while private investment is projected to register a stronger expansion of 4.9%.

Public consumption is projected to expand at a moderate pace of 1.2% and public investment is estimated to decline 7.1%.

Despite an expected slower economic growth in 2019, Nor Shamsiah opined that it will not dampen consumers’ sentiment and private consumption will always hold up as the bulk of the consumption is spent on daily necessities.

On the supply side, all economic sectors will continue to grow in 2019 with the services and manufacturing being the key contributors.

Nor Shamsiah believes the global economy will not fall into a recession and the external growth will continue to support Malaysia’s export growth, which is estimated to expand 3.4% this year compared with 6.8% in 2018.

The current account balance is projected to remain in surplus, albeit narrowing to 1.5% to 2.5% of gross national income.

Commenting on monetary policy, Nor Shamsiah said the central bank has been closely monitoring developments and will focus on supporting economic growth.

“Any adjustment to the OPR does not immediately suggest that there are risks to growth as we are not a growth-targeting central bank,” she said, referring to the Overnight Policy Rate.

Nor Shamsiah also alleviated market concerns over deflation seen in the first two months of the year, reiterating that there is no collapse in demand conditions.

“We’re not suffering from deflationary pressure. Deflation occurs when price declines are broad based. More than 50% of goods in the CPI basket are experiencing increase in prices. The decline in headline inflation is solely due to transport cost and high base effect.”

Headline inflation, as measured by the CPI (Consumer Price Index), is projected to increase 0.7% to 1.7% this year. The CPI declined by 0.4% and 0.7% in January and February, respectively.

On Finance Minister Lim Guan Eng’s call for banks to be more flexible in lending, Nor Shamsiah does not see banks tightening lending, evidenced by the highest ever loan disbursement growth of 7.3% in 2018 against 5% in 2017.

Malaysia’s external debt stood at RM924.9 billion as at end-2018 or 64.7% of GDP, higher than the RM885.2 billion (65.4% of GDP) as at end-2017, mainly due to the increase in interbank borrowings and corporate loans to finance investment activity as well as valuation effects following the weakening of the ringgit.

“Under the baseline projection, external debt will decline to 56% of GDP by 2023 facilitated by continued account surplus and economic growth, faced against the adverse shocks of external debt that will rise above the baseline projection but remain manageable due to Malaysia’s debt profile and external buffers,” Nor Shamsiah explained.

GDB awarded construction job by TRC Synergy

PETALING JAYA: Construction services firm GDB Holdings Bhd has been appointed as the principal works contractor by Trans Resources Corp Sdn Bhd (TRCSB) for a RM135 million mixed development in Ara Damansara, Petaling Jaya.

TRCSB is a wholly owned subsidiary of TRC Synergy Bhd.

GDB said in a statement yesterday that the 30-month project’s works encompass architectural, civil and structural, as well as mechanical and electrical works.

The first phase of the project comprises two blocks of 18-storey residential serviced apartments on an eight-storey podium which consist of a seven-storey car park and one-storey related facility on top of the podium.

The project is scheduled to commence on April 16 and complete by Oct 15, 2021.

GDB expects the contract to contribute positively towards the future earnings of the group for the duration of the contract and provide positive earnings visibility until the fourth quarter of the financial year ending December 2021.

Its managing director Cheah Ham Cheia said with this new project in hand, GDB has replenished its order book and enhanced its earnings visibility.

“We are optimistic that our track record will be a key competitive edge in securing more contracts in this challenging environment,” he added. The new contract adds to the group’s order book of RM537 million as at Feb 28. Its ongoing projects are the Aira Residence in Damansara Heights and Menara Hap Seng 3 in Kuala Lumpur.

Hiap Teck registers RM5.4m loss in Q2

PETALING JAYA: Hiap Teck Venture Bhd reported a net loss of RM5.4 million in the second quarter ended Jan 31 compared with a net profit of RM30.55 million a year ago.

In a filing with Bursa Malaysia, the group said the losses were due to the share of loss of joint venture (JV) entity of RM10.57 million compared with the share of profit of JV entity of RM18.59 million a year ago.

Revenue for the quarter fell 16.79% to RM251.7 million from RM302.48 million a year ago due to lower sales from the trading and manufacturing segments, caused by lower demand and weakening steel prices.

The trading division reported a 16% drop in revenue to RM117.38 million from RM139.14 million a year ago while the manufacturing division reported a 13% decline in revenue to RM146.5 million from RM168.3 million a year ago.

This led to a lower profit from operations of RM13.09 million for the quarter, compared with RM21.24 million recorded a year ago.

For six months ended Jan 31, Hiap Teck’s net profit plunged 89.45% to RM4.92 million from RM46.59 million a year ago while revenue for the period rose 3.40% to RM580.05 million from RM560.97 million a year ago.

Moving forward, the group expects the operating environment of the local steel industry to remain challenging due to the sluggish property market, limited positive developments in the construction and infrastructure sectors as a result of the ongoing review and renegotiations of mega projects by the government.

In addition, the soft domestic steel demand is also affected by global market conditions triggered by rising trade tensions between the US and China, volatility of currency and prices of all steel products.

“However, the group remains optimistic that the domestic steel demand could see an increase in the second half of 2019 as we are expecting the government to conclude the review and renegotiations of the contracts and roll out few high impact infrastructure projects soon,” it said.

BNM loosens policies to mitigate forex risks

KUALA LUMPUR: Bank Negara Malaysia (BNM) has announced further liberalisation in the foreign exchange administration framework aimed at providing greater hedging flexibility for residents to better manage their foreign exchange risks.

Firstly, residents can now hedge their foreign currency obligations for longer tenure as the flexibility has been extended from six months to 12 months effective immediately, according to governor Datuk Nor Shamsiah Mohd Yunus.

Foreign currency obligations include current account obligations such as import of goods and services as well as distribution of profits, dividends and interests payable; and loan repayments.

Residents may also obtain approval from BNM to hedge their foreign currency obligations beyond 12 months.

Secondly, effective May 2, 2019, SMEs with net import obligations can receive payment in foreign currency from resident importers. Resident exporters can make payment in foreign currency to resident SMEs (net importers) for settlement of domestic trade in goods and services upon one-off registration with respective banks. This allows SMEs which are net importers to achieve “natural hedge”, thus minimising forex risks.

In late 2016, BNM announced that exporters holding earnings in foreign currency, would need to convert as much as 75% of it to ringgit. It was one of several other measures announced to support the falling ringgit.

On the ringgit, Nor Shamsiah said BNM is comfortable with the currency’s current levels.

“When we look at where the ringgit is, we’re moving in line with other regional currencies. There’s no misalignment,” she said, adding that the currency’s volatility has been low.

“We’ve developed our financial markets to a point where we are now able to mitigate large flows of capital and the ringgit flexibility is one sort of strength of our economy.”

Meanwhile, BNM will study the introduction of cash transaction limit and a public consultation will be undertaken in the second or third quarter of the year.

Nor Shamsiah said the central bank will also be coming out with the licensing requirements for virtual banks by year-end.

“We’ve had some interest, some discussions with a few banks that have established virtual banks overseas but these are at preliminary stage.”

Gamuda’s Q2 earnings dip in wake of Splash disposal

PETALING JAYA: Gamuda Bhd’s net profit for the second quarter ended Jan 31 fell 22.58% to RM173.14 million from RM223.64 million a year ago due to absence of profits from Splash.

In a filing with Bursa Malaysia, the group said it stopped recognising its share of Splash profits following the sale of Splash at the end of 2018.

“The two projects in Vietnam continued to sell well and together with the earnings contribution from Singapore, mitigated the lower earnings contribution from the new townships in Malaysia,” it said.

Revenue for the quarter rose 12.63% to RM1.13 billion from RM998.92 million a year ago. Of the total revenue, construction segment contributed RM1.12 billion while property segment contributed RM617.86 million during the quarter. Concession segment contributed RM130.46 million.

For the six-month period, Gamuda’s net profit fell 19.3% to RM345.18 million from RM427.72 million a year ago while revenue rose 14.65% to RM2.03 billion from RM1.77 billion a year ago.

During the period, Gamuda Engineering reported lower construction earnings due to the reduction in MRT Line 2’s contract value following the agreement with the government to undertake the elevated and underground works as a single turnkey contract.

For Gamuda Land, the overseas projects spearheaded by Vietnam and Singapore continued to perform well with overseas sales representing two-thirds of group property sales. Overall property earnings fell due to lower earnings contribution from new townships in Malaysia.

For Gamuda Infrastructure Concession, earnings were lower due to the sale of Splash last year.

For the financial year ending July 31, the group expects its performance to be driven by overseas property sales, progress of MRT Line 2 and steady earnings contribution from the expressway division.

Yinson’s Q4 net profit up 6% on higher offshore, marine contribution

PETALING JAYA: Yinson Holdings Bhd’s net profit in the fourth quarter ended Jan 31 (Q4FY19) increased 6.2% to RM60.7 million, from RM57.14 million in the same quarter a year ago.

This was mainly attributed to higher revenue from offshore and marine segment and improved contribution from other operations, the group said in Bursa Malaysia filing today.

Revenue for the quarter soared 11.7% to RM287.6 million, compared with RM257.39 million in the corresponding quarter last year.

The group has recommended a final single-tier dividend of 2 sen per share for the financial year ended Jan 31.

Yinson’s full-year net profit, however, fell 19.6% to RM234.9 million against RM292.18 million a year ago.

This was mainly due to higher impairment loss on trade and receivables, impairment loss on tax recoverable, higher depreciation and amortisation, impairment loss on investment in a joint venture, lower share of results in joint ventures, as well as higher finance cost and tax expenses.

However, Yinson said the reduction is set-off by profit on higher recorded revenue, lower administrative overheads, net favorable foreign exchange movement and higher interest income.

Its full-year revenue grew 13.7% to RM1.03 billion from RM910.16 million previously.

On its prospects, the group said the short- to medium-term outlook in the oil and gas industry remains challenging and uncertain due to emerging new alternative energy resources and financial institutions risk appetite towards the sector.

“Amid the challenging global economic environment and the volatility of other currencies against US dollar, the group shall strive to achieve satisfactory results for the next financial year ending Jan 31, 2020,” it added.

MIEA to lodge police reports against nine proptech firms

PETALING JAYA: The Malaysian Institute of Estate Agents (MIEA) has identified nine proptech start-ups that operate real estate practices illegally.

The institute said it is ready to lodge police reports on whoever is infringing the law and meddling with the practice.

In a statement today, MIEA expressed concerns over proptech start-ups claiming to provide real estate technology solution but have circumvented the law by carrying out real estate practice illegally.

“Firstly, they come in saying that their tech platform is to bridge a sale or rental and help buyers and sellers and/or landlords and tenants respectively.

“They even directly state that this is to avoid using real estate agents to help save cost for them and they provide real estate services, prepare tenancy agreements, collect rentals and even claim their service is better,” said MIEA president Eric Lim.

“These tech start-ups are getting braver and bolder by challenging the law. They claim to help the public sell and rent their properties and that means they are illegally operating real estate practice when they collect a fee in any shape or form,” he added.

The real estate agency practice in Malaysia is governed by Act 242 whereby real estate agents are registered and real estate negotiators are certified by the Board of Valuers, Appraisers, Estate Agents & Property Managers (BOVEAP).

Real estate transactions in the country can only be handled by real estate agents, real estate negotiators and property owners thus the real estate practices undertaken by such proptech start-ups are illegal, according to Section 22c of the Act.

“We call upon BOVEAP the regulators of our profession and the Finance Ministry to take the necessary action against these ‘proptech brokers’ to protect the public and the laws of the country,” said Lim.

He said real estate agents and negotiators are legally bound to follow the rules, standards and ethics in rendering service to clients and MIEA members are trained to protect the interest of clients.

“Monies collected are required by law to be placed in a client’s account and covered with professional indemnity insurance. All real estate negotiators and probationary estate agents are trained to represent the clients professionally and we play a big role in the country helping clients to get their ideal property.

“Any insinuation of any tech companies in what we do and who does not understand the complexity and role we play is an infringement on our practice and we will not condone nor be silent about it anymore,” Lim added in the statement.

Wages of Malaysians still ‘not up to par’

KUALA LUMPUR: Malaysian workers receive lower compensations relative to their contribution to national income from productivity and equity perspectives, according to a study “Are Malaysian Workers Paid Fairly?: An Assessment of Productivity and Equity” in Bank Negara Malaysia’s (BNM) Annual Report 2018.

Analysis of the wage to productivity ratio shows that Malaysian workers are still being paid less than workers in benchmark economies, even after accounting for the different productivity levels across countries. This suggests that Malaysia’s current wage productivity levels are misaligned.

To illustrate this point, if a Malaysian worker produces output worth US$1,000 (RM4,070), the worker will be paid US$340 (RM1,400) for it. The corresponding wage received by a worker in benchmark economies for producing the same output worth US$1,000 is, however, higher at US$510.

Further analysis reveals that most industries in Malaysia compensate workers less than those in the benchmark economies, even after adjusting for productivity (see chart). This is particularly evident in the wholesale and retail trade, food and beverage and accommodation industries that make up 19% of economic activity and 27% of total employment in Malaysia. These industries are generally more labour-intensive, and dependent on low-skilled workers.

However, employers surveys indicate that salary increments are expected to be sustained between 4.9% and 5.2% in 2019.

The labour share of income has been on the rise in Malaysia, from 31.7% in 2010 to 35.2% of GDP in 2017. This bucks the global trend where the labour income share has trended lower in recent years. However, Malaysia’s labour share of income still lags behind most advanced economies. This implies that a larger fraction of national income in Malaysia goes to capital owners rather than workers, that is capital owners benefit much more than workers in Malaysia.

Higher labour income share does not necessarily imply higher incomes for workers. Therefore, BNM said it is critical that the 11th Malaysia Plan target for a labour income share of 38% by 2020 be achieved through higher wages instead of the creation of more low paid, labour-intensive jobs. This would require a transition away from its labour-intensive structure through increased capital- and knowledge-based investments that will result in a much needed demand for highly educated and skilled workers who can command high wages.

Evidence suggests that the lack of high-skilled job creation could have played an integral role in this. Between 2010 and 2017, the number of diploma and degree holders in the labour force increased by an average of 173,457 persons per annum, much higher than the net employment gains in high-skilled jobs of 98,514 persons per annum. This suggests that the economy has not created sufficient high-skilled jobs to absorb the number of graduates entering the labour force. In addition, a study by Khazanah Research Institute also found that 95% of young workers in unskilled jobs and 50% of those in low-skilled manual jobs are overqualified for these occupations.

Malaysia has made significant progress in transforming the economy from that of a low income agrarian country to an upper-middle-income country. Significant reduction in poverty was achieved while big strides were made in improving living standards across the population.

The study suggests that more can be done to build on the progress made to ensure sustainable increases in income, including generating quality labour demand, reducing labour mismatches, reinforcing wage-productivity links and creating a conducive labour market through regulatory and legislative interventions.