Monday, May 6th, 2019

 

Trump plays hardball with China ahead of key talks

WASHINGTON, May 6 — US President Donald Trump decided to play hardball with Beijing ahead of a key round of negotiations this week, threatening to impose tariffs on all of the US$550 billion in Chinese goods imports. The threat tanked stock…


Swiss court declares driver an Uber employee

GENEVA, May 6 — A Swiss court has ruled that a former Uber driver was an employee of the ride-sharing firm, not an independent contractor, in a potentially landmark decision, the driver’s lawyer said today. The ruling by the labour court in…


Jamaludin allays concerns about monopoly post Digi-Celcom merger

PETALING JAYA: The proposed merger between Digi and Celcom in Malaysia will not result in a monopoly, said Axiata president and group CEO Tan Sri Jamaludin Ibrahim (pix).

Speaking at a media briefing here today in conjunction with the proposed merger, he said although the merged entity would command more than 50% market share in the mobile space, the new entity as a converged player would only command one-third market share.

Jamaludin noted that the new entity would enable it to provide affordable pricing, better quality and better coverage to the consumers.

However, he could not guarantee lower prices post-merger.

Jamaludin explained that the proposed merger would provide stronger balance sheet of RM15 billion to RM20 billion with the listing of Celcom via injection into Digi.

Jamaludin said it will take two to three months to complete the signing and six to nine months to obtain all relevant approvals. The merged entity is expected to be established in the third quarter of 2020.

Speaking of why Bangladesh’s Robi is not involved in the proposed merger, he said it would create a monopoly in the market with about 80% market share.

Vodafone Idea in India is also excluded as the group is seeking to dispose of it.

Jamaludin gave the assurance that there will be no job cuts due to the proposed merger.

“If at all, it will be purely voluntary (via voluntary separation scheme and mutual separation scheme),” he said, adding that its major shareholder Khazanah Nasional Bhd has already given its blessing to proceed with merger discussions.

Khazanah holds a 37.14% stake in Axiata, followed by Permodalan Nasional Bhd (18.42%) and the Employees Provident Fund (16.36%).

Telenor president and CEO Sigve Brekke said board representation on the new entity will reflect the shareholding structure. Telenor is expected to appoint the CEO of the new entity. – by EVA YEONG


US stocks futures tumble on Trump trade threat on China

NEW YORK, May 6 — Wall Street stocks were sharply lower early today, joining most global bourses in tumbling as US President Donald Trump threatened new tariff measures on China. US stocks futures fell after Trump threatened yesterday to raise…


Bursa Malaysia enters blockchain-powered securities borrowing and lending

KUALA LUMPUR: Bursa Malaysia Bhd has embarked on a securities borrowing and lending (SBL) Proof-of-Concept (POC) – a first of its kind in Asean that explores the opportunities afforded by blockchain technology to develop greater transparency and address other operational challenges associated with the SBL market.

The project aims to ramp up efficiency, speed and capacity in securities lending supply and borrowing demand (lending pool).

Developed in partnership with the exchange’s technology partner Forms Syntron Information (HK) Ltd, a wholly-owned subsidiary of Shenzhen Stock Exchange-listed Shenzhen Forms Syntron Information Co Ltd, the POC will involve a diverse range of SBL market participants.

Affin Hwang Investment Bank Bhd, CIMB Investment Bank Bhd, Citibank Bhd, Kumpulan Wang Persaraan (Diperbadankan) and Malacca Securities Sdn Bhd are collaborating with Bursa Malaysia and Forms to drive the development of the blockchain-enabled lending pool to suit the industry’s specific needs, cost and efficiency pressures.

Bursa Malaysia CEO Datuk Muhamad Umar Swift said across different markets, empirical studies show that short selling helps provide additional liquidity and improves price efficiency.

“The growth potential of Malaysia’s SBL market makes it a prime candidate where the power of blockchain technology can create a considerable impact. The collaboration also benefits the wider industry through new knowledge, insights and practical experience in harnessing digital innovation to support and drive the growth of the capital market.”

The initiative also opens the possibility for Bursa Malaysia to undertake deeper explorations in blockchain technologies to address other operational challenges prevalent to SBL activities in Malaysia and discover more opportunities to drive end-to-end functionalities such as market interest discovery, trade capture and collateral management.


Warren Buffett says US-China trade war ‘bad for the whole world’

NEW YORK, May 6 — Warren Buffett said today that a trade war between the United States and China would be “bad for the whole world.” Buffett spoke after US President Donald Trump tweeted yesterday that he will raise tariffs on US$200 billion…


Foreign selling on local bourse picks up

PETALING JAYA: The momentum of foreign net selling activity on Bursa Malaysia picked up last week, extending the selling streak to the sixth week, according to MIDF Research.

Foreign funds sold RM275.7 million net of local equities last week, almost four times more than what was seen in the week before.

The research house said Monday recorded a foreign net outflow of RM96.3 million net as investors waited for a slew of data from the US, Europe and China which may shed some light on the prospects of global economic growth.

“Foreign net selling peaked during the week on Tuesday at RM102.9 million net as Malaysia and other regional markets were closed on Wednesday. Sentiment was also partially affected by the lower-than-expected Purchasing Managers’ Index (PMI) in China.”

“As markets reopened on Thursday, foreign investors continued to take out local equities at a tune of RM88.8 million net. The trend of foreign net outflow was in conformity with other regional peers namely, Thailand and Indonesia.”

However, MIDF said international funds made their way back to Bursa on Friday as they snapped up RM12.2 million net of local equities, bringing the five-day selling streak to an end.

“Performance of the local bourse on that day was partly influenced by Malaysia’s April trade surplus of RM14.4 billion, the largest gain since October 2018.”

For the month of April, Malaysia recorded a foreign net outflow of RM1.49 billion, marking the third consecutive month of foreign net selling. This brings the foreign outflow from Malaysia for the first four months to RM2.76 billion compared with a foreign net inflow of RM3.71 billion recorded during the same period last year.

“Among the four Asean markets we monitor, Malaysia retains its position as the nation with the largest foreign net outfl ow amongst the four Asean markets we monitor.

“Meanwhile, amongst the seven Asian markets we track, India is the nation with the largest foreign net inflow nearing US$10 billion as the general election is still ongoing until May 23.”


Reprimands, fines for Perak Corp, Wintoni ex-directors

KUALA LUMPUR: Bursa Malaysia Securities Bhd has publicly reprimanded Perak Corp Bhd and Wintoni Group Bhd, which is in liquidition, for breaches of the Bursa Malaysia Securities Listing Requirements.

Seven Perak Corp former directors were reprimanded and fined a total of RM237,500.

The regulator also reprimanded seven former directors of Wintoni, who were fined RM165,400 in total.

Perak Corp was publicly reprimanded for failing to issue its annual report for the financial year ended Dec 31, 2016 before its deadline; failing to carry out a limited review on the company’s quarterly reports for four quarters and failing to ensure that the quarterly report 4/2016 took into account the adjustments announced on June 1, 2017.

Wintoni was publicly reprimanded for committing financial reporting breaches, corporate governance breaches and internal audit function breaches. This includes failing to issue its quarterly reports, annual report, failing to ensure that there were at least two independent directors in the board, failing to establish an internal audit function, among others.

Wintoni’s liquidator was also publicly reprimanded for breach of rules.

Bursa Malaysia said it views the contraventions seriously as the timely and accurate submission of financial statements and the corporate governance requirements on composition of the board of directors, audit committee and internal audit function are fundamental obligations of listed companies and of paramount importance in ensuring a fair and orderly market for securities traded on Bursa Malaysia and necessary to aid informed investment decisions.


To cut or not to cut?

PETALING JAYA: All eyes are on Bank Negara Malaysia’s (BNM) monetary policy tomorrow – whether there will be an interest rate cut amid weak economic outlook.

OCBC Bank believes the central bank may wait to monitor the situation a bit longer before making a decision to cut, especially with the return of US-China trade tensions and US dollar strength.

“Overall, we retain our expectations that BNM may only cut as early as July 2019 rather than the upcoming May 2019 meeting,” it said in a research note today.

AmBank Research concurred, saying that while noises that BNM may cut the Overnight Policy Rate (OPR) have gained traction, it opined that the central bank will most likely hold the rate in May and institute a rate cut in July.

OCBC said a major concern that may underlie BNM’s decision to cut could be regarding the growth situation as the Industrial Production Index for Q1 has been on a decline and it has usually been reflective of weaker GDP growth to come.

“However, the question then becomes the extent to which BNM primarily puts its focus on growth when adjusting the OPR. Historically, this has tended to be the case as a cut would follow a period of slowing growth or a hike similarly would come after some time of robust strong expansion.

“Furthermore, with the government undertaking fiscal consolidation, tools to stimulate the economy are limited. Externally, there is also now the higher risk that the possibility of any form of a near-term resolution on the US-China trade tensions may not materialise.”

BNM has maintained the OPR at 3.25% since January 2018.

Meanwhile, Malaysia’s gross domestic product (GDP) growth could fall below 4% to a low of 3.8% in the first quarter (Q1) this year given the persistent contraction in exports.

AmBank Research expects Q1 GDP to hover between 3.8% and 4.2% based on its preliminary estimation following less exciting trade numbers. Last year, the local economy grew 4.7%.

HLIB Research expects the decline in global PMI manufacturing will continue pending developments in the US-China.

“Closer to home, Malaysia was also negatively affected with exports recording a decline (-0.9% year-on-year (yoy)). Nevertheless, the larger drop in imports (-2.9% yoy) have led to wider trade surplus of RM37.4 billion (Q1 18: RM33.4 billion; Q4 18: RM34.8 billion) which indicates that net exports could contribute to overall Q1 GDP.”

Kenanga Research also believes that trade performance will remain relatively subdued, premised upon the yet uncertain outcome to the extended US-China trade nego-tiations and ongoing economic moderation in major global markets, including China, the European Union and the US. It is maintaining the exports forecast of 4-6% in 2019 against 6.8% in 2018.

“Along with an expectation of slower domestic demand, GDP growth will likely extend its slowdown into the Q2 to 4.2% from an estimated 4.4% in Q1, adding to our whole projection of a slower growth of 4.5%.”


‘Strengthen corporate governance through independent, diverse board’

KUALA LUMPUR: The Securities Commission’s inaugural Corporate Governance (CG) Monitor 2019 highlighted the need for policies and practices for long serving independent directors and gender diversity in the boardroom.

SC chairman Datuk Syed Zaid Albar lauded the adoption of the best practices by public listed companies, which includes the nine-year tenure limit for independent director.

“A survey by Institutional Shareholder Services Inc that found 70% of institutional investors agreed that having a large number of directors with long tenure is a concern. It is believed to prevent boards from introducing new skills and ideas to the running of the business,” he said.

According to the SC report, setting a tenure limit is also recognised as a means of controlling the risk of entrenchment and facilitating board refreshment to ensure it has the optimum mix of skills and experience required to lead and navigate the company.

The report highlighted that there has been a reduction in the average tenure of independent directors from seven years in 2015 to five years as at December 2018.

In addition, Asian Corporate Governance Association’s (ACGA) CG watch 2018 ranked Malaysia 4th in the region for corporate, a jump its from 7th place finish in 2016.

While Malaysia climbed the corporate governance ranking due to concrete moves by the government to tackle endemic corruption issued fostered by the previous administration, its weakest score was in the independence category which is measured by a company’s board size, tenure and share of independent directors.

Nonetheless, ACGA founding secretary-general Jamie Allen cautioned that the reduction of the average tenure from seven to five years might not be ideal for an independent director.

“Somewhere, between six to nine years would be a good length of time for an independent director to be on the board, though this estimate might vary from company to company. If it can put forth a good case to its shareholders for a director that has been on the board for nine years but still extremely independent that should be okay.”

With regards to gender diversity, Malaysia has achieved its target of eliminating all-male boards in the top 100 listed companies in January last year.

In 2018, women participation in the top 100 companies was at 23.68%, a seven percentage point increase from 16.6% recorded in 2016.

Meanwhile, women account for 28% of senior management positions for all listed companies, higher than the Asia Pacific average of 23%.

Maybank Kim Eng CEO Datin Ami Moris said diversity in the boardroom should be approached through a structured and systematic way instead of just box ticking to meet the 30% target.