Monday, July 8th, 2019
BRUSSELS, July 8 — Italy’s Finance Minister Giovanni Tria today signalled he was open to sales tax hikes next year to favour growth and reduce levies on labour, in a further conciliatory gesture to Europe that could however cause him trouble at…
LONDON, July 8 — Sterling hovered near a six-month low against the dollar today as investors continued to bet on lower British interest rates and added to their short positions on the currency. As major central banks around the world including the…
NEW YORK, July 8 — Wall Street stocks retreated early today on worries over slowing global growth and diminishing hopes for an aggressive Federal Reserve interest rate cut. US markets continued to pull back after Friday’s strong June jobs report…
PETALING JAYA: The outflow of foreign funds from Malaysia is expected to wane after a rebound in foreign portfolio inflows in June, according to economists.
Kenanga Research believes the forecast lower pullout of international funds is premised on the pivot towards a dovish monetary policy stance by the US Federal Reserve (Fed) and the European Central Bank, leading to highly probable benchmark interest rate cuts and liquidity injections.
Foreign investors turned net buyers of Malaysia’s debt securities in June, as total foreign holdings increased by RM6.6 billion or 3.8% month on month to RM182.6 billion, recording the largest inflow in eight months, after declining in the previous two successive months.
Consequently, the share of total foreign holdings of Malaysia’s debt rose to 12.3%.
Foreign investors also emerged as net buyers in the local equity market in June, with a net inflow of RM100 million, after pulling out funds for the previous four straight months.
Collectively, the capital market saw the largest net inflow of foreign funds in 17 months, supported by strengthening of the ringgit amid growing indication of an imminent rate cut by the Fed, as well as hopes of a trade war truce at the recent Group of 20 summit in Osaka, Japan.
Kenanga said June’s improvement was largely attributable to a net increase of Malaysian Government Securities (MGS) and short-term notes (ST), with foreign holding of 36.9% and 54.5%, each.
These have more than offset declines in Malaysian Government Investment Issues (GII) by RM10 million and Private Debt Securities (PDS) by RM100 million, marginally squeezing the foreign holdings share of total GII and PDS to 4.4% and 1.68%, respectively.
“While there is a possibility for the trend to reverse into a net outflow amidst the looming uncertainty surrounding the US-China trade dispute and rising growth moderation in major economies, we foresee that the pullout of funds by foreign investors would be less compared to the previous year,“ said Kenanga.
It said the US 10-year treasury note average yield extended its fall, dropping by 31 basis points (bps) to 2.06% in June, while the benchmark Malaysian 10-year MGS average yield decreased by 13 bps to 3.67%, widening the average yield spread in June to 161 bps.
Overall, it expects Bank Negara Malaysia (BNM) to hold the Overnight Policy Rate (OPR) steady at 3.00% in 2019 following a rate cut of 25bps in May.
“However, we opine that BNM has scope and space to lower the OPR, in case of a steeper deterioration of the economy and should the Fed decide to cut rates more than once this year.”
On the ringgit outlook, Kenanga maintained its US dollar-ringgit year-end forecast of 4.10 (2018: RM4.13), as it foresees an imminent Fed rate cut to trigger a “risk on” sentiment, lifting demand for higher yielding emerging market assets.
Meanwhile, UOB Research said a temporary trade truce post-G20 provides relief as US and China agreed to restart talks after negotiations broke down in early May.
“However, we still see substantial risk with 30% probability that trade dialogues could break down during the process which is expected to be lengthy.”
PETALING JAYA: Bank Negara Malaysia (BNM) is expected to keep the Overnight Policy Rate (OPR) unchanged at 3% at tomorrow’s monetary policy meeting following the 25-basis point cut in May, according to Standard Chartered Research.
It said the central bank’s last policy stance sounded neutral.
“The rate cut in May was intended to address some signs of financial conditions tightening, rather than any significant growth deterioration or fall in inflation,” it said in research note
“While, downside risk to growth is expected to remain, we think the May cut was pre-emptive and expect the central bank to remain watchful.”
Standard Chartered expects Malaysia’s growth to remain above 4.5% year on year with stable core inflation (excluding tax changes effect) at 1.6%.
Meanwhile, it noted that the Monetary Conditions Index indicated that monetary conditions have loosened in Malaysia.
“The policy rate cut, a weaker real effective exchange rate and a slight improvement in money-supply growth have contributed to looser conditions.”
Malaysia’s gross domestic product growth moderated to 4.5% in the first quarter of 2019 from 4.7% in the fourth quarter of 2018, on the back of a significant decline in private investment.
Despite that, BNM is maintaining its baseline projection of 4.3%-4.8% growth for the year amid escalating tensions in global trade.
Governor Datuk Nor Shamsiah Mohd Yunus said the projection has taken into account the US-China trade war, including the latest tariff increase.
Meanwhile, the central bank expects inflation to remain low in the immediate term, mainly due to policy measures such as the price ceiling on domestic retail fuel prices until mid-2019 and the impact of the changes in consumption tax policy on headline inflation.
PETALING JAYA: Mestron Holdings Bhd today entered into a memorandum of understanding (MoU) with Platinum Core Solutions Sdn Bhd (PCS) to explore a joint venture arrangement in providing centralised system for base band unit (BBU) that convert cellular baseband signals into radio frequency signals to licensed network service providers in Malaysia.
Mestron Engineering is involved in the manufacturing of steel poles as well as trading of outdoor lighting products, while PCS is engaged in the provision of telecommunication engineering and consultancy services. PCS is also a licensed network services and network facilities provider.
The centralised BBU system is developed by PCS as a network solution to boost internet speed. It is a carrier neutral network solution for all mobile network operators and is managed centrally at a centralised facility hosted by PCS with the necessary service infrastructure.
The implementation of centralised BBU system will entail the replacement of existing telecommunication towers and monopoles with new multifunctional poles (smart pole) that are able to support street lighting application, broadband transmission (4G and 5G), surveillance cameras and wireless network components (public Wifi).
“The MoU provides the company with an opportunity to expand its foothold in the telecommunication infrastructure business by participating in the centralised BBU system project,” Mestron said.
PETALING JAYA: TDM Bhd’s wholly owned subsidiary TDM Plantations Sdn Bhd has entered into a medium-term agreement with Ikhasas CPO Sdn Bhd for the supply of crude palm oil and/or roundtable on sustainable palm oil certified crude palm oil (CPO) products.
The agreement is for a period of 43 months, in which it has to deliver 2,500 metric tons of CPO to Ikhasas.
An upfront payment of RM189 million will be paid to TDM in three tranches. TDM plans to use the upfront payment to pare down its borrowings (RM52.5 million), capital expenditure (RM10 million) and working capital (RM125 million).
PETALING JAYA: Berjaya Sports Toto Bhd’s 88.26%-owned subsidiary Berjaya Philippines Inc’s (BPI) stake in Philippine Gaming Management Corporation (PGMC) has been pared down to 39.99% from 99.99%.
The group said in a filing with the stock exchange that BPI has disposed of a 20% stake in PGMC to Jose A. Bernas for 117.15 million pesos (RM9.45 million), bringing its shareholding to 79.99% from 99.99%.
Following that, as BPI waived its right to subscribe for additional PGMC shares issued, BPI’s stake in PGMC will further decline to 39.99% from 79.99%.
Upon the disposal and subscription, PGMC has ceased to be a subsidiary of BPI.
The cash proceeds arising from the disposal will be utilised by BPI for its working capital and/or other project investment.
The only business of PGMC is the lease of lottery terminals and providing maintenance to the Philippine Charity Sweepstakes Office pursuant to the supplemental equipment lease agreement which will expire in August 2019.
“The disposal represents an opportunity for BPI to unlock part of its investment in PGMC for working capital and other project investment,“ BPI said.
However, the disposal and subscription resulted in a loss of about 372.5 million pesos at the BPI group level during the current financial year ending April 30, 2020 mainly due to the disposal, deemed disposal and loss on re-measurement on the retained interest as an associated company.
KUALA LUMPUR: Kenanga Investment Bank Bhd’s asset management subsidiary Kenanga Investors Bhd (KIB) today completed the acquisition of 100% equity stake in Libra Invest Bhd, a fund management arm of ECM Libra Financial Group Bhd for RM50.1 million.
Effective today, Libra Invest will operate as a wholly owned subsidiary of KIB.
Kenanga Investment Bank group managing director Datuk Chay Wai Leong said this is a significant step forward in terms of growing its asset management business in Malaysia.
“This will propel the asset under management of KIB as a group over the RM10 billion mark, enhancing its position as one of Malaysia’s leading unit trust and asset management companies,” he said in a statement.
KIB executive direcor and CEO Ismitz Matthew De Alwis said this brings together KIB’s competitive edge in equity products and Libra Invest’s fixed income strength to deliver tangible results for investors.
“There will be no immediate changes to our day-to-day operations as we work towards seamlessly integrating both the entities. We target to complete harmonisation of systems, processes, and all critical facets of both entities, by the end of third quarter this year. Our priority is to ensure a smooth transition for all our internal and external stakeholders,” he added.
Earlier last month, the Securities Commission Malaysia approved ECM Libra’s proposed disposal of Libra Invest to KIB. ECM Libra has also disposed of its investment banking and securities business prior to venturing into the hospitality business.
KIB provides investment solutions ranging from collective investment schemes, portfolio management services, exchange traded funds, financial planning and alternative investments for retail, high net worth, corporate and institutional clients.
PETALING JAYA: Barakah Offshore Petroleum Bhd has proposed to undertake a regularisation plan that involves a share capital reduction, disposal of a pipelay barge, placement of shares and debt settlement schemes.
In a filing with Bursa Malaysia, the company said that the proposed regularisation plan was formulated to address and uplift its Practice Note 17 (PN17) status, by returning the company to a better financial standing and settlement of scheme creditors.
The proposed share capital reduction entails the cancellation of RM185.51 million of the issued share capital of Barakah, resulting in the reduction of the issued share capital from RM231.89 million to RM46.38 million. The RM185.51 million credit will be used to set-off the accumulated losses of the company.
The second part of the regularisation plan is the proposed disposal of a pipelay barge by PBJV Group Sdn Bhd to Lecca Group Pte Ltd for US$21 million (about RM88 million) cash. The pipelay barge is a marine vessel that is primarily used for the laying of pipes underwater and is owned by Kota Laksamana 101 Limited (KL101).
Meanwhile, the proposed placement entails the proposed placement of 375 million Tranche 1 placement shares representing up to 44.87% of Barakah’s existing issued share capital at 4 sen per share, together with RM25 million in nominal value of RCULS-B on the basis of five RCULS-B for every three placement shares subscribed.
The proposed placement also includes the option to subscribe for up to 250 million Tranche 2 placement shares to Lecca at an exercise price of 4 sen per Barakah share over a five-year period.
As at May 31, 2019, the total outstanding liabilities due to the scheme creditors of Barakah and PBJV amounted to RM106.65 million and RM287.99 million respectively.
The proposed placement would result in the placement investor (Lecca) being obliged to undertake a mandatory offer to acquire the remaining Barakah shares it does not already own. However, it does not intend to do so and will submit an application to the Securities Commission Malaysia for an exemption.
The US$21 million (RM86.8 million) raised from the proposed disposal will be used as partial repayment of debt owing to EXIM Bank while the subscription of Tranche 1 placement shares together with RM25 million in nominal value of RCULS-B would raise RM40 million, which will be used for settlement of scheme creditors of PBJV, working capital and expenses of the proposed regularisation plan.
The proceeds raised from the subscription of Tranche 2 placement shares, if any, will be used for working capital requirements of the group.