Tuesday, July 9th, 2019


India’s TCS reports 11pc rise in profits

MUMBAI, July 9 — India’s biggest software outsourcing firm Tata Consultancy Services (TCS) today reported record quarterly earnings, buoyed by a growing demand for its banking and financial services. Mumbai-based TCS posted a 11.2 per cent rise…

US stocks continue retreat ahead of Powell testimony

NEW YORK, July 9 — Wall Street opened in the red today, leaving US stocks down for the third straight session as investors awaited this week’s testimony from Federal Reserve Chairman Jerome Powell. Stock prices have retreated from last week’s…

Govt sues Aeon Credit over unpaid taxes

KUALA LUMPUR, July 9 — The government is suing Aeon Credit Service (M) Bhd over unpaid taxes for seven years of assessment from 2010 to 2016. In a filing with Bursa Malaysia earlier today, Aeon Credit confirmed it received a writ of summons…

UK watchdog proposes to fine Marriott US$124m for data breach

LONDON, July 9 — Marriott International Inc said today the UK Information Commissioner’s Office (ICO) had proposed to fine the hotel chain £99.2 million (RM512 million) due to a massive data breach in its Starwood hotels reservation system. In…

Malaysia among top 10 in cross-border capital for commercial property investments in Asia-Pacific

KUALA LUMPUR: Malaysia saw an 18% year-on-year increase in cross-border capital for commercial property investments in the first quarter (Q1) of 2019, placing it in the top 10 countries in Asia Pacific, according to independent global property consultancy Knight Frank’s 2019 edition of its flagship report, Active Capital.

Knight Frank Malaysia executive director of capital markets James Buckley said overseas investors are carefully watching the progress of the new government who have made some encouraging progress in tackling corruption and cutting costs, particularly the renegotiation of Chinese-backed infrastructure projects.

“With high supply in the office and retail sectors, we are particularly focused on alternative real estate sectors such as car parking, educational and logistics investment properties where the fundamentals are stronger. We have also seen good demand from overseas groups for hospitality assets. We anticipate that there will be increasing repositioning opportunities for older office buildings where increasing vacancy may lead owners to consider alternative uses,” he said in a statement today.

Between Q1 2018 and Q1 2019, China remains the largest recipient of cross-border capital in Asia Pacific as its economic prowess continues to attract attention from foreign investors. This is followed by developed Asian economies such as Australia, South Korea, Japan and Singapore, as these matured economies are commonly viewed as safe havens for key investors such as REITs, private equity firms and hedge funds.

Knight Frank said the global residential sector had undergone some transformation in recent years, especially in developed countries, as occupiers across all-age groups began to adopt an asset light model, preferring to rent rather than owning their residence.

“This occurs as the modern society favors flexibility and experience of living over the possession of tangible assets. This has resulted in the proliferation of co-living spaces.”

Knight Frank Malaysia executive director of capital markets Allan Sim said in some developed Asian markets such as Hong Kong and Singapore, with the scarcity of land as well as high property prices, developers see the opportunity to fill the gap with co-living spaces targeting young professionals.

In Malaysia, as the co-working trend continues to gain traction, the idea of co-living which shares similarities with co-working is expected to take shape, especially in well-connected business districts.

“Challenges in the property market have also prompted developers to be more creative in generating expected revenue, resulting in the emergence of developments with co-living elements. For example, co-living spaces such as Co-Coon Co-Living KL by Tan & Tan Developments Bhd and the incoming Lyf Raja Chulan Kuala Lumpur by The Ascott Ltd are starting to make inroads into Malaysia.

“The demand for co-living spaces, which is intertwined with co-working, is poised to grow in the midterm given rapid urbanisation coupled with the shift in lifestyle habits especially among the millennial generation,” Sim added.

White House economic advisor says Fed chief’s job is safe

WASHINGTON, July 9 — Federal Reserve chief Jerome Powell’s job at the head of the US central bank is safe, White House economic advisor Larry Kudlow said today. President Donald Trump has lambasted Powell repeatedly for raising interest rates,…

Deutsche Bank shares slide as investors digest revamp

FRANKFURT, July 9 — Shares in Deutsche Bank, Germany’s embattled biggest lender, continued to decline in trading today, as analysts said the jury was still out on the massive restructuring announced at the weekend. Deutsche Bank stock was down…

Cyber attacks cost US$45b in 2018 as ransomware hits hard

WASHINGTON, July 9 — An estimated two million cyber attacks in 2018 resulted in more than US$45 billion (RM186 billion) in losses worldwide as local governments struggled to cope with ransomware and other malicious incidents, a study showed today….

Analysts don’t rule out further OPR cut this year

PETALING JAYA: Analysts have mixed views on whether Bank Negara Malaysia (BNM) will announce another interest rate cut this year.

JPMorgan expects external headwinds to put a lid on economic growth and maintained its projection of a 25 basis point (bp) cut at the MPC meeting on Sept 12.

“In our view, the recent dovish shift in developed market central banks and the downside risks to growth could open room for policy easing in the region, including Malaysia. Thus, we continue to look for a 25bp cut in the policy rate at the September 12 MPC meeting, though this call remains adaptive to the evolution of global financial conditions and support from domestic drivers of growth,” it said.

It expects the country’s gross domestic product (GDP) growth to slow slightly to 4.3% this year from 4.7% last year.

Nonetheless, MIDF Research expects BNM to keep the Overnight Policy Rate (OPR) unchanged at 3% for the rest of 2019, as there will be less pressure from both domestic and external fronts.

In its research report, MIDF Research said that the central bank’s decision to maintain the OPR at its MPC meeting today was in line with its expectation.

“The 25 basis point cut in May 2019 is sufficient to boost economic growth particularly domestic demand. As long as gross domestic product growth is more than 4% and core Consumer Price Index still positive, we opine no further change in monetary stance is required at this juncture. In addition, the Fed has signalled possible rate cut by at least once this year.”

It said that the rate cut in May would improve both domestic consumption activities and investment particularly in the second half of 2019 (2H19) while the strong momentum in private consumption and services sector will drive the economy into a good position this year.

In addition, leading indicators such as leading index and business tendency survey point towards better growth trajectory in 2H19. The research house expects the economy to expand by 4.9% this year, while headline inflation rate is expected to average at 0.6%, lower than the 1% last year.

Food inflation was expected to provide upside pressures to the overall inflation while transport inflation was anticipated to recover significantly in 2H19 due to rising global crude oil prices, more targeted domestic petrol subsidy and removal of the RON95 fuel price cap.

“However, we note that the developments in these areas have been muted. Even with the removal of the RON95 price cap, the prices are expected to be on the low side in line with declining global crude oil prices which are affected by the ballooning trade tensions, among others.

“We anticipate inflationary pressure mainly from fuel-related items to remain weak in line with our expectation of Brent crude oil price at US$70 per barrel for 2019,” said MIDF Research.

OCBC Bank economist Alan Lau expects BNM to hold the benchmark rate for the rest of 2019, but does not rule out additional cuts if growth risks worsen.

“In particular, as highlighted these include those related to global uncertainties and weakness in the commodity sectors. We probably may still have to wait further down the road before we get an idea on how much such risks have worsened given the current trade truce between the US and China,” he said.

In its statement, BNM maintained its projected GDP growth range at 4.3-4.8%. Lau noted that a possible restart of the East Coast Rail Link project could provide further boost to growth.

Food inflation is expected to provide upside pressures to the overall inflation rate. – BERNAMAPIX

Rubber gloves sector under pressure due to oversupply, says research house

PETALING JAYA: Malaysian rubber glove manufacturers’ selling prices and operating profit margins will come under pressure in the short term due to oversupply, according to AmResearch.

With that, the research house is downgrading the sector to “neutral” from “overweight”.

Nevertheless, it expects the sales volume to continue to grow at around 8-10% for the year.

“The expected robust growth is underpinned by an expanding global healthcare sector as well as increased awareness on the importance of hygienic practices throughout the industry, especially in emerging markets such as India and China,” it said.

“Currently, glove consumption per capita in emerging markets such as India and China is still low at around two to six gloves as opposed to 100-280 gloves for developed countries.”

In 2018, Malaysia’s rubber gloves export expanded 14% year-on-year (y-o-y), with natural rubber gloves recording a 7.6% increase and nitrile gloves 18.2% growth.

AmResearch believes that there will be pressure on operating profit margins in 2019 stemming from the influx of glove supply of the “Big 3” producers, namely Top Glove, Kossan and Hartalega.

“FY19 will see an enlarged supply of gloves by 13%, although the expansion will come at a gradual pace. As this exceeds the organic demand growth expectation of 8-10%, we believe average selling price (ASP) will be slightly weighed down initially.”

The research house said it will take six to 12 months for demand-supply to reach equilibrium.

“The Big 3 producers enjoyed higher sales volume of between 5% and 18.8% in 1H19, while ASP movement was mixed largely on the back of mixed raw material price and US dollar/ringgit movements.”

“As a result, there was a contraction in ebitda (earnings before interest, taxes, depreciation and amortisation) margin for Top Glove and Hartalega but an improvement in Kossan’s in the latest quarterly results.”

Nonetheless, with an estimated 2% to 4% drop in nitrile-based rubber (NBR) price in 1H19, AmResearch said it bodes well for the Big 3 as the lower NBR price will widen their products’ margins.

Nitrile gloves production makes up 95% of Hartalega’s, 45% of Top Glove’s and 75% of Kossan’s total gloves production.

It highlighted that the NBR price will continue to decline due to the falling prices of butadiene, which is an input cost for nitrile gloves.

Meanwhile, the research house expects a weaker ringgit will elevate the glove producers’ margin as exports make up most of the sales.

AmResearch’s top pick is Top Glove due to expansionary plans; efforts in improving quality and operational efficiency; as well as its position as the largest rubber glove manufacturer.