Thursday, August 1st, 2019


US manufacturing drops near three-year low as exports shrink

WASHINGTON, Aug 1 — America’s manufacturing slowdown worsened last month as weaker demand sent activity to its lowest level in nearly three years, according to a survey released today. It was the fourth straight monthly decline in manufacturing…

US Senate aims to pass Trump-backed two-year spending, debt limit deal

WASHINGTON, Aug 1 — The US Senate today will try to complete a months-long effort by lawmakers and the Trump administration to set spending levels for the next two years for the military and numerous domestic programmes while also temporarily…

Amazon chief Bezos cashes in US$1.8b of share pile

SAN FRANCISCO, Aug 1 — Inc founder Jeff Bezos sold shares worth US$1.8 billion (RM7.5 billion) in the last three days of July, reducing the value of his stake in the world’s third most valuable company to about US$110 billion. The…

Search for new IMF head widens to include British candidate

BRUSSELS, Aug 1 — European governments widened their search for a new head of the International Monetary Fund, extending a deadline to 1800 GMT today so that Britain can put forward a candidate. EU finance ministers, having failed to reach a…

Wall St higher on tech boost, focus shifts to earnings

NEW YORK, Aug 1 — US stocks bounced back today, helped by technology shares as focus shifted to corporate earnings after a cautious message from the Federal Reserve on interest rates drove some of the biggest falls since May in the previous…

Malaysia has potential to become Asean’s digital hub: MDEC

GEORGE TOWN: Malaysia has the potential to become a digital hub for Asean as the combined market value in the region is projected to reach up to US$1 trillion (RM4.12 trillion) by 2025.

Malaysia Digital Economy Corporation Sdn Bhd (MDEC) vice-president (investment & industry development) Hew Wee Choong said that there is a huge potential to tap in this area.

Combined with the country’s digitalised ecosystem tailored to boost the start-up presence and to draw in investors, it was only natural for Malaysia to become a hub for the digital economy of Asean.

Currently, Asean has 639 million consumers, about half of China’s population with a gross domestic product (GDP) of US$2.5 trillion and an average growth of 6%.

The region with its 10 countries combined, is the globe’s fifth largest economy with tremendous potential to grow due to a young and energetic population.

Hew said that Malaysia has placed the country in a position to spread the growth of the digital economy throughout the region.

The country already has 20.9 million smartphone users with a household internet penetration rate of 86% while the digital economy is expected to contribute up to 20% of the nation’s entire GDP by next year.

Hew outlined that Malaysia will boost funding for start ups and reaching out to techpreneurs in the region.

“We will also set up an environment which would allow start-ups to collaborate seamlessly with multinational corporations and with fellow service providers,” he said after attending a technology assessment seminar titled “Keysight World”.

The Keysight World seminar was organised by the US-based Keysight Technologies, whose production line in Penang provides the leadership for its global supply chain.

According to him, Malaysia will also bring in the necessary technology applications to help start-ups grow their ventures.

In addition, MDEC will liaise with venture capitalists and new age investors to consider setting up more funds for the Asean digital ecosystem.

Keysight Technologies president Datuk Gooi Soon Chai said that 40% of future capital investments for the Internet of Things (IoT) would be in Asia.

He said that Keysight is already involved in the processes of IoT, Artificial Intelligence, Big Data with one example being the firm’s research in autonomous vehicles, which may come to fruition by the middle of this new millennium.

In light of the progress made in the electronics and electrical market, Gooi said that Keysight has also doubled its research grant from US$300 million to US$600 million to be invested in Penang.

With the bigger investment, Penang is set to play a big part in the age of the Industrial Revolution 4.0 hence it is important for both the public and private sectors to be ready for the digitalisation of the state and the region, said Gooi.

RAM Ratings: Malaysian exports in June likely higher, but external headwinds loom

KUALA LUMPUR: RAM Ratings expects Malaysia’s exports to have continued expanding in June, albeit at a more moderate pace of 1.1% (May: 2.5%), partly attributable to the Hari Raya festive holidays in June and generally more subdued global trade.

In line with its sustained export performance, imports in June are anticipated to be 1.6% higher (May: 1.4%). This would bring Malaysia’s overall trade surplus to RM5.7 billion at month-end.

Looking ahead, the Japan-South Korea trade row is envisaged to exert further downside pressure on weak regional trade momentum, particularly for the electrical and electronics (E&E) supply chain. This follows Japan’s decision to impose restrictions on exports of high-technology chemicals to South Korea (effective July 4).

According to RAM, these items are vital to the production of semiconductors and display screens on smart devices – components of South Korea’s prominent E&E sector. Given Japan’s dominance in the supply of these high-technology materials (accounting for a reported 90% of global supply), this will likely exacerbate the already sluggish outlook on South Korea’s E&E exports.

RAM said the direct impact on Malaysia’s exports from a potential shortfall in supply as well as a potential loss in demand from South Korea appears limited, as the former does not rely heavily on the latter’s E&E sector but Malaysia could be indirectly affected via a disrupted global E&E production chain.

RAM head of research Kristina Fong said the latest escalation in trade tensions between Japan and South Korea poses key downside risks to the global supply chain for E&E products, especially given the latter’s dominance in the supply of memory chips.

“South Korea accounted for 37.6% of global memory chip exports in 2018. Although first-degree effects may not be significant for Malaysia, the potential overarching supply bottlenecks for key inputs (such as these chips) in the short term may further stifle the tech cycle and retard the growth of the global E&E industry,” Fong said in a statement today.

However, she noted that there may still be some room for trade-diversion benefits for Malaysia, in a bid to manage bottlenecks in the supply chain for inputs arising from export restrictions.

She said demand may be diverted to Malaysian firms and global E&E players could also capitalise on the existing infrastructure and scale up their output capacity in Malaysia if they decide to diversify their production away from South Korea.

Bursa: Healthy IPO pipeline in the second half of the year

KUALA LUMPUR: Bursa Malaysia Bhd expects strong listing activity in the second half of the year with 13 initial public offerings (IPOs), according to its CEO, Datuk Muhamad Umar Swift (pix).

“We have a healthy pipeline of 13 companies to be listed in the second half of the year with an estimated market capitalisation of RM15 billion,” he told reporters at a briefing on Bursa Malaysia’s financial results today.

“While the market is softer, it makes us confident that we are seeing this stream of businesses coming in, that Malaysia has a deep base for investors,” he said.

Of the 13 companies that have received approval for listing, three will be listed on the Main Market and seven on the ACE Market, while the remaining three will be listed on the LEAP Market.

In the first half of the year, a total of 14 companies with a market capitalisation of RM5.5 billion were listed on the bourse.

Meanwhile, Bursa Malaysia’s profit after tax and minority interest (patami) fell 23.6% to RM93.2 million in the first half of the year ended June 30, 2019 (1H19) from RM122 million in 1H18.

Despite a decline in its performance, Muhamad Umar said he is cautiously optimistic for the second half of the year. With the net foreign funds inflows in June, he believes that the market has bottomed out.

“We think Malaysia has a wonderful story, growth is good, we have foreign funds flowing back in again and new projects are coming in, it’s time for investors to consider a comeback,” he said.

Although Muhamad Umar is upbeat on the prospect of foreign fund inflows for the second half of the year, he said it remains to be seen whether they will return to last year’s level due to the uncertainties in the market.

He said trade tensions between the US and China as well as a potential no-deal Brexit would be hurdles for foreign funds to return to their previous level on the local bourse.

“On the other hand, the fundamentals of the local market remain strong – we have a strong and sound banking system as well as positive developments such as the ECRL (East Coast Rail Link) and the relaunching of Bandar Malaysia,” he added.

For 1H19, Bursa Malaysia’s revenue fell 14% to RM250.49 million from RM291.27 million in first half of the previous year. It declared an interim dividend of 10.4 sen to be paid on Aug 30, 2019.

With Fed’s ‘insurance’ cut, Powell takes cue from Greenspan

WASHINGTON, Aug 1 — In cutting US interest rates but signalling that a series of further cuts was unlikely, Federal Reserve Chairman Jerome Powell yesterday took a page from the playbook of his predecessor Alan Greenspan, who used a similar tactic…

Tough demand conditions weigh on PMI in July

KUALA LUMPUR: The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index™ (PMI®) – a composite single-figure indicator of manufacturing performance – was largely unchanged in July, falling only marginally from 47.8 in June to 47.6.

At current levels, the PMI is broadly indicative of annual gross domestic product (GDP) growth of 4.5%, according to historical comparisons.

According to IHS Markit, the seasonally adjusted Output Index increased for the first time since April during the latest survey period.

“Firms reported a net inflow of new business from abroad for the first time since April, albeit only marginal, with the US, Japan and Turkey mentioned as particular sources of higher export demand,” it said in a statement today.

The rise in exports helped keep the seasonally adjusted New Orders Index above the weak levels seen at the start of the year, but overall demand conditions remained challenging.

Anecdotal evidence suggested that increased competitive pressures had made securing new work more difficult, and that concerns over global economic growth and geopolitical concerns remained headwinds.

However, when looking towards the coming 12 months, Malaysian manufacturers anticipate order book volumes to pick up and support production growth, said IHS Markit, who noted Malaysia’s remarkably resilient business confidence despite external headwinds, though the July survey saw optimism pull back from June’s 68-month peak.

The latest survey data also highlighted firms taking a more cautious approach to staffing levels, as employment was reduced in July. Difficulties in retaining and hiring staff were also mentioned as a factor behind the weaker jobs numbers.

The cautious approach was also apparent in purchasing and inventories data. Buying levels were tapered in July, as has been the case since last October, while stocks of inputs and semi-manufactured items were also pared back. According to anecdotal evidence, existing stocks were sufficient to meet the current operational requirements.

Elsewhere, input prices continued to rise, propped up by unfavourable exchange rate variation as well as reports of increased charges from suppliers and greater utility costs.

“However, the rate of input price inflation eased to a three-month low from May’s recent peak to hint at an easing of supply chain inflationary pressures. At the same time, Malaysian manufacturers raised their output charges only marginally in July, in most cases to partly share greater cost burdens with customers,” said IHS Markit.

IHS Markit chief business economist Chris Williamson said the pull-back in the PMI from the higher levels seen early in the second quarter comes at a time of weakening global economic growth and rising worldwide geopolitical concerns.

He said the global PMI surveys have indicated the slowest pace of worldwide GDP expansion for three years in recent months, with deteriorating trade flows and reduced business investment acting as major drags.

Williamson said the positive net balance of companies expecting output to continue to rise over the coming year is an encouraging sign of resilience in the face of global headwinds, with optimism commonly being fueled by new projects, expansion plans and more aggressive marketing.