Monday, August 5th, 2019

 

Wall Street tumbles as yuan slide intensifies trade worries

NEW YORK, Aug 5 — Wall Street’s main indexes fell sharply today, led by technology companies, as China’s willingness to let the yuan slide in response to the latest US tariff threat fanned fears that it could further aggravate an ongoing trade…


UK biggest retailer Tesco axes 4,500 supermarket jobs

LONDON, Aug 5 — Supermarket giant Tesco said today it is to axe about 4,500 jobs across its city-centre UK stores to slash costs. Tesco, which is Britain’s biggest retailer, will carry out a “reduction of around 4,500 colleagues” as the…


Sterling hits 23-month low vs euro as no-deal Brexit worries grow

LONDON, Aug 5 — Heightened worries of a no-deal Brexit and the growing probability of a general election after the October Brexit deadline kept the pound subdued today, after it hit a 23-month low against the euro. Versus the dollar, the British…


Rakuten Trade lowers year-end forecast for FBM KLCI to 1,720 points

PETALING JAYA: Rakuten Trade has revised downwards its year-end forecast for the FBM KLCI to 1,720 points from 1,760 points previously.

“This is due to the weaker corporate earnings in the bourse and external factors,” said its head of research Kenny Yee at Rakuten’s second-half market outlook briefing today.

For 2019, it has revised the forecast for Malaysia’s corporate earnings to -0.5% from its previous expectations of 2.3% growth.

Nonetheless, Rakuten is optimistic on Malaysia’s index-linked blue-chip stocks, particularly within the banking sector due to a low prevailing foreign shareholding level of 14.9% and the fact that many are trading at reasonable levels.

At the moment, the FBM KLCI is estimated to trade at a price-to-earnings ratio of 15.5 times against a historical five-year average of 18.0 times.

During the session, Yee shared some of the research house’s top picks, including Crest Builder Holdings Bhd, Econpile Holdings Bhd, Kelington Group Bhd, MBSB Bank Bhd and Serba Dinamik Holdings Bhd.

He noted that the merger between Telenor ASA and Digi.com Bhd has proved to be a boon to the sector, which has managed to outperform the market. Once the merger is concluded, Yee expects there will be more merger & acquisition (M&A) activities in the sector.

The banking sector is also expected to see more M&As as local banks have reached their saturation point with the need to expand regionally and to counter the imminent digital banking wave.

On the currency front, Rakuten expects the ringgit to test the RM4.00 level against the US dollar by the end of the year. “This will be driven by foreign net inflows and the start of pump-priming activities in the country,” Yee explained.

The pump-priming activities will come from the resumption of East Coast Rail Link, Bandar Malaysia and infrastructure projects related to the Penang Transport Master Plan. Once these mega projects are kick-started, the market will see an inflow of foreign funds, particularly from China.

When asked whether he foresees another rate cut by Bank Negara Malaysia, Yee opined that it is not likely to happen. This, he said, is because the pump-priming activities would be a better instrument to spur the economy as the construction sector has high spillover effects that would be more effective than an interest rate cut.


Asian stocks in sea of red as US-China trade dispute escalates

PETALING JAYA: Bursa Malaysia, together with the rest of the Asian markets, sank today as the US-China trade war escalated and the Chinese yuan weakened to a low in more than a decade.

The local bourse opened lower with the FBM KLCI at 1,621.12 points, 5.64 points down from Friday’s close of 1,626.76. The benchmark index closed at an intraday low of 1,610.41 points, shedding 16.35 points.

The Bursa scoreboard showed 827 losers and 163 gainers, with 897 counters unchanged, at the end of trading today.

All sectoral indices were down, with the worst performer being the energy index which fell 2.59% or 28.08 points to close at 1,055.75.

Meanwhile, on the currency market, the ringgit slid to a six-week low as the China’s yuan broke the psychological 7-per-dollar level. Based on Bank Negara Malaysia’s (BNM) middle rate, the ringgit continued to weaken by 0.5% against the US dollar to 4.1775 today from 4.1565 last Friday.

On the regional stock markets, Hong Kong’s Hang Seng Index and South Korea’s Kospi Index slumped more than 2% each.

Last week, US President Donald Trump said he would impose 10% tariffs on US$300 billion (RM1.25 trillion) worth of Chinese imports. The abrupt announcement was made on Twitter last Friday after a trade war truce which lasted about a month, and China has vowed to retaliate.

The additional 10% tariff is on top of the 25% tariffs already imposed on some US$250 billion of goods imported from China.

Hong Leong Investment Bank (HLIB) Research said the negative spillover to Malaysia could be in the form of a reduction in gross domestic product (GDP) growth by up to 1.1 percentage points (ppt).

“As a small open economy, Malaysia will not be insulated by the escalating trade tensions. Based on BNM’s estimation, a 25% tariff on remaining trade with China and blanket auto tariff would lead to reduction of Malaysia’s GDP growth by 0.9 to 1.1 ppt, with the impact of US-China trade accounting for about half of that,” it said in its report today.

As the trade war continues to prolong with the possibility of worsening, the research house expects BNM to reduce the Overnight Policy Rate (OPR) by 25 bps to 2.75%, which is the lowest since March 2011, as early as November 2019.

HLIB Research also revised downwards its 2019 average ringgit assumption to 4.15-4.20 against the US dollar from 4.05-4.15 previously. This implies a depreciation bias for the remainder of the year.

“This comes on the back of heightened risk aversion with US-China trade tensions potentially evolving into a full blown trade war, possibility of yuan depreciating and revision in our OPR expectations from unchanged to 25bps cut,” it added.

Meanwhile, S&P Global Ratings said the latest development is a negative for global business confidence and could compound weakened global investment growth and economic prospects if the additional tariffs go into effect on Sept 1.

“We reiterate our view that the first-order impact on credit is generally low to moderate for issuers in both countries. We hold this view even in the scenario of both countries imposing tariffs of 25% in all goods imported from each other.

“Both countries have diversified export markets. Their own domestic markets are very large and businesses still cater to them, and a large number of rated corporates still have some flexibility in managing their costs, including, in some cases, the option of passing on the additional expense from tariffs to customers,” it said in a statement today.

While the short-term impact of higher tariffs is manageable for both countries, S&P said the longer-term effects on growth prospects could be greater.

“The recent reaction in equity markets reflects this risk. This in turn could dampen the investment appetite and have a flow-on effect to credit markets,” it added.


Indonesian official refuses to be drawn on whether iron ore export ban might be brought forward

JAKARTA, Aug 5 — A top Indonesian mining ministry official said today he did not want to speculate on whether the government might bring forward a planned ban on iron ore exports from 2022. The ban is aimed at making miners process minerals in…


MGB to develop project in Cameron Highlands

PETALING JAYA: MGB Bhd’s indirect wholly owned subsidiary Sinaran Kencana Sdn Bhd has entered into a joint venture (JV) agreement with Aset AZG Sdn Bhd to jointly develop 1.884-acre leasehold land in Cameron Highlands, Pahang.

It told Bursa Malaysia that the group plans to develop the land into a block of serviced apartment with and estimated gross development value (GDV) of RM107 million over a project period of four years.

Under the agreement, both parties agreed to enter into an unincorporated JV to share all expenses, profit or losses from the project on an equal 50:50 basis.

MGB said the JV represents an opportunity for the group to further capitalise on its experience and expertise in property development.

“This bodes well with the group’s strategy to grow its property development segment either through acquisition of small scale landbank or JVs with landowners.”

The JV development is expected to contribute positively to MGB’s future earnings.


Banks not investing enough on fraud risk management: KPMG survey

KUALA LUMPUR: KPMG’s Global Banking Fraud Survey finds that banks are still reactive towards fraud and not investing enough on fraud risk management.

According to the survey, which was conducted by the multinational accounting firm between November 2018 and February 2019, the total cost of fraud risk management was not monitored by 52% of banks surveyed.

“This makes it an outlier within bank operations and reduced visibility to the Board and Risk Committees who make key budget, resourcing and investment decisions,“ KPMG Malaysia head of forensics Tan Kim Chuan said in a statement today.

The survey was conducted across 43 retail banks, 13 of which are in the Asia-Pacific region, five in the Americas and 25 in Europe, the Middle Eastern and African regions.

Based on the findings, 61% of the banks surveyed have reported an increase in external fraud – in value and volume – over the past three years.

The survey also found that over half the respondents recovered less than 25% of the fraud losses, thereby demonstrating that fraud prevention is key.

“Cyber and data breaches remain the most significant challenge as reported by banks across all three regions, and these challenges may be amplified with the increasing popularity of open banking, as banks across the globe are getting ready to open their doors to third parties to access their customer data,“ it said.

According to Tan, criminals have become more sophisticated today and are leveraging on technology to scam more victims. This means financial institutions need a paradigm shift in their approach to mitigate fraud risks in a sustainable and effective manner.

“To meet mounting customer expectations, financial institutions should focus on building a well-structured fraud management model that can deal with evolving digital transformation, identify unknown risks, harness the benefits of technology and reduce the cost of compliance,“ he added.

Commenting on Bank Negara Malaysia’s Risk Management in Technology policy issued on July 18, 2019, which aimed at guiding financial institutions in the country to combat the rise in cybercrime, Tan said the introduction is timely and will be a useful guide on the backdrop of increased technology adoption within the financial services sector.

The policy, which will come into effect beginning Jan 1, 2020, sets out the expectations for banks to establish a holistic technology risk management framework, which encompasses all levels of the organisation from the board level down, to continuously assess risks, identify gaps, and prioritise activities to mitigate and manage technology risk against its approved financial risk appetite.


Report: Fiat Chrysler open to fresh merger talks with Renault

PARIS, Aug 5 — The chief of Fiat Chrysler remains open to the possibility of resuming merger talks with France’s Renault, months after talks between the two automakers aimed at forging an industry powerhouse broke down, according to an interview…


‘Do more to harness potential in tourism’

KUALA LUMPUR: Malaysia has not done enough to tap the vast potential of tourism related business opportunities, according to ACCCIM’s Malaysia’s Business and Economic Conditions Survey.

This was concurred by 78.2% of respondents, while 81% also acknowledged that Malaysia’s tourism is lagging behind its neighbours.

Throughout 2001-2008, tourist arrivals in Malaysia had grown by 4.2% per annum to 25.8 million persons, which was lower compared with Cambodia (14.7% per annum), Vietnam (11.8%), Laos (11.3%), Phillippines (8.4%), Thailand (8.2%), Indonesia (6.8%) and Singapore (5.4%).

The survey found that simplified visa rules, the rollout of e-visas or visa-exemption are crucial to facilitate and ease the entry of travellers and tourists as indicated by 52.7% of respondents. Front-services counters at airports must also be enhanced.

The preferred tourism products indicated by respondents are eco-tourism (78%), followed by culinary tourism (73.4%), cultural tourism (55.6%), recreational tourism (49.5%), agro-tourism (48.8%) and medical tourism (37.7%).

It is proposed that Malaysia organise an annual mega food fiesta in major states, as well as nationwide food hunting tours to drive Malaysia as a food haven.

Niche markets such as medical tourism, education tourism as well as meetings, incentives, conferences and exhibitions industry should be promoted as these are high quality tourism products.

To improve the country’s competitiveness in recapturing higher contribution from tourism, 68.3% of respondents opined that the government should further enhance the effectiveness of tourism promotion, marketing and branding.

It also proposed that a short and simplified course for part-time tour guides be conducted to handle tourists from China as there is a lack of tour guides, particularly Chinese speaking.

Respondents also opined that the Budget 2020 should roll out more tourism-related measures and provide more allocations to support tourism-related activities and development, in facilitating preparations for Visit Malaysia Year 2020.