Tuesday, August 6th, 2019


Bursa rebounds slightly but ringgit softens further

PETALING JAYA: The local stock market rebounded by 0.1% today after it tanked on Monday on fears over renewed trade tensions, but the ringgit continued its downward trend, weakening as much as 0.37% to 4.1930 to the US dollar.

As at 5pm, the local unit was trading 0.3% lower at RM4.1900 against the greenback, compared with RM4.1775 on Monday. The ringgit has weakend 1.8% in the past two weeks from 4.1143 recorded on July 25.

Today, Bursa Malaysia’s benchmark index, the FBM KLCI, closed 0.09% or 1.38 points higher at 1,611.79 points after trading in the range of 1,588.98 to 1,617.22 points during the session. Market breadth, however, was negative with 502 losers compared with 436 gainers.

Plantation and telecommunication stocks registered the biggest losses, with their indices declining 0.45% and 0.65%, respectively.

Meanwhile, other equity markets in the region continued to see heavy selling, with the Shanghai bourse’s composite index retreating 1.6%, Hong Kong’s Hang Seng Index easing 0.67%, Tokyo’s Nikkei 225 losing 0.65% and Seoul’s Kospi falling 1.5% respectively.

Malacca Securities said market conditions remain frail after Monday’s steep drop with global equities continuing to be gripped by the escalating trade war between the world’s two biggest economies.

“Under the prevailing environment, we see stocks on Bursa Malaysia continuing to head lower over the near term as the market uncertainties are amplified.”

It said concerns over the slowing global economy remain unabated after the trade war moved into a more severe phase that shows little hope for a quick reprieve.

“Fears of a prolonged trade tiff will also continue to keep market sentiments on the cautious side and send more market players to the sidelines until there is renewed clarity in the market’s direction.”

Moody’s Investors Service vice-president of sovereign risk group Martin Petch said the US Treasury’s designation of China as a currency manipulator represents an escalation of the trade tensions between the two countries, and will likely contribute to a hardening of positions. It also increases the likelihood that US tariffs on Chinese products will rise beyond current levels, followed by further retaliatory measures by China.

He said unless negotiations between the US and China resume rapidly, this latest development is likely to create negative spillover effects in both China, the US and globally, and particularly in Asia.

“At this stage, we do not expect the US Treasury designation to have a material impact on China’s foreign exchange policy. However, market expectations of potential further yuan devaluation may lead to devaluation in other currencies, particularly those with strong trading ties to China,” said Petch.

Meanwhile, IHS Markit Asia Pacific chief economist Rajiv Biswas said the yuan’s slide against the US dollar will reinforce negative sentiment in global financial markets towards emerging markets currencies.

“Risk aversion towards emerging markets currencies is also increasing due to the escalating US-China trade war and the recent wave of policy easing by Asia Pacific central banks, including Bank Negara Malaysia.

DWL enters ICT industry via new unit

PETALING JAYA: DWL Resources Bhd has incorporated a new wholly owned subsidiary, DWL Technologies Sdn Bhd (DTSB) with plans to enter into the information and communications technology (ICT) industry.

The group said in a statement today that DTSB directors Datuk Seri Aminul Islam Abdul Nor and Datuk Rathakrishnan Vellaisamy, both have over 20 years experience in the ICT industry.

DTSB will mainly be involved in the business of providing ICT solutions including technology-based security, cross-border technology and management system solutions.

It will leverage on the experience, expertise and network of the directors to bid for related projects from government and private sectors in the near future.

“Tapping on both our expertise and network in this industry, we are confident that DTSB will soon set its mark as a leader in ICT solutions which offers unparalleled end-to-end and advanced technology solutions to our customers. In order to do that, we will proactively work together with our global strategic alliance partners to gain our foothold in this ever-changing market,” said Aminul Islam.

“We believe that DTSB will contribute positively to the earnings of the group in time to come while creating more value for our stakeholders as we aim to bid for more government-linked projects along side with our sister companies in their pursue of success in the infrastructure and construction industry,” he added.

Barakah seeks RM1.02b from Petronas over licence suspension

PETALING JAYA: Barakah Offshore Petroleum Bhd is demanding a sum of RM1.02 billion from Petronas Nasional Bhd (Petronas) over the suspension of the licence of its wholly-owned subsidiary PBJV Group Sdn Bhd last month.

The Practice Note 17 (PN 17) company told Bursa Malaysia that it was based on the loss of future profits, reputation and shares prices.

Petronas and its unit Petronas Carigali Sdn Bhd (PCSB) have been given 14 days to comply with the demand.

Barakah said the notice of demand dated August 5 is to dispute the validity of the suspension without any legal justification nor compliance to procedures.

“The contract has been successfully carried out and completed prior to the suspension. Upon completion of the contract, positive appraisal was subsequently given by PCSB, hence making the suspension unwarranted.”

Recall that the letter from Petronas indicated that there was an adverse report from PCSB pertaining to the non-performance of PBJV in relation to the contract relating to provision of underwater services for PCSB. As such, Petronas decided to suspend PBJV’s licence for a period of three years with effect from the date of the letter.

Malaysia has room to pursue expansionary fiscal policy, says economist

PETALING JAYA: Malaysia has the room to cut interest rates a bit more or pursue a more expansionary fiscal policy amid global trade disruptions, according to Asean+3 Macroeconomic Research Office (AMRO) chief economist Dr Khor Hoe Ee.

Speaking at an economic outlook briefing today, he said macroeconomic policies will be the appropriate responses if there is a further slowdown in growth for the region due to external headwinds and other risks.

CIMB group chief economist Dr Donald Hanna opined that another Overnight Policy Rate cut is likely within the next three to six months after the 25-basis-point reduction in May.

“We will get another cut, partly because the world’s economy has worsened on the back of the likely increase in tariffs come September by the US, which is an open blow for an open economy like Malaysia.”

Khor noted that the escalation of global trade tensions stemming from additional tariffs slapped against China by the US remains the biggest threat to Malaysia and the Asean+3 region.

Last Thursday, US President Donald Trump announced that he will impose tariffs on another US$300 billion (RM1.26 trillion) worth of Chinese goods from Sept 1.

However, Khor said AMRO has main-tained Malaysia’s economic growth forecast of 4.5% for the year.

“Malaysia’s growth has held up quite well, despite the bad hits it has taken from the trade war particularly with the negative exports growth over the last several months as well as the abolition of the Goods and Services Tax.”

For Asean+3, Khor foresees a lower growth of 4.9% against the previous projection of 5.1%. In a worst-case scenario, growth may moderate to 4.7%.

Apart from the trade tensions between the world’s two largest economies, Khor pointed out that there is also an increased likelihood of an escalation of geopolitical risks in the Middle East in the next two to five years. “This would likely increase the price of oil, of which the Asean region is a net consumer,” he said.

Bank Negara likely to cut interest rate in next 3-6 months, says economist

KUALA LUMPUR, Aug 6 — Bank Negara Malaysia (BNM) may cut its key interest rate in the next three to six months, partly because the world economy has worsened following the escalating United States (US)-China trade dispute, said CIMB Group chief…

Ringgit closes at more than two-month low

KUALA LUMPUR: The ringgit fell as much as 0.29% to its lowest level in more than two months against the US dollar, as investors remained concerned about the worsening US-China trade tensions.

At 6pm, the ringgit finished at 4.1890/1920 against the US dollar from 4.1770/1800 at yesterday’s close.

It was the local unit’s weakest performance since May 31, 2019 when it ended at 4.1890/1920 versus the greenback.

VM Markets Pte Ltd managing partner Stephen Innes said the continuous trade spat between the two economic superpowers has also affected the oil and commodity markets, amid already slowing global demand.

“The oil price will remain under pressure due to escalating US-China trade tensions. The escalation is negative for global growth forecast and very negative for oil prices,“ he told Bernama.

At 6.30pm, benchmark Brent Crude was at US$59.95 (RM 251.12) per barrel compared with US$65.05 (RM 272.49) per barrel a week ago.

Meanwhile, against a basket of other major currencies, the local note traded lower.

It slid against the Singapore dollar to 3.0318/0350 from yesterday’s 3.0231/0264 and weakened against the yen to 3.9367/9406 from 3.9343/9389.

Vis-a-vis the pound, the local unit fell to 5.1123/1180 from 5.0684/0741, and it depreciated against the euro to 4.6917/6963 from 4.6561/6611. — Bernama

HSBC to pay nearly €300m to end Belgian probe

BRUSSELS, Aug 6 — HSBC has agreed to pay nearly €300 million (RM1.4 billion) to end a Belgian criminal investigation into allegations of massive fraud and money-laundering involving wealthy diamond traders, prosecutors said today. The…

Oil prices up slightly, but US-China trade tensions drag

LONDON: Oil prices rebounded slightly today from big falls in recent sessions, but Brent crude remained near seven-month lows around US$60 (RM251) a barrel due to escalating trade tensions between China and the United States.

Brent prices have lost more than 9% in the past week, with US President Donald Trump vowing to impose new tariffs on Chinese imports and China making further moves against US agricultural cargoes.

The US also responded to a decline in China’s yuan on Monday by branding the country a currency manipulator.

International benchmark Brent futures were up 18 cents at US$59.99 a barrel by 1005 GMT, having dipped earlier in the session to their lowest since Jan 14 at US$59.07.

West Texas Intermediate crude futures rose 25 cents to US$54.94 per barrel.

“This morning’s slight price recovery is hardly worthy of mention. Concerns about demand and the escalating trade conflict are still keeping the oil market in a strangle-hold,” Commerzbank analyst Carsten Fritsch said in a note.

“As far as the oil market is concerned, there are two key questions: ‘Why should China carry on buying US crude oil?’ and ‘Why should China continue to adhere to the US sanctions when it comes to buying Iranian oil?’”

Global equities hit a two-month low and Brent fell more than 3% on Monday as traders worried the dispute between the world’s two biggest oil buyers would dent demand, helping to prompt yester-day’s short-covering.

“It’s difficult for oil to hold (up) when you have such moves in equities,” Petromatrix analyst Olivier Jakob said.

Oil prices could find some support later today, with a Reuters poll showing US crude oil inventories were expected to have fallen for an eighth consecutive week.

China says US currency manipulator labelling could cause chaos in financial markets

BEIJING/SHANGHAI: China’s central bank said on Tuesday that Washington’s decision to label Beijing as a currency manipulator would “severely damage international financial order and cause chaos in financial markets”.

Washington’s decision to ratchet up currency tensions on Monday would also “prevent a global economic and trade recovery,” the People’s Bank of China (PBOC) said in the country’s first official response to the latest U.S. salvo in the two sides’ rapidly escalating trade war.

China “has not used and will not use the exchange rate as a tool to deal with trade disputes,” the PBOC said in a statement on its website.

“China advised the United States to rein in its horse before the precipice, and be aware of its errors, and turn back from the wrong path,” it said.

The U.S. currency accusation, which followed a sharp slide in the yuan on Monday, has driven an even bigger wedge between the world’s largest economies and crushed any lingering hopes for a quick resolution to their year-long trade war.

The dispute has already spread beyond tariffs to other areas such as technology, and analysts caution tit-for-tat measures could widen in scope and severity, weighing further on business confidence and global economic growth.

The U.S. Treasury Department said on Monday it had determined for the first time since 1994 that China was manipulating its currency, taking their trade dispute beyond tariffs.

The U.S. decision was driven purely by political motive to “vent its anger”, said Global Times, an influential Chinese tabloid published by the Ruling Communist Party’s People’s Daily.

China “no longer expects goodwill from the United States”, Hu Xijin, the newspaper’s editor-in-chief, tweeted on Tuesday.

The U.S. decision to label China a manipulator came less than three weeks after the International Monetary Fund (IMF) said the yuan’s value was in line with China’s economic fundamentals, while the U.S. dollar was overvalued by 6% to 12%.

The U.S law sets out three criteria for identifying manipulation among major trading partners: a material global current account surplus, a significant trade surplus with the United States, and persistent one-way intervention in foreign exchange markets.

Chinese state media had warned that Beijing could use its dominant position as a rare earths exporter to the United States as leverage in the trade dispute. The materials are used in everything from military equipment to high-tech consumer electronics.

Shares in some of China’s rare earth-related firms surged on Tuesday amid speculation the sector could be the next front in the trade war.

Beijing could also step up pressure on U.S. companies operating in China, analysts say.

Beijing in June issued a travel advisory warning Chinese tourists about the risks of travelling to the United States, citing concerns about gun violence, robberies and thefts.

Air China said on Tuesday that it was suspending its flights on the Beijing-Honolulu route starting on Aug. 27, following a review of its network.

In a further sign of deteriorating ties, China’s commerce ministry announced overnight that its companies had stopped buying U.S. agricultural products in retaliation against Washington’s latest tariff threat.

“In the end, the United States will eat the fruit of its own labour,” the PBOC said.

Chinese monetary authorities let the yuan fall past the closely watched 7 level on Monday so that markets could finally factor in concerns around the trade war and weakening economic growth, three people with knowledge of the discussions told Reuters on Monday.

The yuan has tumbled as much as 2.7% against the dollar over the past three days to 11-year lows after President Donald Trump’s sudden declaration last week that he will impose 10% tariffs on $300 billion of Chinese imports from Sept. 1.

But it appeared to steady on Tuesday amid signs that China’s central bank may be looking to stem the slide, which has sparked fears of a global currency war.

The offshore yuan fell to a record low of 7.1397 per dollar on Tuesday before clawing back losses after the central bank said it was selling yuan-denominated bills in Hong Kong, a move seen as curtailing short selling of the currency.

Onshore yuan also opened weaker before steadying, but remained below the 7 level. While the central bank set a slightly firmer-than-expected morning benchmark rate, it was still the weakest since May 2008.

The PBOC has insisted the value of its yuan is determined by the market, though it has maintained a firm grip on the currency and supported it when it neared sensitive levels over the past year.

U.S. Treasury Secretary Steven Mnuchin said the U.S. government will engage with the IMF to eliminate unfair competition from Beijing.

A IMF spokeswoman said the organization does not have any immediate comment.

After determining a country is a manipulator, the Treasury is required to demand special talks aimed at correcting an undervalued currency, with penalties such as exclusion from U.S. government procurement contracts.

“Naming China a currency manipulator could open the door for U.S. tariffs to eventually increase to more than 25% on Chinese goods,” according to a note from DBS Group Research.

PRG’s Furniweb warns of RM4.2m loss in 1H19

PETALING JAYA: Furniweb Holdings Ltd, a 54.19%-owned subsidiary of PRG Holdings Bhd, has warned of a RM4.2 million net loss for the six months ended June 30, 2019.

According to Furniweb’s profit warning announcement released to The Stock Exchange of Hong Kong Ltd (HKEX), the group expects to record a substantial decline in its financial performance and anticipates to report a net loss for the period of about RM4.2 million compared to the net profit of about RM600,000 for the corresponding period in 2018.

The group said its profitability for the period was mainly affected by the increase in marketing and distribution cost as its retail business commenced operation in the second quarter of 2019.

The group also saw an increase in administrative expenses due to professional fees incurred for the acquisition of Meinaide Holdings Group Ltd, which was completed on June 28, 2019, as well as pre-operating and administrative expenses incurred during the period for the retail business of the group.

The profit warning is based on the preliminary review of the unaudited consolidated management accounts of the group for the six months ended June 30, 2019.

Furniweb is listed on the Growth Enterprise Market or GEM of HKEX.