Tuesday, August 13th, 2019


Cathay manager Swire vows support for China; shares plumb 10-year lows

HONG KONG, Aug 13 — The top shareholder and manager of Cathay Pacific Airways condemned protests in Hong Kong and vowed to follow China’s aviation regulations, after the airline suspended a second pilot today as deepening unrest hit its…

George Kent takes MRCB to arbitration

PETALING JAYA: George Kent (Malaysia) Bhd has commenced arbitration proceedings on Malaysian Resources Corp Bhd (MRCB) following a difference of opinion with MRCB in the shareholders agreement dated June 8, 2015 entered into between both parties for the LRT3 project.

Under the terms of the shareholders’ agreement, George Kent and MRCB agreed to form a 50:50 joint venture (JV) company, namely MRCB George Kent Sdn Bhd to tender for, undertake and complete the LRT3 project from Bandar Utama to Johan Setia.

George Kent and MRCB have a difference of opinion in the interpretation of certain provisions of the shareholders agreement with regards to the options for securing of the financing requirements for the JV company.

George Kent does not expect any material financial impact by reason of the commencement of the arbitration proceeding other than legal cost to be incurred. No material operational impact is expected arising from the arbitration.

As at current date, the issued and paid up share capital of the JV company stood at RM10 million.

Palm oil stocks dip in July

KUALA LUMPUR: Malaysia’s total palm oil stocks fell 0.79% in July 2019 to 2.39 million tonnes from 2.41 million tonnes recorded in the previous month, according to the Malaysian Palm Oil Board (MPOB).

The board in its “Performance of the Malaysian Palm Oil Industry for the Month of July 2019” reported today stated that crude palm oil (CPO) stocks fell 0.72% to 1.34 tonnes from 1.35 tonnes while processed palm oil stock decreased by 0.88% to 1.055 million tonnes from 1.64 tonnes previously.

It also said CPO production rose 15.06% to 1.74 million tonnes versus 1.51 tonnes in June.

Palm kernel output was higher by 15.6% at 411,701 tonnes from 355,397 tonnes.

Palm oil exports according to the board, increased by 7.37% to 1.49 million tonnes from 1.38 million tonnes in June, while exports of oleochemical added 13.4% to 288,2651 tonnes against last month’s 254,188 tonnes.

Biodiesel exports in the month under review also jumped 154.4% to 78,920 from 31,022 tonnes, while exports of palm kernel cake inched up 1.67% to 218,501 from 214,918 tonnes.

Meanwhile, palm kernel oil exports shed 2.63% in June 2019 to 83.806 tonnes vis-a-vis 86,066 tonnes in the preceding month.

Analysts cautious on auto sector

PETALING JAYA: Analysts are cautious on the automotive sector following the appointment of DreamEdge as the Malaysian anchor company for the New National Car Project (NNCP) which was announced last Friday.

“Near term, uncertainties in relation to the impact to industry landscape and government incentives to support the project, will create an overhang, leading to potentially higher risk premium being priced into existing sector plays,” said MIDF Research in its report today.

The research house downgraded the sector to a “neutral” from “overweight” previously, given its recent downgrades of Tan Chong Motor Holdings and UMW Holdings, coupled with a weakening ringgit and a flattish total industry volume (TIV).

It noted that the NNCP is expected to require “a few hundred million” in investment with a private investor already secured for the project.

Following the appointment by the International Trade and Industry Ministry (Miti), Daihatsu Motor Company (DMC) has been named as the advanced technology assistance provider for the project.

“However, the technology collaboration with DMC will not involve DMC taking up any equity stake in DreamEdge,” it said.

“Rather, it may include technology exchange of the platform to be used as well as powertrain development,” it added.

For NNCP, DreamEdge will focus on upper body design, human machine interface, interiors, noise vibration and harshness, and ride and handling.

According to MIDF Research, the arrangement is similar to Perodua’s, whereby the company designs the upper body and interiors while the more capital expenditure-intensive platform and powertrains are sourced from DMC.

It said that the government will consider giving tax incentives to participants of the project if they qualify. The finer details of the collaboration are expected to be announced next month.

Meanwhile, CGS-CIMB opined that the NNCP could provide competition to the domestic auto industry if it could create attractive products with competitive prices.

“However, we think the NNCP remains on a preliminary stage as many details have yet to be finalised,” said the research house.

It maintained its “neutral” call on the sector, with the ringgit’s strengthening against the yen and US dollar, interest rate reduction and favourable new policies as key upside risks.

At the moment, DreamEdge has plans to release its first prototype for the NNCP in March next year and it expects to launch its first model in 2021.

According to its CEO Kharil Adri Adnan, the NNCP’s first model will likely be a C-segment sedan vehicle using hybrid technology.

CGS-CIMB said that the car company intends to engage local contract manufacturers to utilise the excess production capacity in the domestic automotive industry.

“This will help to speed up its product development and manufacturing process in order to meet the March 2021 dateline. Hence, it does not plan to build a new manufacturing plant for NNCP,” it said.

Ajinomoto to invest RM355m in new Seremban plant

PETALING JAYA: Ajinomoto (Malaysia) Bhd will construct a new plant on its acquired land in Techpark @ Enstek, Seremban, at a total capital investment of RM355 million.

The land will be home for the company’s new plant and support facilities, which will include its corporate office, and recreational space and facilities for its staff.

“The company plans to strengthen the development and production for halal-compliant products as the recognised and established halal food and seasoning manufacturer. The new plant will enable Ajinomoto to meet this plan which will contribute to the company’s continuing profit growth and sustainability for the future business expansion,“ it said in a stock exchange filing.

The new plant will initially be for manufacturing of Ajinomoto’s current range of halal consumer and industrial products, Umami seasoning Aji-No-Moto, flavour seasonings, menu specific seasonings and products for the industrial food producers with capacity and space for manufacture of new products that the company may launch.

“The introduction of advanced technology will enable the company to further improve its overall efficiencies and productivity. The new plant is designed to be eco-friendly as well as provide a work-friendly and safe environment for the company’s staff.”

Construction is planned to commence in October 2019 and barring any unforeseen circumstances, is expected to be completed by March 2022.

The costs of the new plant will be funded through a combination of internally generated funds and external borrowings. The cost of it is expected to impact the earnings of the company in the initial few years of operating at the new plant due to depreciation of the new assets and repayment of external borrowings.

PetChem reports 22% drop in Q2 earnings

PETALING JAYA: Petronas Chemicals Group Bhd (PetChem) reported a 22.3% decline in net profit to RM1.12 billion for the second quarter ended June 30, 2019 against RM1.44 billion recorded in the same period last year due to lower sales revenue and higher tax expense.

In a filing with Bursa Malaysia, the group said overall average products prices fell during the quarter in tandem with declining crude oil prices and softer market demand.

Average product prices for the olefins and derivatives segment declined as crude oil prices decreased, coupled with softer market demand. The drop in crude oil prices also led to lower average product prices for the fertilisers and methanol segment.

During the quarter, the group recorded a revenue of RM4.33 billion, an 8.3% decrease from RM4.73 billion recorded in the same quarter of the previous year, due to lower product prices partially offset by higher sales volume and the weakening of the ringgit against the US dollar.

For the first six month of the year, PetChem registered a net profit of RM1.92 billion, a 25.4% drop from RM2.57 billion recorded in the corresponding period of last year. Revenue fell 12.5% to RM8.46 billion from RM9.68 billion a year ago.

The group declared an interim dividend of 11 sen per share for the financial year ending Dec 31, 2019, to be paid on Sept 13, 2019. The entitlement date is Aug 28, 2019.

The group said that its operations are expected to be primarily influenced by global economic conditions, foreign exchange rate movements, utilisation rate of its production facilities and petrochemical products prices which have a high correlation to crude oil price, particularly for the olefins and derivatives segment.

Moving forward, the group expects the product prices for its olefins and derivatives segment to stabilise in the coming quarter along with its product prices in the fertilisers and methanol segment.

RM1.04b net selling by foreign funds on Bursa last week

PETALING JAYA: Foreign investors sold RM1.04 billion net of equities on Bursa Malaysia last week, the largest weekly foreign net outflow in 12 weeks.

MIDF Research said the exodus of foreign funds from Bursa last week marked the fourth uninterrupted week of foreign net selling.

Foreign net selling intensified on Monday as foreign investors offloaded RM357 million, the largest in a day since early May this year. Sentiment was partially dampened by China’s retaliation towards US President Donald Trump’s latest tariff threat by letting the yuan tumble to the weakest level in more than a decade.

“It is notable that the heavy foreign net outflow on Monday was in conformity with other regional peers under our coverage,” said MIDF in its fund flow report.

The pace of foreign net selling slowed down a little to RM219.9 million net on Tuesday. China’s move to limit the depreciation of the yuan restored calm in investors’ nerves.

The level of foreign net outflow heightened to RM269.5 million following a batch of surprise interest rate cuts by central banks across the Asia Pacific (New Zealand, Thailand and India) to counter the risks in the global economy.

Optimism returned to the markets on Thursday as foreign net selling substantially dropped to RM30.7 million amidst the green light granted by Japan to allow exports of semiconductor manufacturing material to South Korea.

Nevertheless, such positive vibes diminished the next day as foreign funds dumped RM158.1 million after the US put the decision for US companies to restart business with Huawei Technologies Co on hold as China halts crop buying from the US.

“Last week’s massive net outflow brings the year-to-date the foreign net outflow from Malaysia to stand at RM6.01 billion. This makes up around 51.0% of last year’s total foreign net outflow,” MIDF said.

Yen and US dollar rise as investors seek safety

LONDON, Aug 13 — The Japanese yen remained near seven-month highs today and the US dollar supported, as investors unnerved by the Sino-US trade war, protests in Hong Kong and a crash in Argentina’s peso currency sought safety. The euro briefly…

Kyodo: US President Trump asked Japan PM to buy farm products

TOKYO, Aug 13 — US President Donald Trump has directly asked Japanese Prime Minister Shinzo Abe to buy farm products worth a ‘huge amount’, Kyodo news agency reported today, citing unidentified Japanese and US government sources. Japan and the…

Ringgit closes lower versus US dollar on growth concern

KUALA LUMPUR: The ringgit closed lower against the US dollar as concern over global economic slowdown spurred appetite for the greenback, dealers said.

At 6pm, the ringgit finished at 4.1960/1990 against the US dollar from Friday’s close of 4.1830/1860.

A dealer said risk assets remained under pressure as tensions between the United States and its major trading partners continued to build up.

“This prolonged tension is not good for emerging currencies such as the ringgit, as the uncertain situation will make investors opt for safe havens like the US dollar and (Japanese) yen,” he told Bernama.

Tension between US and China is heating up again after US President Donald Trump threatened to impose a 10 per cent tariff on US$300 billion worth of imports from China starting on Sept 1.

Meanwhile, the ringgit was traded mixed against a basket of major currencies.

It rose against the Singapore dollar to 3.0213/0252 from 3.0259/0285 recorded last Friday, and increased versus the British pound to 5.0633/0703 from 5.0652/0705.

The local currency, however, depreciated against the Japanese yen to 3.9905/9945 from Friday’s 3.9522/9561 and decreased vis-a-vis the euro to 4.7016/0654 from 4.6858/6908 previously.

The market was closed yesterday in lieu of Hari Raya Aidiladha which fell on Sunday. — Bernama