Wednesday, August 21st, 2019


Merkel warns of Brexit economic pain before Johnson visit

BERLIN, Aug 21 — German Chancellor Angela Merkel warned today of the economic impact of a chaotic no-deal Brexit, hours before she was to receive British Prime Minister Boris Johnson on his first foreign visit. “The economic sky is not…

Budge on Brexit, British PM Johnson to tell Merkel in Berlin

BERLIN, Aug 21 — Prime Minister Boris Johnson was set to tell German Chancellor Angela Merkel today that unless she agrees to change the Brexit deal, Britain will leave the European Union on Oct. 31 without one. More than three years after the…

US stocks gain on good retailer earnings

NEW YORK, Wall Street stocks bounced early today after strong US retailer results and ahead of the release of Federal Reserve meeting minutes. The strong earnings came as yields on the 10-year US Treasury note pushed higher after faltering…

IMF warns Trump tariff, currency policy won’t work

WASHINGTON, Aug 21 —US tariffs on China will not fix the trade deficit, and neitherts, Internationa will weakening the US dollar through interest rate cul Monetary Fund economists said today. In unusually blunt language, the IMF warned that…

Alibaba said to have postponed Hong Kong IPO of up to US$15b

HONG KONG/NEW YORK: China’s biggest e-commerce company Alibaba Group Holding Ltd has delayed its up to US$15 billion (RM62.6 billion) listing in Hong Kong amid growing political unrest in the Asian financial hub, two people with knowledge of the matter told Reuters.

Alibaba’s Hong Kong-listing plans are being closely watched by the financial community for indications on the business environment in the Chinese-controlled territory and provides a window into Beijing’s reading of the situation.

While no new timetable has been formally set, Alibaba could launch the Hong Kong deal as early as in October, seeking to raise US$10-US$15 billion, when political tensions ease and market conditions become favourable again, said one of the people.

The decision to postpone the deal, initially set for late August, was taken at a board meeting before Alibaba’s latest earnings release last week, the second person said.

The delay is due to the lack of financial and political stability in Hong Kong amid more than 11 weeks of pro-democracy demonstrations which have become increasingly violent and plunged the city into turmoil, the people added.

Tear gas has been used frequently by police while more than 700 people have been arrested, followed by an unprecedented airport shutdown last week. Hong Kong’s stock market fell to seven-month lows last week.

“It would be very unwise to launch the deal now or anytime soon,” the first person said. “It would certainly annoy Beijing by offering Hong Kong such a big gift given what’s going on in the city,” the source added.

Both people declined to be identified as they were not authorised to speak to media.

Alibaba declined to comment on its Hong Kong deal plans.

The deal, potentially the world’s biggest equity deal of the year and the largest follow-on share sale in seven years, would give Alibaba a war chest to keep investing in technology.

The company, however, views it as a way to “diversify its access to capital markets”, but not as core to its business, said the second source. Alibaba “does not see the postponement as a blow”, the person added.

Meanwhile, a listing by Alibaba is a big deal for the Hong Kong stock exchange, which is lagging behind its New York rivals in the annual battle to be the leading global listings venue.

Just last month, Anheuser-Busch InBev cancelled a planned up to US$9.8 billion Hong Kong IPO of its Asia Pacific unit.

The city loosened its rules last year specifically to lure overseas-listed Chinese tech giants to list closer to home. Alibaba would be the first to test the new system.

Asked last week whether Hong Kong’s turmoil would affect Alibaba’s listing, Hong Kong stock exchange CEO Charles Li avoided directly acknowledging the company’s application, which is still technically confidential.

But Li added: “I am confident that companies like that ultimately will find a home here, because this is home and I think they will come. I don’t know when though.”

Tune Protect’s earnings slip to RM10.7m in Q2

KUALA LUMPUR, Aug 21 — Tune Protect Group Bhd posted a lower net profit or RM10.71 million in its second quarter ended June 30, 2019, compared to the RM12.81 million recorded a year earlier. Among others, the digital insurer attributed the weaker…

Corporate tax cut may not be feasible, says economist

PETALING JAYA: It may not be feasible to grant the Federation of Malaysian Manufacturers’ (FMM) wish for a corporate tax cut to 20% from the current 24% in view of the country’s financial condition.

This is according to Sunway University Business School Professor of Economics Dr Yeah Kim Leng, who said that the current corporate tax rate does not affect Malaysia’s competitiveness in the region.

“Corporate tax rate is only one of the factors considered by foreign investors, what is important is the overall effective tax rate,” Yeah told SunBiz when asked about the call for a corporate tax cut.

Today FMM president Datuk Soh Thian Lai disclosed that 40% of 509 respondents to its semi-annual business conditions survey hoped for a reduction in corporate tax in the upcoming Budget 2020.

He said the government could emulate Singapore and Vietnam in cutting their corporate tax rates to enable industry players to enjoy higher profits amid the current environment.

“With more profits, they (industry players) could make more investments,” he said at a briefing on the survey findings.

However, Soh said the federation’s members understood the problems faced by the government, especially in tackling the hefty national debt.

Yeah explained that although a lower tax rate might spur investments and businesses, the current situation is biased towards direct taxation.

Last year, Malaysia saw the transition to the Sales and Service Tax (SST) from the more broad-based Goods and Services Tax (GST), as part of the Pakatan Harapan government’s manifesto pledge that has resulted in a drop in the tax base.

Yeah also pointed out that a review by the Finance Ministry showed that despite Malaysia’s higher corporate tax rate compared to some neighbouring countries, it does not deter foreign investments in the country.

This is in line with the International Monetary Fund’s (IMF) latest Fiscal Monitor Report that found no strong empirical evidence that moderately progressive tax systems harmed economic growth.

The IMF cited that countries with relatively low tax levels and degrees of redistribution could raise their top income-tax rate without hurting growth.

Soh also wished that the government could increase the development expenditure proportion to 24% from 17-18% in the previous years by cutting down wastage or leakages, which in turn would spur economic growth.

Apart from a tax cut, FMM members requested a clearer foreign worker policy from the government in the budget.

Soh said the federation has proposed a multi-tier levy system for the employment of foreign workers with 50% of the levy going towards a fund to aid local manufacturers in adopting automation to prepare them for Industrial Revolution 4.0.

Currently, an estimated 34% of FMM members have implemented automation in their manufacturing process, while 33% more are considering to do so.

Yeah lauded the suggestion as it would provide an incentive for the manufacturers to automate.

“Automation is long overdue as countries with a labour surplus are catching up as the standard of living improves, in turn this increases the labour cost for local businesses who employ the foreign workers.”

He added that the increased labour cost will force businesses to automate eventually.

China threatens sanctions on US firms linked to Taiwan warplanes sale

BEIJING, Aug 21 — China today blasted a huge planned US arms shipment to self-ruled Taiwan and threatened to sanction firms involved in the sale of F-16 fighter jets. The US State Department yesterday approved the transfer of 66 Lockheed…

Tomei’s Q2 profit almost triples

PETALING JAYA: Tomei Consolidated Bhd’s net profit for the second quarter ended June 30, 2019 surged almost three times to RM1.12 million from RM394,000 a year ago, thanks to its retail and manufacturing and wholesale segments.

The group reported an increase of 4.6% in revenue to RM135.51 million from RM129.58 million previously.

For the six-month period, its net profit grew 37.66% to RM3.98 million from RM2.89 million in the same period a year, while revenue was down 0.2% to RM278.84 million versus RM279.53 million previously.

The group said will continue with its rationalisation strategy in improving its sales volume through the introduction of more new designs and at the same time taking step to contain its operating cost.

“Barring any unforeseen circumstances, the board of directors is of the view that the group will remain profitable for the year,“ Tomei said.

MSM registers third straight quarterly loss

PETALING JAYA: MSM Malaysia Holdings Bhd saw a net loss of RM67.33 million for the second quarter ended June 30, 2019 compared with a net profit of RM14.33 million a year ago, attributable to lower average selling price, higher refining cost and higher finance cost incurred following the modification of certain terms in respect of the Islamic term loan.

This marks its third consecutive quarter in the red.

The group’s revenue fell 17.3% to RM474.02 million from RM573.03 million last year due to a 7% reduction of overall average selling price.

For the six-month period, MSM also posted a net loss of RM74.34 million compared with a net profit of RM30.14 million a year ago, partly attributable to higher finance cost and commercialisation cost of MSM Johor that includes depreciation.

Its revenue dropped 14.47% to RM959.46 million from RM1.12 billion.

MSM group CEO Datuk Khairil Anuar Aziz said it expects 2019 to be challenging for the group, due to the glut of refined sugar in the domestic market and the weakening of the ringgit.

The refining cost increased 15% on the back of higher fuel costs as a result of the increase in gas tariffs from January 2019. Its financial performance was further strained by lower capacity utilisation rate in MSM Johor, which came on line in April this year.

Moving forward, the market has forecast a stronger ringgit, which would be positive for MSM over the next few months. However, it remains cautious for 2H 2019.

“We are constantly monitoring world sugar trends and prices. MSM expects to capitalise on the anticipated lower average cost per MT of raw sugar, as the slide in the benchmark NY#11 and relatively favourable ringgit are in our favour,” Khairil Anuar said in a statement.

However, other factors such as the imposition of the sugar tax for sugared beverages, the possible issuance of even more approved permits (APs) and potential liberalisation of the local sugar market may also affect MSM’s bottom line negatively.

Thus, MSM is engaging with relevant authorities and customers to discuss further, industry related matters, especially the issuance of APs.