Wednesday, September 18th, 2019


Billionaire Brexiteer Ratcliffe’s Ineos to build new 4×4 vehicle in Britain

LONDON, Sept 18 — Ineos, the petrochemicals firm run by pro-Brexit billionaire Jim Ratcliffe, Britain’s third-richest person, will build a new 4×4 vehicle in the UK, a boost to an industry hit by closure announcements this year. As part of a…

Airbus to stay in UK despite no-deal Brexit, says executive

LONDON, Sept 18 — Aviation giant Airbus remains “concerned” about the risks of a no-deal Brexit, but will not be shifting operations outside the UK as previously suggested, a senior executive said today.  “We are concerned about Brexit…

US Fed signals rate cut as market jitters cast shadow

WASHINGTON, Sept 18 — The US Federal Reserve is poised to deliver the year’s second interest rate cut today but a glitch in critical financial plumbing for the US economy is casting a shadow over the deliberations. With the second day of the…

Total, Eni stake new claim in Cyprus gas and oil search

NICOSIA (Cyprus), Sept 18 — Energy giants Total and Eni have joined forces to explore and exploit another oil and gas block up for grabs offshore from Cyprus, Cypriot authorities said today. The agreement makes France’s Total and Italy’s Eni…

British Airways pilots cancel Sept. 27 strike to give time for talks

LONDON, Sept 18 — British Airways pilots have cancelled a strike set for Sept. 27 after 48 hours of industrial action earlier this month grounded almost all the airline's flights in a dispute over pay. "In a genuine attempt at establishing a…

US housing starts, building permits hit 12-year high

WASHINGTON, Sept 18 — US homebuilding surged to more than a 12-year high in August as both single- and multi-family housing construction increased, suggesting that lower mortgage rates were finally providing a boost to the struggling housing…

IEA sees no need for emergency oil stock release

LONDON, Sept 18 — The International Energy Agency currently does not see a need to release emergency oil stocks following a weekend attack on Saudi Arabia’s oil facilities, the agency’s head said today. “Currently the markets are well…

Oil prices step back on Saudi supply reassurance

LONDON: Oil prices retreated yesterday, extending the previous day’s decline after Saudi Arabia said it would quickly restore full production following last weekend’s attacks on its facilities.

Tension in the Middle East remained elevated, however, after Saudi Arabia said it would provide evidence later yesterday linking Iran to the attacks. The United States had already said it believed the attacks against the world’s top oil exporter originated in southwestern Iran.

Iran has denied involvement in the strikes.

Brent crude oil futures were down 77 cents, or 1.21%, at US$63.78 a barrel by 1241 GMT. US West Texas Intermediate crude futures were down 92 cents, or 1.55%, at US$58.42.

Oil prices tumbled 6% on Tuesday after the Saudi energy minister said the kingdom had restored oil supplies to customers at their level before the attacks by drawing from its inventories. Saturday’s attacks effectively shut 5% of global oil output.

“As much as the Saudis have downplayed the extent of the latest outages, we should not be lulled into a false sense of security,” said Stephen Brennock, of London-based oil brokerage PVM. “Tensions in the region are still running high and the spectre of a further escalation is hanging over the oil market.”

Energy Minister Prince Abdulaziz bin Salman had said on Tuesday that Saudi Arabia’s average oil production in September and October would be 9.89 million barrels per day (bpd) and that this month’s oil supply commitments to customers would be met fully.

Production capacity would reach 11 million bpd by the end of September and 12 million bpd by the end of November, the kingdom’s production capacity before the attacks, he said.

Relations between the United States and Iran have deteriorated since US President Donald Trump pulled out of the Iran nuclear accord last year and reimposed sanctions on its oil exports.

“The oil market is facing challenging times. Recent attacks on oil facilities in Saudi Arabia have painfully demonstrated the risks to oil supply, which is why short-term price spikes are possible at any time,” said Commerzbank analyst Carsten Fritsch.

Still, fundamental supply and demand balances are deteriorating, Fritsch added, forecasting Brent oil prices of US$60 a barrel next year.

“Demand growth is weakening, oil supply outside Opec is rising significantly and Opec+’s production discipline has faded recently,” he said.

Opec – the Organization of the Petroleum Exporting Countries – and a number of other oil producers including Russia agreed last year to cut output by 1.2 million bpd to reduce global stocks and prop up prices. – Reuters

Malaysia’s household debt dips but remains high: Bank Negara

PETALING JAYA: Malaysia’s household debt level remained elevated at 82.2% of gross domestic product (GDP), according to Bank Negara Malaysia (BNM).

This compares with 83% as at end-2018.

The central bank said in its financial stability review for the first half of 2019 that loans for the purchase of residential properties continued to be the key driver of debt growth.

Aggregate household financial assets continued to expand at a faster pace than that of debt, sustaining household financial asset buffers at 2.2 times of debt.

While most households continue to be able to comfortably service their debt, BNM cautioned that pockets of risks remain as higher incidents of default have been observed among housing loan borrowers that are more exposed to income variability.

It said although the share of household debt held by borrowers earning less than RM3,000 per month has continued to decline over the years, the leverage of these borrowers has risen steadily largely due to housing loans which have been made more accessible under various loan assistance schemes introduced in recent years.

“This borrower group remains susceptible to financial distress given their limited financial buffers to weather potential shocks.”

However, the central bank noted that risks to financial stability remain largely contained given the low exposures of banks to higher-risk borrowers as banks continued to maintain sound lending practices.

“The implementation of the National Strategy for Financial Literacy 2019-2023 and the proposed enactment of the Consumer Credit Act are expected to further strengthen household resilience and mitigate future risks.”

Meanwhile, BNM said house prices continued to expand at a more moderate pace amid sustained demand for affordable properties, but total unsold units have risen further, mainly driven by properties priced above the maximum affordable house prices in individual states.

“While the mismatch between housing supply and demand is likely to take some time to resolve, firm demand for affordable housing is expected to mitigate risks of a sharp and broad-based decline in house prices.”

In the non-residential segment, Bank Negara said the incoming supply of new office space and shopping complexes remains significantly higher than recent average annual demand.

“This is likely to further compound already elevated levels of vacancy rates for prime office and retail space, and prime retail space per capita in major cities. Banks remained cautious in lending to this segment, with low exposures that continue to be largely performing.”

Based on BNM’s sensitivity analysis, banks have sufficient capital buffers to withstand severe losses under adverse stress scenarios in the broad property market which incorporate potential spillovers to other economic sectors that are highly dependent on the performance of the property sector.

The central bank said domestic financial stability remained intact in the first half of 2019, amid continued challenges in the external and domestic environment.

“Strong domestic institutional investors, including financial institutions, have continued to provide an important source of stability to the domestic markets during periods of heavy portfolio outflows. This in turn has supported stable domestic funding conditions for businesses and households.”

Liquidity in the banking system also remained sufficient to support domestic financial intermediation, with the liquidity coverage ratio of the banking system strengthening further over the past six months.

Survey: Asian companies’ confidence ticks up but recession fears grow

SINGAPORE: Confidence among companies in Asia lifted slightly in the September quarter from 10-year lows, but most firms do not plan on hiring or expect business to pick up as they see a risk of a global recession looming, a Thomson Reuters/INSEAD survey found.

The Thomson Reuters/INSEAD Asian Business Sentiment Index tracking firms’ six-month outlook rose five points to 58 in the survey. A reading above 50 means optimistic respondents outnumbered pessimists.

The latest showing, though, means the index has not risen above the mid-60s for a year and is one of the seven weakest readings since the 2008-2009 global financial crisis.

“We are in a state of almost permanent uncertainty, which is not leading yet to a crisis but I think at some point we are going to see the cost of it,” said Antonio Fatas, a Singapore-based economics professor at global business school INSEAD.

“Some investments are going to be postponed, some investments are going to be stopped and little by little the engine of growth is going to slow down.”

Respondents rated a global recession as the top risk, overhauling trade-war fears which had topped the table for the previous six quarters.

A total of 102 companies from a range of sectors responded to the survey, conducted in 11 Asia-Pacific countries where 45% of the world’s population lives and almost a third of global gross domestic product is generated.

Participants included firms from automaking to technology such as Canon Inc, SoftBank Group Corp and Hero MotoCorp Ltd. Companies surveyed can change from quarter to quarter.

The survey was conducted from Aug 30 to Sept 13, as global markets rallied on signs of a thaw in US-China trade tensions.

The trade war has also proven a boon for some, as businesses relocate from China to Southeast Asia and elsewhere to avoid tariffs.

However, cool responses on hiring plans and the sales outlook suggest that any optimism is muted, and unlikely to be solid enough to drive investment and spending.

More than two-thirds of respondents plan on cutting staff or at best holding numbers steady in the next six months. Only 39% expect their sales volumes to rise.

“It’s about not over-committing on expansion plans … it’s about being prudent,” said Suresh Sidhu, chief executive officer of edotco Group, a telecoms infrastructure firm headquartered in Kuala Lumpur, with business across South and Southeast Asia.

“I don’t see people stopping, I just see people thinking about stopping. We definitely have not scaled up very aggressive plans … in times of great complexity and unpredictability, people generally don’t spend.”

Economic indicators also suggest a gloomy outlook.

Rising global protectionism could shave 0.8% from the world’s economic output next year, the International Monetary Fund said last week.

Flagging demand has already flayed Asian firms such as Samsung Electronics Co Ltd, whose profit halved for the June quarter, and automakers from Japan’s Mazda Motor Corp to India’s Tata Motors Ltd.

And data released this month showed China’s economic woes deepened in August, with growth in industrial production at its weakest in more than 17 years, while US manufacturing also shrank.

Alvin Liew, senior economist at Singapore’s United Overseas Bank, said the trade war is the biggest driver of the slowdown that will probably deepen unless a breakthrough in negotiations can recharge business confidence and investment.

“I don’t think anybody has the kind of delusion that both countries will come to a full-scale agreement and the world will turn into a better place after that,” he said.

“But there’s still some hope holding out and some optimism that they could do an interim trade deal … something to put some certainty back,” Liew said. “At the end of the day both sides know that this is not good overall.” – Reuters