budget deficit

 
 

Ringgit to weaken slightly in second quarter after elections?

Hor Kwok Wai

“Macro US dollar weakness seems sustained at the beginning of 2018, and ringgit strength should sustain until the general election. But we may see a retracement of the ringgit against the US dollar in the second quarter,’’ according to Hor Kwok Wai(pic), chief operating officer, global markets, Hong Leong Bank. THE ringgit, which hit a level not seen since July 2016, is expected to trade on a stronger note but may retrace slightly to above 4.00 to the US dollar in the second quarter. “Overall, the ringgit is expected toRead More


MARC: Foreign holdings of govt debt to go up

PETALING JAYA: Foreign holdings of government bonds are expected to increase towards the end of 2018 and record a net positive inflow, according to the Malaysian Rating Corp Bhd (MARC).

This is on the back of expectation of an overnight policy rate (OPR) hike in early 2018; upbeat outlook of the ringgit; improvement in crude oil prices; and strengthening of the US economy that could lead to a faster pace of interest rate normalisation.

“The lower volume of maturing Malaysian Government Securities (MGS)/ Government Investment Issues (GII) papers in 2018 with a projected total value of RM62.8 billion should also provide support,” MARC said in a report titled “2018 Bond Market Outlook: Getting Back in Cycle”.

The rating agency expects gross issuance of MGS/GII in 2018 to come in within the range of RM100 billion to RM105 billion, premised on the government’s budget deficit estimate of RM39.8 billion (as per Budget 2018); RM62.8 billion worth of MGS/GII papers projected to mature in 2018; and MARC’s forecast of a GII-to-MGS ratio of 44:56.

On corporate bonds, the primary market’s gross issuance this year is estimated to be in the range of RM90 billion to RM100 billion, slightly higher than the earlier projection of RM85 billion to RM95 billion.

This will be driven by sturdy pipeline of issuances from the government guaranteed (GG) segment related to the financing of current and new large-scale infrastructure projects, including the extensions of the LRT 3 and the MRT 2 lines as well as the ECRL and the Merdeka PNB118 tower.

“The primary market is expected to take a breather in 2018 following a bumper year in 2017 when issuers had rushed to raise funds given the prospects of monetary policy normalisation and therefore likely higher borrowing costs ahead.”

Unrated corporate bonds issuance is also expected to continue growing because of savings on issuance costs as well as capital market incentives introduced in Budget 2018.

In the secondary market for MGS and corporate bonds, MARC anticipates bond yields to increase gradually in 2018.

Meanwhile, MARC anticipates Bank Negara Malaysia to hike the OPR by between 25 and 50 basis points this year given the increased likelihood of Malaysia’s gross domestic product growth hitting above the 5% level again in 2018.

The research house also expects both cost-push and demand-pull factors to keep the inflation rate hovering at around 3% in 2018, with the lagged inflation effect of both higher pump and food prices in the last few months of 2017 to persist.


Foreign holdings of govt bonds to rise: MARC

PETALING JAYA: Foreign holdings of government bonds are expected to increase towards the end of 2018 and record a net positive inflow, according to the Malaysian Rating Corp Bhd (MARC).

This is on the back of expectation of an overnight policy rate (OPR) hike in early 2018; upbeat outlook of the ringgit; improvement in crude oil prices; and strengthening of the US economy that could lead to a faster pace of interest rate normalisation.

“The lower volume of maturing Malaysian Government Securities (MGS)/ Government Investment Issues (GII) papers in 2018 with a projected total value of RM62.8 billion should also provide support,” MARC said in a report titled “2018 Bond Market Outlook: Getting Back in Cycle”.

The rating agency expects gross issuance of MGS/GII in 2018 to come in within the range of RM100 billion to RM105 billion, premised on the government’s budget deficit estimate of RM39.8 billion (as per Budget 2018); RM62.8 billion worth of MGS/GII papers projected to mature in 2018; and MARC’s forecast of a GII-to-MGS ratio of 44:56.

On corporate bonds, the primary market’s gross issuance this year is estimated to be in the range of RM90 billion to RM100 billion, slightly higher than the earlier projection of RM85 billion to RM95 billion. This will be driven by sturdy pipeline of issuances from the government guaranteed (GG) segment related to the financing of current and new large-scale infrastructure projects, including the extensions of the LRT 3 and the MRT 2 lines as well as the ECRL and the Merdeka PNB118 tower.

“The primary market is expected to take a breather in 2018 following a bumper year in 2017 when issuers had rushed to raise funds given the prospects of monetary policy normalisation and therefore likely higher borrowing costs ahead.”

Unrated corporate bonds issuance is also expected to continue growing because of savings on issuance costs as well as capital market incentives introduced in Budget 2018.

In the secondary market for MGS and corporate bonds, MARC anticipates bond yields to increase gradually in 2018.

Meanwhile, MARC anticipates Bank Negara Malaysia to hike the OPR by between 25 and 50 basis points this year given the increased likelihood of Malaysia’s gross domestic product growth hitting above the 5% level again in 2018.

The research house also expects both cost-push and demand-pull factors to keep the inflation rate hovering at around 3% in 2018, with the lagged inflation effect of both higher pump and food prices in the last few months of 2017 to persist.


Saudi boosts citizen benefits as taxes bite

RIYADH, Jan 6 — Saudi Arabia announced today it had boosted stipends and benefits for citizens to cushion the impact of economic reforms including the kingdom’s first ever taxes after an oil price slump. Most working Saudi Arabians are…


Strong ringgit, strong fundamentals

KUALA LUMPUR, Jan 6 — The strengthening of the ringgit against the US dollar to break the psychologically significant 4.0 level to US$3.99 — a 16-year high — is testimony to the strength of the Malaysian economy. The country continues to…


Qatar to allow 100% control for foreign investors in most economic sectors

DOHA: Qatar has approved legislation allowing 100% ownership for foreign investors in most sectors of the economy in a bid to boost non-energy revenues, the government said today.

The move comes at a time of political crisis in the Gulf, with Qatar under an economic and diplomatic boycott by neighbouring countries for the past seven months. It is also an attempt by Qatar, the third largest economy in the Gulf, to secure new revenues to finance a budget deficit due to the slump in oil prices since mid-2014.

Overseas investors will be able to fully own businesses in almost all economic sectors but they are not allowed to purchase real estate or own franchises, according to the ministry of economy and trade.

To invest in the banking and insurance sectors, foreigners need to secure a special permit from the government, the law states.

Currently, foreign investors can own up to 49% of companies listed on Qatar’s stock exchange in accordance with a law passed in 2014.

The new law was approved at the Cabinet’s weekly meeting on Wednesday. It is not yet clear when the draft law will come into force. – AFP


Qatar allows full ownership for foreign investors

DOHA, Jan 4 — Qatar has approved legislation allowing 100-per cent ownership for foreign investors in most sectors of the economy in a bid to boost non-energy revenues, the government said today. The move comes at a time of political crisis in…


Suu Kyi govt ups Myanmar minimum wage as economy staggers

YANGON, Jan 3 — Myanmar is set to raise the minimum wage to around US$3.60 (RM14.50) a day, state media announced today, as Aung San Suu Kyi’s civilian government struggles to project economic progress after almost two years in power. The…


As US budget fight looms, Republicans flip their fiscal script

WASHINGTON, Jan 2 ― The head of a conservative Republican faction in the US Congress, who voted this month for a huge expansion of the national debt to pay for tax cuts, called himself a “fiscal conservative” on Sunday and urged budget…


Saudi Arabia, UAE introduce value-added tax in first for Gulf region

DUBAI: Saudi Arabia and the United Arab Emirates (UAE) introduced value-added tax from yesterday, a first for the Gulf which has long prided itself on its tax-free, cradle-to-grave welfare system.

Saudi Arabia compounded the New Year blow for motorists with an unannounced hike of up to 127% in petrol prices with immediate effect from midnight.

They are the latest in series of measures introduced by Gulf oil producers over the past two years to boost revenues and cut spending as a persistent slump in world prices has led to ballooning budget deficits.

The 5% sales tax applies to most goods and services and analysts project that the two governments could raise as much as US$21 billion (RM85 billion) in 2018, equivalent to 2.0% of gross domestic product.

But it marks a major change for two super-rich countries where the mall is king. Dubai has long held an annual shopping festival to draw bargain hunters from around the world to its glitzy retail palaces.

Saudi Arabia has deposited billions of dollars in special accounts to help needy citizens face the resulting rise in retail prices.

The other four Gulf states – Bahrain, Kuwait, Oman and Qatar – are also committed to introducing VAT but have decided to delay the move until early in 2019.

The increase in fuel duty in Saudi Arabia was the second in two years. But it still leaves petrol prices as some of the lowest in the world.

High-grade petrol rose 127% from 24 cents a litre to 54 cents, while low-grade petrol rose 83% from 20 cents a litre to 36.5 cents. Duty on diesel and kerosene remained unchanged.

Saudi Arabia has introduced a raft of measures to raise revenue and cut spending as it bids to balance its books. – AFP