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PETALING JAYA: Malaysian banks’ asset risks will rise in 2019, as business conditions deteriorate for export-oriented sectors, said Moody’s vice-president and senior analyst Simon Chen.
“Profitability will also fall, as revenue growth slows and credit costs rise. Nevertheless, the banks’ capital buffers will further improve, due to slower asset growth; thereby helping the banks withstand the higher asset risks,” he said in a statement today.
The expected weak export-oriented sectors, particularly electronics, construction and real estate, is attributable to a slowdown in global trade and weaker economic growth.
However, Moody’s said this will not result in a sharp increase in impaired loans, with robust domestic consumption and stable employment conditions supporting asset quality.
Systemwide loan growth grew to 5.6% in 2018 from 4.1% in 2017, because of a gradual recovery in loan demand among corporates and households, partially as a consequence of the removal of a goods and services tax.
For 2019, the loan growth rate is expected to fall back to about 4-5% in 2019, as slower economic growth and uncertainty around the new government’s longer-term policy stance suppress loan demand among businesses and households.
Most Malaysian banks rated by Moody’s reported improvements in asset quality and capitalisation in 2018 but profitability was mixed.
Although profitability will weaken this year, the rating agency said capital generation will continue to outpace capital consumption due to weaker loan growth, leading to further rises in capital ratios. At the same time, deposit growth will continue to outpace loan growth as banks prepare for net stable funding ratio implementation.
The impaired loan ratios of most Moody’s rated Malaysian banks fell at the end of 2018 on the back of the slower formation of new impaired loans at home and overseas, loan repayments and write-offs.
PETALING JAYA: The headline Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI), which is a composite single-figure indicator of manufacturing performance, recorded 47.6 in February, down from 47.9 in January, pointing to a sharper deterioration in manufacturing sector business conditions.
IHS Markit, which compiles the survey, said the health of Malaysia’s goods-producing economy deteriorated for a fifth successive month in February, with continued declines seen in both output and new orders.
“Employment levels stagnated, while output charges stopped rising for the first time in eight months amid a fractional fall in operating costs. Sustained downturns in production in sales led companies to reduce purchasing activity and inventories,” it added.
Nevertheless, expectations towards output over the coming 12 months remained positive despite dipping since January.
Intakes of new work fell during February, with firms attributing this to a general market slowdown causing existing client demand to decline. The decrease was marked overall and among the strongest seen across the near seven-year survey history.
New orders from international sources were also down in February. Asian markets were cited as a drag on export sales. As a result, production volumes were cut for a fifth successive month. The rate of decrease was only moderate, but accelerated amid some reports of factory shutdowns.
The strong decline in new business led capacity pressures to ease further during the latest survey period. Backlogs of work fell at a faster pace and for the sixth time in as many months. Employment remained flat, with staffing levels unchanged from January.
Although headcounts were raised in some instances as part of company expansions, this was offset by job cutting at other firms due to reduced demand.
With lower production requirements, input purchasing was decreased at the second-fastest rate since June 2017 and at a marked rate overall. This filtered through to inventories, with stocks of purchases declining at one of the strongest rates seen since data collection started in mid-2012.
Malaysian manufacturers also scaled back their holdings of finished items. Despite softer demand for inputs, vendor performances deteriorated at a faster pace.
Delivery delays were blamed on material shortages at suppliers and logistic troubles. The extent to which lead times lengthened was mild, but the strongest since last October.
Against the current downbeat manufacturing picture, Malaysian goods producers remained upbeat on the output prospects over the coming 12 months.
Forecasts of improved demand and planned new product launches supported optimism. Nevertheless, the degree of optimism was the weakest for three months.
Lastly, input prices fell marginally amid reports of favourable exchange rate movements, enabling firms to leave output prices broadly unchanged.
Commenting on the survey data, IHS Markit economist Joe Hayes said that the February data pointed to a sustained contraction of Malaysia’s manufacturing economy, reflecting further falls in production and sales.
“New orders decreased at one of the strongest rates across the survey history, as panellists reported unfavourable underlying demand. Near-term manufacturing prospects appear downbeat, as firms opted to leave workforce numbers unchanged, scaled back input buying sharply and reduced inventories, suggesting that firms are bracing themselves for continued production cutbacks.”
KUALA LUMPUR, Feb 28 — Malaysia’s business confidence in the first quarter of 2019 softens with the confidence indicator easing -2.2 per cent after increasing 7.1 per cent in the fourth quarter of 2018. The Statistics Department said the…
PETALING JAYA: Expectations of businesses turn less optimistic for the first half of 2019, with the overall net balance registering 0.6% against 12.3% recorded in the previous survey result, according to Statistics Department.
Based on the data in “Business Tendency Statistics” for the first quarter of 2019, respondents in industry and services sectors expect positive business conditions for the period of January to June 2019, but lower at 0.5% and 7.5%, respectively.
Meanwhile, construction and wholesale and retail trade sectors expect business situation to deteriorate with a net balance of -24.5% and -6.4%, respectively.
In addition, the department said according to the data, businesses confidence lessen in the first quarter of the year.
After showing an increase in the fourth quarter of 2018, the confidence indicator dropped to -2.2% in the first quarter of 2019.
“Industry, construction and wholesale and retail trade sectors expect their business situation to decline in the first quarter of 2019 with confidence indicators of -3.6%, -18.9% and -8.2%, respectively.
“Meanwhile, services sector expects their business situation to improve at a moderate rate with a smaller confidence indicator at 5.9% as compared to 18.8% recorded in the last quarter,” it added.
Overall, it said respondents expect gross revenue to increase in the first quarter of 2019 with a net balance of 11.8%, with a total of 30.4% of the respondents anticipate that their gross revenue to increase, while 51% expected unchanged.
In contrast, 18.6% of the respondents foresee a decrease in gross revenue.
In terms of number of employees, the hiring trend remain positive in the first quarter of 2019, where a net balance recorded 3.5%.
A total of 8.5% of the establishments intend to add their workforce, while 5% of the establishments expect to reduce number of employees in the first quarter of 2019, it added.
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BEIJING: China’s central bank is not yet ready to cut benchmark interest rates to spur the slowing economy, despite cooling inflation and a stronger yuan, which have fanned market expectations of such a move, policy sources told Reuters. But the People’s Bank of China (PBOC) is likely to cut market-based rates and further lower banks’ […]