‘Super Mario’ shock: Euro slides, yields hit new lows

LONDON, June 18 — The euro took a beating and German bond yields hit a fresh record low today in reaction to European Central Bank President Mario Draghi’s comments indicating a possibility of new rate cuts or asset purchases. Draghi said the…

Asian shares wobble on trade, political tensions; focus turns to Fed meet

TOKYO: – Asian shares got off to a shaky start on Monday as investors were cautious ahead of a closely-watched Federal Reserve meeting, while political tensions in the Middle East and Hong Kong kept risk-appetite in check.

MSCI’s broadest index of Asia-Pacific shares outside Japan opened slightly lower and was last little changed, while Japan’s Nikkei average stood flat.

Wall Street stocks ended lower on Friday as investors turned cautious before this week’s Fed meeting, while a warning from Broadcom on slowing demand weighed on chipmakers and added to U.S.-China trade worries.

“The week ahead is likely to provide some clarification for investors on three fronts that have been a source of uncertainty. The FOMC meeting, with updated forecasts, is centre stage,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.

A private gauge on eurozone’s manufacturing sector as well as U.S.-China trade frictions will also be watched closely, Chandler said.

Financial markets have been sideswiped since a sudden escalation in Sino-U.S. trade tensions in early May, with growing anxiety among investors that a protracted standoff could tip the global economy into recession.

Adding to the tensions between the world’s two biggest economies, U.S. Secretary of State Mike Pompeo told Fox News on Sunday that U.S. President Donald Trump would raise the issue of Hong Kong’s human rights with China’s President Xi Jinping at a potential meeting of the two leaders at the G20 summit in Japan later this month.

On Sunday, hundreds of thousands of black-clad protesters in Hong Kong demanded that Beijing-backed city leader Carrie Lam step down over her handling of a bill that would have allowed extradition to China, resulted her to issue a rare apology.

Geopolitical tensions in the Middle East added another layer of uncertainty for investors after the United States blamed Iran for attacks on two oil tankers in the Gulf of Oman last week.

Hopes that global central banks will keep the money spigot open have helped to temper some of the fears, and all eyes are on the Fed’s two-day meeting starting on Tuesday.

Strong U.S. retail sales data on Friday rolled back expectations of a Fed rate cut at this week’s meeting to 21.7%, from 28.3% on Thursday, according to CME Group’s FedWatch tool. But bets of an easing at the July meeting remain high at 85%.

The Bank of Japan also meets this week and is widely expected to reinforce its commitment to retain a massive stimulus program for some time to come.

The retail report also sent short-dated U.S. Treasury yields higher, flattening the yield curve.

Benchmark 10-year notes was last at 2.091%, while two-year bond yield edged up, shrinking the spread between two- and 10-year yields to 23.6 basis points compared to more than 30 earlier this month.

A Reuters poll showed a growing number of economists expect the Fed policymakers to cut interest rates this year, although the majority still see it holding steady.

In currency markets, the dollar index against a basket of six major currencies climbed to 97.583 on Friday, its highest level in almost two weeks, after the U.S. retail sales data eased fears that the world’s largest economy is slowing sharply.

The index last stood at 97.511, while the euro fetched $1.1220, near the lower end of its weekly trading range.

Oil extended gains on Monday after the attacks on two oil tankers last week raised concerns about potential supply disruptions, but prices remained on track for a weekly loss on fears that trade disputes will dent global oil demand.

Brent futures rose 0.2% to $62.13 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose 0.2% to $52.60.

Spot gold eased 0.1% to $1,340.25 an ounce after hitting a 14-month peak on Friday.

Bitcoin jumped overnight to $9,391.85, its highest level in 13 months. It was last quoted at $9150.15. – Reuters

Malaysia Airlines Q1 revenue up 2%, breakeven unlikely

SEPANG: Malaysia Airlines Bhd has reported a year-on-year (yoy) revenue improvement of 2% in the first quarter ended March 31, 2019 (Q1) on the back of increased available seat kilometres, but does not expect to break even this year due to external volatilities.

It said the increased available seat kilometres was driven by an 8% increase in domestic and international capacity. Load factor was unchanged at 75.2% as the airline matched increase in capacity with market demand. The airline saw a marginal growth in yield on the back of the added capacity and a positive passenger growth of 5%.

The quarter saw improvement in ancillary revenue following initiatives that allow passengers greater choice and flexibility. This, coupled with competitive pricing for products such as prepaid baggage and seat selection and other ancillary products, saw an increase in ancillary revenue by 23% yoy.

Group CEO Izham Ismail said notwithstanding an improvement in its Q1 operational performance in comparison to last year, it expects 2019 to remain extremely challenging. The competitive environment is expected to continue to tighten in 2019, driven by overcapacity in the region as well as domestic. This is largely driven by the price-sensitive leisure market which directly impacts yield.

“While the airline has hedged against fuel and forex, we will continue to be impacted by such external volatilities including the ongoing trade war between the US and China, and does not foresee to break even this year,” he said in a statement.

Its key focus remains to continue driving revenue improvements through enhanced product and service offerings focusing on what passengers value, while driving cost optimisation. The efforts in improving customer experience is reflected in its Customer Satisfaction Index (CSI) and Net Promoter Score (NPS). It also achieved operational stability with On-time Performance (OTP), disruption management and mishandled baggage which have shown improvements.

“Looking ahead, our forward booking looks much stronger compared to last year as the airline continues to strengthen our sales channels including the travel trade partners and build on existing products such as MHexplorer. The rest of the year will also see the airline looking to build revenue via other methods beyond traditional ticket sales which will include deeper collaborations with our partners.”

The airline also noted a large increase in passengers in Q1 accessing the three Golden Lounges in KLIA following refurbishments and improvements in offerings.

The airline achieved an OTP of 86% compared to 76% the previous year, a result of improved operational efficiencies overall including network realignment as well as improved technical dispatch reliability and ground handling process.

The uptrend in CSI and NPS continues following improvements in cabin, boarding and check-in services as well as website and mobile app experience.

Asian stocks subdued, oil near five-month low on US inventory build

TOKYO, June 13 — Asian stocks stuttered today, dogged by the uncertainty over an intractable US-China trade dispute, while oil prices flirted with five-month lows thanks to higher US crude inventories and a bleaker demand outlook. MSCI’s…

Swiss regulators fine banks over forex rigging ‘cartels’

ZURICH, June 6 — Swiss competition authorities said today they had fined five large banks some US$90 million (RM373.7 million) for collusion in foreign exchange trading, following steep fines recently imposed by Brussels. Barclays, Citigroup,…

What is the US currency watch list and why is Singapore on it?

SINGAPORE, May 31 — Other than knee-jerk reactions in the financial markets, economists said that there would likely be no short-term impact on Singapore for being on the United States’ watch list for currency practices. Eight other nations —…

IHH reports 56% jump in Q1 earnings

PETALING JAYA: IHH Healthcare Bhd reported a 56.4% jump in net profit to RM89.51 million for the first quarter ended March 31, 2019 against RM57.23 million in the previous year’s corresponding period, attributed to growth from its existing operations and contribution from Gleneagles Hong Kong Hospital and Acibadem Altunizade Hospital, as well as the acquisition of Amanjaya Specialist Centre and Fortis Healthcare.

Its revenue also grew 27.6% to RM3.64 billion from RM2.85 billion.

IHH managing director and CEO Tan See Leng said in India, the group is already working with Fortis’ new leadership to execute its turnaround and is beginning to see some operational improvements to the business.”

He pointed out that in most recent quarterly results, Fortis reported an operational profit before tax for the first time while achieving cost savings and increased revenue.

As for its operations in Turkey, he said the group’s decisive actions to pare down US$250 million (RM1.04 billion) of non-Lira debt last month will reduce forex volatility on earnings from the second quarter onwards.

“In Greater China, we ramped up operations in Gleneagles Hong Kong with new service offerings catering to demand, while the development of Gleneagles Chengdu and Gleneagles Shanghai continues on track.”

Ringgit may face selling pressure on US move

PETALING JAYA: The ringgit may face selling pressure, bearing the brunt of the US Treasury Department’s surprise decision to place Malaysia on its watch list for currency manipulation.

The local unit strengthened slightly to 4.1960 against the greenback today.

According to PublicInvest Research, the US could also raise the heat on affected countries especially if the trade imbalance has not improved after some time.

“The US could apply the same pressure against China (import tariff) which may in turn affect our export momentum and hence, our trade surplus,” it said in its report today.

“On the flip side, competitive ringgit could be a boon amid our diversified exports that could provide the needed support. Malaysia’s fundamentals remain strong driven, by a broad-based and diversified economy, providing long-term support to the ringgit. In the immediate term though, it could face some selling pressure as a result of this unexpected shock,” it added.

In response to the US Treasury Department’s move, Bank Negara Malaysia (BNM) stressed that it does not undertake unfair currency practices and believes that the Malaysian economy will not be affected by its inclusion in the watch list.

“We concur with BNM that Malaysia remains a proponent of a fair and open trade and does not engage in currency manipulation. Our trade surpluses have remained steady and rising since the 1980s ever since Malaysia embarked on an economic transformation to become a manufacturing power house,” said PublicInvest Research.

“There is scant evidence of currency manipulation given our small forex reserve levels (2018: US$103 billion) compared to daily global forex transactions valued at US$1.3 trillion (RM5.45 trillion). Therefore, currency manipulation to keep ringgit competitive may not last long especially when market forces are much stronger and bigger for that matter,” it said.

It added that the ringgit could be influenced more by global macro conditions or, notably, interest rate movements in advanced economies.

UOB Global Economics & Markets Research said that any ringgit weakness in the near term is more likely due to the trade uncertainty as the US mulls imposing further tariffs on China’s goods exports to the US.

This, coupled with the Huawei ban and other looming US actions, could affect changes in the global electronics supply chain.

Countries that are placed on the watch list have met two of the three criteria outlined. Malaysia met the first two criteria, which is a significant bilateral trade surplus with the US of at least US$20 billion or 0.1% of US GDP and a current account surplus of at least 2% of GDP.

“However, the report did not find evidence of persistent, one-sided intervention over the last few years. As such, we do not think that this should warrant further action from the US Treasury to label Malaysia a currency manipulator in its next report in Nov/Dec 2019.

“This is premised on Malaysia meeting only two of the three criteria. The US Treasury also acknowledges Malaysia’s narrowing current account surplus over the past decade, Malaysia’s external rebalancing in recent years and encourages further measures to support this trend,” said UOB.

IHH Healthcare to reduce forex exposure in Turkey

KUALA LUMPUR: IHH Healthcare Bhd aims to reduce foreign exchange (forex) exposure to between US$300 million and US$350 million (RM1.257 billion and RM1.466 billion), from US$420 million currently in Turkey, where it has a 90% stake in Acibadem.

IHH group CFO Low Soon Teck said the group also plans to refinance between US$125 million and US$187.5 million of its debt denominated in euro and US dollar into Turkish lira.

“For this exercise, we have to do it in stages or we’ll place ourselves out of the market. At the moment, we aim to reduce it to US$350 million to US$300 million by the end of the year,” he told reporters at its AGM today.

Last year, the group held debt denominated in euro and US dollar equivalent to US$670 million in its Turkish market, where the free-falling lira saw a 30% decline against the US dollar. The group subsequently managed to reduce the forex risk to US$420 million earlier in April.

Besides reducing the forex risk, the healthcare group will be expanding its presence in China.

Outgoing managing director and CEO Dr Tan See Leng said it has established three greenfield projects in China, namely Gleneagles Chengdu Hospital, Gleneagles Shanghai Hospital and Gleneagles’ day surgery and ambulatory centre.

“The expansion follows the hub-and-spoke strategy unveiled four years ago, in which each of the hospitals would be supported by a number of its medical centres; and with the completion of the greenfield projects, three of the four hub and spokes clusters that were identified in our strategy will be completed,” he said.

Gleneagles Chengdu Hospital will have a capacity of 350 beds with capital expenditure (capex) of RM420 million. It is due to be completed in the second half of the year along with the day surgery and ambulatory centre in Shanghai.

The capex for IHH’s 450-bed capacity Gleneagles Shanghai Hospital, which is scheduled to be completed in the second half of 2020, is RM513.8 million.

On the South Asian front, IHH is awaiting the Indian Supreme Court’s judgment on its bid to acquire controlling stake in Fortis Healthcare Ltd, in which it currently has a 31.1% stake.

According to Tan, the court will reconvene on July 2 and with the general election out of the way, it expects to receive a judgment in the third quarter of this year.

He said the group’s outlook in Fortis has been “rosy” so far as it has managed to achieve all the 100 days objectives for the Indian healthcare provider.

Fortis returned to the black for its fourth quarter (January-March) of its 2019 financial year, recording a pre-tax profit of 135.6 crores against a loss of 932 crores in the corresponding period in the previous year. The hospital’s earnings before interest, tax, depreciation and amortisation jumped 120%.

On Monday, the group announced that Tan would be stepping down as its managing director and CEO when his contract expires on Dec 31, 2019. Columbia Asia Group CEO Dr Kelvin Loh will return to IHH to take over Tan’s role.

Loh, who joined Columbia Asia Group in 2017, had previously held senior management roles in IHH between 2008 and 2017, and had served as CEO of the group’s Singapore operations division.

IHH Healthcare to reduce forex risk in Turkey

KUALA LUMPUR: IHH Healthcare Bhd aims to further reduce foreign exchange (forex) exposure to between US$300 million and US$350 million, from US$420 million currently in its Turkish home market where it has a 90% stake in Acibadem.

IHH group CFO Low Soon Teck (pix) said that the group plans to refinance between US$125 million and US$187.5 million of its debt denominated in euro and US dollar into Turkish lira.

“For this exercise, we have to do it in stages or we’ll place ourselves out of the market. At the moment, we aim to reduce it to US$350 million to US$300 million by the end of the year,” he told reporters at its AGM today.

Last year, the group held debt denominated in euro and US dollar equivalent to US$670 million in its Turkish home market, where the free falling lira saw a 30% decline against the US dollar.

The group subsequently managed to reduce the forex risk to US$420 million earlier in April.