Sunway in talks for potential stake sale of healthcare unit

PETALING JAYA: Sunway Bhd has confirmed that it appointed Maybank Investment Bank Bhd to explore strategic investment options for its healthcare portfolio, in line with the company’s objective to enhance shareholder value as the company continues to explore and evaluate various options for all its businesses.

“Should there be any material development, the company will make the necessary announcement, in compliance with the Main Market Listing Requirements of Bursa Malaysia Securities Bhd,“ Sunway said in a stock exchange filing today.

It was reported that Sunway picked the bank to help with a stake sale in its healthcare unit that sources said could fetch at least US$250 million (RM1.03 billion).

The company plans to sell a combination of old and new shares representing a 20% to 25% stake in Sunway Medical Centre Bhd and has reached out to potential suitors, said the sources.

source https://www.thesundaily.my/business/sunway-in-talks-for-potential-stake-sale-of-healthcare-unit-MN3843835

U.S. job growth seen slowing in August, unemployment rate falling below 10%

WASHINGTON: U.S. job growth likely slowed further in August as financial assistance from the government ran out, threatening the economy's recovery from the COVID-19 recession.

The Labor Department's closely watched employment report on Friday would come as companies from transportation to manufacturing industries announce layoffs or furloughs. It could add pressure on the White House and Congress to restart stalled negotiations for another fiscal package, and will likely become political ammunition for both Democrats and Republicans with just two months to go until the presidential election.

Programs to help businesses pay wages have either lapsed or are on the verge of ending. A $600 weekly unemployment supplement expired in July. Economists credited government largesse for the sharp rebound in economic activity after it nearly ground to a halt following the shuttering of businesses in mid-March to control the spread of the coronavirus.

"The pandemic has really torn our economic and social fabric," said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. "The ending of the fiscal stimulus has not helped the situation."

According to a Reuters survey of economists nonfarm payrolls likely rose by 1.4 million jobs last month, with some of the anticipated gains coming from hiring for the 2020 Census. Employment increased 1.763 million in July and its growth peaked at 4.791 million in June.

Friday's report is one of just two monthly labor market scorecards left on the calendar before the Nov. 3 presidential election.

President Donald Trump, who is trailing in polls behind former Vice President Joe Biden, the Democratic Party nominee, is likely to tout the continued job gains as a sign that the economy is improving after suffering its biggest shock in at least 73 years in the second quarter.

But employment would still be about 11.5 million below its pre-pandemic level. Most of the job gains have been workers being recalled from furloughs or temporary layoffs. Though new COVID-19 infections have subsided after a broad resurgence through the summer, many hot spots remain.

United Airlines said on Wednesday it was preparing to furlough 16,370 workers on Oct. 1. American Airlines has announced its workforce would shrink by 40,000, including 19,000 involuntary cuts. Ford Motor Co said it was targeting 1,400 U.S. salaried jobs for elimination by year end. Mass transit rail operators are also eying furloughs.

A report this week from the Federal Reserve based on information collected from the U.S. central bank's contacts on or before Aug. 24 showed an increase in employment. The Fed, however, noted that "some districts also reported slowing job growth and increased hiring volatility, particularly in service industries, with rising instances of furloughed workers being laid off permanently as demand remained soft."

"Restaurants and other businesses in the services industry are not going to continue calling workers back when demand is not there," said Ryan Sweet, a senior economist at Moody's Analytics in Westchester, Pennsylvania. "We need the stimulus like weeks ago."

SPENDING IN JEOPARDY

The unemployment rate is forecast to have dropped to 9.8% in August from 10.2% in July, according to the Reuters survey. That would leave it just under the 10% peak shortly after the end of the 2007-09 Great Recession.

But the measurement of the jobless rate has been biased downward by people misclassifying themselves as being "employed but absent from work." At least 29.2 million were receiving unemployment benefits in mid-August.

Lydia Boussour, a senior economist with Oxford Economics in New York, estimated that payroll gains in line with expectations would leave one out of two laid-off workers still unemployed, with an increased risk of a prolonged high unemployment spell.

"The fact that the employment is settling into a trend of slow, grinding improvement is a worrisome sign for the broader recovery," said Boussour. "The combination of slow employment progress and poor health conditions along with the absence of fiscal aid risk jeopardizing the consumer spending rebound in the coming months."

Slowing job growth will likely have a limited impact on gross domestic product in the third quarter, which economists estimate could rebound at an annualized rate of as high as 30% after sinking at a historic 31.7% pace in the April-June quarter. But it will hurt fourth quarter GDP, with consumer spending taking a hit.

Though wages surged at the depth of the pandemic, that was because the job losses were concentrated in the low wage services industries like restaurants and bars.

Average hourly earnings are forecast unchanged in August after rising 0.2% in July. That would lower the annual increase in wage to 4.5% from 4.8% in July.

The service sector is likely to account for most the anticipated gains in August. Manufacturing is expected to have added another 50,000 jobs. Government payrolls were likely boosted by the hiring of at least 250,000 workers for the population count, though some it could be offset a decline in education employment at states and local governments.

"We look for education-related employment to be particularly weak as the back-to-school season will be abnormal in many areas," said Daniel Silver, economist at JPMorgan in New York. - Reuters

source https://www.thesundaily.my/business/u-s-job-growth-seen-slowing-in-august-unemployment-rate-falling-below-10-XN3843321

Australia’s ANZ says 15,000 mortgage holders fear they can’t pay

SYDNEY: About 15,000 people with Australia and New Zealand Banking Group Ltd mortgages fear they can no longer pay their home loans due to the economic impact of the coronavirus, the head of Australia's fourth-largest lender said on Friday.

ANZ CEO Shayne Elliott told a parliamentary hearing the bank still did not know the true impact of the virus on the bank's roughly A$246 billion ($179 billion) mortgage book since customers could pause repayments if they could not make them.

However, of the bank's 84,000 customers who had deferred loan repayments, "about 15,000 of those people have said 'right now I'm really uncertain, I've lost my job ... and I probably am going to need more help' and they're the people we're talking to", Elliott told parliament.

"It's going to be devastating for anybody. Thousands of people are going to be in a struggling position."

Australian bank bosses must face questioning in a parliament committee twice a year, and Elliott was the first since COVID-19 prompted a broad shutdown of the world economy. Australia, which has reported 737 deaths related to the virus, recorded its biggest economic slump and confirmed its first recession in three decades this week.

Elliott told parliament the bank believes house prices would fall about 10% nationwide, and that the economy was unlikely to experience a fast - or "V-shaped" recovery - due to its reliance on immigration and free movement of people and goods.

"We think (the peak of insolvencies) is probably more like the middle of next year, that's when the crisis will start to hit the banks," he said.

"We think (gross domestic product) recovers in an absolute sense sometime in 2022."

ANZ's head of retail and commercial banking, Mark Hand, told parliament banks were unprepared for a deluge of inquiries about home loan refinancing when shutdowns began, resulting in weeks-long delays getting approvals.

The bank had since shortened its loan approval time to 10 days, with a target of two to three days this month, he added. - Reuters

source https://www.thesundaily.my/business/australia-s-anz-says-15000-mortgage-holders-fear-they-can-t-pay-KM3842279

Dollar hunkers down before key U.S. jobs report

TOKYO: The dollar steadied against major currencies on Friday as traders awaited key U.S. jobs data that may cast doubt on the strength of economic recovery from the coronavirus outbreak.

The Australian dollar clawed back early losses and stabilised after the country's retail sales accelerated in July, easing concern about the economy.

The greenback has managed to halt its recent slide, but analysts warn sentiment remains weak due to concern about the strength of U.S. economic growth and speculation that the Federal Reserve will keep rates low for a very long time.

"The dollar has rebounded against the euro and could continue to rise a little further," said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.

"However, my main scenario is for the dollar to fall, for stocks to rise and for yields to fall because the Fed is expected to stick with low interest rates."

Against the euro, the dollar stood at $1.1851 in Asia on Friday, extending a pullback from a two-year low hit on Tuesday.

The British pound bought $1.3285, retreating from its highest level in almost a year due to a lack of progress in trade negotiations between Britain and the European Union.

The greenback was quoted at 0.9096 Swiss franc

Against the yen, the dollar traded at 106.18.

Data due later on Friday is expected to show U.S. non-farm payrolls grew by 1.4 million in August, which would be slower than the 1.763 million jobs created in the previous month.

There are growing signs the labour market recovery from the depths of the pandemic is faltering, with financial support from the government virtually depleted.

The U.S. central bank last week overhauled its policy framework to focus more on addressing shortfalls in employment and less on inflation, which would allow it to keep rates lower for longer periods, which is a negative for the dollar.

Chicago Fed President Charles Evans said on Thursday the bank could promise to keep interest rates pinned near zero until inflation reaches 2.5%, well above current low levels and modestly above the inflation target of 2%.

The dollar index against a basket of six major currencies was little changed in Asia on Friday at 92.759.

The dollar's downtrend will continue for at least another three months due to the outlook for the Fed's monetary policy, a Reuters poll of analysts showed on Friday.

The Antipodean currencies initially fell slightly, tracking the broader loss of investor confidence as a sell-off in U.S. tech shares hit Asian stocks and a closely-watched measure of market volatility hit a 10-week high.

However, the looming U.S. jobs data brought investors back to a more measured posture.

The Australian dollar steadied at $0.7275, supported after local retail sales accelerated in July.

Across the Tasman Sea, the New Zealand dollar erased losses to trade to $0.6712. - Reuters

source https://www.thesundaily.my/business/dollar-hunkers-down-before-key-u-s-jobs-report-ML3841709

Jumping on the healthcare bandwagon

PETALING JAYA: While there appears to be a throng of players venturing into the healthcare sector now, the market is yet to be deemed “saturated”, given that it is still early to gauge when the supply and demand of personal protective equipment (PPE), rubber gloves and other healthcare products will reach equilibrium.

Two days ago, four companies announced their diversification into healthcare-related businesses, including Iconic Worldwide Bhd (into PPE business), LKL International Bhd (glove deal), Vizione Holdings Bhd (glove-making) and MQ Technology Bhd (Covid-19 vaccine).

This is in addition to companies that have diversified into the glove business (Karex Bhd, Inix Technologies Holdings Bhd, AT Systematization Bhd, MSCM Bhd); the PPE business (ACO Group Bhd, Caely Holdings Bhd, Ni Hsin Resources Bhd); face masks (Komarkcorp Bhd, Notion VTec Bhd, Pecca Group Bhd, Titijaya Land Bhd) and more.

Rakuten Trade vice president of equity research Vincent Lau said the prospects of the healthcare sector are good given the strong demand for healthcare products, which is why these companies are jumping on the bandwagon.

“It’s a good sign (that healthcare is booming),“ Lau told SunBiz, adding that businessmen will try their hands at lucrative activities.

“We don’t know how they will perform (by diversifying into this healthcare business). Time will tell. How profitable or whether it is a good move or not, it remains to be seen until we look at their financials.

“With a vaccine or not, glove demand will still be there. Healthcare products, masks, PPE products will still be needed whether we have the Covid-19 or not. It’s the new normal.”

An industry source said a “bubble” will only occur once all the players are in operation.

“Now they’re still in their works to set up their facilities. There will be a bubble once demand dwindles. Glove demand will sustain and stay on the high side for the meantime and won’t drop so fast.”

He added that although the healthcare sector is seeing many newcomers, it is still early to tell when supply and demand will reach equilibrium. Moreover, new players need time to set up their facilities before they can commence operations.

“More visibility of the supply and demand equilibrium can be seen next year, not this year.”

The industry source said many of the non-glove players entered the glove manufacturing market due to strong profit visibility.

“Most of these ventures can pay off. The payback (cash flow generated after initial capex outlay) period is short so people are taking chances. Businessmen need to take risks to make money.”

The addition of these players is also good for the economy, as it strengthens export, expands the supply chain and create more jobs.

However, an analyst opined that it will be challenging for newcomers tap into the market as many have their suppliers already.

“By the time they built their factories, demand will stabilise by then. But more players will be good as it ensures quality products due to the competition,” he noted.

source https://www.thesundaily.my/business/jumping-on-the-healthcare-bandwagon-CI3831136

General Motors and Honda to jointly develop vehicles in North America, deepening collaboration

DETROIT/BENGALURU: General Motors (GM) and Honda Motor Co on Thursday revealed plans to team up in North America to make a range of vehicles, deepening their ties as the auto industry comes under greater pressure to share technology and costs to meet demands for cleaner vehicles.

Under the alliance, Honda and GM said, the companies intend to share common vehicle platforms, including electrified and internal combustion propulsion systems.

The companies still need to complete a definitive agreement and officials said greater details on expected cost savings would be available then, but a person familiar with the matter said the savings would run in the billions of dollars for each company.

The partnership represents a significant expansion of existing collaborations between the two companies on electric and autonomous vehicles, connected vehicle technology and fuel cells. Honda is an investor in Cruise, the self-driving business that GM majority owns.

"Overall, we believe this alliance would help both companies realize significant cost savings in the development of our vehicle portfolios," GM President Mark Reuss said in a statement.

The deal marks another milestone in the consolidation of the global auto industry, as pressures to cut emissions and move toward EVs strain the capital and engineering resources of even the largest players.

Former Fiat Chrysler Automobiles (FCA) chief executive Sergio Marchionne had for years pushed for consolidation in the global auto industry, arguing it was inevitable to manage prohibitive capital costs.

FCA announced a US$50 billion merger with France's PSA last year to create the world's fourth largest carmaker, Stellantis, in a move to address cost and scale issues. That deal is expected to close by the end of the first quarter of 2021.

Japan's Toyota Motor Corp has been expanding ties with smaller Japanese automakers such as Mazda Motor Corp and Subaru. Ford Motor Co and German automaker Volkswagen AG have forged a wide-ranging alliance covering electric and commercial vehicles and autonomous driving technology.

Analysts and GM investors have been pushing for a transformational change at the Detroit automaker, with repeated questions around the spinoff of its EV operations into a separate company. GM CEO Mary Barra has said such an option was not off the table.

GM and Honda said in April they would jointly develop two new EVs for Honda and were planning to explore more ways to expand their alliance. They have already worked together on the design of an autonomous vehicle called Cruise Origin, and also collaborated on fuel cells and batteries.

Honda has for years remained largely independent, staying clear of industry mergers. But the GM alliance will give it economies of scale it cannot achieve on its own, Honda executive vice president Seji Kuraishi said. North America is Honda's largest market and GM's second largest behind China.

GM and Honda said joint development discussions will begin immediately, with engineering work starting in early 2021.

The companies plan to explore vehicle platform-sharing possibilities in more than four core segments including crossovers and midsized pickup trucks, along with propulsion systems, infotainment and connectivity services, advanced driver-assist features, vehicle connectivity and other technology. They also will cooperate on purchasing.

Credit Suisse analyst Dan Levy said in a research note that it was "encouraging" to see the companies teaming up on gasoline-powered engines as that technology still requires investment even as the industry shifts to EVs. – Reuters

source https://www.thesundaily.my/business/general-motors-and-honda-to-jointly-develop-vehicles-in-north-america-deepening-collaboration-EN3834611

US weekly jobless benefits claims dip below 1 million but labour market recovery faltering

WASHINGTON: The number of Americans filing new claims for unemployment benefits fell below 1 million last week for the second time since the Covid-19 pandemic started in the United States, but that does not signal a strong recovery in the labour market.

The drop in initial claims to a five-month low reported by the Labor Department on Thursday largely reflected a change in the methodology it used to address seasonal fluctuations in the data, which economists complained had become less reliable because of the economic shock caused by the coronavirus crisis.

There are growing signs the labour market recovery from the depths of the pandemic in mid-March through April is faltering, with financial support from the government virtually depleted.

"There are new seasonal adjustment factors this week which brings down the joblessness slightly," said Chris Rupkey, chief economist at MUFG in New York. "The labour market looks just as bad as it was and it will be a miracle if economic growth can continue at such a fast clip during this recovery if it has to drag along millions and millions of workers without paycheques."

Initial claims for state unemployment benefits fell 130,000 to a seasonally adjusted 881,000 for the week ended Aug 29. Economists polled by Reuters had forecast 950,000 applications in the latest week. A staggering 29.2 million people were on unemployment benefits in mid-August.

The Labor Department has switched to using additive factors to more accurately track seasonal fluctuations in the series. The government dropped the multiplicative seasonal adjustment factors it had been using because they could cause systematic over-or under-adjustment of the data in the presence of a large shift in the claims series.

Unadjusted claims rose 7,591 to 833,352 last week. The increase in the raw numbers, which many economists prefer to focus on, added to a raft of data suggesting the labor market recovery was ebbing.

A report on Wednesday from the Federal Reserve based on information collected from the US central bank's contacts on or before Aug 24 showed an increase in employment. The Fed, however, noted that "some districts also reported slowing job growth and increased hiring volatility, particularly in service industries, with rising instances of furloughed workers being laid off permanently as demand remained soft."

Private employers hired fewer workers than expected in August. In addition, data from Kronos, a workforce management software company, and Homebase, a payroll scheduling and tracking company, showed employment growth stagnated last month.

Another report on Thursday showed job cuts elevated in August amid layoffs by airlines. United Airlines said on Wednesday it was preparing to furlough 16,370 workers on Oct 1.

The weak labor market reports raise the risk of a sharper slowdown in job growth in August than is currently anticipated by financial markets. The government is scheduled to publish August's employment report on Friday.

According to a Reuters survey of economists non-farm payrolls likely rose by 1.4 million jobs last month after increasing by 1.763 million in July. That would leave nonfarm payrolls about 11.5 million below their pre-pandemic level.

The claims report also showed the number of people receiving benefits after an initial week of aid dropped 1.238 million to 13.254 million in the week ending Aug 22. Part of the decrease in so-called continuing claims was likely because of people exhausting eligibility for benefits.

The number of people receiving unemployment benefits under all programmes jumped 2.2 million to 29.2 million in the week ended Aug 15.

"While Wall Street hits record highs, much of Main Street remains in severe distress," said Ron Temple, head of US Equity at Lazard Asset Management in New York. "The pandemic and the federal failure to sustain necessary assistance to households as well as state and local governments are weakening long-term economic growth and social stability."

Fiscal stimulus boosted economic activity after it nearly ground to a halt following the shuttering of non-essential businesses in mid-March to control the spread of Covid-19. That set up the economy, which plunged into recession in February, for a sharp rebound in the third quarter.

A US$600 weekly unemployment supplement expired in July and funding programmes for businesses have also lapsed, leaving the outlook for growth uncertain. – Reuters

The number of people receiving unemployment benefits under all programmes jumped 2.2 million to 29.2 million in the week ended Aug 15. – AFPPIX

source https://www.thesundaily.my/business/us-weekly-jobless-benefits-claims-dip-below-1-million-but-labour-market-recovery-faltering-FN3834337