Between development and managing debts, you can’t take sides : Guan Eng

PUTRAJAYA: Information can be a double-edged sword, depending on how it is being perceived and in the case of the country’s debt level, all is well as the government is balancing it within its means, Finance Minister Lim Guan Eng said.

“In the deficit economy, one can’t avoid from borrowing, but it is important to note on how it is being channelled,” he said.

While it may sound like an old track record, Lim stressed the fact that the debt situation was inherited from the previous Barisan Nasional (BN) government, which conveniently resorted to off-balance-sheet financing to cover-up dubious debts.

Since Pakatan Harapan (PH) took over the government in May 2018, a comprehensive review of the government’s financial obligations was carried out, which confirmed that it had accumulated RM1.087 trillion of debt and liabilities as at the end of 2017.

Despite the government’s total debt and liabilities being reduced to 75.4 per cent of Gross Domestic Product (GDP) in 2018 from 79.3 per cent in 2017, direct debt increased to 51.2 per cent of GDP from 50.1 per cent.

“This (increase in direct debt) is basically to finance our fiscal deficit, especially development expenditure, (even though) we (PH) have not undertaken any (new) megaprojects.”

“These are the development projects under the five-year plan (11th Malaysia Plan 2016-2020). Development expenditure must continue, especially in critical areas such as hospitals and public infrastructure,” he told Bernama in an exclusive interview.

Under the BN government, these deficits or shortfalls were covered by government revenues.

“But we cannot do that under the present administration because we have to use some of it to pay off interest payment and debt obligations. For instance, we have begun paying for 1Malaysia Development Bhd’s (1MDB) interest and debt obligations,” Lim said

He said payments related to 1MDB would only increase over time before it starts to taper off after 10 years.

“Remember the world-renowned scandal involved RM52 billion (including interest) with 20 years tenure. In 2020 alone, we are looking at an increase in debt payment interest of up to RM2 billion,” the Finance Minister revealed.

That additional obligations and payments were done discreetly by the previous government, making the balance sheet look as if there are rooms to borrow further.

But the PH government is being very open on how it is funding the development projects, which is in the form of loans that have resulted in an increase in its direct debts, he said.

Lim said the money from Tabung Harapan Malaysia amounting to RM203.29 million as at March 31, 2019, would be fully used up by end of this year to settle part of 1MDB debt and interest obligations.

In the interview that lasted almost one hour, the Finance Minister was clear in his message that between development expenditure and managing the country’s debt, one can’t take sides.

Both have to go hand in hand as long as it is contained within its means.

To date, Lim said the PH government is very much committed to fiscal consolidation of 3.4 per cent in 2019 and 3.0 per cent in 2020.

“We intend to stick to the target,” he said.

“Even though we have a fiscal deficit, we do not run a twin deficit. We have been enjoying Current Account Surplus, which is very important. We are among the very few countries in the world without a twin deficit and it gives a lot of confidence,” he said.

A current account surplus means an economy is exporting a greater value of goods and services than its is importing.

The country’s economy has also remained solid despite the external headwinds with 4.9 per cent growth recorded in the second quarter of this year from 4.5 per cent in the first quarter.

Hence, Lim said there is also enough room for contingency measures or stimulus packages if the global economy scenario warrants it.

“We still hope that the trade talks between the United States and China will be a successful one so that we can continue to enjoy sustainable economic growth.”

Lim also said the three-year timeframe to restore the country’s fiscal health remains.

“There are talks of a possible economic downturn next year (but) I don’t think it will affect our three years rehabilitation of restorative programme to put Malaysia back on track by 2021 – fiscally speaking.”

“With the right pre-emptive measures we should be able to stick to the three-year rehabilitative fiscal programme,” he added.

Earlier in a statement, Lim said the new government has been praised by international rating agencies and investment analysts for the marked improvement in transparency, as well as the standards of good governance.

“Their repeated affirmation of our sovereign ratings at A-/A3 since then, despite the increased transparency in the state of our balance sheet, demonstrates their conviction that this government is taking concrete measures to address the weaknesses.

“Now, we hope the people can see that we are making progress,” he said. -- Bernama

source https://www.thesundaily.my/business/between-development-and-managing-debts-you-can-t-take-sides--guan-eng-KY1436581

Malaysia’s Sep manufacturing PMI at four-month

PETALING JAYA: The headline IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) rose to a four-month high of 47.9 in September, up from 47.4 in August.

This was the first time since April that the headline index has increased. At current levels, the PMI is broadly indicative of annual gross domestic product (GDP) growth of between 4.5% and 5%, according to historical comparisons.

The latest PMI data suggested that business conditions in Malaysia’s manufacturing sector remained challenging in September, although there were signs of improvement as the new orders and output indices both increased.

New product launches are anticipated to drive production volumes over the coming year and business optimism subsequently remained strong.

Employment held steady in September, while input price inflation moderated.

The survey’s output index picked up slightly in September, but held close to the levels seen across the third quarter, indicating a stable production trend.

IHS Markit said demand conditions also showed some signs of stabilisation in September. While survey data pointed to an increasingly tough environment in recent months, improved sales to existing customers reportedly contributed to a rise in the new orders index.

“Nevertheless, challenges remained apparent as clients held out for price discounts amid strong competitive pressures. External demand also remained fragile, with orders from key export markets dropping.”

Meanwhile, current and future workloads were deemed sufficient to hold employment steady during September.

The future output index was consistent with a relatively strong level of confidence, highlighting that businesses expect production volumes to be higher than present levels over the coming 12 months.

According to firms, forecasts of greater demand from domestic and external clients, as well as the planned development of new products drove the positive outlook.

However, a darkening global economic environment and geopolitical concerns contributed to a moderation in firms’ optimism compared to that seen in August.

IHS Markit said the latest survey data pointed to greater cost pressures faced by Malaysian goods producers, although the rate of input price inflation slowed and was historically weak overall. The vast majority of firms kept selling prices unchanged (97%) during September.

Commenting on the latest survey results, IHS Markit chief business economist Chris Williamson said with global headwinds intensifying, it is no surprise to see Malaysia’s manufacturers continuing to struggle in September, but there are at least some encouraging signs of upward momentum being regained.

He said the September survey comes on the heels of global PMI data showing worldwide economic growth slipping closer to three years lows mid-way through the third quarter, led by the steepest drop in global trade since 2012.

“In this environment, it’s reassuring to see that the Malaysia PMI is indicating only a very marginal easing of growth so far in the third quarter, thanks to the PMI reviving to a four-month high in September, hinting that GDP is likely to continue to expand at a respectable annual rate of 4-5% in the third quarter.

“However, while businesses generally remain upbeat about expanding production over the coming year, September saw some loss of optimism. It will therefore be important to watch global developments to ascertain whether growth momentum can be sustained as we head into the fourth quarter,” he said in a statement.

source https://www.thesundaily.my/business/malaysia-s-sep-manufacturing-pmi-at-four-month-YY1436540

CIMB banks on renewable technology for SMEs

KUALA LUMPUR: CIMB Group Holdings Bhd has launched a financing facility for small and medium enterprises (SMEs) to buy and install equipment related to renewable energy technologies.

Group chief executive officer Tengku Datuk Seri Zafrul Aziz (pix) said the facility, which has no size limit, is part of the bank's recently-issued US$680 million (RM2.85 billion) Formosa & Reg S Sustainable Development Goals (SDG) bond.

The bond is issued to fund projects related to the United Nations' sustainable development goals.

source https://www.thesundaily.my/business/cimb-banks-on-renewable-technology-for-smes-CY1436477

Australia home prices jump most in 2-1/2 yrs but home approvals sink ahead of RBA decision

SYDNEY: Australian home prices posted their biggest monthly jump in 2-1/2 years in September, with the dominant markets of Sydney and Melbourne bouncing strongly, but approvals to build new homes collapsed to the lowest since 2013.

Tuesday's grim building approval numbers reinforced expectations that the Reserve Bank of Australia (RBA) would cut interest rates by another quarter-point at a policy meeting later in the day (0430 GMT), knocking the local dollar to one-month lows of $0.6733.

Building approvals fell 1.1% in August, less than a sharper 10% slide in July but against market expectations for a bounce of 2.5%, data from the Australian Bureau of Statistics (ABS) showed.

Total building approvals are at the lowest level since January 2013 and 44% below their November 2017 peak, in a blow to what had been one of Australia's stronger sectors.

"These data indicate that we're yet to see a bottom in building approvals and suggests increased risk of a deeper residential construction downturn," said Kaixin Owyong, Sydney-based economist at National Australia Bank.

Worried about a broader economic slowdown, rising unemployment and tepid inflation, the RBA chopped the cash rate in back-to-back meetings in June and July to a record low of 1% and has shown willingness to go again if needed.

Futures now imply an 80% chance the RBA will reduce interest rates for the third time this year to 0.75% at its Tuesday board meeting. One more cut to 0.5% is almost fully priced in by early 2020.

Record low interest rates have boosted home prices, helping end two years of continuous declines which ate away household wealth and confidence in a blow to consumption and the broader economy.

Separately, figures from property consultant CoreLogic on Tuesday showed home prices across capital cities rose 1.1% in September from August, while values for the nation as a whole gained 0.9%, the biggest jump since March 2017.

"CHALLENGING SCENARIO"

Some economists believe the price revival could prove a blessing for the construction sector which has seen a severe downturn in new home approvals, particularly for the once red-hot apartment sector.

In a positive sign, Tuesday's data showed a small bounce in approvals to build new apartments while non-residential construction surged 54%.

"The recovery in non-residential construction over recent months should go some way to countering the weakness in residential," economists at ANZ wrote in a note.

"Lower interest rates should eventually filter through to a pick-up in housing approvals."

The CoreLogic data showed the Sydney and Melbourne markets each saw price jumps of 1.7% in September.

On a year-on-year basis, Sydney prices were still down 4.8% and Melbourne off 3.9%, but that was a major improvement from the double-digit annual declines clocked earlier this year.

This uptrend led economists at RBC to raise their forecasts for Australia's house prices to an annualised rate of 6-8% growth in coming quarters, up from 4%.

However, RBC's Su-lin Ong said she doesn't expect the gains to be sustained, citing still modest property listings and turnover as well as rising unemployment, among other factors.

"Indeed, the more challenging scenario for the RBA in 2020 would be the persistence of sub-trend growth, sub-target inflation and a weaker labour market while house prices stay well above nominal (output) growth and the cash rate reaches the lower bound," Ong said. - Reuters

source https://www.thesundaily.my/business/australia-home-prices-jump-most-in-2-1-2-yrs-but-home-approvals-sink-ahead-of-rba-decision-EY1436420

Japan proceeds with twice-delayed sales tax hike as growth sputters

TOKYO: Japan rolled out a twice-delayed increase in the sales tax to 10% from 8% on Tuesday, a move that is seen as critical for fixing the country's tattered finances but that could tip the economy into recession by dampening consumer sentiment.

The government has already applied measures to mitigate the pain on consumption, mindful of avoiding the effects of the last increase, in 2014, which led to a severe economic downturn.

Television broadcasters showed images of crowds buying items such as wine, cosmetics and jewellery before the increase hit.

"I was a bit worried whether I can buy this at 8% tax rate, but now I'm relieved that I made it," a 45-year-old woman told public broadcaster NHK after buying a 70,000-yen ($647) bed at a department store in Tokyo.

When the government raised the tax to 8% from 5% in April 2014, a last-minute buying spree and a subsequent pullback in demand caused a big downward swing in consumer spending.

The bitter memory led Prime Minister Shinzo Abe to twice delay the increase to 10% until Oct. 1. But the higher tax rate will still hit an economy suffering from slowing global demand and bitter trade tensions.

The government and central bank policymakers expect the impact from the 2%-point tax hike to be much smaller than that of the previous increase.

To ease the pain on low-income households, some food and non-alcoholic beverages will be exempt from the higher tax rate.

The government has also set aside 2 trillion yen for discounts and shopping vouchers as well as public works spending. Another 300 billion yen will be spent on tax breaks for housing and car purchases.

But that may not be enough to boost consumption.

"The reduced tax rate and reward points system may limit the pain to shoppers," said Koya Miyamae, a senior economist at SMBC Nikko Securities.

"Still, consumer sentiment tends to deteriorate before and after a tax hike, which will in turn dampen economic activity."

If the pain proves bigger than expected, the government has said it is ready to deploy additional measures.

"I'll take the initiative to check the economic situation closely and take additional economic measures flexibly, if necessary," Economy Minister Yasutoshi Nishimura said on Monday. - Reuters

source https://www.thesundaily.my/business/japan-proceeds-with-twice-delayed-sales-tax-hike-as-growth-sputters-JY1436380

Succumbing to M&A wave, Australian surf brand Rip Curl is snapped up by Kathmandu

SYDNEY: New Zealand outdoor clothing maker Kathmandu Holdings said it will buy Rip Curl Group for A$350 million ($236 million) in a deal that sees the last of Australia's big three surf brands fall to overseas control.

Kathmandu said the acquisition would make it a NZ$1 billion ($625 million) company, expand its presence in Europe and North America and give it a "seasonal balance" between Rip Curl's summer/beach focus and Kathmandu's winter/outdoor offerings.

Started in 1969 by surfer friends Brian Singer and Douglas Warbrick and still based at popular Bells Beach, Rip Curl with local rivals Billabong and Quiksilver ranked among the world's biggest brands for sales of wetsuits, boardshorts and branded beach t-shirts.

The sale closes a chapter on Australia's once central role in surfwear culture. U.S. private equity firm Oaktree Capital gained control of Billabong and Quiksilver over the past three years following troubled efforts by the companies to expand globally.

Singer and Warbrick will gain shares in Kathmandu as will Rip Curl CEO Michael Daly, who will continue in his role and report to Kathmandu Chief Executive Xavier Simonet, the companies said in the statement.

Clothing retailers around the world are paring back brick-and-mortar operations to compete with online giants like Britain's ASOS Plc and low-cost "fast fashion" chains such as Zara, owned by Spain's Industria de Diseno Textil SA.

The fiercer competition has coincided with broader economic headwinds which have prompted central banks to cut lending rates, making it cheaper to buy out other companies.

"We are seeing rates being cut around the world, which means the cost of capital for foreign entities is getting much cheaper... so we'll probably see more M&A because of that," said Daniel Cuthbertson, managing director of Value Point Asset Management.

After buying Rip Curl, Kathmandu said it would have 341 of its own stores around the world, plus 254 licensed stores in Australia, New Zealand, North America, Europe, South East Asia and Brazil. - Reuters

source https://www.thesundaily.my/business/succumbing-to-ma-wave-australian-surf-brand-rip-curl-is-snapped-up-by-kathmandu-EY1436305

Bursa Malaysia opens fractionally higher

KUALA LUMPUR: Bursa Malaysia opened fractionally higher this morning on mild bargain hunting after a recent sell-off, while also tracking a stronger overnight US equity market, dealers said.

At 9.10am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) increased 1.13 points to 1,585.04 from 1,583.91 on Monday.

The index opened 1.03 points higher at 1,584.94.

On the broader market, gainers marginally surpassed losers 108 to 90, while 170 counters were unchanged, 1,589 untraded and 18 others suspended.

Turnover amounted to 94.89 million shares worth RM29.42 million.

Malacca Securities Sdn Bhd said despite Wall Street’s better overnight performance, the broader market environment on Bursa Malaysia remained cautious as most market players are unsure of its next course hampered by the lack of developments in the Malaysian equity market.

“As a consequence, the indifferent trend looks to persist for now as the market interest also continues to stay on the low side.

“On the FBM KLCI, we expect it to continue lingering within the 1,580 and 1,590 levels over the near term. Apart from the above levels, the other support and resistance levels are at 1,572 and 1,600 respectively,” it said in a research note today.

Among heavyweights, Maybank improved six sen to RM8.57, PBBank eased two sen to RM20.06, Tenaga fell four sen to RM13.60, PChem dropped three sen to RM7.51 while IHH added one sen to RM5.69.

Of the most actives, Sapura Energy and Borneo Oil each lost half-a-sen to 27.5 sen and 4.5 sen respectively while Seacera rose one sen to 25.5 sen.

The FBM Emas Index recovered 5.62 points to 11,209.33, the FBMT 100 Index gained 5.87 points to 11,043.70 but the FBM Emas Shariah Index slid 0.93 of-a-point to 11,767.49.

The FBM 70 depreciated 0.71 of-a-point to 13,932.36 but the FBM Ace rose 7.31 points to 4,502.43.

Sector-wise, the Financial Services Index increased 29.23 points to 15,338.95, the Plantation Index perked 15.36 points to 6,735.88 but the Industrial Products & Services Index was 0.24 of-a-point weaker at 153.04.

The physical price of gold as at 9.30am stood at RM191.46 per gramme, down RM2.37 from RM193.83 at 5pm yesterday. — Bernama

source https://www.thesundaily.my/business/bursa-malaysia-opens-fractionally-higher-HY1436108

Ringgit falls against US dollar ahead of us manufacturing data release

KUALA LUMPUR: The ringgit was lower against the US dollar this morning on weaker demand for the local note, ahead of the release of US manufacturing sector data.

At 9.02am, the local note was at 4.1860/1900 against the greenback compared to 4.1850/1890 at the close yesterday.

A dealer said market players are expecting the US manufacturing data making a return to growth in September after experiencing contraction for the first time in three years in August.

“August US manufacturing activity contracted due to the US-China trade war. For September, market players are expecting positive development, and this will likely ease concern on the impact of the trade war,” he added.

Meanwhile, the ringgit traded mostly higher against other major currencies.

It fell against the Singapore dollar to 3.0272/0310 from 3.0256/0296 yesterday but increased against the yen to 3.8698/8746 from 3.8757/8801.

The local note strengthened versus the British pound to 5.1404/1457 from 5.1496/1562 and rose against the euro to 4.5598/5658 from 4.5704/5752 previously. — Bernama

source https://www.thesundaily.my/business/ringgit-falls-against-us-dollar-ahead-of-us-manufacturing-data-release-XY1436088

LTAT chairman: No criminal element in fund’s financial irregularities

KUALA LUMPUR: The slew of financial irregularities revealed in the Armed Forces Fund Board (LTAT) are deemed “mismanagement” rather than criminal intent, said LTAT chairman Gen (R) Tan Sri Dr Mohd Zahidi Zainuddin.

“In our deliberations, it’s a mismanagement, and this mismanagement has come out with numbers that were not properly accounted for. When we commissioned Messrs Ernst & Young to do the audit, these are discrepancies that we found, which are not criminal, but mismanagement that has taken place and we are here to correct that,” he told a press conference after announcing LTAT’s dividend for the financial year ended Dec 31, 2018 (FY18) today.

He said if further investigations reveal any criminal element or misconduct that requires action to be taken, LTAT will refer it to the appropriate authorities.

Last week, LTAT’s independent accounting firm Ernst & Young unearthed several instances of “financial irregularities and weaknesses” for FY17 and FY18.

LTAT chief executive Nik Amlizan Mohamed cited an example of mismanagement in which the income from land sales was used to pay dividends.

“No entity should pay dividends without the funds to do so. In 2016, RM238 million was taken when it should not have because the sale was not completed then. It was a substantial amount,” she explained.

Nik Amlizan said she came on board LTAT on Oct 1, 2018 and, since then, there have been many discoveries followed by measures that it has had to undertake to ensure that LTAT moves forward on the right footing sustainably.

LTAT has embarked on a transformation plan which consists of six main pillars encompassing LTAT’s new vision and mission, strengthening corporate governance, enhancing strategic stake-holder management, enhancing sustainable investment returns, improving infrastructure and building talent management.

“We want to move forward. It’s challenging to get returns for the soldiers. If possible, we don’t want to take too much time to look into the past. The assessment (by Ernst & Young) is to help the new management to restore the organisation,” said Nik Amlizan.

Under the corporate governance pillar, it has established a risk board and set up a legal and secretarial department, human resources department and introduced compliance unit as part of risk management department, as well as reintroduced the enterprise risk management framework.

In terms of investment portfolio, she said, LTAT’s new chief investment officer is reviewing the asset allocation strategy and such implementation can only be ready next year.

“We need to introduce fixed income. We never have an investment in MGS (Malaysian Government Securities). It’s a natural asset allocation in any government pension fund. ESG (environmental, social and governance) is something we strongly believe in.”

Nik Amlizan opined that it is premature to discuss asset disposals at this point as all assets under LTAT are considered investments and it has no intention of selling any of its assets now.

Meanwhile, Nik Amlizan admitted that LTAT’s exposure to Boustead Holdings Bhd is high and is not reflective of best practices from investment policies and structure as it cannot be reliant on one or two investments to make its returns.

However, she said it will not rush into making “irresponsible decisions” as there is still deep value in Boustead.

source https://www.thesundaily.my/business/ltat-chairman-no-criminal-element-in-fund-s-financial-irregularities-CA1435532

Foreign investors still net sellers on local bourse

PETALING JAYA: Foreign funds remained as the net sellers on Bursa Malaysia last week, according to MIDF Research.

“Based on data from Bursa, foreign investors sold RM150.9 million net of local equities last week compared to RM249.3 million in the week before. So far in 2019, there has been 26 weeks of foreign net selling,” the research house said in a report today.

It noted that a sense of calm descended on Monday as foreign investors shrugged off China’s cancellation of a planned visit to farms in the US which was unrelated to the trade matters between the two nations.

“As such, international funds accumulated RM11.5m net of local equities on the same day.”

Foreign funds turned net sellers to a tune of RM62.2 million on Tuesday despite the new waivers granted to domestic state and private companies to buy US soybeans without being subjected to retaliatory tariffs.

The pace of foreign net selling activity was little changed at RM62.9 million on Wednesday as investors weighed the rising possibility of impeachment proceedings being brought against President Trump.

MIDF said positivity returned to the market on Thursday as foreign investors snapped up RM100.1 million net of local equities. This followed the draft rules in China of requiring banks to distribute excess provisions for bad loans to investors to curb accounting malpractice.

“Foreign net selling peaked during the week on Friday at RM137.3 million as Malaysia was retained on the watchlist for exclusion from the FTSE Russell World Government Bond Index.”

With one day trading left, MIDF said September has seen a foreign net outflow of RM486.7 million net, one of the lowest among the four Asean markets monitored.

On a year-to-date basis, international funds have taken out RM7.83 billion worth of local equities from Bursa.

source https://www.thesundaily.my/business/foreign-investors-still-net-sellers-on-local-bourse-DA1435511

TSR Capital claiming RM35m from YTL-linked firm over contract termination

PETALING JAYA: TSR Capital Bhd is claiming RM35 million from Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd (SPYTL) over the termination of the sub-contract work for the Electrified Double Track project from Gemas to Johor Baru.

TSR Bina said in a filing with Bursa Malaysia that its wholly owned subsidiary TSR Bina Sdn Bhd has commenced arbitration proceedings against SPYTL, citing the termination of the sub-contract by SPYTL is unlawful and wrongful.

In response to TSR’s notice of arbitration, SPYTL has also made a counterclaim with a claim sum of about RM22 million.

TSR believes the risks of losses and adverse impact on the company to be minimal and therefore not material.

“There is no material operational impact arising from the arbitration. The company does not expect any losses to arise by reason of the commencement of the said arbitration proceeding other than legal cost and time incurred in the claim.”

TSR also stressed that the arbitration proceedings are not expected to have a material impact on its earnings per share and net assets per share for the financial year ending June 30, 2020.

Early this year, TSR secured a RM307 million contract from SPYTL for sub-contract work, which includes site clearance and embankment earthwork.

The project was supposed to be completed by March 2020.

source https://www.thesundaily.my/business/tsr-capital-claiming-rm35m-from-ytl-linked-firm-over-contract-termination-MA1435493

Kinsteel granted more time to submit regularisation plan

PETALING JAYA: Kinsteel Bhd has been granted an extension until Dec 31, 2019 by Bursa Malaysia to submit a regularisation plan in order to lift its Practice Note 17 (PN17) status.

According to the group’s Bursa disclosure, it might face a possible delisting from the stock exchange in the event of failure to submit a regularisation plan or obtain approval for the implementation of said plans from the authorities.

Last week, Kinsteel unveiled its revamp plan, including a 70% share capital reduction from RM83 million to RM24.9 million.

The credit from the proposed capital reduction of RM58.1 million will be used to offset its accumulated losses, which stood at RM865 million as at June 30, 2019.

Kinsteel is also seeking to raise up to RM46.6 million via a special issue of new shares with free warrants to selected placees; and a rights issue of new shares with free warrants to existing shareholders.

In addition, the group proposed a disposal of five parcels of industrial land for RM140 million.

Kinsteel also proposed a settlement of RM159.7 million inter-company debt owed by Perfect Channel Sdn Bhd, as well as a proposed scheme of arrangement and compromise with the creditors of Kinsteel involving total liabilities of RM1.68 billion as at June 30, 2017.

The group was first affected by the PN17 status in October 2016, after its auditor expressed a disclaimer of opinion in its audited financial statements for FY16, when its current liabilities exceeded current assets.

source https://www.thesundaily.my/business/kinsteel-granted-more-time-to-submit-regularisation-plan-EA1435475

BMVProp plans fractionalised asset offerings in Malaysia

PETALING JAYA: Australia-based BMVProp is planning to offer fractionalised assets with a collective value of RM600 million in Malaysia to address the current property overhang issue.

The fractionalised assets will be offered to the public via its platfrom based on their valuation.

Owners of the property are entitled to the rental proceeds as well as to sell the assets to others with an annual valuation as a reference price for the fractionalised asset.

Initially, BMVProp will distribute rental returns to investors on a quarterly basis denominated in Australian dollar with a possibility of offering returns on a monthly basis in the future with multiple currency options.

According to the platform director Alex Knight (pix), BMVProp is currently undergoing due diligence process for properties with a total value of RM600 million and that the platform is expected to be launched by the end of this year.

“We genuinely believe that this is a solution that could help people sell more properties and invest in properties as well.”

For its foray into the Malaysian property market, BMVProp has set its sights on assets in Kuala Lumpur, Johor Baru, Penang and Langkawi.

Knight said the main considerations to acquire a particular property is long-term rental potential, rental yield as well as capital growth potential.

He explained that with the lower threshold of investment via fractionalised assets, BMVProp is able to expand its reach to more customers and investors, hence translating into a larger market size and better sales.

According to Knight, the platform will be looking at numerous pension funds in Australia, also known as superannuation funds.

“We are increasingly looking internationally to find opportunities that we believe can generate returns for investors.”

Out of the country’s super-annuation funds, he said an estimated US$167 billion (RM699 billion) will be heading overseas into international investments.

“So we’re not going to be just defined to Australia, we’ll have properties all over Asia Pacific in our portfolio, but one particular interest of ours is properties in Malaysia given the current issues of overhang.”

source https://www.thesundaily.my/business/bmvprop-plans-fractionalised-asset-offerings-in-malaysia-DA1435454

Ringgit continues uptrend against US dollar

KUALA LUMPUR: The ringgit continued its uptrend against the US dollar at the close today on better investor demand for the local currency, a dealer said.

At 6pm, the local note was at 4.1850/1890 against the greenback compared with Friday’s close of 4.1860/1900.

He said the ringgit remained intact after index provider FTSE Russell decided to keep Malaysia on its benchmark World Government Bond Index (WGBI) along with China.

Overall, the ringgit traded mostly higher against other major currencies.

It rose against the Singapore dollar to 3.0256/0296 from Friday’s 3.0292/0325, increased against the yen to 3.8757/8801 from 3.8774/8818, and strengthened versus the euro to 4.5704/5752 from 4.5732/5793.

The local currency, however, depreciated, against the British pound to 5.1496/1562 from 5.1433/1499. previously. — Bernama

source https://www.thesundaily.my/business/ringgit-continues-uptrend-against-us-dollar-XA1435330

Bursa Malaysia ends lower

KUALA LUMPUR: Bursa Malaysia ended the trading session lower today, dragged down by continued selling activities in lower liners and small cap stocks, dealers said.

At 5pm, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) fell 0.015% or 0.23 of-a-point to 1,583.91 compared with last Friday’s close of 1,584.14 after trading between 1,578.53 and 1,586.69 throughout the day.

The index opened 0.12 of-a-point higher at 1,584.26.

The market breadth was negative as losers led gainers to 556 and 298, with 365 counters unchanged, 775 untraded and 63 others suspended.

Turnover eased to 1.85 billion shares valued at RM1.49 billion from 1.88 billion shares worth RM1.32 billion last Friday.

An analyst said after trending the fourth consecutive week of losses, the FBM KLCI failed to rebound despite an extension of six months by FTSE Russell last Friday for Malaysian government bonds to stay on the World Bond Index.

“However, the modest recovery recorded in China’s factory activity in its Caixin/ Markit Manufacturing Purchasing Managers’ Index (PMI) for September at 51.4 from 50.4 in August may limit some of the losses in the local bourse.

“Investors are probably cautious about the global economic growth and the tabling of the upcoming Budget 2020,” the analyst told Bernama.

At the close, Maybank gave up nine sen to RM8.51, while Public Bank and Tenaga gained four sen each to RM20.08 and RM13.64, respectively.

PChem added one sen to RM7.54 and IHH reduced two sen to RM5.68.

As for the actives, Bumi Armada declined one sen to 32.5 sen, while Sapura Energy and Eduspec lost half-a-sen each to 28 sen and four sen, respectively.

At close, the FBM Fledgling Index (FBM FLG) recorded the most losses with 125.18 points at 14,119.66.

The Financial Services Index weakened 7.64 points to 15,309.72 and the FBM ACE declined 57.71 points to 4,495.12.

The FBM Emas Index slipped 2.18 points to 11,203.71, the FBMT 100 Index reduced 0.78 of-a-point to 11,037.83 but the FBM Emas Shariah Index was 7.26 points better at 11,768.43.

The FBM 70 recovered 2.36 points to 13,933.07.

Sector-wise, the Plantation Index shed 3.05 points to 6,720.52 but the Industrial Products & Services Index was 0.15 point higher at 153.28.

Main Market volume decreased to 1.13 billion units valued at RM1.36 billion from last Friday’s 1.14 billion units worth RM1.18 billion.

Meanwhile, warrants turnover narrowed to 324.27 million worth RM69.64 million from 335.30 million valued at RM82.87 million last Friday.

Volume on the ACE Market fell to 393.17 million shares valued at RM61.83 million from 404.66 million shares worth RM57.46 million previously.

Consumer products and services accounted for 147.65 million shares traded on the Main Market, industrial products and services (196.16 million), construction (97.91 million), technology (68.60 million), SPAC (nil), financial services (34.59 million), property (95.67 million), plantations (12.37 million), REITs (13.20 million), closed/fund (298,800), energy (267.93 million), healthcare (24.41 million), telecommunications and media (118.29 million), transportation and logistics (44.06 million), and utilities (17.94 million). — Bernama

source https://www.thesundaily.my/business/bursa-malaysia-ends-lower-DA1435306

Global Q3 M&A sinks to 3-year low amid US-China trade war fears

LONDON/NEW YORK: Global mergers and acquisitions (M&A) plunged 16% year-on-year to $729 billion in the third quarter, according to Refinitiv data, the lowest quarterly volume since 2016, as growing economic uncertainty curbed the risk appetite of companies considering deals.

Concerns that the trade war between the United States and China has plunged global economic growth to its lowest levels in a decade weighed on dealmaking, even as debt financing for acquisitions remained cheap and equity markets stayed robust.

"M&A volumes have dissipated because there are concerns that risks may be rising in several spots, in markets and elsewhere," said Michael Carr, global co-head of M&A at Goldman Sachs Group Inc.

The United States, where consumer spending barely rose in the summer and business investment remained subdued amid the trade tensions, was particularly hit. U.S. M&A sank 40% year-on-year to $246 billion in the third quarter, the lowest such quarterly level since 2014.

Asia, which has been hit by concerns over the future of Hong Kong as a financial hub following a wave of pro-democracy protests, fared only slightly better. M&A activity in the region dropped 20% year-to-year to $160 billion, the lowest level since 2017.

Dealmakers said a mismatch between buyer and seller valuation expectations often proved hard to bridge, with some deals failing to reach the finish line.

"Companies looking at deals have become more risk-averse, and this is likely to bring M&A volumes down for the year. But we expect M&A activity to be strong going into next year," said Robin Rankin, global co-head of mergers and acquisitions at Credit Suisse Group AG.

The only regional bright spot in the third quarter was Europe, where M&A activity reached $249 billion, up more than 45% over the same period last year.

"In Europe we have seen a real mix of different kind of deals which were spread across various sectors and geographies," said Eamon Brabazon, co-head of EMEA M&A at Bank of America Corp.

"This is a sign of a healthy market because we're not relying only on a particular strand. There's no obvious reason to believe the M&A market will turn south in the foreseeable future," he added.

Britain, where uncertainty over Brexit has turned companies into cheaper acquisition targets, remained Europe's biggest M&A market with a 6.4% share of global M&A and $177 billion worth of deals so far this year.

Sterling's near record lows against other major currencies encouraged overseas buyers to snap up "UK Plc", with Hong Kong's richest man Li Ka-shing swooping on pubs operator Greene King and buyout fund Blackstone leading a buyout for Madame Tussauds and Legoland owner Merlin.

A big attempted transaction in the third quarter was Hong Kong Exchanges and Clearing's (HKEX) proposed $39 billion takeover approach to the London Stock Exchange Plc (LSE) . The latter has so far rejected HKEX's overtures.

The biggest deal attempted in the quarter was Marlboro maker Philip Morris International Inc's bid to reunite with Altria Group Inc, in what would have been the biggest corporate merger since 2016, creating a tobacco giant with a market value of more $200 billion. The deal was abandoned last week amid concerns about regulators cracking down on e-cigarettes and vaping products.

Among the big deals in the quarter that made it to the finish line and were sealed with merger agreements were the $24.6 billion merger of U.S. drug giant Pfizer Inc's off-patent branded drugs business with Mylan NV, and U.S. media companies CBS Corp and Viacom Inc's merger in a $20 billion all-stock deal.

As companies deliberate whether they should ink deals by the end of the year, dealmakers expect the M&A pipeline ahead to stay healthy, possibly matching last year's annual volumes of $3.91 trillion in announced transactions.

"Management teams are watching very closely because shareholders expect companies to take advantage of these conditions to grow their business," Goldman's Carr said. - Reuters

source https://www.thesundaily.my/business/global-q3-ma-sinks-to-3-year-low-amid-us-china-trade-war-fears-BB1434267

ACE Market-bound Solarvest to raise RM34.6m for expansion plans

PETALING JAYA: Solarvest Holdings Bhd is looking to raise RM34.6 million from its listing on the ACE Market of Bursa Malaysia.

Solarvest specialises in turnkey engineering, procurement, construction and commissioning (EPCC) services for solar photovoltaic (solar PV) systems.

Of the proceeds raised, RM19.2 million or 55.5% will be utilised for the group’s working capital for daily operations and future projects; RM3 million or 8.7% for its geographical expansion in the domestic and international markets; RM4 million or 11.5% to enhance technical capabilities; and RM5 million or 14.5% for repayment of bank borrowings.

Locally, the group will spread its footprint in the Southern region of Peninsular Malaysia. Beyond Malaysia, it is planning to enter into Vietnam and Taiwan markets.

Solarvest’s IPO entails a public issue of 98.83 million new shares, representing 25.3% of its enlarged share capital at an issue price of 35 sen per share. Of the public issue, 19.53 milion shares will be made available for the Malaysian public; 19.53 million shares for eligible directors, employees and persons who have contributed to the success of Solarvest; 39.06 million shares by way of private placement to Bumiputera investors approved by the Ministry of International Trade and Industry; and 20.7 million shares by way of private placement to selected investors.

Solarvest is slated to be listed on November 26, 2019 with a market capitalisation of RM136.7 million. It is 45% owned by Main Market-listed Chin Hin Group Bhd, which will pare down its shareholding in Solarvest to 33.6% upon listing.

Solarvest has completed solar PV systems for large scale solar photovoltaic plants (LSSPV) as well as residential, commercial and industrial properties.

Its CEO Davis Chong Chun Shiong said the Malaysian solar sector is experiencing an expansionary phase with increasing levels of interest in solar power.

“The take-up rates of the net energy metering programme and LSSPV programme have seen encouraging growth amongst commercial and industrial users as well as large investors.”

He said the outlook of the solar industry is further enhanced by the strong support from the local government, whereby various policies and programmes were implemented to accelerate investment shifts towards renewable energy.

source https://www.thesundaily.my/business/ace-market-bound-solarvest-to-raise-rm34-6m-for-expansion-plans-DB1434063

Fashion retailer Forever 21 files for bankruptcy

Fashion retailer Forever 21 Inc filed for Chapter 11 bankruptcy on Sunday as it joined a growing list of brick-and-mortar players who have succumbed to the onslaught of e-commerce.

Since the start of 2017, more than 20 U.S. retailers, including Sears Holdings Corp and Toys 'R' Us, have filed for bankruptcy as more customers shift to online retailers such as Amazon Inc.

The company lists both assets and liabilities in the range of $1 billion to $10 billion, according to the court filing in the U.S. Bankruptcy Court for the District of Delaware.

The retailer said it received $275 million in financing from its existing lenders with JPMorgan Chase Bank, N.A. as agent, and $75 million in new capital from TPG Sixth Street Partners, and certain of its affiliated funds.

With these funds, Forever 21 said it intends to operate business as usual and will focus on profitable core part of its operations.

Meanwhile, the company plans to close most of its international locations in Asia and Europe, but will continue operations in Mexico and Latin America.

Founded in 1984, the retailer has 815 stores in 57 countries. Last week, it said it would exit Japan and close all 14 stores at the end of October.

Kirkland & Ellis LLP was serving as the company's legal adviser, Alvarez & Marsal advised on restructuring, and Lazard acted as its investment banker. -Reuters

source https://www.thesundaily.my/business/fashion-retailer-forever-21-files-for-bankruptcy-BC1433892

Handal Energy bags first crane maintenance contract in East Malaysia

PETALING JAYA: Handal Energy Bhd has secured a contract from Sarawak Shell Bhd (SSB) and Sabah Shell Petroleum Company Ltd (SSPC).

The group told Bursa Malaysia that the contract entails the provision of offshore crane operations, maintenance services, repair services and provision of manpower services for about 29 offshore cranes under SSB and SSPC located off the waters of Sarawak and Sabah.

The contract will commence from October 15, 2019 for a duration of two years with an option for a one-year extension.

It does not have a specified value as it is on a “call-out” basis whereby the work orders will be awarded at the discretion of SSB/SSPC based on its activity schedule and maintenance and repair schedule throughout the duration of the contract.

Handal Energy expects the contract to its earnings for the financial year ending June 30, 2020 and subsequently until the expiry of the contract.

Going forward, its managing director Sunildeep Singh Dhaliwal said the group will be tendering for more crane-related projects in East Malaysia.

At the midday break, Handal Energy’s share price slipped 2.7% to 35.5 sen on 40,000 shares done.

source https://www.thesundaily.my/business/handal-energy-bags-first-crane-maintenance-contract-in-east-malaysia-YC1433771

Hong Kong Aug home prices drop for third month, steeper declines forecast

HONG KONG: Hong Kong private home prices fell for the third straight month in August, according to government data released on Monday, as increasingly violent street protests take a toll on the economy.

Prices dropped 1.37%, steeper than July's revised 0.10% fall, and June's 0.3% decline. It was the biggest percentage decline since December 2018, when prices dropped 2%.

Derek Chan, head of research at property agent Ricacorp, said the fall was within expectations.

"Home prices in September are set to fall more steeply and we may see a drop of about 2%," Chan said, adding anti-government demonstrations and the ongoing Sino-U.S. trade war were pressuring the market.

Prices still managed to gain 8.5% in the first eight months, although analysts and property agents are forecasting anything between a rise of 5% to a drop of 5% for full-year prices.

"The property market performance this year will depend on the situation of Sino-U.S. trade tension as well as the local economy and social conditions," said Thomas Lam, executive director of Knight Frank.

Adrian Cheng, executive vice-chairman of New World Development, said at the group's results press conference last week he expected a high single-digit fall in this correction.

Hong Kong's open economy is pressured by the year-long U.S.-China trade war and social unrest since mid-June over a now-withdrawn extradition bill that would have allowed people to be sent to mainland China for trial in Communist Party-controlled courts.

But the housing sector has been more resilient than others, with new launches this month selling most or all apartments as tight supply continues to keep prices high.

source https://www.thesundaily.my/business/hong-kong-aug-home-prices-drop-for-third-month-steeper-declines-forecast-FC1433689

China Sept factory surveys show flickers of improvement but outlook still weak

BEIJING: Factory activity surveys in China pointed to slight improvement in September as domestic demand picked up, but analysts believe the gains will be short-lived as the property market cools and Sino-U.S. trade tensions remain elevated.

Persistent weakness in China's vast manufacturing sector has reinforced market expectations that Beijing needs to roll out more support measures to cushion the country's worst economic slowdown in decades, even if that risks racking up more debt.

The official Purchasing Managers' Index (PMI) rose to 49.8 in September, slightly better than expected and advancing from 49.5 in August. But it remained below the 50-point mark that separates expansion from contraction on a monthly basis, data from the National Bureau of Statistics (NBS) showed.

Analysts polled by Reuters had expected the headline reading would be unchanged.

A private business survey also released on Monday showed growth in factory activity unexpectedly quickened to a 19-month high of 51.4 in September, largely due to a rise in domestic orders as government support measures kicked in.

But economists cautioned the rebound is likely be unsustainable, and forecast further economic weakness ahead.

"We believe the official manufacturing PMI may decline again, the growth slowdown could gather pace and (financial)markets could become more volatile in coming months," economists at Nomura said in a note.

Nomura recently lowered its third-quarter growth forecast for China to 5.9% and its fourth-quarter view to 5.8%, slowing from the 6.2% reported in the second quarter. It cited continued U.S. tariff pressure, slowing industrial production and signs that property investment and construction may be starting to cool.

Total new orders, including those from home and abroad, did swing back to growth in September for the first time in five months, the official PMI showed, but the expansion was marginal.

Moreover, export demand remained weak, with orders falling for the 16th straight month, albeit at a milder pace.

Production rose at a quicker pace in September, buoyed by the growth in new orders. In particular, output in the food processing, textile, special equipment and electrical machinery sectors stood at high levels, Zhao Qinghe, an official with the statistics bureau said in a statement accompanying the data.

"With a slew of growth-boosting policy measures kicking in, optimism among manufacturing firms... reached 54.4, the highest in the third quarter," said Zhao.

The activity surveys followed unexpectedly weak August data which showed growth in industrial production tumbled to its weakest level in 17-1/2 years, while factory deflation deepened. Winter smog controls are expected to keep a lid on heavy industries in some parts of the country in coming months.

"While China's fiscal stance is unlikely to be loosened during the remainder of the year, we think the PBOC will find it an increasingly hard sell to refrain from more decisive monetary easing," Martin Lynge Rasmussen, China Economist at Capital Economics said in a note, adding the better PMIs were likely a false dawn.

The Peoples' Bank of China has lowered banks' reserve requirements seven times since early 2018 to free up more funds for lending. China also trimmed its new benchmark lending rate in September for the second month in a row.

But analysts note monetary policy easing has been more cautious than in past downturns, likely due to concerns about rising debt and financial risks, particularly involving the property market.

Export-oriented manufacturers are particularly vulnerable as the nearly 15-month Sino-U.S. trade war shows no signs of ending.

Top-level trade negotiators from the two sides are expected to meet in Washington on Oct.10-11 to determine if they can agree a truce in their trade war, but most analysts doubt a durable agreement can be reached.

Higher U.S. tariffs on Chinese goods are due to take effect in mid-October and mid-December, and sources told Reuters the Trump administration is considering radical new pressure tactics on Beijing, including the possibility of delisting Chinese companies from U.S. stock exchanges.

With business uncertainties clouding the outlook, the official survey showed Chinese factories continued to cut jobs in September. The employment sub-index was at 47.0 versus 46.9 in August.

A separate survey showed services sector activity remained well in expansionary territory, but construction growth eased, with a sub-reading for construction activity standing at 57.6, down from 61.2 in August. Beijing recently tightened financing for property developers.

The non-manufacturing PMI in September was at 53.7, slightly down from August's 53.8.

Beijing is counting on a strong services sector to cushion the impact from trade uncertainties and factory job losses. But the sector began showing signs of cooling late last year amid the broader economic slowdown. - Reuters

source https://www.thesundaily.my/business/china-sept-factory-surveys-show-flickers-of-improvement-but-outlook-still-weak-EC1433666

LTAT’s net profit halves in FY18, dividend rate at record low of 2%

KUALA LUMPUR: The Armed Forces Fund Board’s (LTAT) unaudited net profit fell 51.9% to RM221 million for the financial year ended Dec 31, 2018 (FY18) compared with the restated net profit of RM459.5 million for FY17.

The significant decline for FY18 was a result of various factors dating back two financial years, such as restatement of FY16 and FY17 accounts, overpayment of dividends for FY16 and FY17, impact to retained earnings, negative impact from MFRS implementation and outstanding dividend from subsidiaries not received.

Chairman Tan Sri Dr Mohd Zahidi Zainuddin (pix) announced that LTAT is declaring a dividend of 2% for FY18, its lowest ever.

Last week, LTAT’s accounting firm Messrs Ernst & Young unearthed several financial irregularities and weaknesses for the financial years ended Dec 31, 2017 and 2018.

source https://www.thesundaily.my/business/ltat-s-net-profit-halves-in-fy18-dividend-rate-at-record-low-of-2-BC1433614

Call to investigate errant ‘property gurus’ and their investment schemes

PETALING JAYA: Some “property gurus” have been convincing people to buy houses of certain projects for their own interests and profit, according to Axis REIT Managers Bhd head of investment Siva Shanker.

Some of them even made promises of the properties fetching higher rents than the monthly mortgage payment, he said.

Siva urged the authorities to investigate the “property gurus” and their investment schemes which could lead to another crisis in the next few years if left unchecked.

At the same time, developers have to juggle between profit and economics, and build properties that are in demand, such as single- or double-storey landed homes in decent locations.

“This will create activity in the market and, with transactions moving, it will buoy the property market. It will take a few years to reduce the overhang to a more manageable level but if we keep building, it will never end,” he said.

“In 2020 and 2021, the market will slowly improve, provided that the political situation is stable. If Pakatan Harapan continues what they are doing and get the economy up and stabilised, we will see a better property market.”

Commenting on calls to lower the minimum price for foreign buyers, Siva said it would not have meaningful impact on addressing the overhang issue, due to the significant number of unsold homes unless projects are sold entirely to buyers from a specific country, such as what happened in Johor.

“This would create an enclave of foreign buyers. We don’t want that. What we want is higher-end foreign buyers taking up our high-end properties in cities. We want a cosmopolitan and international flavour.

“Opening up a bit to more foreign buyers might be a good idea, if this is the goal. But the overhang is so much that this would not help much and it would not address the real issue, the real cause of the problem,” he added.

Siva said the overhang situation is worse than what is reported because overhang figures reported by the National Property Information Centre (Napic) only captures the unsold units from the primary market.

“Napic overhang figures are only the tip of the iceberg. What about those overhang in the subsale market? Those that were bought but could not be sold or rented out?” he questioned.

source https://www.thesundaily.my/business/call-to-investigate-errant-property-gurus-and-their-investment-schemes-AF1430002

Beware of irresponsible ‘property gurus’, house buyers warned

PETALING JAYA: The property market moved into positive territory last year, marking the first sign of improvement since 2012, bringing along with it the return of irresponsible “property gurus”, said Axis REIT Managers Bhd head of investment Siva Shanker (pix).

“For 2018 and 2019, I believe we are at the bottom of the U-curve. The market improved in 2018 compared with 2017, for the first time since 2012 except for a small positive in 2014. Last year we were already in the positive. The first quarter of 2019 compared with the first quarter of 2018 also showed a small improvement,” he told SunBiz.

However, the return of market confidence also comes with the return of so-called “property gurus” who are offering easy loan schemes such as 100% loans with money back guarantees aimed at speculative buyers.

“Now, the market is improving a little bit in certain sectors and you can see these ‘property gurus’ coming out of the woodwork again, offering things like 100% loans with money back guarantees, seminars on how to invest in property and promoting these schemes all over the internet, which is attracting many people,” said Siva, who is also Malaysian Institute of Estate Agents past president.

“Why is this so rampant? These property gurus are basically teaching people to buy without putting any money down. These are the same type of people who caused the problems back in 2012. We could potentially see a repeat of the same problem,” he warned.

Siva said the current overhang issue plaguing the nation was caused by excessive speculative buying in the past, which drove prices up beyond the reach of genuine buyers and led developers to build excessive units within the same segment.

“Why did we get into this situation in the first place? Because everyone was building the same thing, within the RM500,000 to RM1 million range. Serviced apartments were built on commercial land, which is usually for office towers and shophouses. For a long time, these apartments were sold very quickly. But they were sold to speculators who could neither afford nor need the properties,” he said.

Developer interest bearing schemes, which were meant to make it easier for genuine buyers to purchase homes, were misused by speculative buyers who bought properties with just a small downpayment on the advice of “property gurus” who said that they could later sell the properties at a 20-40% premium.

source https://www.thesundaily.my/business/beware-of-irresponsible-property-gurus-house-buyers-warned-JN1429658

Bursa Malaysia opens marginally higher

KUALA LUMPUR: Bursa Malaysia opened marginally higher today lifted by mild buying support on selected heavyweight stocks after last Friday’s selling activities, dealers said.

At 9.07am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) gained 1.12 points to 1,585.26 from Friday’s close of 1,584.14.

However on the broader market, losers slightly outpaced gainers 115 to 97, while 164 counters were unchanged, 1,618 untraded and 63 others suspended.

Turnover amounted to 94.81 million shares worth RM29.19 million.

The higher benchmark index was limited by the extension of selling activity in lower liner shares.

Malacca Securities Sdn Bhd said the local stocks are expected to perform better today following the extension granted by FTSE Russell last Friday for Malaysian government bonds to meet the listing requirements.

It gave another six month’s grace for Malaysian government bonds to meet liquidity requirements to stay on the World Bond Index.

“However, due to the overwhelming selling last week, it appears that market players are still unconvinced of Malaysian stocks near term direction with the bearish trend sustaining amid the lack of fresh buying.

“Consequently, we think that the near term outlook will remain and the key index is still poised for further downside bias over the near term,” it said in a note.

The online trading house said as it is, the broad market conditions are staying dour with fewer impetuses to drive market sentiments and this could also mean that the key index could retest the 1,580 level again.

“If the level also fails to hold, the year low of 1,572 level could be retested.

“The resistances, on the other hand, are at the 1,590-1,600 levels,” it added.

On index performance, heavyweights Maybank and CIMB rose two sen each to RM8.62 and RM5.03 respectively, while Public Bank, Tenaga and IHH were flat each at RM20.04, RM13.60, and RM5.70 respectively.

Petronas Chemicals increased three sen to RM7.56.

For the actives, Sapura Energy, Bumi Armada and Eduspec each lost half-a-sen to 28 sen, 33 sen and four sen respectively.

The FBM Emas Index recovered 5.36 points to 11,211.25, the FBMT 100 Index was up 5.44 points to 11,044.06 and the FBM Emas Shariah Index was 1.68 points higher at 11,762.85.

The FBM 70 slipped 2.72 points to 13,927.98 and the FBM Ace was down 23.82 points to 4,529.01.

Sector-wise, the Financial Services Index advanced 29.98 points to 15,347.35, the Plantation Index added 6.60 points to 6,730.17 and the Industrial Products & Services Index was 0.16 of-a-point firmer at 153.29.

The physical price of gold as at 9.30am stood at RM194.79 per gramme, down 16 sen from RM194.95 at 5pm last Friday. — Bernama

source https://www.thesundaily.my/business/bursa-malaysia-opens-marginally-higher-CC1433271

Ringgit extends gains in early trade

KUALA LUMPUR: The ringgit extended last week’s upward momentum to open higher against the US dollar this morning backed by positive sentiment for the local currency.

At 9.05am, the local note was at 4.1850/1890 against the greenback compared with Friday’s close of 4.1860/1900.

A dealer said despite a better dollar sentiment, demand for the ringgit remained intact after FTSE Russell decided to keep Malaysia on its benchmark World Government Bond Index (WGBI), along with China.

Overall, the ringgit traded mostly higher against other major currencies.

It rose against the Singapore dollar to 3.0273/0307 from Friday’s 3.0292/0325, increased against the yen to 3.8764/8812 from 3.8774/8818, and strengthened versus the British pound to 5.1425/1487 from 5.1433/1499.

The local currency, however, depreciated against the euro to 4.5750/5798 from 4.5732/5793 previously. — Bernama

source https://www.thesundaily.my/business/ringgit-extends-gains-in-early-trade-BC1433254

Mini–Circuits unscathed by US-China trade war

GEORGE TOWN: Mini–Circuits Technologies (Malaysia) Sdn Bhd, the local arm of US multinational electronics giant Mini-Circuits, has registered impressive profit margins despite fears over a global slowdown due to the fallout from the US–China trade war.

In fact, the consolidation of Mini–Circuits can be cited as an example of how some manufacturers here are benefiting from the impasse in the US–China trade ties, said the group chairman and president Datuk Seri Dr Kelvin Kiew (pix).

Kiew spoke to theSun on how the company managed to adjust its business model to cope with the adversities from rising trade tariffs from both US and China.

“Initially we were worried, but it has turned out to be good because we have a worldwide network of production lines so we are not reliant on China alone.

“Others may not have the leverages that Mini–Circuits enjoys so it may be difficult for them; but for this company, it has turned out positive.”

For Mini-Circuits, the trade war meant high tariffs on products shipping from China to US and vice versa as well that no US firms could have business dealings with China’s telecommunications conglomerate – Huawei.

After reviewing its client list, Mini-Circuits found that it had only supplied 1% of its products to Huawei and to avoid paying the additional tariffs, it relocated some of its production lines from China to Penang and India.

The group has 16 factories in Europe, India, Indonesia, the US, Taiwan and China, while Penang is considered as its main hub in Asia, according to Kiew. It has a customer base of 20,000 and global workforce of close to 700 employees.

“So we are well positioned to address the trade war although we hope that it can be resolved so global trade can resume at a robust pace.”

The trade war has seen the financial clout of its Penang operations growing where last year it recorded its highest ever revenue growth of over 100%, while there is a 50% growth projection for its global operations this year.

As Mini–Circuits is privately held, Kiew said that he was not at liberty to disclose the financial figures but stressed that the company was in a strong position.

The revenue gained has allowed the group to consider expanding its Penang operations in the future to complement its present one which is already one of the biggest in the Bayan Lepas Free Industrial Zone.

In the future, Kiew expects the products of Mini–Circuits to be applied in robotics, artificial intelligence and automation.

source https://www.thesundaily.my/business/mini-circuits-unscathed-by-us-china-trade-war-KN1429639

Malaysian bonds still attractive despite global index ‘watch list’ status

PETALING JAYA: Malaysian bonds remain attractive to international investors despite the uncertainties due to its watch list status in FTSE Russell’s World Government Bond Index (WGBI) according to Sunway University Business School professor of economics Dr Yeah Kim Leng.

“In the light of the current low yield environment in the bond market, Malaysian bonds still retains a positive yield differential that will attract international investors seeking to increase their yield,” he told SunBiz.

He said there has been a call for government to employ fiscal stimulus rather than resorting to unconventional monetary policy such as negative interest rate or zero-bound rates.

“Until those issues are addressed, the search for a higher yield in the fixed income market will prove to be a positive for emerging markets including Malaysia.”

Although the fate of Malaysian Government Securities (MGS) in the index remains unclear until the next review in March 2020, Yeah said the decision has lifted the concerns of bond market players.

“Even though Malaysia remains in the watch list, it is still positive development for Malaysia, at least in the short term,” he said.

On the other hand, UOB Malaysia senior economist Julia Goh pointed out that FTSE Russell and index users are encouraged by the efforts and engagement of Malaysian authorities to address concerns on market liquidity and accessibility.

Bank Negara Malaysia (BNM) said earlier that it has had positive engagements with the index provider, following further liberalisation of the foreign exchange administration rules to improve market liquidity and accessibility.

“These measures have helped to sustain Malaysia’s position in the WGBI for now, FTSE retains Malaysia on the watch list to ensure sufficient progress of reforms,” said Goh.

However, JF Apex head of research Lee Chung Cheng is not so optimistic on the latest development as it could lead to sell-off on Bursa Malaysia.

“This will translate into an increase in volatility for MGS and ringgit until the next review in March,” said Lee.

AmInvestment Bank Research also highlighted the overhanging concern on potential US$8 billion (RM33.6 billion) foreign outflows from the Malaysian bond market in the event of a downgrade.

“Apart from Malaysian bonds, a downgrade would hurt the ringgit, and in turn, the appetite for Malaysian equities as well.”

The FBM KLCI declined 8.86 points or 0.56% to 1,584.14 points last Friday, while the ringgit appreciated 0.18% to 4.1955 against US dollar.

source https://www.thesundaily.my/business/malaysian-bonds-still-attractive-despite-global-index-watch-list-status-NN1429492

KLCI expected to trade sideways next week

KUALA LUMPUR: Bursa Malaysia is expected to trade sideways next week as it awaits stronger local catalysts for the push into positive territory, with the benchmark FTSE Bursa Malaysia (FBM KLCI) expected to trade between 1,580 to 1,595.

Philip Capital Management senior vice-president (investment) Datuk Dr Nazri Khan Adam Khan said as global tensions prevail from the ongoing US-China trade war, it was best for investors to be more selective and focused on defensive-stocks.

“Overall, a slowing global economy and elevated uncertainties over the prolonged US-China trade feud, as well as rising geopolitical tensions in the Middle East, remain as headwinds for the local bourse,“ he told Bernama.

From a technical perspective, Nazri Khan said despite the present downtrend, the market should set itself for a rebound, once the dust settles on the US-China trade front and a stronger market catalyst is present.

“Although the local bourse is still under pressure in trading at below the 1,600-point mark, this does not negate our multi-month bullish view, as it is supported by the two appearances of the Bullish Harami candlestick pattern in August and September,“ he added.

In the course of the week, the market was influenced by the continuous US-China trade spat, as well as the review by FTSE Russel on Malaysia’s bond market.

Trade representatives from the US and China are set to resume talks on Oct 10 and investors remain cautious over the outcome.

Despite being retained in the FTSE index, analysts had mixed views on the matter, with a majority remaining cautious as the local bond market’s performance is still under review until March 2020, which could lead to a higher fund outflow in the coming months.

On Friday, Bursa Malaysia closed 0.55 per cent lower due to selling pressure in selected heavyweights over cautious market sentiment, the global economic growth outlook, as well as recession fears.

On a week-on-week basis, the FBM KLCI weakened 13.27 points to 1,584.14 from last week’s close of 1,597.41.

The FBM Emas Index declined 77.08 points to 11,205.89, the FBMT 100 Index fell 76.80 points to 11,038.61 and the FBM Emas Shariah Index contracted 73.14 points to 11,761.17.

The FBM 70 lost 32.44 points to 13,930.71 and the FBM Ace Index slipped 20.44 points to 4,552.83.

Sector-wise, the Financial Services Index dropped 144.57 points to 15,317.36, the Industrial Products and Services Index slid 1.42 points to 153.13, and the Plantation Index contracted 53.10 points to 6,723.57.

Weekly turnover decreased to 9.89 billion units worth RM7.52 billion compared with 10.10 billion units worth RM8.57 billion previously.

Main Market volume declined to 5.81 billon shares worth RM6.67 billion compared with 6.81 billion shares valued at RM6.29 billion.

Warrants turnover was higher at 1.72 billion worth RM379.59 million compared with 1.58 billion units worth RM339.38 million.

The ACE Market volume firmed up to 2.35 billion shares valued at RM462.30 million in comparison with 1.70 billion shares valued at RM322.56 million. - Bernama

source https://www.thesundaily.my/business/klci-expected-to-trade-sideways-next-week-AY1427002

Ringgit to trade steadily against the us dollar between 4.18-4.20 next week

KUALA LUMPUR: The ringgit is expected to trade steadily against the US dollar within the 4.18 - 4.20 range next week, following news that the Malaysian government bonds are staying on index provider FTSE Russell’s watchlist.

On Friday, FTSE Russell announced that Malaysia remains on its benchmark World Government Bond Index (WGBI), along with China.

Axi Trader Asia-Pacific market strategist Stephen Innes said as the ringgit was traded sideways last week tracking the Chinese yuan’s performance, the news would be supportive to the local note’s performance in the coming week.

“The (ringgit) outlook looks relative stable next week with China heading for a long National Day holiday (Oct 1-7),“ he said.

Meanwhile, in an email to Bernama, FXTM market analyst Han Tan said Malaysia’s economic resilience - as evidenced by the 4.7% year-on-year growth in gross domestic product in the first half of 2019 - had weathered the current external headwinds.

“For the week ahead, a break above 4.20 for US dollar- ringgit should be met, with stiffer resistance at 4.23, while the 4.16 range continues to act as the near-term support level,“ he said.

For the week just ended, the local note was mostly lower throughout the week, mainly influenced by the uncertainties in the United States-China trade talks, weakening crude oil prices as well as FTSE Russell’s decision to review the Malaysian government bonds’ participation in the WGBI.

The ringgit ended the week lower at 4.1860/1900 against the greenback from 4.1680/1720 on Friday last week.

The local currency, however, traded mostly higher against most other major currencies, except the yen.

It strengthened against the Singapore dollar to 3.0292/0325 from 3.0297/0337, increased versus the euro to 4.5732/5793 from 4.6040/6.101 and surged against the pound to 5.1433/1499 from 5.2196/2254.

Vis-a-vis the yen, the local unit fell to 3.8774/8818 from 3.8589/8637 previously. - Bernama

source https://www.thesundaily.my/business/ringgit-to-trade-steadily-against-the-us-dollar-between-4-18-4-20-next-week-FX1426979

Ringgit snaps 4-day losing streak on FTSE Russell decision

KUALA LUMPUR: The ringgit snapped four days of losses to end the week firmer against the US dollar after index provider FTSE Russell decided to maintain Malaysian bonds on its fixed-income watchlist.

At 6pm, the local note closed at 4.1860/1900 against the greenback, improving 70 basis points from Thursday’s close of 4.1930/1980.

FXTM market analyst Han Tan said the ringgit had weakened alongside most Asian currencies for the week, as risk aversion fuelled the stronger US dollar narrative.

“The decision by FTSE Russell to keep Malaysian bonds on its benchmark World Government Bond Index (WGBI) is supportive of the ringgit in the interim,“ he told Bernama.

However, Tan said the risk of expulsion lingered on, as investors continued to eye how else policymakers might improve market liquidity and accessibility.

At the close, the ringgit also traded higher against other major currencies.

It rose against the Singapore dollar to 3.0292/0325 from 3.0347/0392 on Thursday and advanced against the Japanese yen to 3.8774/8818 from 3.8958/9011 yesterday.

Vis-a-vis the euro, the local unit strengthened to 4.5732/5793 from 4.5842/5914 while against the British pound, it improved to 5.1433/1499 from 5.1658/1736 yesterday.

Meanwhile, in a note today, MIDF Amanah Investment Bank Bhd Research (MIDF Research) said news that Malaysia bonds stayed on FTSE Russell’s watchlist had provided positive sentiment to the ringgit, despite a further update of the watchlist to be provided in the next interim review in March 2020.

Therefore, it expected the local note to gradually appreciate against the greenback towards the end of the year.

The research firm said the estimate would also be supported by the expansionary Budget 2020 to be announced on Oct 11, coupled with the resumption of US-China trade talks from Oct 10-11, which would slightly calm the ongoing tensions.

“Factoring all that, we foresee the ringgit trading at 4.15 versus the greenback by end-2019.

“Similarly, we also expect the local note to average at 4.15 against the US dollar for 2019,“ it said, adding that year-to-date, the ringgit averaged at 4.13 against the greenback. — Bernama

source https://www.thesundaily.my/business/ringgit-snaps-4-day-losing-streak-on-ftse-russell-decision-EX1426262

Bursa Malaysia ends lower on heavyweight selling pressure

KUALA LUMPUR: Bursa Malaysia ended the week lower as most blue chip stocks were under selling pressure due to global economic anxiety and the lack of fresh local catalysts to act as a market drivers.

At 5pm, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) declined 8.86 points or 0.55 per cent to 1,584.14 compared to yesterday’s close of 1,593.00 after trading between 1,583.45 to 1,592.05 throughout the day.

The index opened 2.76 points lower at 1,590.24.

The market breadth between losers and gainers widened to 482 and 287 respectively, with 432 counters unchanged, 800 untraded and 71 others suspended.

Turnover stood at 1.88 billion shares worth RM1.32 billion.

An analyst told Bernama that heavyweight stocks, especially financial-related counters as well as government-linked, will be the first to react to uncertainties in the equity market.

Citing Maybank, Petronas-related counters and Sime Darby Plantation as examples, she said that the key index was dragged down by the companies’ performance due to their higher weightage in the composite index.

“A strong new catalyst is needed to push the market for it to be on the positive track in the coming weeks. If not, it will continue to trade sideways, coupled with the global economic downtrend.

“With Malaysian bonds being retained in the FTSE World Government Bond Index (WGBI) watchlist until the next review in March 2020, it will be a challenge to minimise foreign outflow,“ she said.

At the close, Maybank and Petronas Gas slipped 10 sen to RM8.60 and RM16.48, respectively, Sime Darby Plantation fell eight sen to RM4.80 while Petronas Chemicals gained one sen to RM7.53 due to last minute buying.

On other financial heavyweights, Public Bank slipped six sen to RM20.04, CIMB Group weakened five sen to RM5.01, Hong Leong Financial erased 28 sen to RM16.10 and AMMB lost five sen to RM4.11.

Even though the heavyweights might be able to weather through the downtrend, the analyst said small capital indices, especially those under ACE market would be under intense pressure due to sell offs.

At close, the Financial Services Index dropped 125.90 points to 15,357.46 while FBM ACE declined 0.7 per cent to 4,552.83.

“If the trend continues to be on the sideways, the index could slip further to below 1,580 points. The immediate resistance level now is viewed at 1,595 points,“ she said.

As for the actives, MNC Wireless eased 2.5 sen to 8 sen, Bumi Armada declined 1.5 sen to 33.5 sen and MTAG fell half-a-sen to 13.5 sen.

The FBM Emas Index slipped 65.27 points to 11,205.89, the FBMT 100 Index contracted 65.72 points to 11,038.61 and the FBM Emas Shariah Index was 56.46 points lower at 11,761.17.

The FBM 70 fell 99.29 points to 13,930.71.

Sector-wise, Plantation Index shed 50.58 points to 6,723.57 and the Industrial Products & Services Index was 0.16 point lower at 153.13.

The physical price of gold as at 5.00pn stood at RM194.95 per gramme, down RM1.72 from RM196.67 at 5.00pm yesterday. — Bernama

source https://www.thesundaily.my/business/bursa-malaysia-ends-lower-on-heavyweight-selling-pressure-FX1426241

BNM, BI strengthen bilateral monetary, financial cooperation

PETALING JAYA: Bank Negara Malaysia (BNM) and Bank Indonesia (BI) entered into agreements to further strengthen bilateral monetary and financial cooperation between the central banks.

The two central banks inked a local currency bilateral swap agreement (LCBSA), which will enable the two to access foreign currency liquidity from each other if needed.

According to a press statement, the LCBSA allows for the exchange of local currencies between the central banks of up to RM8 billion or IDR28 trillion with an effective period of three years, which can be extended by mutual agreement of the central banks.

“This will complement efforts to support the wider usage of local currencies to facilitate cross-border economic activity between Malaysia and Indonesia,”

Furthermore the bilateral meeting also saw the signing of a memorandum of understanding (MoU) to forge closer cooperation on innovation in payments and digital financial services, as well as surveillance on anti-money laundering and counter financing of terrorism.

In the MoU, the two central banks reaffirmed the commitment in supporting the development of payment systems and digital financial innovation as part of initiatives to advance financial development and integration between the two countries.

The meeting also discussed recent economic and financial developments, including in the areas of Islamic finance, social financing and financial market development.

In addition, the central banks expressed their commitment in strengthening cooperation between both nations to further enhance financial sector development in achieving sustainable economic progress

source https://www.thesundaily.my/business/bnm-bi-strengthen-bilateral-monetary-financial-cooperation-EX1426107

MOF welcomes move to drop bank charges for over the counter transactions and CDM

PUTRAJAYA: The Finance Ministry has welcomed the termination of transaction charges imposed by 26 commercial banks on cash and cheque transactions for credit cards and financing repayments over the counter of up to RM2 and 50 sen at cash deposit machines.

Its Minister Lim Guan Eng said the Association of Banks Malaysia (ABM) had done well to heed the ministry’s advice to listen to the views of the public and consumers.

He said the transaction charges were first implemented in December 2017 under the previous government to promote the migration to e-payments.

“However, the charges have proved burdensome for low-income earners and those with poor access to Internet connectivity to conduct online and mobile banking.

“The termination of the charges effective Sept 26, demonstrates that the commercial banks are committed to serving consumer needs, using the latest technology without financially burdening them.

“ABM has also demonstrated that it is not obsessed with profits from these fees and charges by abolishing them for the first time since introduced in 2017,” he added. - Bernama

source https://www.thesundaily.my/business/mof-welcomes-move-to-drop-bank-charges-for-over-the-counter-transactions-and-cdm-HB1425786

Sapura Energy secures contracts and contract extension worth RM774 million

KUALA LUMPUR: Sapura Energy Bhd (Sapura Energy) has secured three new contracts and two contract extensions worth RM774 million, bringing the value of its cumulative contract wins year-to-date to about RM3.1 billion.

In a statement here, the global integrated oil and gas services and solutions provider said with these new wins, the group would be executing works in Malaysia, Thailand and Brunei.

Sapura Fabrication Sdn Bhd (Sapura Fabrication) has secured a contract from Brunei Shell Petroleum Company Sdn Bhd (BSP) for the provision of Engineering, Procurement, Construction and Installation (EPCI) works for the Salman Project in Brunei.

The project is divided into two parts, comprising the Salman greenfield scope and the Egret East greenfield scope, said Sapura Energy.

The Salman greenfield scope entails EPCI works and support for hook-up, pre-commissioning and commissioning of wellhead platform and substructures, pipelines and umbilical, water and chemical injection module, along with a construction yard upgrade.

Meanwhile, the Egret East greenfield scope consists of Front-End Engineering Design (FEED) services with an optional EPCI scope for wellhead platforms, substructures and pipelines.

In Malaysia, Sapura Fabrication was awarded a contract by PETRONAS Carigali Sdn Bhd for the provision of Procurement, Construction, Hook-up and Commissioning (PCC), and start-up works of BNJT-K BN-84 well tie-in for Bardegg-2 and the Baronia Enhanced Oil Recovery (EOR) Development Project.

For its drilling segment, Sapura Drilling Asia Limited has secured a contract from PTT Exploration and Production Public Company Ltd for the provision of its tender-assist drilling rig, Sapura T-17, for the Bongkot gas field in the Gulf of Thailand said Sapura Energy.

Meanwhile, Sapura Drilling Asia Sdn Bhd has been awarded a contract extension by PETRONAS Carigali Sdn Bhd for the provision of its semi-submersible tender-assist drilling rig, Sapura Berani.

The contract entails the drilling of five additional wells in Erb West, offshore Sabah and the Dulang facilities, offshore Peninsular Malaysia.

Sapura Drilling Sdn Bhd was also awarded a one-year contract extension by BSP for the provision of its semi-submersible tender-assist drilling rig, Sapura Pelaut. - Bernama

source https://www.thesundaily.my/business/sapura-energy-secures-contracts-and-contract-extension-worth-rm774-million-HB1425768

Genting group committed to RSPO’s zero burning policy

KUALA LUMPUR: Genting Grouptoday said the conglomerate is committed to the implementation of the Zero Burning Policy in the development of its oil palm plantation.

The group said its subsidiary, Genting Plantations Bhd, has been a member of the Roundtable on Sustainable Palm Oil (RSPO) since 2006 and implements sustainable criteria in all of its operations, which includes the implementation of the policy.

Genting said this in a statement in response to Greenpeace’s article on Indonesia’s forest fire crisis, in which it listed the plantation arm of the conglomerate among the top 10 groups with the largest areas of burned land in Indonesia between 2015 and 2018.

“We are unable to comment on the accuracy of Greenpeace’s data, but based on the Indonesian Ministry of Environment and Forestry’s map, the burnt areas are predominantly outside the concession of our Indonesian subsidiary, PT Globalindo Agung Lestari.

“Additionally, Greenpeace’s map may have also included areas with hotspots which are not owned by PT Globalindo Agung Lestari,” Genting Group said.

The group however noted that according to its 2016-2018 internal data, 6.8 hectares of PT Globalindo Agung Lestari’s land experienced burning during that period.

“This aside, we also noted that some 203 hectares of community-owned land encountered burning. These lands were cultivated with other crops and not with oil palm,” it said.

It said Genting Plantations has established a satellite and drone hotspot monitoring system to assist the surveillance by the internal fire patrol teams.

If a fire breaks out, its fire patrol teams will immediately report it to the local police and Disbun Perkebunan, the local plantation agency, along with pictorial evidence and details of action taken within 24 hours.

“The fire team will also work with the authorities and local communities to extinguish the fire in the shortest possible time.

“Additionally, we will also report it to the RSPO through the Internal Fire Hotspot Monitoring form,” it added. - Bernama

source https://www.thesundaily.my/business/genting-group-committed-to-rspo-s-zero-burning-policy-LB1425728

China onshore, Malaysia bonds stay on FTSE Russell’s watchlist

NEW YORK/KUALA LUMPUR: Index provider FTSE Russell will retain China's onshore government bonds on a watchlist for a possible upgrade that could allow Chinese debt entry to its widely-tracked government bond index.

Malaysian bonds, which were on review for a downgrade that would have excluded them from the World Government Bond Index (WGBI), were also retained on the watchlist, giving the Southeast Asian country six months to try and improve liquidity so that it avoids a damaging eviction from the index.

FTSE Russell will provide another update after an interim review in March.

Malaysian bonds were first put on a review for a downgrade in April. The country's bond market is the most foreign-owned in Asia, and analysts said the additional time could help the central bank work on more measures to enhance liquidity on top of what has already been done.

The Malaysian ringgit firmed 0.05% against the dollar to 4.191 as of 0224 GMT. Analysts said markets will next focus on the country's budget to be presented on Oct. 11.

"FTSE Russell will continue to engage with market participants to understand the practical impact of recent initiatives announced by Bank Negara Malaysia to improve market liquidity and accessibility," the index provider said on Thursday, referring to the country's central bank.

Last month, Bank Negara Malaysia (BNM) announced additional measures to give more flexibility to foreign investors to trade in the ringgit, and for resident businesses to manage hedging of foreign currency risks, in an attempt to stay in the index.

BNM Governor Nor Shamsiah Mohamad Yunus said after its last policy meeting the central bank had a "very positive engagement" with FTSE Russell about Malaysia's status on its government bond index.

"The liberalisation measures taken thus far are likely working but haven't sufficiently crossed the hurdle to completely take Malaysia out of the watchlist," Malaysia's Maybank Kim Eng said in a note.

"We think there could be more follow-up measures by BNM on fine-tuning of policies."

BNM did not immediately respond to a request for comment.

Maybank said the overall impact on the bond market was expected to be neutral, while Malaysian investment bank MIDF said it expected the ringgit to gradually appreciate against the dollar towards the end of the year.

Analysts at Morgan Stanley said earlier this year that foreign investors had cut their Malaysian government bond holdings since late 2016, and that nearly $8 billion could leave Malaysia if it was dropped from the index. Malaysia represents 0.39% of the benchmark.

Overhanging concerns of potential foreign outflows are "a negative to the market" due to the extended period of uncertainty, according to AmInvestment Bank.

"Apart from Malaysian bonds, a downgrade would hurt the ringgit, and in turn, the appetite for Malaysian equities as well," the bank said in a note.

Foreign holdings in Malaysia's bond market were about $157 billion in July.

Malaysia's 10-year sovereign bond is the benchmark issue most widely tracked by foreign investors.

On China, Maybank said investors have noted measures taken by the country to open up its onshore bond market but they want further improvements to secondary-market liquidity and flexibility in foreign exchange execution and the settlement of transactions. - Reuters

source https://www.thesundaily.my/business/china-onshore-malaysia-bonds-stay-on-ftse-russell-s-watchlist-DA1424599