Malaysia’s March manufacturing PMI falls to 48.4, lowest since June 2016

PETALING JAYA: The IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) fell to 48.4 in March, from 48.5 in February, the lowest level since June 2016,

In a statement, IHS Markit pointed out that this signals a sharp slowdown in manufacturing production in Malaysia, as demand- and supplyside factors adversely impacted output volumes.

The latest survey data pointed to the sharpest decrease in new order intakes since data collection began in July 2012.

IHS Markit chief business economist Chris Williamson said the marginal fall in the PMI masks steeper deteriorations in production and new orders trends.

“While supply chain delays are usually seen as a positive development, reflecting rising demand and accelerating economic growth, the current survey is seeing record degrees of supply chain disruption from the coronavirus outbreak, notably from China. These supply shortages are hitting production capacities and constraining growth,”he said.

Williamson added that public health measures aimed at curbing the spread of Covid-19 also led to a fall in demand.

Furthermore, the global pandemic also had a noticeable impact on external markets, as evidenced by a sharp drop in export demand during March.

The rate of decline in the data was broadly in line with that seen in February following the initial negative shock to demand from China.

Meanwhile, supply-side hindrances also restricted production schedules in March, as supplier delivery times lengthened at an accelerated rate that was by far the most severe on record.

“Supply from China should start to improve in coming weeks, helping lift some of the production constraints, but the next problem will be one of slumping global demand for many goods as both business and households around the world spend less due to closures and lockdowns.

“Worse therefore looks set to come in the second quarter, both in terms of exports and domestic demand in Malaysia, but as yet there is great uncertainty as to how long the global slump will persist,” said Williamson.

Although material shortages and domestic currency weakness did lead to a consequent rise in import prices, there were numerous reports from panel members of suppliers cutting their fees due to low input demand.

Overall, the rate of input price inflation slowed to a three-month low.

Meanwhile, the survey data indicated the rate of input price inflation slowed to a three-month low, while output charges fell in March for a third month in a row.

For the month, it reported that purchasing activity fell sharply as lower production requirements and widespread supply chain disruptions deterred firms from buying additional inputs.

In turn, stocks of purchases fell for a third successive month.

The survey found that Malaysian manufacturers also reduced their inventories of finished goods during March.

Looking towards business prospects over the next 12 months,the IHS Markit found Malaysian manufacturers expect further cuts in production, linked to the prospect of sustained supply chain disruption.

““Until more is known about the likely length of the Covid-19 pandemic, businesses are likely to remain highly risk averse, as evidenced already by companies’ future expectations for the year ahead sliding to an all-time low,” said Williamson.

source https://www.thesundaily.my/business/malaysia-s-march-manufacturing-pmi-falls-to-484-lowest-since-june-2016-XB2201330

Very material’ contraction likely in Australia due to coronavirus

SYDNEY: Australia’s central bank was worried about the potential for a “very material contraction” in economic activity when it unveiled quantitative easing in an emergency meeting last month, minutes released on Wednesday showed.

The Reserve Bank of Australia (RBA) held an out-of-cycle meeting on March 18 when it reduced its cash rate to a record low 0.25% and embarked on a bond buying programme to shield the economy from the devastation caused by the coronavirus pandemic.

The minutes showed members agreed the cash rate was now at its effective lower bound and that policymakers had “no appetite” for negative interest rates, implying further cuts were not on the cards.

The RBA holds its next monthly rate review on April 7.

It noted the extraordinary measures “would not have been under consideration in normal times.”

Members said in discussions that it was not possible to provide an updated set of economic forecasts, given the “fluidity of the situation” though it was “likely that Australia would experience a very material contraction”, the minutes showed.

The number of coronavirus cases in Australia now exceeds 4,500 with 20 deaths. Authorities, worried about the spread of infection within the community, have rolled out increasingly restrictive measures to combat the virus.

Economists said the key for policy now was the extent of RBA’s bond buying programme.

The central bank has so far been active in the market every business day since launching QE on March 20, lapping up about A$24 billion ($14.70 billion) worth of Australian sovereign and state government bonds.

Significant job losses

Economists noted the sombre tone of the meeting but said the minutes failed to provide major insights into the RBA’s thinking.

“While the RBA has not released an updated set of macro forecasts, the minutes hinted at substantial revisions amid much uncertainty,“ RBC economist Su-Lin Ong said.

“Coupled with a reluctance to take the cash rate into negative territory and the most recent large fiscal package, it suggests that the RBA is likely to sit on its hands for some time.”

Australian Prime Minister Scott Morrison has pledged A$320 billion in fiscal support or more than 15% of annual economic output in a bid to keep the economy running.

The RBA warned the economic contraction in Australia could potentially linger beyond the June quarter.

“The size of the fall in economic activity would depend on the extent of the social distancing requirements, and potential lockdowns, put in place to contain the virus,“ minutes showed.

“There were likely to be significant job losses over the months ahead, although the extent of this would depend on the capacity of businesses to retain employees during this period.” -Reuters

source https://www.thesundaily.my/business/very-material-contraction-likely-in-australia-due-to-coronavirus-YB2201313

Yinson terminates Ghana FPSO contract

PETALING JAYA: Yinson Holding Bhd, via its Ghanaian joint venture, has terminated its letter of intent with Aker Energy Ghana Limited, as Aker Energy has postponed the activities under the Deepwater Tano/Cape Three Points (DWT/CTP) Petroleum Agreement and the development of the project until further notice amid the Covid-19 pandemic.

In a Bursa filing this morning, the group said it will preserve its right for compensation due arising from the

termination.

“The aforesaid termination will not have any effect on the share capital and shareholding structure of the company. There is expected to have no material effect on the group’s earnings and net asset per share for the financial year ending Jan 31, 2021,” it said.

Yinson had received the letter of intent via its 49%-owned joint venture entity, Yinson West Africa, to provide a floating, production, storage and offloading (FPSO) vessel for the Pecan development project in the DWT/CTP block on Feb 21,

Yinson shares were suspended from trading this morning between 9am and 10am.

At 10.45am, the counter was 2 sen or 0.42% higher at RM4.79 with 496,700 shares done.

source https://www.thesundaily.my/business/yinson-terminates-ghana-fpso-contract-MB2201196

UK banks scrap dividends on coronavirus fears, pressure on bonuses

LONDON/HONG KONG: Britain's top banks said on Tuesday they would suspend dividend payments after pressure from the regulator, saving their capital as a buffer against expected losses from the economic fallout from the coronavirus.

Barclays, HSBC, Lloyds Banking Group , Royal Bank of Scotland, Standard Chartered and the British arm of Spain's Santander all halted payouts.

The lenders had been due to pay out over 8 billion pounds ($9.93 billion) between them in 2019 dividends, with HSBC the biggest payer at $4.2 billion.

The move came in response to a request from the Prudential Regulatory Authority (PRA), which also asked banks and insurers not to pay senior staff bonuses this year.

Hong Kong shares of HSBC fell as much as 9.9% to their lowest since March 2009, while StanChart dropped 7.4% in the morning trade on Wednesday. The broader Hong Kong market index was down 0.4%.

The British lenders said they would not pay interim dividends for 2020 and scrapped planned 2019 payouts, but held off announcing changes to their executive pay policies.

The PRA said banks entered the epidemic, which has put Britain into lockdown, with strong capital positions, enough to withstand a severe UK and global recession.

"The bank has a strong capital base, but we think it is right and prudent, for the many businesses and people that we support, to take these steps now," Barclays Chairman Nigel Higgins said.

Banks pay out dividends as a means of rewarding shareholders and disposing of excess profits, but they have the option to retain the earnings instead to preserve their capital levels.

FOLLOWING ECB'S LEAD

The statements from British lenders come after the European Central Bank (ECB) last week asked euro zone lenders to skip dividend payments and share buybacks until October at the earliest, and use their profits to support the economy.

Several of Europe's largest lenders, including UniCredit , and Societe Generale, have already announced they will hold off paying 2019 dividends for now.

However, there are some hold outs. Swiss banking giants UBS and Credit Suisse have both said they plan to press ahead with 2019 dividends despite their home regulator urging caution over payouts.

The move to scrap 2019 shareholder distributions is expected to free up capital that banks can instead lend to businesses and consumers rocked by the coronavirus pandemic.

But some analysts believe cancelling dividends could actually harm the supply of credit to the real economy.

"We note that euro area bank market capitalization fell on 30 March by the same as the 30 billion euros 'saved' by its dividend ban on Friday 27 March," analysts at Bank of America Merrill Lynch said in a note to clients, referring to the ECB's move.

The European Union's banking watchdog said earlier on Tuesday that banks should be "conservative" in how they award bonuses to preserve capital and keep lending during the coronavirus pandemic.

However it stopped short of calling on banks to stop bonuses altogether.

Italy's UniCredit and Spain's BBVA have both said this week that their top management will waive their 2020 bonuses.

Standard Chartered signalled in a memo on Monday that the bank would likely cut its 2020 executive payouts.

PRA Chief Executive Sam Woods also wrote to heads of insurers, saying they should pay "close attention" to the need to protect policyholders and maintain safety and soundness when considering bonuses or dividends.

HSBC signalled a gloomy first-quarter earnings season for British banks, warning in its statement that it would see bad loans rising and revenues falling as the economic impact of the pandemic hits.

The coronavirus has infected more than 850,000 people globally, and killed over 42,000, a Reuters tally shows. - REUTERS

source https://www.thesundaily.my/business/uk-banks-scrap-dividends-on-coronavirus-fears-pressure-on-bonuses-BB2201175

China factory activity shows minimal growth in March after plunge, still in virus grip

BEIJING: China's factory activity improved in March after plunging a month earlier, a private survey showed on Wednesday, but the bare minimal growth highlighted the intense pressure facing businesses as the global coronavirus pandemic shuts down many countries.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) rose to 50.1 last month, from February's record low of 40.3, and just a notch above the 50-mark that separates growth from contraction.

Analysts had expected it to rise to 45.5.

The findings, which focus mostly on small and export-oriented businesses, lagged an official survey released on Tuesday, which showed factory activity expanded at a faster pace on a month-on-month basis.

After widespread factory closures and travel restrictions imposed by Beijing to contain the spread of the coronavirus that has killed more than 3,000 in the country, businesses in the country have reopened and life for millions of people has started to slowly return to normal.

But as Beijing guards against a second wave of infections from abroad, the pace of business resumptions has been slow. The rapid spread of the virus across hundreds of countries has led to unprecedented lockdowns, bringing the global economy to a shuddering halt and leaving China vulnerable to a sharp economic slump.

Economists are already forecasting a steep contraction in China's first quarter gross domestic product, with some expecting a year-year slump of 9% or more - the first such contraction in three decades. Investment bank ANZ have also raised the prospect of a recession in China, forecasting second quarter GDP to contract by 0.4%-2.1% y/y, depending on the evolution of pandemic.

"To sum up, the manufacturing sector was under double pressure in March: business resumption was insufficient; and worsening external demand and soft domestic consumer demand restricted production from expanding further," said Zhong Zhengsheng, Director of Macroeconomic Analysis at CEBM Group, in a note accompanying the date release.

A sub-index for production rose to 50.6, from February's record drop of 28.6, as more factories reopened amid the dwindling number of locally transmitted infections.

But demand remained weak, with the total new orders placed with Chinese manufacturers falling for the second month, and a number of respondents reported that firms have delayed or cancelled orders due to the pandemic.

A gauge for new export orders was still way below levels seen before the outbreak.

Reuters reported that Chinese exporters are seeing overseas orders being scrapped as the sharp worldwide spike in coronavirus infections and deaths has forced many of the nation's trading partners to slow or suspend production. Some of the exporters have let workers go and warned about possible factory closures in the not too distant future.

Wednesday's survey showed that manufacturers further reduced headcounts in March, although the rate of decline eased from a month earlier, with respondents linking the fall to a combination of voluntary redundancies and efforts to cut costs.

The coronavirus outbreak also continued to strain supply chains in March, highlighted by a further sharp deterioration in vendor performance. Average lead times for inputs increased at the second-quickest rate in just over 12 years amid reports of reduced vendor capacity and material shortages.

Chinese manufacturers cut their selling prices again in March to boost sales, with the rate of discounting the quickest in seven months.

On the bright side, government stimulus measures helped to buoy the survey's manufacturing confidence to elevated levels.

The ruling Communist Party's Politburo said on Friday it would step up macroeconomic policy adjustments and pursue more proactive fiscal policy to revive activity. Beijing is implementing $344 billion of mainly fiscal measures.

The People's Bank of China unexpectedly cut the rate on reverse repurchase agreements by 20 basis points on Monday, the largest in nearly five years, to shore up the economy.

- Reuters

source https://www.thesundaily.my/business/china-factory-activity-shows-minimal-growth-in-march-after-plunge-still-in-virus-grip-BB2201157

Argentina to continue talks with creditors after missing deadline - economy minister

BUENOS AIRES: Argentina will continue talks this week and next with creditors over restructuring its $83 billion in foreign debt, Economy Minister Martin Guzman said on Tuesday, after the South American country missed the March 31 deadline it had set previously.

Argentina is racing to revamp its foreign currency debt and avoid a default that would put its access to global markets at risk just as the coronavirus outbreak is sweeping through the region.

Argentine negotiators were working as quickly as possible to ship a fresh deal to its creditors, but the pandemic had stalled the process, Guzman told a news conference. He did not set a new, firm date for the offer.

The center-left government of President Alberto Fernandez said it was evaluating "multiple combinations of variables" to ensure any new deal was sustainable. That includes delaying maturities, "substantial" reduction in coupons and potential cuts to principal values, according to a statement from the ministry.

Argentina was considering including instruments with coupon payments tied to economic performance in its latest offer, Guzman said. The government would also take into account the "exit yield" because it could determine how much it would cost the country to tap credit markets at more reasonable rates in the future.

"If the idea is that the exit yield be low, that would slow expectations of the rate converging quickly to more sustainable levels ... and that interplay is important as we design a concrete offer," Guzman said.

Argentina hopes to boost central bank reserves to $65 billion by 2024, up from $43.585 billion currently, according to a document outlining the country´s restucturing plans presented by the minister on Tuesday evening.

Both Guzman and President Fernandez have said repeatedly they need to strike a deal with bondholders soon to prevent the further hemorrhaging of reserves.

"In April there are important deadlines under foreign law," the minister said.

Reuters reported on Monday that Argentina was set to lay out "guideposts" about its debt restructuring, though was not yet ready to unveil a concrete proposal.

Guzman laid out an economic road map earlier this month, a key step in debt talks after creditors clamored for more detailed information about the country's plans as both sides look to strike a restructuring.

Guzman said the country's goal is to refinance already scheduled payments to the International Monetary Fund (IMF) under their now two-year old "standby" agreement. In all, Argentina owes the IMF about $44 billion.

"We're looking for a new program, with new conditions. To have a program (of payments) with the IMF requires that our debt situation be sustainable," Guzman said. - Reuters

source https://www.thesundaily.my/business/argentina-to-continue-talks-with-creditors-after-missing-deadline-economy-minister-EB2201107

Ringgit opens higher against greenback

KUALA LUMPUR: The ringgit extended its uptrend to open higher against the US dollar amid the weaker greenback.

At 9.04 am, the local note was trading at 4.2880/2980 compared with Tuesday’s close of 4.3150/3250.

AxiCorp global chief market strategist Stephen Innes said the US Federal Reserve has been quarterbacking the supply of US dollars around the world via USD FX Swap facilities.

“Now they opened up the door even broader US dollar selling overnight by offering up a temporary repo facility with foreign central banks that will start on April 6 and last for six months,” he said, added that this repo facility will be most welcome and should be put to immediate use by countries like Indonesia and Malaysia.

Meanwhile, the ringgit was also traded higher against a basket of major currencies.

It rose against the Singapore dollar at 3.0153/0234 from 3.0240/0325 at Tuesday’s close and strengthened vis-a-vis the euro to 4.7284/7411 compared to 4.7353/7480.

The local unit was also appreciated against the British pound to 5.3210/3364 from 5.3282/3427 but was down versus the Japanese yen to 3.9877/9981 from 3.9773/9876.

source https://www.thesundaily.my/business/ringgit-opens-higher-against-greenback-XA2200981

Bursa opens lower in line with ovenight Wall St tumble

KUALA LUMPUR: Bursa Malaysia reversed yesterday’s gains to start weaker today, tracking Wall Street’s overnight tumble after Dow Jones Industrial Average suffered the worst quarterly fall since 1987.

The key index opened 5.99 points lower at 1,344.90.

At 9.30 a.m. today, there were 184 gainers, 223 losers and 230 counters traded unchanged on the Bursa Malaysia.

The FBM-KLCI was at 1,336.99, down 13.90 points, the FBMACE was at 3,991.00, up 9.19 points, and the FBMEmas was at 9,166.48 down 73.32 points.

Turnover was at 462.530 million shares valued at RM240.351 million.

source https://www.thesundaily.my/business/bursa-opens-lower-in-line-with-ovenight-wall-st-tumble-LA2200962

Fitch revises Malaysia’s fiscal deficit forecast on increased govt spending to fund stimulus

PETALING JAYA: Fitch Solutions has revised its 2020 fiscal deficit forecast for Malaysia to 5.7% of gross domestic product (GDP), from 3.9% previously, to reflect the increased expenditure required to fund the combined RM250 billion stimulus package.

It also projects 2020 real GDP growth at 1.2%, revised downwards from 3.7% previously, reflecting its expectation for further stimulus from the government.

Although the RM250 billion package amounts to 17% of GDP, the research arm of Fitch Ratings remains cautious on its effectiveness at stabilising employment and keeping businesses open amid crushing economic headwinds.

“We do not expect this package to significantly improve the economic outlook, even though the large increase in handouts for households will likely help to keep private consumption growth afloat,” it said

As such, Fitch Solutions said it is maintaining its private consumption growth forecast at 1%.

On the negative side, it said most of the help for businesses has come in the form of loans and loan guarantees, rather than cost reduction measures, such as those adopted in China and Singapore.

“We continue to stress the risks to long-term growth and social security from financing stimulus by drawing on pension funds and relying on the private banking sector to absorb the economic shock, especially since any further stimulus is likely to rely on the same funding strategy, given tight fiscal constraints.

“While concessionary loans and loan guarantees for businesses are a positive step, we are of the view that they are only part of the solution. Cost reduction measures are important in helping businesses remain viable, or decide that the current downturn will not exact losses that will be too costly to weather,” it said.

It went on to elaborate that if businesses decide that it is futile to carry on, they will likely not take up the loans that the government is offering or guaranteeing. Furthermore, businesses have to prove that their revenues have contracted by at least 50% in the year-to-date of the application.

“Given that Malaysia was operating normally until March 18 when the movement control order began, most businesses will likely find it hard to qualify until later in the year,” it said.

source https://www.thesundaily.my/business/fitch-revises-malaysia-s-fiscal-deficit-forecast-on-increased-govt-spending-to-fund-stimulus-YA2200472

IHH Healthcare co-leads minority investment in Singapore-based telehealth company Doctor Anywhere

PETALING JAYA: IHH Healthcare Bhd co-led a minority investment in Singapore-based telehealth company Doctor Anywhere (DA), as part of DA’s US$27 million (RM116 million) Series B round to expand its platform and enter new geographies in Southeast Asia.

The investment is in line with IHH’s strategy to partner with innovative companies that deploy cutting-edge healthcare technology. The aim is to enhance the patient’s experience, treatment and clinical outcomes across its network of 77 hospitals in 10 countries.

IHH Healthcare managing director and CEO Dr Kelvin Loh said the partnership with DA will enable IHH to expand its digital ecosystem and better support clients with IHH’s full suite of healthcare services.

“DA’s end-to-end digital platform enables patients to schedule and receive virtual consultations with a doctor anytime, anywhere. Prescribed medications can also be delivered right to their home. The partnership is immediately synergistic in Singapore which is one of IHH’s home markets,” he said in a statement today.

DA currently serves more than one million users.

Beyond Singapore, its mobile app is also available in Thailand as well as in key Vietnamese cities of Hanoi and Ho Chi Minh City.

In addition to tele-consultations and drug delivery, DA users can also purchase health and wellness products on its online marketplace.

DA founder and CEO Lim Wai Mun said IHH’s strong global healthcare services network and deep pool of expertise, would complement DA’s services to make quality healthcare more accessible to patients in the region.

source https://www.thesundaily.my/business/ihh-healthcare-co-leads-minority-investment-in-singapore-based-telehealth-company-doctor-anywhere-JA2200380

Bank Negara: Ringgit drop in February due to non-resident outflows

PETALING JAYA: The ringgit depreciated 3.3% in February, in line with all regional currencies as domestic financial markets experienced non-resident outflows amid higher global risk aversion following the worsening of the Covid-19 pandemic.

In a statement, Bank Negara Malaysia (BNM) said despite the outflows, yields in the domestic bond market declined.

“In particular, the 10-year Malaysian government securities (MGS) yield declined by 30.5 basis points. While domestic institutional investors provided some support, the large decline mainly reflected expectations for monetary easing amid concerns over the growth outlook,” said the central bank in a report.

On the other hand, Malaysia’s headline inflation moderated to 1.3% in February, from 1.6% in the previous month, reflecting the decline in transport inflation following lower prices of retail fuel products and the 18% reduction in toll rates on selected highways.

Core inflation for the month fell to 1.3%, from 1.7% in January, partly reflecting lower rental inflation.

Meanwhile, exports contracted 1.5% in January from a growth of 2.7% in December 2019, due to slower growth in manufactured exports and a sharper decline in commodities exports.

Going forward, the central bank stated that export growth is expected to remain weak, reflecting the adverse impact of Covid-19 on global demand and supply chains.

In terms of financing, net financing grew to 5% in February compared to 4.7% in January, on faster expansion in outstanding loans of 3.9%.

Outstanding corporate bond growth also increased slightly to 8.2%, from 8% in January, while outstanding business loan growth increased to 3.6%, due mainly to lower repayments.

“Disbursements were broadly sustained during the month. However, outstanding household loan growth declined to 3.7% in February on account of lower disbursements for credit cards, and securities and car loans,” said BNM.

On the whole, banks’ asset quality remained sound with overall net impaired loans ratio remaining stable at 1%.

The central bank highlighted that the banks continued to maintain sufficient buffers against potential credit losses with total provisions (including regulatory reserves) at 125.1% of total impaired loans.

source https://www.thesundaily.my/business/bank-negara-ringgit-drop-in-february-due-to-non-resident-outflows-CA2200361

Ringgit higher against US dollar

KUALA LUMPUR: The ringgit ended higher against the US dollar today, supported by improved oil prices, said an analyst.

At 6pm, the local note was trading at 4.3150/3250 compared with Monday’s close of 4.3250/3400.

As press time, global benchmark Brent crude was trading 3.52% higher at US$27.35 per barrel.

However, oil prices may not be able to hang on as the Covid-19 pandemic could continue to suppress global demand for crude, an analyst told Bernama.

The ringgit was also lifted by China’s positive data, which saw the official manufacturing Purchasing Managers’ Index for March rebounding strongly to 52.0 from 35.7 in February.

“But this may be temporary. With so many caveats supporting the data, it could be worthless due to a higher level of inaccuracy in reporting, which explains the muted global market reaction,” said AxiCorp global chief market strategist Stephen Innes.

On another matter, World Bank in its report released today, said Malaysia’s GDP is expected to contract 0.1% for the first time, since the global financial crisis in 2008, compared with the earlier revised GDP forecast of 4.5%.

Meanwhile, the ringgit was also traded higher against a basket of major currencies.

It rose against the Singapore dollar at 3.0240/0325 from 3.0342/0450 at Monday’s close and improved versus the Japanese yen to 3.9773/9876 from 4.0098/0249.

The local unit strengthened vis-a-vis the euro to 4.7353/7480 compared to 4.7869/8052 and appreciated against the British pound to 5.3282/3427 from 5.3569/3764 previously. - Bernama

source https://www.thesundaily.my/business/ringgit-higher-against-us-dollar-IY2199974

Bursa Malaysia soars 1.66% on mild quarter-end window dressing

KUALA LUMPUR: Bursa Malaysia wrapped up the first quarter of 2020 on a positive note, lifted by some mild quarter-end window dressing seen across the board.

Rakuten Trade Sdn Bhd vice-president of research Vincent Lau said the local bourse was also tracking the uptrend of its regional peers.

At 5pm, the FBM KLCI soared 22.01 points, or 1.66%, to close at 1,350.89 from 1,328.88 at Monday’s close.

The key index opened 7.72 points stronger at 1,336.60 at 9am today and hovered between 1,335.91 and 1,352.20.

Market breadth was overwhelmingly positive with gainers outpacing losers 708 to 185, while 288 counters were unchanged, 817 untraded and 96 others suspended.

Turnover widened to 3.52 billion shares worth RM2.87 billion as compared with 2.83 billion shares worth RM1.86 billion on Monday.

Commenting on today’s performance, Lau said the rebound could be a relief rally as volatility is seen to remain high.

“Market sentiment could turn sour amid the struggling crude oil prices, along with the rising number of Covid-19 cases particularly in the United States,” he told Bernama.

Regionally, Singapore’s Straits Times Index jumped 2.69% to 2,481.23, Hong Kong’s Hang Seng Index advanced 1.85% to 23,603.48 and South Korea’s Kospi Index was 2.19% stronger at 1,754.64.

Among the FBM KLCI’s 30 counters, Petronas Chemicals rose 30 sen to RM5.05, Sime Darby Plantation increased 29 sen to RM4.94, Maybank bagged 14 sen to RM7.45, Tenaga was 22 sen higher at RM12.02 and Petronas Dagangan surged RM1.04 to RM21.16.

Of the mostly actively traded counters, Armada and Sapura Energy edged up half-a-sen each to 13.5 sen and eight sen, respectively, Hibiscus accumulated 2.5 sen to 34 sen, Sanichi lost half-a-sen to 4.5 sen while Pegasus Heights was flat at five sen.

Top gainers included Dutch Lady which firmed RM1.26 to RM43.30, while Nestle garnered 70 sen to RM136.70, Kuala Lumpur Kepong strengthened 66 sen to RM20.76, F&N perked 50 sen to RM31.02 and Panasonic Manufacturing Malaysia was 40 sen higher at RM26.88.

On the index board, the FBM Emas Index improved 159.40 points to 9,239.81, the FBM Emas Shariah Index accumulated 196.12 points to 10,105.08 while the FBMT 100 Index climbed 148.78 points to 9,166.52.

The FBM 70 surged 168.93 points to 10,550.56 and the FBM Ace was 198.34 points stronger at 3,981.81.

Sector-wise, the Industrial Products and Services Index edged up 3.77 points to 107.60, the Financial Services Index leapt 133.93 points to 12,270.67 and the Plantation Index was 208.96 points higher at 6,252.13.

Main Market volume expanded to 2.60 billion shares valued at RM2.63 billion versus 1.82 billion shares valued at RM1.64 billion on Monday.

Warrants turnover was higher at 328.13 million units worth RM84.10 million as compared with 290.31 million units worth RM92.63 million yesterday.

Volume on the ACE Market, however, contracted to 590.30 million shares valued at RM158.33 million against 718.09 million shares worth RM120.46 million yesterday.

Consumer products and services accounted for 373.98 million shares traded on the Main Market, industrial products and services (384.50 million), construction (196.45 million), technology (353.0million), SPAC (nil), financial services (83.55 million), property (258.68 million), plantations (64.84 million), REITs (12.62 million), closed/fund (4,000), energy (620.88 million), healthcare (55.38 million), telecommunications and media (70.47 million), transportation and logistics (96.66 million), and utilities (34.41 million). - Bernama

source https://www.thesundaily.my/business/bursa-malaysia-soars-166-on-mild-quarter-end-window-dressing-JY2199902

Huawei posts 5.6% rise in 2019 profit, smallest increase in 3 years

SHENZHEN: China's Huawei Technologies reported its smallest annual profit increase in three years, hurt by weak overseas sales amid an intensifying U.S. campaign to restrict its global expansion due to security concerns.

Net profit for 2019 came in at 62.7 billion yuan ($8.9 billion), up 5.6% compared with a 25% jump a year earlier.

Its carrier business, which includes 5G mobile network equipment, saw sales rise just 3.8%.

Accusing Huawei of being a threat to national security, Washington placed the company on its so-called Entity List, which restricts sales of U.S.-made goods and some other items made abroad that contain U.S. technology.

U.S. President Donald Trump's administration is also preparing further measures that will seek to restrict the supply of chips to the company, sources familiar with the matter told Reuters this month.

The United States alleges the Chinese government could use Huawei equipment to spy, an accusation Huawei has rejected.

"We will need to further adapt to the long-standing restrictions imposed by the Entity List, while also addressing the impact of the ongoing COVID-19 pandemic," Liang Hua, chairman of the board, said in a report posted on its website.

Overall revenue rose 19% to 858.8 billion yuan, helped by a 34% jump in sales for its consumer business unit which includes smartphones.

That was mainly driven by China, where sales surged 36.2% to 506.7 billion yuan. In contrast, revenue from the Asia-Pacific region excluding China fell 13.9%, while in Europe and the Middle East sales grew just 0.7%.

Huawei dominated smartphone sales in China, taking a 38.5% share of the market in 2019 compared with 27% a year earlier, according to research firm Canalys. This was in part due to a boost in nationalist sentiment after the company came under increasing pressure from the United States.

It spent 15.3% of its revenue, or 131.7 billion yuan, in research and development last year. Cash flow from operating activities jumped by more than one fifth to 91.4 billion yuan, thanks to a strong performance in its home market. - Reuters

source https://www.thesundaily.my/business/huawei-posts-56-rise-in-2019-profit-smallest-increase-in-3-years-MY2199086

Biggest companies pay the least tax, leaving society more vulnerable to pandemic – new research

The coronavirus pandemic is rocking financial markets, disrupting supply chains and sharply reducing consumer spending. The crisis is hitting the likes of airlines and high street retailers particularly hard, and is decimating many small businesses. Unfortunately, this is proving devastating for millions of precarious and low-income workers across the world.

Many governments – including the UK and the US – have announced fiscal stimulus packages, including tax relief, to individuals and business. Such measures are welcome, but our new research suggests that they should be understood against broader shifts in the tax regime which leave society less able to withstand the pandemic.

As we show by looking at American companies, these shifts reinforce inequality not only between large and small firms but also between high and low-income households. The result is a fraying social fabric through which the coronavirus can spread rapidly.

The big discount

The graph below maps the worldwide effective tax rate – the rate that is really paid as opposed to any rate set by governments – for US non-financial corporations listed on the stock market. The dark grey bars show the average tax rate of the top 10% of corporations ranked by revenues, while the light grey bars show the bottom 90%. The line above the bars shows the ratio of the tax rate of the top 10% relative to the bottom 90%.

Worldwide effective tax rates

This shows that the worldwide tax system was progressive in the 1970s, with the largest corporations paying slightly higher rates than the smaller ones. By the mid-1980s the system had turned sharply regressive and has stayed so ever since. For 2015-18, smaller listed corporations were effectively paying a 41% rate on their profits, while larger corporations paid 28%.

What accounts for this persistent tax advantage for larger corporations? Are they gaming the domestic system? Or do they enjoy a foreign tax advantage because they have the resources to evade taxes and shift profits to low-tax jurisdictions? To address these questions, we compared the tax rate on domestic income to the rate on foreign income.

The graphs below looks at how much US corporations really pay in taxes to different authorities. Again comparing the largest 10% corporations with the rest, the top left graph focuses on tax payments in the US as a whole. The top right graph drills down to US federal taxes while the graph on the bottom left is for the total taxes paid to US states. These three graphs show that the entire domestic system of taxes, both federally and at state level, has been persistently biased towards large corporations since the mid-1980s.

Effective tax rates by jurisdiction

This is different to what American corporations pay to other countries, as shown in the graph labelled “foreign” in the bottom right-hand corner. This rate has fallen dramatically for larger and smaller corporations alike, fitting the conventional wisdom that tax competition has intensified with globalisation. Until as recently as the end of the 1990s, however, the foreign tax structure in the US was progressive, meaning that the largest corporations were paying more. This has now reversed, just like it did for domestic taxes several decades earlier.

Concentration and inequality

Why should we care if big business has a persistent tax advantage? One problem is that the tax system encourages businesses to concentrate into bigger and bigger entities. In recent years there have been growing concerns about the dominance of big business in advanced economies, including the US. Studies show that as large corporations take greater shares of revenues, profits and assets, they also charge higher prices, pay lower wages, provide lower quality goods and services, and scale back innovation and investment.

Most policy debate has focused on governments rolling back antitrust legislation to remedy this concentration of businesses. Our research suggests that, at minimum, corporate tax should be part of this conversation: the global tax system rewards corporations for reaching a size that is actually bad for society. This may include impeding our ability to mitigate the spread of coronavirus.

Take the notoriously concentrated pharmaceuticals sector, which was already being blamed for a growing problem of drug shortages well before the arrival of the pandemic – partly due to business decisions to discontinue old products that wereren’t profitable enough. Lobbyists for big pharma were also successful in blocking provisions in a new US$8.3 billion (£6.7 billion) coronavirus emergency spending bill that would tackle unfair pricing and thus threaten companies’ intellectual property rights over essential medicines.

The tax advantage of big business also helps to widen household inequality. Supporters often claim that tax savings allow business to expand productive capacity, employment and wages, and therefore create widespread prosperity. Yet our research shows that as the rate they effectively pay declines worldwide, large corporations scale back their capital expenditures.

If large corporations aren’t using their tax windfall to expand productive capacity, what are they doing with it? According to our findings, they are enriching their shareholders.

In the 1970s, large corporations allocated 30 cents toward dividend payments and stock buybacks for every dollar of capital expenditure. From 2010-18, the amount they spent on enriching their shareholders had jumped to 93 cents.

This surge wouldn’t be such a problem if share ownership was widely dispersed, but it’s not. The top 1% of US households own, either directly or indirectly, 40% of all corporate shares, and the top 10% of households own 84%.

So the corporate tax regime has fuelled inequality, which is an important vector for the spread of the coronavirus. Many people on lower incomes are forced to make the wrenching choice between going into work and potentially contracting and spreading the coronavirus, or staying at home and failing to make ends meet.

The government measures for individuals and small businesses are a welcome - but by no means sufficient - attempt at ameliorating problems that the regressive tax regime has helped to create. Let’s also use this crisis as an opportunity to reform the tax system in ways that help tackle inequality and reduce corporate concentration.

source https://www.thesundaily.my/business/biggest-companies-pay-the-least-tax-leaving-society-more-vulnerable-to-pandemic-new-research-XX2198808

Dollar may be set for another damaging bout of strength

LONDON: If the 2008 financial crisis is any guide, world markets - which have barely had time to recover from the dollar's 9% surge in mid-March - may be set for another damaging bout of strength in the greenback.

In the 10 days from March 9, the dollar leapt against almost every other currency as companies and banks bought it to pay their creditors, trade partners and suppliers. Money market funding rates jumped and share prices plunged as those desperate for the U.S. currency liquidated investments.

Such a spike in the dollar - the currency of choice in global commerce and investment, used in up to 90% of all FX transactions - is bad news, as it rapidly tightens financial conditions, exacerbating the very problems that policymakers are striving to prevent.

Since March 23, the surge has faded, as the U.S. Federal Reserve cut interest rates again, injected trillions of dollars into the financial system and opened swap lines with other central banks to ease dollar strains overseas. Currency swap rates have calmed down and equities are rallying again.

But what if this is just a pause rather than a halt to the dollar's upward path?

Brown Brothers Harriman strategist Ilan Solot, who worked at the Fed in 2008 as a currency trader, is among those expecting another bout of dollar strength.

"Policymakers understand the funding shortage problem well from the previous crisis and they have rushed to solve that, but this crisis could very well see a real economy shock," he said.

Central bankers have repeated the stimulus playbook of 2008, but "this is a liquidity shock to the real economy, and we don't know how that will play out," Solot added.

PLAYBOOK

Like many analysts, he suggests looking at the 2008 crisis.

Through all of 2007 and well into 2008, the dollar index fell steadily as hedge funds ramped up short positions despite growing unease over U.S. subprime mortgages and the collapse of Bear Sterns. But from March to November 2008, the dollar rocketed 24% thanks to overseas demand.

And much like recently, money market rates soared.

Then Fed rate cuts and Washington's $700 billion bank bailout bill kicked in; as the money market logjam eased, the dollar retreated and troughed on Dec. 18, 2008.

The respite was brief, however. The currency took off again, and rose another 15% before peaking in March 2009. That allowed equities and emerging markets to bottom out.

The uncertainty this time is that the twin demand and supply shocks caused by the virus could last indefinitely as millions more are sickened across the world. Companies and individuals trying to stay afloat are likely to hoard cash dollars.

A move higher now would also fit with the so-called Dollar Smile theory. Put forward by former Morgan Stanley strategist Stephen Jen, it holds that the greenback strengthens in tough times as investors rush for safe, liquid assets.

It then falls as U.S. growth flags, forcing Fed rate cuts - the bottom of the smile - before rising again as the U.S. economy leads the global growth rebound.

Jen, who now runs hedge fund and advisory firm Eurizon SLJ Capital, expects the U.S. economy to stage a full recovery by the end of the year, while Europe will reclaim end-2019 GDP levels only towards the end of next year.

"We were on the left side of the dollar smile, but for much of the second half of 2020 and in 2021, I expect us to move to the right of the dollar smile," he added.

And even after large rate cuts, dollar assets offer higher yields - the interest rate gap between three-month U.S. and German bills offers a 1% return on an annualised basis.

Meanwhile, despite its retreat, the dollar is near the highest since 2002 against trade partners' currencies, reviving speculation of Treasury intervention to rein it in. But the turbulent times make that unlikely.

"The historic rally is not quite over," Goldman Sachs said, adding that in a further equity drawdown, there could be another 3%-5% upside to the trade-weighted dollar from recent highs.

DEMAND AND SUPPLY

The coronavirus disruption also comes amid an increasingly fragile demand/supply balance in dollar markets.

For years tighter regulations have constrained U.S. banks' ability to lend dollars. But the currency's role in international transactions hasn't lessened, and that has led to a dollar funding gap - the difference between non-U.S. banks' dollar assets and their liabilities.

This imbalance may amount to $1.5 trillion a year, according to International Monetary Fund estimates.

Parts of the swap market reflect the unease - three-month dollar-yen swaps are at an elevated 44 bps versus an average 20 bps in 2019.

The FRA-OIS gauge of bank funding costs is at levels not seen since the financial crisis . Market players say that rather than interbank problems, its surge suggests unprecedented demand from companies that are drawing down credit lines and seeking to borrow more from banks.

Ariel Bezalel and Harry Richards, fund managers at Jupiter Asset Management, reckon the global economy is about to enter a period of persistent dollar shortages.

"There are simply not enough dollars going to the outside world at this critical juncture," they wrote.

Sure, the Fed's asset-buying, multi-trillion dollar cash injections and swaplines with foreign central banks will help. But it may be running to standstill.

The dollar was involved in 90% of currency transactions globally in a $6.6 trillion daily market, BofA noted, adding: "The reality is that the Fed is incapable of equilibrating supply/demand mismatches...if there is a rush to hold U.S. dollars."

They predict the dollar index will rise eventually to 120 from the current 102, although they gave no time frame. - Reuters

source https://www.thesundaily.my/business/dollar-may-be-set-for-another-damaging-bout-of-strength-FX2198744

Kumpulan Powernet bags RM354m hydropower plants contract

PETALING JAYA: Kumpulan Powernet Bhd (KPower) has bagged a RM354 million job from Kangsar Hidro Sdn Bhd to undertake, amongst others, the preliminary study, design, supply, construction, commissioning and completion of five mini hydropower plants with total capacity of 32.47MW, all in Perak.

Kangsar Hidro is a joint venture entity between Yayasan Perak, a Perak state agency and Kangsar Capital Sdn Bhd, a wholly owned subsidiary of OHP Ventures Sdn Bhd, which was established to undertake the development of the project. Currently, Yayasan Perak and Kangsar Capital own 15% and 85% equity interest in Kangsar Hidro respectively.

Kangsar Hidro and the company will enter into a definitive agreement within 60 business days.

KPower said the scope of work includes the preliminary study, engineering, construction, supervision, testing, commission, reliability test, remedy of defect during the defect liability period and provision of all equipment, both permanent works and temporary works in connection with the project. The company will also be responsible to undertake the corresponding mobilisation and preliminary cost in relation to the works.

“The company will complete all the works so as to achieve the target completion date within 48 months from the commencement date or Dec 24, 2024, whichever is earlier,“ KPower said in a stock exchange filing today.

The company will provide an on-demand bank guarantee from a bank in an amount equal to 5% of the contract price (performance bond) substantially for the due observance and performance by the company. The performance bond will remain in full force until the company has provide an on-demand bank guarantee from a bank in an amount equal to 10% of the contract price (warranty bond).

The company will provide a design guarantee to Kangsar Hidro, energy output performance guarantee in relation to the net energy output and completion guarantee that the works will be completed within the period and will meet in all respect the requirements.

In the event that the company fails to achieve the completion guarantee, the company will pay or allow Kangsar Hidro liquidated and ascertained damages (delay LDs) equal to RM260,000 for each day or part day.

In the event that the company fails to achieve the design guarantee and/or energy output performance guarantee, or fails to achieve the performance ratio under the energy output performance guarantees, the company will pay the amount of delay LDs.

“The award is expected to contribute positively to the net assets, consolidated earnings and earnings per share of the company for the financial year ending June 30, 2020 to June 30, 2025,“ KPower said.

The board anticipates that KPower’s foray into the provision of construction-related services from the fulfilment of the award will in future, result in a diversion of 25% or more of the net assets of KPower and/or will contribute 25% or more to the net profits of KPower.

“As such, the board will make the necessary announcement and seek its shareholders’ approval on the diversification of its operations at an EGM to be convened in due course.”

The award constitutes a recurrent related party transaction due to the relationships of KPower directors and its group of companies with Kangsar Hidro.

source https://www.thesundaily.my/business/kumpulan-powernet-bags-rm354m-hydropower-plants-contract-GX2198679

Global M&A dwindles as coronavirus batters world’s economies

LONDON/NEW YORK:Global mergers and acquisitions activity plunged 28% in the first quarter to its lowest level since 2016 as the devastating economic effects of the coronavirus pandemic took hold in March, compounding a slow start to the year for dealmakers.

Deal activity in the United States dropped by half to $252 billion in the first three months from a year ago, driving global volumes down to $698 billion from $964 billion in the first quarter of 2019, according to Refinitiv data. Asia volumes dropped 17% year-on-year to $142.9 billion.

Europe saw its deal volume more than double to $232 billion thanks to a handful of mega-deals clinched just weeks before the virus started battering the continent’s economies.

With large swathes of the globe shut down, the M&A pipeline remains patchy and likely to be dominated by rescue deals, restructurings and nationalizations as governments and central banks try to shore the economy up.

“This crisis is unique. It is something that our generation has never witnessed before,“ said Luigi de Vecchi, chairman of EMEA banking capital markets advisory at Citigroup.

“When stock markets tumble 30% you need to hope to renegotiate a deal if you have the contractual ability to do so. However, if you haven’t reached an agreement you are likely to delay the signing until you have better visibility,“ he said.

Russia used its National Wealth Fund (NWF) to finance this quarter’s biggest deal - the $39 billion purchase of the country’s largest lender Sberbank.

Other big deals included insurance broker Aon’s $30 billion all-stock takeover of rival Willis Towers Watson and the $18 billion private equity-led buyout of Thyssenkrupp’s elevators business.

“We have seen the number of deals announced globally drop 43% year-over-year in the last two weeks,“ said Bank of America’s global M&A head Patrick Ramsey, adding the downward trend was expected to continue into the second quarter.

“Once we get to the back-end of this, we will see a meaningful snap-back in activity. The degree of that snap-back will depend on the economic outlook and equity market recovery,“ Ramsey said.

State intervention

The U.S. Federal Reserve and its global counterparts moved aggressively this month to introduce emergency rate cuts aimed at restoring investor confidence.

“If market turmoil and volatility persist, we will see a polarization between companies in more resilient sectors which can better withstand this crisis, and distressed players in the worst-affected sectors which will be starving for cash,“ said Paulo Pereira, a founding partner at Perella Weinberg Partners.

Pereira added that a rebound in M&A activity will hinge on whether distressed companies will have a “material destabilizing impact” on other sectors, including financial services.

“Inevitably there will be some impact because economic activity is interlinked,“ Pereira said. “But the financial system is now better capitalized than in 2008 and the actions of governments and central banks will be key in determining the ability of the economy to rebound,“ he said.

Dealmakers expect more political intervention to save companies of strategic national interest.

“There will be rescue deals and there will be many of them,“ de Vecchi said.

“You will see a return of state intervention, triggered not only by protectionist moves to deter unwanted takeovers but by the sheer necessity to rescue entire industries, revive strategic assets and, where possible, create domestic champions through consolidation,“ he said.

The bleak outlook has proved a boon for investment banks to whom clients have turned for advice on how to weather the storm.

“Periods of turmoil underscore the value of a trusted adviser and a global platform that spans not only M&A but also restructuring and sovereign advisory,“ said Peter Orszag, Lazard CEO of financial advisory.

“We remain active advising clients as they navigate the drivers of how long the crisis will last, how they should adjust their balance sheets, and what else they should be doing to respond,“ Orszag said.

Investment banks face tough decisions on whether to approve potentially risky loans in order to stay close to their clients, hoping to win mandates when dealmaking picks up again.

“This is the moment when your clients are coming to you to ask for financing and not just for advice. Supporting your clients in these difficult times is a test of loyalty that can prove vital for a long-term relationship,“ de Vecchi said. -Reuters

source https://www.thesundaily.my/business/global-ma-dwindles-as-coronavirus-batters-world-s-economies-YX2198573

RAM Ratings: Debt, sukuk markets can serve as avenue to raise funds for aid packages

PETALING JAYA: In the wake of global equity market meltdown driven by the uncertainties from the Covid-19 pandemic, the debt and sukuk markets will serve as a bulwark to shore up a country’s financial standing, according to RAM Ratings.

It noted that going further into 2020, it is clear that the pandemic has wreaked havoc on every aspect of life with no clear end in sight.

“Undoubtedly markets have been in turmoil and this will likely pose uncertainties with regard to future fund-raising activity. With governments worldwide still weighing the economic implications of Covid-19, various forms of financial aid through economic stimulus packages and interest rate cuts have been announced,” said the ratings agency in a report.

It opined that the coronavirus crisis will provide a window of opportunity for sovereigns to raise funds to finance aid packages, and for corporates to lock in more attractive funding rates while taking stock of their financing maturity profiles.

“In such highly uncertain times, investors will seek safer havens by moving into bonds and sukuk, thereby benefiting some key economies in the sukuk market,” said RAM Ratings.

It added governments that can effectively use monetary and fiscal tools to steer their economies in the right direction will stand a fighting chance of emerging less battered by Covid-19.

Meanwhile, for 2019, the ratings agency highlighted that the global sukuk market delivered a noteworthy performance with a gross issuance of US$130.2 billion, a 41.6% jump from US$91.9 billion recorded for the previous year.

It stated that the top five countries by incremental value were Turkey (+320.4%), Qatar (+62.2%), Malaysia (+57.7%), Bahrain (+45.1%) and Indonesia (+26.2%).

“Even though issuance by non-core markets surged 138% to US$13.3 billion last year (2018: US%5.6 billion), the global sukuk market remained dominated by the Gulf Cooperation Council (GCC, 40%), Malaysia (34%) and Indonesia (15%),” reported RAM Ratings.

It noted that in terms of sovereigns, Saudi Arabia maintained its lead in the global sovereign sukuk market with a 28.9% share, followed by Indonesia (25.3%) , Malaysia (18.5%) and Turkey (9.5%).

The ratings agency pointed out that the primary fund-raising purpose was to support the respective countries’ budget deficits.

In terms of corporate sukuk issuance, the top position was retained by Malaysia with US$31.2 billion or a 55.3% share, followed by the UAE with 17.3%, followed by Saudi Arabia (16.2%) and Qatar (3.6%).

Overall, RAM Rating’s sukuk snapshot report indicated that Malaysia retained its lead with a 34.5% share of the global sukuk market, followed by Saudi Arabia (23.4%), Indonesia (15.0%), the UAE (7.5%) and Turkey (6.8%).

As at end-2019, it highlighted that the value of outstanding global sukuk had spiked up to US$574.1 bil, from US$454.5 billion at end-2018, a positive indication of sukuk’s relevance as an alternative form of financing in the mainstream global financial sector.

source https://www.thesundaily.my/business/ram-ratings-debt-sukuk-markets-can-serve-as-avenue-to-raise-funds-for-aid-packages-AX2198288

Oil prices rebound strongly from 18-year lows

SINGAPORE: Oil prices rebounded strongly in Asian trade Tuesday a day after falling to 18-year lows, as investors took heart from moves by policymakers to support the coronavirus-hit global economy.

US benchmark West Texas Intermediate jumped 7.3 percent to $21.5 a barrel while Brent crude, the international benchmark, was up 3.3 percent at $23.5 a barrel.

In New York on Monday, prices struck their lowest levels since 2002, with WTI briefly falling below $20.

Oil markets have plunged as governments across the planet introduce lockdowns to stem the spread of the virus, hammering demand for the commodity.

About two-fifths of the globe’s population have now been confined to their homes, while the death toll has soared over 37,000, with the US suffering a serious and escalating outbreak.

The crisis has been worsened after top producers Saudi Arabia and Russia launched a price war following a row about reducing output to support virus-hit energy markets.

In its latest move to win market share, Riyadh announced Monday it would raise exports by 600,000 barrels per day to a record 10.6 million barrels per day in May.

But prices rebounded strongly Tuesday as investors bought at bargain prices and focused on stimulus measures rolled out by governments worldwide to support the virus-ravaged global economy, including a $2-trillion package in the US.

Markets were also buoyed by a phone call Monday between US President Donald Trump and Russian counterpart Vladimir Putin where they discussed oil prices.

Stephen Innes, AxiCorp chief global market strategist, said Trump’s call may have been an “attempt to get Russia to pull up a chair to the negotiating table with Saudi Arabia, or maybe even (looking at) loosening sanctions on Russia, as desperate times call for drastic solutions”.

He said any sign of Moscow and Riyadh putting aside their differences would be positive but added that the market “is not entirely buying into it”.

There have also been warnings that oil could sink even further as storage tanks around the world approach full capacity. -AFP

source https://www.thesundaily.my/business/oil-prices-rebound-strongly-from-18-year-lows-KX2198194

Savage sell-off in Chinese dollar bonds lures bargain hunters

SHANGHAI/HONG KONG: Dollar bonds sold by Chinese companies have rebounded sharply on bets by fund managers that a plunge in prices amid market chaos and a scramble for dollars was overdone as China’s economy begins to pick up and stimulus packages kick in.

An index tracking high-yield dollar bonds sold by Chinese companies has rallied 6.9% from three-and-a-half year lows reached last week following a 17% tumble.

Buying has been most obvious among Chinese property developers’ debt, where some bonds slumped to less than 60% of their face value, from trading above 80% in early March.

Bond investors expected to be paid back 100% of face value, so prices below that reflect repayment doubts.

“We have seen some good quality credit in property dropping 30, 40 points, to the kind of level in default territory - and we just don’t see that happening,“ said Sheldon Chan, Hong Kong-based associate portfolio manager at T Rowe Price, whose fund has been bargain-hunting.

Chinese borrowers have accounted for just over half of all dollar-denominated bonds sold by companies in the region over the past five years, according to data from Dealogic, and last year totalled 80% of all junk-rated, or high-yield, issuance.

“Because of the liquidity stress, quite a few quality names came onto the market at very low valuations ... They’re worth buying, and holding,“ said Shen Bowen, a Shanghai-based fund manager at Fullgoal Fund Management Co.

She said some quality Chinese developers, and state-owned companies (SOEs) were “slaughtered by mistake” amid the rush for the exits even though the coronavirus situation in China is improving.

The sell-off was especially severe among longer-dated notes. A bond sold by developer China Evergrande Group and maturing in 2025 fell to as low as 59% of face value this month, but has since recovered to 76%.

A bond issued by Country Garden Holdings maturing in 2025 bounced to 90% of face value after falling as low as 77% last week.

Underpinning the confidence are signs Beijing is stepping up stimulus to revive growth.

On Monday, China’s central bank unexpectedly cut a key money market rate by 20 basis points in the latest of a series of easing measures.

Cary Yeung, head of Greater China debt at Pictet Asset Management, said the major developers he monitors have re-opened 90% of sales centres, as policy support and revived demand kicked in.

“Valuation is good and so are the fundamentals,“ said Yeung. -Reuters

source https://www.thesundaily.my/business/savage-sell-off-in-chinese-dollar-bonds-lures-bargain-hunters-BX2198175

World Bank cuts Malaysia’s GDP forecast to -0.1%

PETALING JAYA: The World Bank Group has significantly lowered its 2020 GDP growth projection for Malaysia to -0.1% from 4.5%, against the backdrop of growing uncertainty over the duration and overall impact of the Covid-19 outbreak.

“This marked reduction incorporates the slower growth momentum from the second half of 2019, but more significantly, it reflects the impact of the outbreak under a scenario where the current large-scale disruption of economic activities would extend for most of the year, before a partial recovery toward the year end,“ it said in the World Bank East Asia and Pacific Economic Update April 2020 “East Asia and Pacific in the time of Covid-19”.

“It is important to note that this estimate has a large degree of uncertainty, conditional on the rapid developments of the outbreak domestically and globally, and the subsequent policy responses,“ the World Bank added.

Net exports and investments are expected to experience a larger contraction in 2020, while private consumption is expected to grow at a much slower pace, from 7.6% in 2019 to 1.6% in 2020.

Government expenditure is expected to increase on various measures, including the economic stimulus package and other key expenditures and initiatives to mitigate the economic and health impact of the outbreak, but the bulk of stimulus activities are expected to be off-budget in nature.

As private consumption is projected to grow at only 1.6% (0.4% in per capita terms), the US$5.50 a day 2011 purchasing power parity poverty rate is projected to remain unchanged at 1.3% in 2020. More significant are the expected employment and income losses among the bottom 40% and even the middle 40%.

Effective economic relief for those affected will depend on both means-tested social assistance such as Bantuan Prihatin Nasional and the ongoing Bantuan Sara Hidup program and employment-based social insurance such as Employees Provident Fund and Employee Insurance System.

Meanwhile, it said the large degree of uncertainty over the outcome of the outbreak presents a major downside risk to the economy.

“An uncontained or further deterioration of the outbreak would result in more severe or prolonged restrictions on overall economic activities, posing a further drag on growth into 2021.

“Moreover, uncertainty over the country’s political stability following the recent change in the ruling coalition and the government’s ability to manage the outbreak could pose further downside risks to growth,” said World Bank.

The other major challenge is the limited fiscal policy space to respond to the crisis. While the recently announced stimulus package could help to mitigate the immediate impact of the outbreak, a deeper economic policy response would be needed should the health crisis deepen and result in a longer duration of economic disruption.

It said more targeted fiscal policy interventions would be needed to help mitigate the impact of the crisis on vulnerable households and businesses, as well as increase public health capacity.

This is further complicated by the plunge in commodity prices, which would put additional strain on fiscal space and in turn may increase the burden on monetary policy as a key policy tool.

source https://www.thesundaily.my/business/world-bank-cuts-malaysia-s-gdp-forecast-to-01-BX2198157

Airbnb to pay hosts $250m for Covid-19 cancellations

SAN FRANCISCO: Airbnb on Monday said it is devoting $250 million to help would-be hosts survive financial losses from refunds given to guests who cancelled travel plans due to the coronavirus pandemic.

The move came as an olive branch of sorts extended to Airbnb hosts blindsided by a the home-sharing platform's decision several weeks ago to give full refunds to guests who cancelled reservations in order to stay home, as health officials and governments have urged.

"Please know this decision was not a business decision, but based on protecting public health," said Airbnb co-founder and chief Brian Chesky.

"While I believe we did the right thing in prioritizing health and safety, I'm sorry that we communicated this decision to guests without consulting you -- like partners should."

Airbnb will pay hosts 25 percent of what they would typically be due if someone booked between March 14 and May 31 cancels the stay due to COVID-19.

Travelers who cancel Airbnb reservations made for that period are promised complete refunds or credit for future stays.

"We know this is just a little bit, but a little bit can go a long way at this time," a seemingly contrite Chesky said while discussing Airbnb's latest steps in a live video stream from his home.

Airbnb also created a $10 million relief fund for experienced and highly rated "superhosts" who need help paying their mortgage or rent due to the coronavirus's devastating effect on the travel industry.

Airbnb employees started the fund with a million dollars, and the two co-founders contributed the remaining $9 million, according to the company.

Airbnb is also adding a feature to its platform that will let people send money to support hosts they bonded with during stays.

"This storm, no matter how bad it is, it is going to end," Chesky said.

"When it is over, on the other side, people are going to be waiting to get out of their homes. And when they do get out of their homes, they are going to explore the world, and stay with you."

About 50,000 Airbnb hosts have volunteered to make their homes available to health care workers, relief providers, and first responders combating the coronavirus pandemic, according to Chesky. - AFP

source https://www.thesundaily.my/business/airbnb-to-pay-hosts-250m-for-covid-19-cancellations-YN2197980

Pandemic to hit growth in Asia, China -World Bank

WASHINGTON: The coronavirus pandemic is expected to sharply slow growth in developing economies in East Asia and the Pacific as well as China, the World Bank said in an economic update on Monday.

The bank said precise growth forecasts were difficult, given the rapidly changing situation, but its baseline now called for growth in developing economies in the region to slow to 2.1% in 2020, and to -0.5% in a lower-case scenario, compared to estimated growth of 5.8% in 2019.

In China, where the coronavirus outbreak originated in late December, growth was projected to slow to 2.3% in the baseline scenario, or as low as 0.1% in the lower-case scenario, compared to growth of 6.1% in 2019.

The region faced an unusual combination of "disruptive and mutually reinforcing events," the report said. "Significant economic pain seems unavoidable in all countries."

Countries in the region should invest in healthcare capacity and take targeted fiscal measures, such as providing subsidies for sick pay and healthcare, to mitigate some of the immediate impacts of the pandemic, the World Bank said.

"Containment of the pandemic would allow for a sustained recovery in the region, although risks to the outlook from financial market stress would remain high," it said.

The financial shock of the pandemic was also expected to have a serious impact on poverty, defined as income of $5.50 a day, the bank said. The baseline scenario called for nearly 24 million fewer people to escape poverty across the region in 2020 due to the pandemic. If the economic situation deteriorated even further, poverty could increase by about 11 million people.

Prior projections estimated that nearly 35 million people would escape poverty in the region in 2020, including over 25 million in China alone, the bank said.

In addition to targeted fiscal measures, countries should look to deeper international cooperation and new cross-border public-private partnerships to ramp up the production and supply of key medical supplies and services, and ensure financial stability in the aftermath of the crisis, it said.

Countries should also ease credit to help households smooth their consumption and help firms survive the immediate shock of the outbreak.

"The good news is that the region has strengths it can tap, but countries will have to act fast and at a scale not previously imagined," said Victoria Kwakwa, vice president for East Asia and the Pacific at the World Bank. - Reuters

source https://www.thesundaily.my/business/pandemic-to-hit-growth-in-asia-china-world-bank-KN2197963

Australian shares rise on financials, but poised for record monthly drop

Australian shares extended gains on Tuesday, helped by quarter-end balancing and on measures to slow the spread of the coronavirus outbreak and contain its economic impact, but the benchmark index was poised for its biggest ever monthly drop.

The S&P/ASX 200 index rose 3.3%, or 173 points, to 5,353.40 by 0113 GMT after Monday's 7% jump. For the month, it was down 17.5%, reflecting investors' fears of a deep recession due to the pandemic.

"The move is mainly due to quarterly macro trade adjustment driven by asset allocation. The macro trade is buying the market exposure," said Mathan Somasundaram, market portfolio strategist at Blue Ocean Equities.

Helping investor sentiment further were Australia's A$130 billion wage subsidy stimulus package and China data showing factory activity unexpectedly expanded in March after contracting sharply to a record low.

Leading gains on the benchmark were financials, which rose as much as 5.9% to a near two-week high, with the "Big Four" banks adding between 6.2% and 7.2%.

Jefferies said, "The real risk for Australian banks remains that an unemployment spike drives a huge collapse in the housing bubble," but the wage subsidy relieved some of these pressures.

Energy stocks climbed, with Whitehaven Coal , the country's largest independent coal producer, jumping 11.5% to a more than one-month high. Cooper Energy rose about 6%.

Healthcare stocks gained 2.7%, boosted by a near 12% rise in hearing devices maker Cochlear Ltd.

Meanwhile, miners lost ground, with gold stocks shedding the most. Newcrest Mining dropped 3.3%, while Evolution Mining dipped 7.2%.

Rare earths producer Lynas Corp said it would follow the Malaysian government's order to extend movement restriction by two weeks. Production at the company's Malaysian processing plant has been halted since March 23.

Across the Tasman Sea, New Zealand's benchmark S&P/NZX 50 index rose 3.4%, or 328.48 points, to 9,989.67.

NZ-listed shares of Australia and New Zealand Banking Group gained 12.5%, while Fletcher Building rose 5.6%.

New Zealand is extending the state of national emergency by seven days to help stop the spread of the coronavirus outbreak. - Reuters

source https://www.thesundaily.my/business/australian-shares-rise-on-financials-but-poised-for-record-monthly-drop-MN2197934

China March factory activity unexpectedly expands, but outlook still grim

BEIJING: Factory activity in China unexpectedly expanded in March after contracting sharply to a record low, but the rapid global spread of the coronavirus is expected to keep businesses and the overall economy under heavy pressure as foreign demand slumps.

China's official Purchasing Managers' Index (PMI) rose to 52 in March from a collapse to a record low of 35.7 in February, the National Bureau of Statistics (NBS) said on Tuesday, above the 50-point mark that separates monthly growth from contraction.

Analysts polled by Reuters expected the March PMI to come in at 45.0.

The NBS attributed the surprise rebound in PMI, a month-on-month indicator, to its record low base in February and cautioned that the readings do not signal a stabilisation in economic activity.

Markets reacted positively to the PMI survey, with Asian stock rising as investors seemed relieved by the rare good news as the pandemic showed few signs of abating.

China's yuan, however, didn't budge, reflecting analysts' broad views that a sustainable bounce in manufacturing activity looked some way off despite a slowdown in China's coronavirus infections from its peak in February.

Many warn that manufacturers and overall economic activity will remain under intense pressure in coming months in light of the rapid spread of the virus across the world, the unprecedented lockdowns in several countries and the almost near certainty of a global recession.

Beijing, at great costs to the economy, had imposed draconian quarantine rules and travel restrictions to curb the pandemic that has killed more than 3,000 in the country. But as locally transmitted infections dwindle, most businesses have reopened and life for millions of people has started to slowly return to normal.

Yet, the pace of business resumptions has been constrained by China's efforts to guard against a second wave of infections from abroad.

The survey's sub-index of manufacturing production picked up to 54.1 in March from February's 27.8, while a reading of new orders rose to 52 from 29.3 a month earlier.

New export orders received by Chinese manufacturers ticked up to 46.4 from 28.7 in February, but were still mired in contraction.

GRIM OUTLOOK

The pandemic, which originated late last year in China, has wreaked havoc along global supply chains and analysts caution that the nation's factories will continue to struggle due to slumping foreign demand amid tight lockdowns in Europe, the United States and a number of other key economies where daily life has ground to a halt.

Already, Chinese exporters are seeing overseas orders being scrapped as the worldwide spike in coronavirus infections and deaths has forced many of the nation's trading partners to slow or suspend production. Globally the outbreak has claimed the lives of over 34,000 people with more than 720,000 infections.

China should not set an economic growth target this year given the high level of uncertainty from the coronavirus pandemic and avoid having to resort to "flood-like stimulus" to meet the goal, a central bank adviser said.

China's foreign trade could further deteriorate from January-February period, which saw a 17.2% slide in exports, the vice industry minister Xin Guobin told a press conference on Monday.

"We estimate that China could lose close to 18 million jobs in the export sector as a result of a 30% y-o-y contraction in exports we expect in the next one to two quarters," economists from Nomura said in a note prior to the data.

Nomura is also forecasting the outbreak to have driven a steep 9% annual contraction in China's gross domestic product in the first quarter.

China's service sector activity also expanded, with official non-manufacturing PMI coming in at 52.3, from 29.6 in February, a separate NBS survey showed.

The service sector now makes up a larger share of China's economy than at the time of the 2002/03 SARS coronavirus epidemic, accounting for about 60% of the country's Gross Domestic Product (GDP).

The government has loosened restrictions in recent weeks which is encouraging consumers to venture back into malls and restaurants, and is giving out millions of yuan worth of shopping coupons to revive consumption.

However, consumer appetite remains depressed and analysts warned the outbreak could have a lingering impact, as many people remain worried about the possibility of new infections or fretting about job security and potential cuts to wages as the economy struggles. - Reuters

source https://www.thesundaily.my/business/china-march-factory-activity-unexpectedly-expands-but-outlook-still-grim-FN2197869

Ringgit trades slightly higher at opening

KUALA LUMPUR: The ringgit opened slightly higher against the US dollar today amidst mixed market appetite.

At 9.01am, the local note stood at 4.3200/3350 compared with yesterday’s close of 4.3250/3400.

AxiCorp global chief market strategist Stephen Innes told Bernama that the local risk sentiment should be more favorable today, as both the overnight United States’ (US) equity markets and oil prices moved higher in lockstep.

The ringgit also got a boost from the latest data from China, which saw official manufacturing Purchasing Managers’ Index for March rebounding strongly to 52.0 from 35.7 in February.

The ringgit was also traded higher against a basket of major currencies.

It rose against the Singapore dollar at 3.0331/0453 from 3.0342/0450 at Monday’s close and improved versus the Japanese yen to 3.9786/9936 from 4.0098/0249.

The local unit strengthened vis-a-vis the euro to 4.7593/7776 compared to 4.7869/8052 yesterday and appreciated against the British pound to 5.3261/3464 from 5.3569/3764 previously. -Bernama

source https://www.thesundaily.my/business/ringgit-trades-slightly-higher-at-opening-NN2197843

Bursa Malaysia rebounds at opening

KUALA LUMPUR: Bursa Malaysia staged a strong rebound to open 7.72 points stronger at 1,336.60 today, tracking the overnight gains on the Wall Street.

At 9.30 a.m, there were 431 gainers, 74 losers and 165 counters traded unchanged on the Bursa Malaysia.

The FBM-KLCI was at 1,337.01, up 8.13 points, the FBMACE was at 3,896.17, up 112.70 points, and the FBMEmas was at 9,155.37 up 74.97 points.

Turnover was at 454.293 million shares valued at RM236.052 million.

At Monday’s close, the Dow Jones Industrial Average gained 690.7 points to finish at 22,327.48, the S&P 500 climbed 85.18 points to 2,626.65 and the Nasdaq Composite Index rose 271.77 points to 7,774.15.

In a note today, Public Investment Bank Bhd said the FBM KLCI opened higher as the Dow booked hefty gains on Monday, supported by healthcare companies Johnson & Johnson and UnitedHealth.

“This is because investors assessed efforts to slow the spread of the COVID-19 pandemic and cushion the economy against the impact of a near lockdown of activity across much of the United States,” it said.

In a separate note, Maybank Investment Bank Research (Maybank IB) said rising palm oil price could offset the sombre mood in the plantation sector, while buying interest could emerge in consumer-related stocks following the recent stimulus package aimed at boosting domestic consumption.

“Technically, we expect the FBM KLCI to range between 1,300 and 1,380 today. Downside supports are at 1,240 and 1,211,” it said.

Among heavyweights, Maybank bagged eight sen to RM7.39, Tenaga added two sen to RM11.82, Public Bank was 24 sen higher at RM16.06, IHH increased four sen to RM5.19 but Maxis slipped five sen to RM5.45.

Of the actives, Vortex and Armada inched up half-a-sen to 5.5 sen and 13.5 sen respectively, Careplus perked two sen to 28.5 sen, UWC advanced five sen to RM1.75 while Trive Property was unchanged at one sen.

Top gainers list was led by Carlsberg which increased 38 sen to RM25.28, Hong Leong Financial and LPI Capital strengthened by 28 sen each to RM14.08 and RM11.70 respectively, Hong Leong Bank was 22 sen better at RM13.64 and United Plantations went up 20 sen to RM24.90.

On the index board, the FBM Emas Index accumulated 80.77 points to 9,161.17, the FBM Emas Shariah Index improved 54.79 points to 9,963.75 while the FBMT 100 Index climbed 76.67 points to 9,094.40.

The FBM 70 advanced 121.18 points to 10,502.81 and the FBM Ace was 64.42 points firmer at 3,847.89.

Sector-wise, the Industrial Products and Services Index edged up 0.34 of-a-point to 194.17, the Financial Services Index jumped 163.60 points to 12,300.34 and the Plantation Index was 15.27 points better at 6,058.44. -Bernama

source https://www.thesundaily.my/business/bursa-malaysia-rebounds-at-opening-FN2197744

New stimulus measures unlikely to boost FBM KLCI company earnings

PETALING JAYA: The second round of fiscal measures announced by Prime Minister Tan Sri Muhyiddin Yassin last Friday is not expected to lift FBM KLCI company earnings as large corporates are pitching in to combat the impact of Covid-19.

In a note, CGS CIMB Research said it is keeping its end-2020 KLCI target of 1,449 points, for now, pending a review of earnings estimates.

However, Affin Hwang Capital expects the KLCI to bottom at 1,008 points given more market volatility ahead with a likely U-shaped earnings per share recovery.

It opined that the market is downplaying the large economic impact of the Covid-19 virus and overestimating a revival of the economy once activity resumes.

The benchmark index fell 14.21 points or 1.06% to 1,328.88 points yesterday as stimulus joy faded.

CGS CIMB said corporates that are badly impacted by Covid-19 (airlines, casinos, airports, retail, SMEs) will see some relief from the wage subsidy programme and RM50 billion guarantee scheme from Danajamin but this may not be sufficient to offset the revenue losses.

“We see the consumer sector (Nestle, QL Resources Power Root, CCK) as potential beneficiaries, as the direct cash handout of RM10bn and the six-month moratorium on all loan repayments will reduce the negative impact on consumer spending.”

It noted that the key negatives stem from the potential downside of 3% to Tenaga Nasional Bhd’s earnings as it will be funding RM150 million out of the RM532 million additional electricity discounts announced as part of its corporate social responsibility initiative.

The option offered by insurance companies/takaful operators for policyholders to defer payment of insurance premiums for three months, will also likely be short-term negative for Syarikat Takaful earnings as it will not be able to book income on deferred premium for three months.

Last Friday, the government announced a RM250 billion package, of which RM128 billion will be channelled to preserve the people’s welfare, RM100 billion to support businesses, including small and medium enterprises, and RM2 billion to strengthen the economy.

Of the fiscal outlays, RM10 billion will be directed to Bantuan Prihatin cash transfers in April to May while RM1.2 billion in cash assistance is allocated to civil servants and pensioners.

The stimulus could widen the budget deficit to 4.9% of gross domestic product (GDP) versus 3.2% under Budget 2020, which also reflects lower revenues due to revised oil prices and economic assumptions.

However, Finance Minister Tengku Datuk Seri Zafrul Aziz indicated the budget deficit could narrow further to 4% of GDP with revenue enhancements to ensure the government maintains a primary balance, including contributions from GLCs.

UOB Research said it expects economic growth in the first half of the year to be negatively affected with potential spillovers into the third quarter if the situation becomes more protracted.

“We expect Malaysia’s economy to post a full-year contraction of 3.5% in 2020, which marks the sharpest decline since the 1997/98 Asian Financial Crisis when GDP fell 7.4%.”

On the fiscal deficit, UOB said the fiscal deficit could be higher by 2.4% points to 5.6% of GDP in 2020 amid the confluence of lower global oil prices, weaker revenue, and lower nominal GDP.

“In order to achieve a fiscal current account surplus and fiscal deficit of 4% of GDP without any adjustments to the expenditure components, we estimate that this would require additional RM24 billion of revenue enhancements through higher dividends possibly from Petronas, Bank Negara Malaysia, and Khazanah.”

The research house is not ruling out the possibility of further monetary support including cuts in the Overnight Policy Rate and statutory reserve requirement ratio.

Meanwhile, Public Investment Bank Research estimated that for every 10% drop in private consumption, GDP may decrease by 1.8% which begs the need to roll out massive measures to assist private consumption. Its GDP growth forecast has been revised downwards to 2.2%, from 3.8% projected previously.

source https://www.thesundaily.my/business/new-stimulus-measures-unlikely-to-boost-fbm-klci-company-earnings-IN2197129

Ringgit expected to weaken further against US dollar

PETALING JAYA: The ringgit is expected to weaken further against the US dollar this year, due to the sell-off seen this month, as well as the downside risks posed by a likely global economic recession and dismal oil price outlook.

In a note, Fitch Solutions said it has revised its 2020 ringgit outlook to RM4.35 against the dollar from 4.25 previously.

“We see bearish technical signs from the ringgit having broken through the key support level of RM4.20 and racing towards the next support level at RM4.50/US dollar.

“While we do not expect to the unit to convincingly breach this longer-term support level, we expect more weakness, keeping the ringgit in the weaker half of the trading range between RM4.20 and RM4.50. This is especially the case in Q2 20 wherein we expect the global economy to slip into recession,” it said.

The ringgit strengthened 0.23% to 4.3350 against the dollar as at 5pm today.

Fitch noted that there is a likelihood for oil prices to average far lower compared with levels in 2019.

“To be sure, Brent crude prices have fallen close to 60% year to date as of March 26, trading at US$28.61/bbl, from US$66.24/bbl and we expect Brent crude oil to average US$43.2/bbl in 2020,” it said.

In addition, it expects Malaysian exports to fall 15% this year, given the likely fall in global economic activity over the coming months, with a cut to the Overnight Policy Rate by an additional total of 100 basis points (bps), bringing it to 1.5% from its current 2.5%.

However, over the longer term, Fitch Solutions sees prospects for the stabilisation of the ringgit in 2021, in line with its expectation of the global economy to begin recovering in late fourth quarter.

“The increasing extent to which the ringgit is becoming undervalued in 2020 will also provide a cushion against deeper depreciation in 2021. However, in order to account for the weaker position the ringgit will likely be in by the end of 2020, we have revised our 2021 average ringgit forecast to RM4.25/US dollar, from RM4.20/US dollar previously,” it said.

Affin Hwang Capital Research, meanwhile, expects the ringgit to remain volatile in the near term, with a revised 2020 year-end target to 4.30 against the dollar, from its earlier projection of 4.20.

source https://www.thesundaily.my/business/ringgit-expected-to-weaken-further-against-us-dollar-FN2197106

Saudi Arabia plans to increase oil exports to 10.6m bpd from May

DUBAI: Saudi Arabia plans to boost its oil exports to 10.6 million barrels per day from May because the country is burning less oil for power generation and there is also lower domestic consumption, a Saudi energy ministry official said today.

The world's top oil exporter has already made plans to boost its crude supply and exports sharply after the collapse earlier this month of a three-year deal between the Organization of the Petroleum Exporting Countries (Opec) and other producers, led by Russia.

The rise in crude oil exports will be "starting from May by about 600,000 barrels per day," the official said.

"This increase came as a result of displacing crude with natural gas from the Al-Fadhili gas plant as a fuel for generating electricity," the official said.

He also said it followed a decrease in local demand for petroleum products due to the reduction in transportation as a result of precautionary measures in place to limit the coronavirus outbreak.

Saudi Arabia had said this month it had directed national oil company Aramco (pix) to keep supplying crude at a record rate of 12.3 million bpd in coming months and export more 10 million bpd from May.

The country is willing to maintain its survival-of-the-fittest oil strategy by using its vast supplies and financial muscle to drive out higher-cost rivals for the long term, sources have told Reuters. Saudi Arabia produces more than a tenth of global crude.

But with demand tumbling because of global measures to contain the coronavirus outbreak, oil companies have been reducing refinery processing rates and global oil demand is expected to plunge 15 million to 20 million bpd, a 20% drop from last year.

Oil prices fell sharply today, with US crude briefly dropping below US$20 (RM86.70) and Brent hitting its lowest level in 18 years, on heightened fears that the global coronavirus shutdown could last months and demand for fuel could decline further.

Brent crude, the international benchmark for oil prices, was down US$2.08, or 8.3%, at US$22.85 by 1127 GMT, after earlier dropping to US$22.58, the lowest since November 2002.

Saudi oil exports are expected to rise in April after Aramco cut its official selling prices (OSPs) to stimulate demand, but a sharp increase now appears less likely as demand plummets due to the coronavirus and a freight rates surge.

On Friday, two Indian refiners declared force majeure on crude purchases from the Middle East after fuel demand plummeted due to a nationwide lockdown to stem the spread of coronavirus and because the companies' tanks are full, sources told Reuters.

"Saudi Arabia is evidently struggling significantly to increase production and exports as planned after the failed Opec+ meeting, likely leading to continued deep discounts for Europe and the US," JBC Energy, an oil and gas research firm, wrote in a note today.

"However, in these two markets, final OSPs risk to fall into negative territory, exposing some difficulties of prospective pricing in the current environment."

Aramco is expected to issue its May OSPs between April 1-5. – Reuters

source https://www.thesundaily.my/business/saudi-arabia-plans-to-increase-oil-exports-to-106m-bpd-from-may-CN2197163