Khazanah, govt to further review proposals for Malaysia Airlines

KUALA LUMPUR: Malaysia’s sovereign wealth fund Khazanah Nasional Bhd says it will continue to work closely with the government and Malaysia Airlines to further review the proposals and finalise a decision on the appropriate strategic option moving forward.

Managing director Shahril Ridza Ridzuan (pix) said the fund has evaluated options to resolve key issues faced by Malaysia Airlines.

He said Khazanah had also launched a process to evaluate potential partners for the airline in 2019.

“A total of nine proposals were received, of which four were shortlisted,” he said in a statement today.

Meanwhile, Shahril Ridza said that Khazanah has successfully achieved a resolution on the PLUS Malaysia toll restructuring.

He said the resolution resulted in an 18 per cent reduction in toll rates on PLUS highways and savings to the government totaling RM42 billion over the new concession period ending 2058 while maintaining Khazanah and the Employees Provident Fund as PLUS shareholders.

“This restructuring is now at the stage of discussions with stakeholders to put into place the necessary amendments to existing agreements,” he added. - BERNAMA

source https://www.thesundaily.my/business/khazanah-govt-to-further-review-proposals-for-malaysia-airlines-XX2066110

Khazanah reports turnaround in overall 2019 performance, profits up to RM7.36b

KUALA LUMPUR: Khazanah Nasional Bhd, in the first full year of its refreshed mandate, reported a turnaround in overall performance for 2019 with record profits from operations contributed by higher divestment gains and lower impairments, and robust portfolio returns.

It achieved profit from operations of RM7.36 billion last year, compared to a loss from operations of RM6.27 billion in 2018.

Gains on divestments increased to RM9.9 billion compared to RM1.4 billion, while impairments were at RM4.9 billion, down from RM7.3 billion the previous year.

The strategic fund also declared a dividend of RM1.0 billion for 2019 while strengthening its financial position with expenses reduced by 28.2 per cent to RM484 million, compared to RM674 million in 2018.

This equates to 35 basis points (bps) as a percentage of assets, compared to 50bps the previous year.

“Our 2019 performance was achieved against a backdrop of uncertainties in the global landscape, which saw a prolonged Brexit process as well as the heightening of the US-China trade war.

“This was made more challenging by the continued low returns environment and generally slower economic growth. Despite these challenges, we managed to achieve significant progress in delivering on our mandate to grow Malaysia’s long-term wealth,” managing director Shahril Ridza Ridzuan said in a statement today.

He said one year into its portfolio rebalancing exercise, Khazanah has progressed significantly towards diversifying the commercial fund under the refreshed mandate and is well positioned to increase its investment activities in 2020.

The strategic fund achieved financial and strategic outcomes for specific assets despite the sluggish market in 2019.

Khazanah conducted regular engagements with the government to enhance the regulatory landscape, refreshed and strengthened the leadership bench at investee companies, and commenced restructuring initiatives to improve financial performance and unlock value.

Looking ahead, Shahril said this year will be particularly challenging as an already uncertain global economy is harmed by the ongoing COVID-19 spread.

“While our government’s stimulus package is a welcome response, we nevertheless are preparing for a period of global economic slowdown.

“The current uncertainties will affect countries and companies alike. Nevertheless, we are comfortable that our diversified portfolio and strategies are robust while accepting that it will be extremely difficult to achieve the same levels of success as 2019,” he said.

Khazanah, he said, would continue to focus on further diversifying the commercial fund, while working with the government to enhance relevant regulatory frameworks, embedding Environment, Social and Governance considerations across all investment activities, and engaging investee companies on value creation initiatives. - BERNAMA

source https://www.thesundaily.my/business/khazanah-reports-turnaround-in-overall-2019-performance-profits-up-to-rm736b-CX2066015

Bursa opens at lowest level since Nov 2011, to test 1,450 support level

PETALING JAYA: Bursa Malaysia opened today at its lowest level since November 2011, at 1,471.34 points. 11.3 points or 0.76% lower than its close of 1,482.64 points last Friday.

This followed a tumultuous week of political upheaval in the country (which continued into the weekend), more cases of Covid-19 being discovered as well as external shocks from the decline seen in US stock markets.

In its daily note, Rakuten Trade Research said more volatility can be expected as sentiments have turned extremely cautious now.

“Treasuries are currently at record lows with the US 10- year yield now at 1.11% thus we would expect foreign funds to U-turn back to Asia seeking for safer havens with reasonable yields like Malaysia with its 10-yield hovering at 2.83%.

“As such, the ringgit is set to strengthen vis-à-vis the US dollar. Meanwhile the FBM KLCI is expected to test the 1,470 today after which the 1,450 would be the next support level,” it said.

At 11.20am, the benchmark index had fallen further by 1.36% to 1,462.52 points.

Across the board, sentiment was mostly negative with the small cap index leading the way, down 287.53 points to 12,448.49, followed by the financial services index down 255.1 points to 14,075.55, and the plantation index down 59.12 points to 6,750.62.

source https://www.thesundaily.my/business/bursa-opens-at-lowest-level-since-nov-2011-to-test-1450-support-level-JB2065856

Australian home prices ran red hot in Feb, more records hit

SYDNEY: Australia's housing market ran red-hot last month as prices in no fewer than five cities reached record highs, a positive for consumer wealth and confidence in the face of the spreading coronavirus crisis.

Data from property consultant CoreLogic out on Monday showed home prices across the nation rose 1.1% in February, from January when they added 0.9%.

That brought gains for the 12 months to February to 6.1%, a world away from the punishing declines seen early last year.

The revival was again led by the major cities with values in Sydney jumping 1.7% in the month and 10.9% for the year. Melbourne boasted gains of 1.2% and 10.7% respectively.

The bull market was also becoming more broad-based with prices in Melbourne, Brisbane, Adelaide, Hobart and Canberra hitting all-time highs.

"At the current run rate of growth, the national index is likely to reach a new nominal high over the next two months," said CoreLogic head of research Tim Lawless.

The rebound in prices is a boon for wealth with Australia's housing stock valued at a hefty A$6.9 trillion ($4.50 trillion).

Housing is one of the few bright spots in an economy that was already struggling before the coronavirus wreaked havoc with tourism and student arrivals from abroad, both big money spinners for Australia.

Such is the drag globally that markets are wagering central banks will soon step in to ease policy and shore up the financial system.

The Reserve Bank of Australia (RBA) holds its second meeting of the year on Tuesday and futures have leaped to fully price in a quarter-point cut in interest rates to 0.5%.

The market is also pricing in a further move to 0.25% by June and analysts suspect the RBA might eventually have to launch a quantitative easing campaign, likely through the purchase of government bonds.

"A strict reading of the leading indicators of the property market suggests that prices will continue to rise strongly over the first half of the year," said Gareth Aird, a senior economist at Commonwealth Bank of Australia, noting the RBA had expressed concerns that borrowing for housing could get out of control.

"The potential fallout from COVID-19 on economic activity means that any concerns around briskly rising house prices will be swept aside in near term monetary policy decisions.: - REUTERS

source https://www.thesundaily.my/business/australian-home-prices-ran-red-hot-in-feb-more-records-hit-GB2065778

Foreigners sold RM1.26b equities on Bursa last week

PETALING JAYA: International investors took out a whopping RM1.26 billion net of local equities last week, the largest weekly foreign net outflow in 88 weeks.

“Offshore investors upped the ante in selling activity last week,“ MIDF Research in its weekly fund flow report today.

It said Bursa had a sluggish start last week as foreign investors only sold RM74.3 million net of local equities on Monday.

The level of foreign net selling activity then accelerated to RM202.8 million net on Tuesday, taking cue of the Dow Jones index which lost more than 1,000 points overnight.

Foreign net selling peaked during the week on Wednesday at RM362.0 million following the increase in number of Covid-19 cases in South Korea which exceeded 1,000. The spike of cases in South Korea reinforces that the spread of the virus outside China is accelerating. Wednesday’s heavy sell-off was in conformity with regional peers.

Worries intensified on Thursday as South Korea reported 505 new coronavirus infections on Thursday, marking the first time a country posted more new infections than mainland China. As such, foreign funds sold RM291.5 million net on Bursa.

International funds continued to sell on Friday at a heightened level of RM333.4 million net, extending the foreign net selling streak on Bursa to seven days.

“The local stock barometer followed suit, declining by 1.5%, closing at 1,482.6 points on Friday, a level not seen since 2011 amidst Malaysia’s political situation.,”MIDF said.

It added that the month of February saw a foreign net outflow of RM1.97 billion, the largest monthly foreign net outflow since August 2019 which saw international funds taking out RM2.60 billion.

“Meanwhile, the foreign net outflow from Malaysia on a year-to-date basis stands at RM2.11 billion, the third smallest amongst the seven Asian markets under our coverage.”

In terms of participation, the average daily traded value (ADTV) of foreign investors surged the most by 100% for the week to reach a healthy level of RM1.93 billion.

source https://www.thesundaily.my/business/foreigners-sold-rm126b-equities-on-bursa-last-week-GB2065558

China factory activity dives to worst on record as coronavirus paralyses economy - PMI

BEIJING: China's factories were dealt a devastating blow in February as the coronavirus epidemic triggered the sharpest contraction in activity on record, a private survey showed on Monday, with the health crisis paralysing large parts of the economy.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) tumbled to 40.3 last month, the lowest level since the survey began in 2004, and down sharply from the 51.1 reading in January as well as the 50-mark that separates growth from contraction.

The headline number was well off a Reuters poll forecast at 45.7 and even worse than the depths of the financial crisis in 2008-09, underlining the crippling effects of the virus across the country where authorities have imposed tough travel curbs and public health measures to contain the outbreak.

The findings, which focus mostly on small and export-oriented businesses, were backed by an equally grim official survey released on Saturday, which showed the steepest contraction on record.

Both the official and private surveys provide the first official snapshot of the state of China's economy since the outbreak of the coronavirus epidemic which has killed almost 3,000 people in mainland China and infected about 80,000. The virus has also spread rapidly to dozens of countries.

"China's manufacturing economy was impacted by the epidemic last month. The supply and demand sides both weakened, supply chains became stagnant, and there was a big backlog of previous orders," Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said in comments on the survey.

The survey showed factory production and new orders collapsing to the worst levels on record, while employment also took a heavy blow. There was no respite for exporters either, with new export orders sinking at one of the sharpest rates in the series history.

The output gauge dived to 28.6 last month, from 52 in January, while that for new business plummeted to 34.9, from 51.9.

The results underlined fears among global health authorities, policymakers and investors of a potential pandemic and its debilitating impact on the global economy. The anxiety sent financial markets into a tailspin last week with trillions of dollars wiped out of stocks.

In response to signs of the deepening economic damage, Beijing has rolled out a steady stream of support measures to help businesses stay afloat, especially small enterprises which are facing a severe cash crunch but are a key source of employment.

China's central bank cut the benchmark lending rate last month to help lower financing costs and has said it would ensure ample liquidity through targeted reductions in banks' reserve requirement ratios.

Those support measures have buoyed business confidence, the private survey found, with the degree of optimism reaching a five year high.

But in the short run, analysts expect the epidemic to deal a sharp blow to growth with many forecasting a severe downturn in the first quarter.

Travel restrictions also affected the supply of labour, with firms struggling to fill roles in February, the survey showed, with factories shedding jobs at the quickest rate in the series history.

Economic growth in China slowed markedly to 6.1% last year, the weakest pace in nearly three decades, amid a bruising trade war with the U.S and despite Beijing's stimulus to boost sluggish investment and demand. - REUTERS

source https://www.thesundaily.my/business/china-factory-activity-dives-to-worst-on-record-as-coronavirus-paralyses-economy-pmi-NB2065186

Corporates to start feeling Covid-19 impact this quarter, say analysts

PETALING JAYA: The economic slowdown experienced in the last quarter (Q4) of 2019 does not seem to have hampered Malaysia’s corporate earnings with analysts saying that the results were in line with their estimates.

MIDF Research senior analyst Imran Yassin Md Yusof told SunBiz that the performance of key sectors on the local bourse, namely banking, oil & gas and plantation met broad expectations despite underperformance by some counters.

JF Apex head of research Lee Chung Cheng concurred, citing that corporate Malaysia remained unaffected by the weak economy in Q4 2019. However, he cautioned that corporate earnings for Q1 2020 could be lower as a result of the impact from the Covid-19 outbreak.

A RM20 billion stimulus package was announced last Thursday to combat the epidemic’s impact. Lee opined that the stimulus package will not have much impact on the overall corporate earnings as it is targeted at specific industries.

For Imran, the effect from the stimulus measures will be more indirect in terms of giving boost to private consumption, such as through the reduction in the minimum Employees Provident Fund contribution by employees from 11% to 7%.

He estimated that this would translate into disposable income of RM10 billion for employees, thus contributing to output growth through consumer spending.

“Private consumption is the single largest and the most dependable source of domestic demand for our economy ... this should provide some indirect support to corporate earnings,” he said.

However, as the economy softens, Imran said, the knock-on effect from a further slowdown in economic activity will be on loan growth and commodity prices.

“This will invariably put pressure on corporate earnings performance,” he added.

source https://www.thesundaily.my/business/corporates-to-start-feeling-covid-19-impact-this-quarter-say-analysts-EA2064170