Kenanga Investment appoints new chairman

KUALA LUMPUR: Kenanga Investment Bank Bhd has appointed Tan Sri Syed Anwar Jamalullail (pix) as its new chairman, effective today, taking over from Izlan Izhab.

In a statement today, the bank said Syed Anwar is also currently the chairman of Nestle (Malaysia) Bhd, S P Setia Bhd as well as Lembaga Zakat Selangor.

“His extensive experience, knowledge and proven leadership will provide the bank with continued momentum to chart innovations, pursue future growth, and further strengthen our position as the largest independent investment bank in the country,” said group managing director Datuk Chay Wai Leong.

The bank added that Izlan will continue to serve as an independent non-executive director of Kenanga Investment Bank and Kenanga Futures Sdn Bhd. -Bernama

source https://www.thesundaily.my/business/kenanga-investment-appoints-new-chairman-AI2648626

Saudi Arabia triples VAT, another unpopular austerity measure

RIYADH: Saudis braced today for a tripling in value added tax, another unpopular austerity measure after the twin shocks of coronavirus and an oil price slump triggered the kingdom's worst economic decline in decades.

Retailers in the country reported a sharp uptick in sales this week of everything from gold and electronics to cars and building materials, as shoppers sought to stock up before VAT is raised to 15%.

The increase could stir public resentment as it weighs on household incomes, pushing up inflation and depressing consumer spending as the kingdom emerges from a three-month coronavirus lockdown.

"Cuts, cuts, cuts everywhere," a Saudi teacher in Riyadh told AFP, bemoaning vanishing subsidies as salaries remain stagnant.

"Air conditioner, television, electronic items," he said, rattling off a list of items he bought last week ahead of the VAT hike. "I can't afford these things from Wednesday."

With its vast oil wealth funding the Arab world's biggest economy, the kingdom had for decades been able to fund massive spending with no taxes at all.

It only introduced VAT in 2018, as part of a push to reduce its dependence on crude revenues.

Then, seeking to shore up state finances battered by sliding oil prices and the coronavirus crisis, it announced in May that it would triple VAT and halt a cost-of-living monthly allowance to citizens.

The austerity push underscores how Saudi Arabia's once-lavish spending is becoming a thing of the past, with the erosion of the welfare system leaving a mostly young population to cope with reduced incomes and a lifestyle downgrade.

That could pile strain on a decades-old social contract whereby citizens were given generous subsidies and handouts in exchange for loyalty to the absolute monarchy.

The rising cost of living may prompt many to ask why state funds are being lavished on multi-billion-dollar projects and overseas assets, including the proposed purchase of English football club Newcastle United.

Shopping malls in the kingdom have drawn large crowds in recent days as retailers offered "pre-VAT sales" and discounts before the hike kicks in.

A gold shop in Riyadh told AFP it saw a 70% jump in sales in recent weeks, while a car dealership saw them tick up by 15%.

Once the new rate is in place, businesses are predicting depressed sales of everything from cars to cosmetics and home appliances.

Capital Economics forecast inflation will jump up to 6% year-on-year in July, from 1.1% in May, as a result.

"The government ended the country's lockdown (in June) and there are signs that economic activity has started to recover," Capital Economics said in a report. "Nonetheless, we expect the recovery to be slow-going as fiscal austerity measures bite."

The kingdom also risks losing its edge against other Gulf states, including its principal ally the United Arab Emirates, which introduced VAT at the same time but has so far refrained from raising it beyond 5%.

"Saudi Arabia is taking massive risks with contractionary fiscal policies," said Tarek Fadlallah, chief executive officer of the Middle East unit of Nomura Asset Management.

But the kingdom has few choices as oil revenue declines.

Its finances have taken another blow as authorities massively scaled back this year's hajj pilgrimage, from 2.5 million pilgrims last year to around a thousand already inside the country, and suspended the lesser umrah because of coronavirus.

Together the rites rake in some US$12 billion (RM51.4 billion) annually.

The International Monetary Fund warned the kingdom's gross dpmestic product will shrink by 6.8% this year – its worst performance since the 1980s oil glut.

The austerity drive would boost state coffers by 100 billion riyals (RM114 billion), according to state media.

But the measures are unlikely to plug the kingdom's huge budget deficit. The Saudi Jadwa Investment group forecasts the shortfall will rise to a record US$112 billion this year. – AFP

source https://www.thesundaily.my/business/saudi-arabia-triples-vat-another-unpopular-austerity-measure-EI2648565

Boustead Plantations appoints new board member

KUALA LUMPUR: Boustead Plantations Bhd has appointed Balik Pulau UMNO division chief Datuk Shah Headan Ayoob Hussain Shah as its non-independent non-executive director, effective today.

In a filing with Bursa Malaysia today, the upstream oil palm plantation company said Shah Headan, 56, possesses a wealth of experience spanning more than 30 years.

“Having started his career at Sime Darby Plantation Bhd, he has held several roles in various entities over the years.

“He also served as a member of the State Legislative Assembly for Teluk Bahang, Penang from 2013 to 2018,“ it said.

Boustead Plantations said Shah Headan holds a Bachelor’s degree in Corporate Communication from Universiti Putra Malaysia and a Diploma in Agriculture from Universiti Pertanian Malaysia.

“We are pleased to welcome Shah Headan to the board.

“His experience and expertise will certainly be beneficial as the group continues to progress in its transformation programme,“ it said. -Bernama

source https://www.thesundaily.my/business/boustead-plantations-appoints-new-board-member-FI2648520

New North American trade deal takes effect, cracks already emerging

WASHINGTON/MEXICO CITY/OTTAWA: The revamped trade pact between the United States, Canada and Mexico taking effect today was meant to create a kind of fortress North America, boosting the region's competitiveness – but cracks are already starting to show in the foundation.

As the deal kicks in, the Trump administration is threatening Canada with new aluminium tariffs, and a prominent Mexican labour activist has been jailed, underscoring concerns about crucial labor reforms in the replacement for the 26-year-old North American Free Trade Agreement (Nafta). The risk of disputes among the three trading partners is growing, analysts say.

The US-Mexico-Canada Agreement (USMCA) includes tighter North American content rules for autos, new protections for intellectual property, prohibitions against currency manipulation and new rules on digital commerce that did not exist when Nafta launched in 1994, an agreement US President Donald Trump has lambasted as the "worst trade deal ever made”.

The coronavirus has all three countries mired in a deep recession, cutting their April goods trade flows – normally about US$1.2 trillion (RM5.1 trillion) annually – to the lowest monthly level in a decade.

"The champagne isn't quite as fizzy as we might have expected – even under the best of circumstances – and there's trouble coming from all sides," said Mary Lovely, a Syracuse University economics professor and senior fellow at the Peterson Institute for International Economics in Washington. "This could be a trade agreement that quickly ends up in dispute and higher trade barriers."

Issues dogging USMCA include hundreds of legal challenges to Mexico's new labour law championed by President Andres Manuel Lopez Obrador to ensure that workers can freely organise and unions are granted full collective bargaining rights.

A ruling against it would harm Mexico's ability to deliver on provisions aimed at ending labour contracts agreed without worker consent that are stacked in favour of companies and have kept wages chronically low in Mexico.

Democrats in the US Congress had insisted on the stronger labour provisions last year before granting approval, prompting a substantial renegotiation of terms first agreed in October 2018.

The arrest of Mexican labour lawyer Susana Prieto in early June has fuelled US unions' arguments that Mexican workers' rights are not being sufficiently protected.

"I remain very concerned that Mexico is falling short of its commitments to implement the legislative reforms that are the foundation in Mexico for effectively protecting labor rights," US Representative Richard Neal, chairman of the House Ways and Means Committee, said on Tuesday, adding that USMCA's success "truly hinges" on its new labor enforcement mechanism.

US Trade Representative Robert Lighthizer has said he will file dispute cases "early and often" to enforce USMCA provisions, citing Mexico's failure to approve US biotech products..

That could lead to increased tariffs on offending goods, such as products from individual factories where labour violations are found.

Carlos Vejar, a former Mexican trade negotiator, said it was in the country's interest to uphold pledges made to strengthen unions and end child labour. "If Mexico isn't mindful of this, there will be cases against Mexico, and Mexico will lose them," Vejar said.

US national security tariffs on imported steel and aluminium – including from Canada and Mexico – were a major irritant during USMCA negotiations until a deal for exemptions was reached last year. But now, USTR is considering domestic producers' request to restore the 10% duty on Canadian aluminium to combat a "surge" of imports across the northern border.

Canadian Prime Minister Justin Trudeau on Monday told reporters that these would hurt both countries and raise materials costs for US manufacturers.

Another source of disputes could be the energy sector, where the main US oil and gas lobby has already complained that recent actions by Mexico favoring state oil company Pemex violate protections for private investors carried over from Nafta.

Canada has also complained about new Mexican rules formally threatening investment in renewable energy.

USMCA will put new compliance burdens on the region's automotive manufacturers as the coronavirus craters consumer spending and auto production. Within three to five years, vehicles' minimum North American content rises to 75% from 62.5%. Automakers must also produce 40% of their vehicles' content in "high wage" areas – effectively the United States and Canada.

A US International Trade Commission study found this would draw more auto parts production to the United States, but may curb US vehicle assembly and raise prices, limiting consumer choice in cars. The same panel found that after 15 years, the deal would add US$68.5 billion annually to US economic output and create 176,000 jobs compared with a Nafta baseline. – Reuters

source https://www.thesundaily.my/business/new-north-american-trade-deal-takes-effect-cracks-already-emerging-HI2648292

Thail business group see economy shrinking 5%-8% this year

BANGKOK: Thailand's economy is expected to contract between 5% and 8% this year, deeper than the 3%-5% contraction projected in May, due to the impact of the coronavirus outbreak, a group of the country's leading business associations said today.

Despite the easing of virus restrictions, most economic indicators declined in May and June, weighed by the weak purchasing power of households and businesses, while tourism remains under pressure, according to a joint standing committee on commerce, industry and banking.

"The economy is not good yet and job losses will increase," Kalin Sarasin, chairman of the Thai Chamber of Commerce, told a briefing. "Although businesses started to reopen, there is no income yet".

The business group now predicts exports will drop by 7%-10% this year, rather than a 5%-10% declined forecast earlier.

The group said it was worried about a recent rise in the baht, which is likely to appreciate further.

The group said it was still pushing the government to take part in Asia-Pacific trade agreement talks to boost the economy, amid widespread opposition.

The group plans to hold a seminar on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership tomorrow. – Reuters

source https://www.thesundaily.my/business/thail-business-group-see-economy-shrinking-5-8-this-year-FD2647766

Asia’s factory pain shows signs of easing

TOKYO: Asia's factory pain showed signs of easing in June, as a rebound in China's activity offered some hope the region may have passed the worst of the devastation caused by the coronavirus pandemic.

But sluggish global demand and fears of a second wave of infections will tame any optimism on the outlook and keep pressure on policymakers to support their ailing economies.

A series of business surveys released today showed broad improvements in manufacturing across Asia in June from the depths hit in April and May. Activity in some economies swung to growth while declines in other places slowed.

In China, factory activity grew at a faster clip in June after the world's second-largest economy lifted coronavirus lockdown measures, the Caixin/Markit purchasing managers' index (PMI) showed.

Manufacturing activity also expanded in Vietnam and Malaysia, pointing to a slow but steady recovery ahead.

India's manufacturing activity contracted for a third straight month in June but at a much slower pace, as both output and new orders shrank at softer rates.

Similarly, the export powerhouses of Japan and South Korea continued to see manufacturing activity decline, albeit at a softer pace.

"The chance of a V-shape recovery in the manufacturing sector appears slim at this stage," said Joe Hayes, economist at IHS Markit, which compiles the survey.

"We're still awaiting signs of meaningful improvement in Japan's manufacturing sector, with the PMI for June failing to stage a substantial recovery."

Globally, the pandemic has infected more than 10 million and killed more 500,000. A resurgence in new cases in several countries has prompted some governments to backpedal on plans to reopen their economies and fueled concerns the worst is still to come.

In its latest projections, the International Monetary Fund expects the global economy to shrink by 4.9% this year and rebound by just 5.4% next year.

China's Caixin/Markit PMI rose to 51.2 in June from 50.7 in May, marking the highest reading since December 2019. That followed a similarly upbeat reading from the Chinese government's own PMI yesterday.

Vietnam and Malaysia also saw their PMIs crawl back above the 50-mark separating growth from contraction, a welcome sign for policymakers struggling to combat the pandemic's fallout.

"The host of PMI data release this morning offers some reassuring signs that the outlook for the crucial manufacturing sector continues to be on the mend," said Wellian Wiranto, an economist at OCBC Bank.

But analysts expect any recovery in the region to be slow.

While China's export orders shrank at a slower pace, its employment contraction worsened, the PMI showed, underscoring the fragile recovery.

"Overall manufacturing demand recovered at a fast clip, but overseas demand remained a drag," said Wang Zhe, senior economist at Caixin Insight Group.

Japan's PMI rose to a seasonally adjusted 40.1 in June, while South Korea's PMI ticked up to 43.4 - both remaining far below the rise-or-fall threshold of 50.

Separately, a Bank of Japan survey showed big manufacturers' confidence sinking to levels last seen during the 2009 global financial crisis, reinforcing expectations the country was sinking deeper into recession.

"If demand doesn't rebound fast enough, companies will have to shed jobs," said Shinichiro Kobayashi, senior economist at Mitsubishi UFJ Research and Consulting. "That will delay Japan's economic recovery, which could end up in a L-shape." – Reuters

source https://www.thesundaily.my/business/asia-s-factory-pain-shows-signs-of-easing-XD2647707

Oil rises after drop in U.S. crude stocks suggests demand pickup

TOKYO: Oil prices rose more than 1% on Wednesday after data showed crude inventories in the United States fell much more than expected, suggesting demand is improving even as the coronavirus outbreak spreads around the world.

Brent crude rose 48 cents, or 1.2%, to $41.75 a barrel by 0345 GMT after declining more than 1% on Tuesday. U.S. crude was up 54 cents, or 1.4%, at $39.81 a barrel, having dropped by 1.1% in the previous session.

U.S. crude and gasoline stocks declined more than expected last week, while distillate inventories rose, data released by the American Petroleum Institute (API) late on Tuesday showed.

Crude inventories dropped by 8.2 million barrels to 537 million barrels, against analysts' forecasts for a draw of 710,000 barrels.

Official inventory data from the U.S. government's Energy Information Administration is due out later on Wednesday.

Also supporting prices was a drop in output from the Organization of the Petroleum Exporting Countries (OPEC) to the lowest in two decades in June.

The 13-member grouping produced an average of 22.62 million barrels per day (bpd) in June after they agreed to cut output, a Reuters survey found, down 1.92 million bpd from May's revised figure.

"The fall in output means that OPEC over-complied with the deal in June, with compliance coming in at 107%," ING Economics said, though noting that the over-compliance followed additional cuts by Saudi Arabia, the United Arab Emirates and Kuwait.

Those producers agreed to more cuts during June than other OPEC members.

"It is likely that compliance will slip again in July, unless we see a significant improvement in compliance from Iraq and Nigeria," ING said.

Prices for later this year are likely to be capped, analysts said, as the world is awash with oil after the coronavirus caused demand for fuel to drop by around a third.

A Reuters poll of analysts indicated that oil prices will consolidate at around $40 a barrel this year, with a recovery potentially picking up in the fourth quarter.

The coronavirus continues to spread around the world with ever increasing rates of infection. Cases now total more than 10 million with more than half a million people dying after catching COVID-19. - Reuters

source https://www.thesundaily.my/business/oil-rises-after-drop-in-u-s-crude-stocks-suggests-demand-pickup-AD2647064