Pecca ventures into PPE business

PETALING JAYA: Pecca Group Bhd’s wholly-owned subsidiary Pecca Leather Sdn Bhd is venturing into developing, producing and supplying of personal protective equipment (PPE) that include face masks, face shields, and PPE garments to both the commercial and medical communities.

“Pecca Leather will repurpose some of its existing production lines and leverage on its present pool of craftsmen as well as production facilities to pursue the PPE business. The company has allocated RM2.2 million in capital expenditure for the purchase of machineries and the setup of cleanroom facilities for the production of face masks,“ Pecca said in a stock exchange filing today.

Pecca Leather is in the midst of applying for the approvals and certifications from all the relevant authorities for the production of the PPE. Subject to the approvals being obtained from all the relevant authorities, the production is expected to commence within the first quarter of financial year ending

June 30, 2021.

Pecca Leather is currently in discussion with several key distributors to market and distribute its PPE products to their clientele in the commercial and healthcare industry.

“The company is of the view that the market demand for PPE will continue to be well above normal for the foreseeable future post-Covid-19 new normal. Furthermore, repurposing existing production lines is part of Pecca Leather’s plans to fully utilise its present idle resources and to generate additional revenues,“ it said.

In addition, the PPE business is part of the company’s corporate social responsibility program to join the combat against the Covid-19 pandemic in Malaysia by supporting and equipping the frontline healthcare personnel with the crucial protective equipment.

On the potential risks related to the PPE business, it said Pecca Leather has, throughout the years, established its track record and expertise in undertaking the manufacture of high-quality industrial products and as such, believes that Pecca Leather is able to mitigate these risks.

Subject to the approvals being obtained from all the relevant authorities, the PPE business is expected to contribute positively to the earnings and will enhance net assets per share of Pecca and its group of companies for the financial year ending June 30, 2021. The PPE business will be funded through

internally generated funds.

The company will continue its focus on its core business of manufacturing and supplying high quality

automotive leather seat upholstery.

source https://www.thesundaily.my/business/pecca-ventures-into-ppe-business-LA2637368

Petronas refutes Reuter’s report over Sarawak tax settlement

PETALING JAYA: Petroliam Nasional Bhd (Petronas) has refuted a recent Reuters report which claimed the national oil & gas company had urged the prime minister to drop a planned tax settlement to Sarawak.

In a statement, Petronas said the alleged conflict is “mere speculative reporting”.

“The alleged conflict between the Prime Minister, Petronas and its shareholder is mere speculative reporting without any basis whatsoever. Petronas wishes to reiterate that in line with the joint statement issued on May 8, Petronas, in collaboration with its Shareholder, is currently in the midst of negotiations with the Sarawak state government to achieve appropriate commercial resolution.

We remain committed in working closely with our Sarawak counterparts and our stakeholders to reach the best outcome on this matter. Our aim is to achieve a resolution that will lead to a more stable and conducive business and investment environment for the oil and gas industry, which will be especially important given current market challenges,” it said.

source https://www.thesundaily.my/business/petronas-refutes-reuter-s-report-over-sarawak-tax-settlement-JA2637218

May exports declines 25.5% to RM62.7b

PETALING JAYA: Malaysia’s May exports continued to register a decline of 25.5% to RM62.7 billion year-on-year (yoy), on the continued effect from the Covid-19 pandemic.

“In May 2020, Malaysia’s exports recorded a decrease at a slower pace than imports, resulting a trade surplus of RM10.4 billion, higher by 14.7% compared to May 2019. Meanwhile, Malaysia’s total trade stood at RM115 billion, decreased 27.8% yoy,” said chief statistician Datuk Sri Mohd Uzir Mahidin.

Re-exports was valued at RM8.8 billion registering a decrease of 30% yoy and accounted for 14% of total exports. Domestic exports also recorded a decrease of 24.7% to RM53.9 billion.

The decrease in exports was attributed by lower exports to India (-RM3.2 billion), Singapore (-RM2.5 billion), Thailand (-RM2.1 billion), Japan (-RM2 billion) and the European Union (-RM1.9 billion). Lower imports were mainly from China (-RM3.3 billion), Singapore (-RM3.1 billion), the European Union (-RM2.3 billion), Thailand (-RM2.1 billion) and Indonesia (-RM1.4 billion).

The main products which contributed to the decline in exports were electrical and electronic products (-RM5.8 billion), petroleum products (-RM2.9 billion), crude petroleum (-RM1.7 billion), manufacture of metal (-RM1.4 billion), chemical and chemical products (-RM1.2 billion), and machinery, equipment and parts (-RM1.1 billion). While decreases in imports were noted for petroleum products (-RM5.1 billion), chemical and chemical products (-RM2.6 billion), transport equipment (-RM2.4 billion), machinery, equipment and parts (-RM1.9 billion) and crude petroleum (-RM1.8 billion).

Meanwhile, imports also registered a decline of 30.4% to RM52.3 billion yoy which was the largest decline since January 2009 during the global financial crisis in 2009.

The decrease in imports by end use was attributed by intermediate goods, capital goods and consumption goods. Imports of intermediate goods, lower by 27.8% to RM30.8 billion.

Capital goods stood at RM6.7 billion, decreased 27.8% and consumption goods declined 21.9% to RM5.2 billion.

source https://www.thesundaily.my/business/may-exports-declines-255-to-rm627b-EA2637152

Foreign selling on Bursa rises to RM624.7m last week

PETALING JAYA: Offshore investors continued to offload stocks listed on Bursa Malaysia for the 19th consecutive week, selling RM624.7 million net of local equities last week.

“So far in 2020, foreign investors have sold RM16.4 billion net on Bursa. In comparison with the other six Asian markets we track, Malaysia still has the fourth smallest foreign net outflow on a year-to-date basis,“ MIDF Research said in its fund flow report today.

As markets reopened on Monday last week, international investors took out RM133.8 million net of local equities which was a similar trend for all South East Asian markets on fear of a resurgence in Covid-19 outbreak that could drag the economic recovery on a longer period. Nonetheless, the local bourse managed to close slightly higher by about 0.3% to 1,511.2 points on the same day.

Note that the foreign net outflow occurred on every day last week. The foreign net selling continued to increase the next day on Tuesday at a tune of RM146.9 million before started to subside on Wednesday and Thursday with the lowest foreign net outflow of the week on Thursday at a tune of RM74.7 million.

Nonetheless, foreign net selling activity rose to RM159.7 million on Friday, which was also the highest foreign net outflow last week. Investors’ appetite was negatively affected by the downgrading of

Malaysia’s economic growth by World Bank to -3.1% from -0.1% for year 2020 announced on Thursday. The KLCI Index closed lower by about 1.3% to 1,488.1 points last week.

“In comparison to another three South East Asian markets that we tracked, Malaysia recorded the second lowest foreign net outflow and Philippines had the lowest foreign net outflow last week. While Thailand and Indonesia posted relatively higher foreign net outflow, foreign investors seemed to ease their selling last week as compared to the preceding week before.”

In terms of participation, all investor groups recorded a weekly decline in their average daily traded value (ADTV). Foreign investors experienced the largest weekly decline in their ADTV by 45.5% to reach RM880.4 million which was below the healthy level of RM1.0 billion.

source https://www.thesundaily.my/business/foreign-selling-on-bursa-rises-to-rm6247m-last-week-FA2637135

Weakly recovering oil prices to limit further ringgit depreciation

PETALING JAYA: Fitch Solutions have revised its 2020 and 2021 average exchange rate forecasts to RM4.300 and RM4.200 against the US dollar, respectively, from RM4.350 and RM4.250 previously as a recovery in commodity prices, especially crude oil, is likely to limit the extent of weakness in the ringgit in the short term.

“We maintain our view for the ringgit to average stronger in 2021 as the global economy will likely be in a stronger footing,“ it said in a commentary.

On the short-term (three to six months) outlook, Fitch said the ringgit has recovered from the selloff in Q1’20 since its last update on the currency published on March 27, recording a 3% recent rally in June trading at RM4.275 as of June 26 compared to RM4.365 at the end of May. However, the year-to-date average exchange rate has weakened significantly to RM4.248 as of June 26, from RM4.170 on March 27 as the ringgit had continued to trade in the RM4.300 and RM4.400 range between April and the end of May.

“While this weakening is broadly in line with our previous 2020 average exchange rate forecast of RM4.350 against the US dollar, we are dialing back slightly on our bearish view of the ringgit due to a better outlook for especially oil prices over the remainder of 2020. Accordingly, we have revised our 2020 average forecast to RM4.300.”

From a technical perspective, its call for the RM4.500 support level to hold has played out and the trading range it previously identified between this level and the RM4.200 resistance level has held up well over the course of Q2’20.

“We continue to expect the ringgit to range-trade between these two levels, most likely closer to the lower half of the band as the global economy emerges from lockdown and oil prices mount a slight recovery as a result the global recovery and a renewed OPEC+ pact to cut crude oil production,“ said Fitch.

Indeed, on the back of these two main factors, it now expects Brent crude prices to average US$40.00 a barrel, from US$33.00 previously, and significantly lower than the government assumption of US$63.00 in 2020. While the year-to-date average Brent crude price stands at US$42.25 a barrel as of June 24 means its forecast of US$40.00 a barrel still implies some downside risks, the extent of the negativity has been much reduced. This likely floor under crude oil prices is likely to support the ringgit over the coming months. Indeed, it partially attributed the recent rally in the ringgit to a similar rally in Brent prices from their trough of US$19.33 a barrel on April 21 to US$42.37 on June 24.

“Beyond crude oil, we also expect a still muted but nonetheless, brightening outlook for the prices of other key export commodities to support the ringgit against further weakness. In particular, we expect higher average palm oil prices in 2020 (RM2,300/tonne) compared to 2019 (RM2,150/tonne). This should provide support to Malaysia’s terms of trade over the coming months and put a floor under the ringgit.”

Furthermore, while it expects the generally dovish monetary policy stance taken by major central banks across the globe to offset the depreciatory pressure from Bank Negara Malaysia’s (BNM) rate cutting cycle. It expects BNM to undertake aggressive easing of the Overnight Policy Rate to 1.00% in 2020, from the current rate of 2.00% as of June 24.

However, even more aggressive monetary easing being implemented by the world’s major central banks, including the US Federal Reserve, the ECB and the Bank of England, which have all announced large asset purchase programmes, will help to ensure that the yield advantage Malaysia has will not diminish too greatly.

Although bond yield spreads between Malaysia and the US would narrow due to BNM’s actions, it expects the 10-year bond yield spread will likely remain above 100bps at the end of 2020. Additionally, Malaysia’s currency swap agreements with countries including China, South Korea and Indonesia, will help to guard against one-way short bets against the ringgit, which has an elevated likelihood amid greater concerns about EM growth and debt sustainability caused by the Covid-19 pandemic.

On the long-term (six to 25 months) outlook, it continues to expect the ringgit to trade in the weaker half of its long-term trading range between RM3.80 and RM4.50 against the US dollar, but see prospects for a stabilisation of the unit in 2021, in line with its view for the global economy to begin recovering in late Q4’20. 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 slightly stronger position the ringgit will likely be in by the end of 2020, it has revised its 2021 average ringgit forecast to RM4.20/USD, from RM4.25 previously.

In line with its view for the ringgit to become increasingly undervalued in real effective exchange rate (REER) over the course of 2020, the spot REER came in 13.5% below the 10-year moving average in May, compared to 7.8% in February.

This is close to the steepest degree of undervaluation since 2003 of 15.8% in September 2015 (which saw the ringgit rally for roughly six months in REER terms thereafter) and the increasing attractiveness of the ringgit is likely to provide support to the currency over the long term.

“We see heavy downside risks to both our short- and long-term forecasts, especially in the event of a second wave of infections serious enough to spark another round of lockdown measures in the world’s major economies, or in Malaysia,“ said Fitch.

It added that any disruption to the tentative recoveries indicated by high frequency data in June would put more pressure on Malaysia’s economy and further sap risk sentiment around the world, threatening the ringgit further.

source https://www.thesundaily.my/business/weakly-recovering-oil-prices-to-limit-further-ringgit-depreciation-BA2637113

Business expected to remain contractionary despite improved outlook

PETALING JAYA: Business sentiment among Malaysia companies have improved slightly despite remaining in the contractionary zone in Q3’20, according to Dun & Bradstreet (D&B) Malaysia’s Business Optimism Index (BOI) study.

According to its study, BOI fell on a year-on-year (yoy) basis BOI fell by 20.55 percentage points from 7.22 percentage points in Q3’19 to -13.33 percentage points in Q3’20.

Quarter-on-quarter (qoq), the index improved by 8.53 percentage points from -21.86 to -13.33 percentage points.

Dun & Bradstreet Malaysia Sdn Bhd CEO Audrey Chia commented with the gradual resumption of economic activities and interstate travels, it is expecting sentiments to improve slightly in the months ahead.

“The government’s fiscal and monetary stimulus packages will help stimulate economic growth, with some expected recovery towards the end of the second half of 2020,” she said in a report.

“However, growth across the majority of sectors is expected to remain muted, with continued contractions seen in services, wholesale trade and manufacturing.”

The six business indicators under the quarterly BOI study include volume of sales, net profits, selling price, inventory level, employees and new orders.

On a yoy basis, all six indicators have fallen for the quarter.

Volume of sales plunged from 2.50 percentage points reported previously to -19.20 percentage points, net profits fell from -5 percentage points previously to -22.40 percentage points and selling price plunged to -7.20 percentage point from +9.17 percentage points.

Similarly, 3Q’19 saw new orders drop to -12 percentage points from +25.83 percentage points previously, inventory levels plunged from +5 percentage points to -8.8 percentage points and employment levels tumbled from +5.83 percentage points to -10.4 percentage points.

Moving forward, D&B noted that the financial and mining sectors are most upbeat while the services, manufacturing and wholesale trade sectors are most pessimistic for the third quarter of this year.

source https://www.thesundaily.my/business/business-expected-to-remain-contractionary-despite-improved-outlook-XA2637077

Bundesbank must decide on ECB bond purchases - top court judge

BERLIN: The decision on whether Germany should pull out of the European Central Bank's bond-buying programme lies with the Bundesbank, a judge in Germany's highest court said in remarks published on Sunday.

Germany's Constitutional Court ruled in May that the ECB overstepped its mandate with over 2 trillion euros of government bond purchases, ordering the Bundesbank to quit the scheme unless the ECB can prove proportionality within three months.

Peter Huber, a conservative judge at the court who drafted the ruling, told the Frankfurter Allgemeine Zeitung that the court was no longer involved and the decision on whether to quit rested with Germany's central bank.

"The Bundesbank is bound by our decision, but it must determine on its own responsibility whether the ECB's statement of reasons fulfils our requirements or not," Huber said. "The Federal Constitutional Court is no longer involved."

The ruling set off an unprecedented legal conflict with a national court looking to exert jurisdiction over an institution of the European Union and trying to curtail its policy framework, seen as an encroachment on ECB independence.

In a compromise deal, the ECB agreed last week to give vital documents underpinning its policy decisions to Bundesbank chief Jens Weidmann, who can then present them to the German parliament and government, as demanded by the court ruling.

Astrid Wallrabenstein, a judge-designate at the court, told a newspaper last week she was optimistic a solution to the row over the ECB's bond purchases can be found.

Wallrabenstein, who was nominated by the pro-European Greens, is expected to make the Constitutional Court, widely seen as having a narrow Eurosceptic majority, less confrontational toward the ECB. - Reuters

source https://www.thesundaily.my/business/bundesbank-must-decide-on-ecb-bond-purchases-top-court-judge-YA2637032