CEOMorningBrief FRIDAY, SEPTEMBER 22, 2023 ISSUE 641/2023 theedgemalaysia.com FED SIGNALS HIGHER-FOR-LONGER RATES WITH HIKES ALMOST FINISHED p13 Broker X Smart Choice to Trade Bursa, Hong Kong & U.S. Markets HOME: Rafizi: Central database 60% done; approved, import permits policy paper ready p3 7-Eleven to sell Caring stake at higher price tag of RM675 mil to BIG Pharmacy p6 High Court allows Maxis unit to start judicial review on RM104 mil IRB tax assessment p6 WORLD: Thailand’s weakening baht not all bad for economy — PM p15 Toshiba to go private as US$13.5 bil buyout offer succeeds p19 Russia temporarily bans diesel exports; European prices jump Report on Page 3. MCMC in final stage of talks with broadband service providers to lower internet prices — Fahmi BLOOMBERG Report on Page 2.
FRIDAY SEPTEMBER 22, 2023 2 THEEDGE CEO MORNING BRIEF published by ( 2 6 6 9 8 0 - X ) tel . 603-77218000 Level 3, Menara KLK, 1 Jalan PJU 7/6, Mutiara Damansara, 47810, Petaling Jaya, Selangor, Malaysia publisher + ceo . Ho Kay Tat editor-in-chief . Kathy Fong chief commercial officer . Sharon Teh chief operating officer . Lim Shiew Yuin editors . Jenny Ng . Tan Choe Choe Lam Jian Wyn to contact editors: [email protected] to advertise: [email protected] the edge ceo morning brief Read from desktop or mobile device. You can print in A4 to read. Set print mode to fit or shrink oversize page. to get on emailing list [email protected] Russia temporarily bans diesel exports; European prices jump (Sept 21): Russia temporarily banned exports of diesel in a bid to stabilize domestic supplies, driving European prices higher in already tight global fuel markets. So far this year, Russia was the world’s single biggest seaborne exporter of diesel-type fuel, narrowly ahead of the US, according to Vortexa data compiled by Bloomberg. The country shipped more than 1 million barrels a day during January to mid-September, with Turkey, Brazil and Saudi Arabia being among the main destinations. The ban, which also applies to gasoline, comes into force on Sept 21, and doesn’t have a final date, according to the government decree. Diesel prices in Europe jumped on concern the measure will aggravate global shortages. The world’s oil refiners are struggling to produce enough of the fuel amid curbed crude supplies from Russia and Saudi Arabia, the biggest producers within the Organization of Petroleum Exporting Countries and its allies. “Despite this being only a temporary ban, the impact is significant as Russia remains a key diesel exporter to global markets,” said Alan Gelder, vice president of refining, chemicals and oil markets at consultancy Wood Mackenzie Ltd. “The global refining system will struggle to replace those lost Russian volumes at a time when global diesel inventories are already at low levels.” In northwest Europe, the premium of benchmark diesel futures to crude oil — known as the ICE Gasoil crack — climbed sharply, temporarily topping US$37 a barrel, according to fair value data compiled by Bloomberg. Price impact Diesel futures for delivery in October also grew more expensive relative to barrels for arrival the following month. The bullish Bloomberg structure, known as backwardation, surpassed US$35 per ton, before paring some of those gains. “Temporary restrictions will help saturate the fuel market, that in turn will reduce prices for consumers” in Russia, the government’s press office said on its website. There are exemptions for minor supplies, including deliveries to trade alliance partners from some former Soviet republics, as well as intergovernmental agreements, humanitarian aid and transit, the decree said. Under the decree, fuel cargoes already accepted for shipment by Russian Railways or those with loading papers for seaborne transportation can still be exported. That indicates diesel flows will only gradually decline, while these cargoes are shipped. The tanker, Ellora, sailed from Russia’s Black Sea port of Novorossiysk on Thursday, after loading about 35,000 tons of gasoil, according to vessel-tracking data monitored by Bloomberg and a port report. The ban includes all types of diesel, including summer, winter and Arctic blends, as well as heavy distillates including gasoils, according to the decree. Last year, Russia’s seaborne exports of diesel-type fuel were about 0.95 million barrels a day, according to Vortexa data. That was about 3.4% of total global demand. “This is a super big deal. We’re talking exports of close to 1 million barrels a day being shut in,” said Eugene Lindell, head of refined products at consultancy FGE. However, Russia won’t be able to keep up a diesel export ban for long, because they’ll soon run out of tank space, he added. Inflation battle Russia’s government has spent weeks in talks with oil producers to decide on measures to rein in rising fuel prices. President Vladimir Putin said last week that officials and companies had agreed on how to act in the future, but the wrangling continued, people familiar with the matter said. Surging car-fuel prices have been one the biggest contributors to inflation, a potential political headache as the Kremlin prepares for the presidential election in March. Retail gasoline and diesel prices in Russia have climbed 9.4% from the start of the year to Sept 18 compared with an increase in overall consumer prices of 4%, according to Federal Statistics Service data. Political sensitivity to rising fuel prices and the impact on farmers spilled into the open earlier this week, when the speaker of the lower house of parliament, Vyacheslav Volodin, a key Putin ally, criticized the Energy Ministry for failing to prevent the increase. The government considered “quite serious measures,” First Deputy Energy Minister Pavel Sorokin told lawmakers who peppered him with questions. REUTERS
friday september 22, 2023 3 The E dge C E O m o rning brief home PUTRAJAYA (Sept 21): The government’s central database system (PADU) has now reached 60% in its development, and will be up and running to be used in January, said Economy Minister Mohd Rafizi Ramli. PUTRAJAYA (Sept 21): The government does not interfere in the employment process of foreign workers, especially in the selection of workers and their countries of origin, said Human Resources Minister V Sivakumar. In response to a recent news article concerning foreign workers from Bangladesh, he said employers determine selection of workers and the source of country based on their suitability in adapting to the nature of work of their respective industries. PUTRAJAYA (Sept 21): The Malaysian Communications and Multimedia Commission (MCMC) is in the final stage of negotiations with broadband service providers to enable wholesale internet prices to be offered at a lower rate, said Minister of Communications and Digital Fahmi Fadzil. The minister said he has requested that the negotiations be concluded next week to allow for the next step, which is the signing of a Memorandum of Understanding (MOU) between the Ministry of Communications and Digital (KKD) and the broadband service providers. He said that the negotiation process has taken quite some time as it involves various parties, but the outcome will result in a significant reduction in internet prices. “I believe we are almost reaching a conclusion [following the negotiations]. I expect it to be concluded by next week,” he told reporters after attending KKD’s monthly assembly here on Thursday. On Aug 7, Fahmi reportedly said that all broadband internet service providers have been instructed to reduce internet prices starting September, in line with the implementation of the Mandatory Standard on Access Pricing (MSAP) which would lead to a reduction in internet wholesale prices and cheaper packages. Fahmi said the reduction in internet prices also aims to decrease the inflation rate in the country’s telecommunications sector, which has now eased from 0% to -3.7% as of last July. “Under the Unity Government, we have successfully reduced the inflation rate in the communication sector. This means that we will indeed offer the internet at affordable prices,” he said. On Aug 25, Fahmi reportedly said that KKD would implement various initiatives to reduce the financial burden on the people in the communication sector in line with the positive development of the inflation rate. Read the full story Rafizi: Central database 60% done; approved, import permits policy paper ready Govt does not interfere in foreign worker employment process, says HR minister MCMC in final stage of talks with broadband service providers to lower internet prices — Fahmi Bernama Bernama Bernama He described the short period (started only in June 2023) to develop the PADU system, which provides a combination of socio-economic information for every household in the country, as a momentous challenge for his ministry, but could be implemented for the targeted subsidy programme, thanks to the cooperation of more than 270 government agencies and statutory bodies. “I can say it is actually challenging, but in another three months, we will be able to pull it off,” he said at a press conference after attending a session involving the Ministry of Economy’s PADU development with the secretary general and director general of the ministry and agency here on Thursday. In other developments, Rafizi said the policy paper for reducing approved permits and import permits is ready, and will be brought to the National Economic Action Council (NEAC) in early October. So far, he said the ministry is re-examining the priorities in the policy paper before it is presented in the NEAC meeting. “We have to go through the details again because this is regarding the whole economic diagnosis, so the list of agendas to bring to the NEAC is getting longer,” he said. “The ministry has always maintained an approach that the employment of foreign workers is subject to the principle of prioritising local workers and the demand from employers, depending on their actual needs based on criteria determined by the government according to sectors. “As a trading nation, the government acknowledges the contribution of foreign workers in helping the growth and development of the nation’s economy,” he said in a statement on Thursday, adding that Malaysia has 14 other source countries aside from Bangladesh for employers to choose from, with regards to foreign workers. Sivakumar said there was a misunderstanding regarding the recruitment process and the quota allocation from the country, and therefore made a clarification as it reflects negatively on the employment process and procedures in the country. He emphasised that human suffering should not be tolerated or compromised particularly on the rights and welfare of workers. It was reported that a migrant rights activist has expressed concern regarding the number of Bangladeshis coming into Malaysia, with many of them said to be left stranded upon arrival. Suhaimi Yusuf/ The Edge
friday september 22, 2023 4 The E dge C E O m o rning brief home KUALA LUMPUR (Sept 21): Three associations representing property managers and consultants, estate agents, and valuers have come out to support the government’s move to refine the Strata Management Act 2013 as part of its 12th Malaysia Plan MidTerm Review revealed this month. In particular, the proposed amendment on the Act includes a requirement for strata residences to be managed by a probationary property manager registered under the Board of Valuers, Appraisers and Estate Agents and Property Managers (BOVAEP). This is part of efforts to further strengthen the function of Joint Management Body (JMB) and Management Corporation (MC), according to the MidTerm Review report. To clarify, the 2013 Act currently allows the appointment of any persons (registered or non-registered) to manage the common property on behalf of JMB and MC. This provision will be amended to include the requirement that only a registered property manager can be appointed by the developer, JMB, or MC should they decide to hire the third independent party. “This proposal is a vital step toward addressing the challenges facing strata housing in our country,” said the association in a joint statement — Malaysian Institute of Property and Facility Managers (MIPFM), the Malaysian Institute of Professional Estate Agents and Consultants (MIPEAC) and the Association of Valuers, Property Managers, Associations laud move to require strata residence managers to be registered with BOVAEP NEW YORK (Sept 21): Türkiye has agreed that Malaysia Airports Holdings Bhd (MAHB) will continue to operate the Istanbul Sabiha Gokcen (ISG) International Airport. During their bilateral meeting on Thursday, Turkish President Recep Tayyip Erdogan conveyed the agreement to Prime Minister Datuk Seri Anwar Ibrahim. “He (Erdogan) agreed that MAHB should continue operating the ISG, as they are satisfied with the success of the company in the first stage, and now they want to extend [operations], including building a longer runway,” Anwar said at a press conference after meeting with the president of Türkiye. Anwar, who was in New York to attend the 78th United Nations General Assembly, said Türkiye strongly believes that MAHB is best suited and capable of running the ISG operations. Although the agreement to continue operations by MAHB has been announced, Anwar said it will go through the normal process under the relevant ministries. “This tremendous support is also a vote of confidence in the Malaysian company to develop and manage the ISG,” he added. Fully owned by MAHB, the airport is the sixth busiest gateway in Europe, with passenger numbers reaching 25 million in 2021, which was 70% of the pre-pandemic level. During the meeting, which was also attended by Cabinet ministers from both countries, Anwar said they also discussed efforts to increase bilateral cooperation in terms of investment and trade. Malaysia is Türkiye’s largest trading partner in Asean, with a trade volume of US$4.7 billion (RM22.05 billion) in 2022, a 35% growth from 2021. Malaysia’s total export volume to Türkiye in 2022 reached RM17.39 billion, which largely comprised palm oil, palm oil-based agricultural products, metal manufacturing, textiles, clothing, footwear, electrical and electronics products, and palm oilbased manufactured products. Total imports in 2022 stood at RM2.86 billion, which included petroleum products, jewellery, iron and steel products, chemicals and chemical products, textiles, clothing and footwear. NEW YORK (Sept 21): Malaysia has expressed its willingness to purchase military equipment from Türkiye, Prime Minister Datuk Seri Anwar Ibrahim said. Anwar said prior to this, some of Malaysia’s military equipment was purchased from South Korea, adding that the choice of suitable purchases from Türkiye will be decided by the Malaysian Armed Forces Council. “We could be looking at drones and helicopters…according to Türkiye’s area of specialisation. However, I will leave it to the Armed Forces on what is best,” the prime minister said after a bilateral meeting with Türkiye President Recep Tayyip Erdogan at the Turkish House here on Thursday. Anwar is in New York to attend the 78th Session of the United Nations General Assembly. Anwar: MAHB to continue operating ISG International Airport as agreed by Türkiye by D Arul Rajoo Bernama by D Arul Rajoo Bernama by Priyatharisiny Vasu theedgemalaysia.com Malaysia ready to purchase military equipment from Türkiye, says PM Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS). “By supporting these initiatives, we can create better living conditions, enhance property values and foster vibrant communities for generations to come,” the statement said. The announcement further signals that the government is ready to enhance governance by improving and streamlining strata property regulations, it added. According to the Mid-Term Review report, the efforts underlined by the government to improve strata housing management are aimed to improve the standards of building maintenance and management, as well as encourage good governance. In addition, training programmes on good governance and mediation to manage conflicts will be conducted for committee members of JMBs and MCs to ensure accountable and efficient management of strata residences. The Strata Management Act 2013 (Act 757) was brought into force in 2015 with the primary aim of streamlining the law governing the management and maintenance of stratified properties. Read also: Malaysia, Türkiye reach consensus on measures to address Islamophobia
FRIDAY SEPTEMBER 22, 2023 5 THEEDGE CEO MORNING BRIEF Saturday, 7 october 2023 8.30aM — 1.00PM Mandarin oriental, Kuala luMPur The way forward retirement planning is no longer what it used to be. changing demographics and the new normal in the postpandemic economy are forcing a rethink and a shake-up. this is exacerbated by continued market volatility, black swans and rising cost of living. RetiRement Reimagined foRum 2023 SCAn To regiSTer or regiSTer online AT: https://myevents.theedgemalaysia.com * Terms & conditions apply. FIRESIDE CHAT Datuk Wira Ismitz Matthew De Alwis Executive Director / Chief Executive Officer, Kenanga Investors Bhd Bryan Lin Chief Executive Officer, Subang Jaya Medical Centre Moderators: Kuek Ser Kwang Zhe Editor, Wealth, The Edge Malaysia Pathma Subramaniam Editor, Digital Edge, The Edge Malaysia The State of Retirement in Malaysia Datuk Seri Amir Hamzah Azizan Chief Executive Officer, Employees Provident Fund Are Malaysians Prepared for Retirement? Tan Sri Dr Noor Hisham Abdullah Former Director General, Ministry of Health of Malaysia Safeguarding Wealth Transfer and Distribution: A Holistic Approach to Retirement and Estate Planning Nor Fazlina Mohd Ghouse Chief Executive Officer, Maybank Trustees Bhd Partner Limited seats available
FRIDAY SEPTEMBER 22, 2023 6 THEEDGE CEO MORNING BRIEF HOME KUALA LUMPUR (Sept 21): Toyo Ventures Holdings Bhd is looking to have a US$10.36 million (RM48.62 million) lawsuit it faces from KS Lee Energy Llp, in relation to a terminated agreement linked to a coal-fired power plant project in Vietnam, to be disposed of prior to going to full trial. In a bourse filing on Thursday, the printing ink and precision mould maker said its wholly-owned subsidiary Toyo Ink Group Bhd (TIGB) — the defendant in the suit — has filed an application for summary disposal of the suit. “TIGB’s application was heard by the judge on Sept 15 and 21, 2023. After hearing submissions from counsel, the judge reserved his decision to be delivered on Oct 4, 2023,” it added. Toyo Ventures said it has been advised that the summary disposal application has a “good prospect of success”. According to the group’s prior bourse filings, the lawsuit is related to an agreement concerning the 2.12GW coal-fired power plant project Song Hau 2, which was inked between TIGB and KS Lee Energy in January 2018. The agreement was subsequently terminated in July last year. However, KS Lee Energy under the suit is claiming US$10.37 million in equity success and debt success fees it claimed to be remunerated under the agreement. In a bourse filing in May this year, Toyo Ventures said: “As far as the board of directors of Toyo Ventures is concerned, and subject to legal counsel’s advice, the plaintiff (KS Lee Energy) is not entitled to the project success fee.” Shares in Toyo Ventures closed unchanged at RM1.43, giving the group a market capitalisation of RM168.31 million. Toyo Ventures makes bid for summary disposal of RM49 mil suit High Court allows Maxis unit to start judicial review on RM104 mil IRB tax assessment KUALA LUMPUR (Sept 21): 7-Eleven Malaysia Holdings Bhd will dispose of its 75% stake in Caring Pharmacy Group Bhd to BIG Pharmacy Holdings Bhd at a higher price tag of RM675 million, from RM637.5 million announced previously. The convenience store chain operator, via Convenience Shopping (Sabah) Sdn Bhd (CSSSB), has signed a sale and purchase agreement (SPA) with BIG Pharmacy for the cash disposal. This follows a binding term sheet that CSSSB received from BIG Pharmacy’s subsidiary back in June, which was announced on July 21 this year. The cash consideration is a premium of RM37.5 million from its initial value of RM637.5 million announced on July 21. The new price tag represents an implied price-to-earnings (PE) multiple of KUALA LUMPUR (Sept 21): Maxis Bhd’s wholly-owned subsidiary, Maxis Broadband Sdn Bhd (MBSB) has been granted leave for judicial review by the High Court on Thursday in respect of a RM104 million penalty for its 2022 tax assessment, its Bursa Malaysia filing showed. The High Court also granted a stay of all further proceedings, including the enforcement of the 2022 tax notice until the full and final determination of the judicial review. To recap, on March 31, 2021, MBSB was served with an additional assessment notice of RM230 million for years of assessment 2018 and 2019. Before that, on Nov 20, 2020, MBSB had also been slapped with a RM140 million tax bill for the years of assessment 2016 and 2017. These brought the total additional assessment across the five years from 2016 to 2020 to RM477 million, which Maxis is challenging in court. Maxis’ shares finished one sen or 0.25% lower at RM4.04, giving it a market capitalisation of RM31.64 billion. 20.7 times, vis-a-vis the PE multiple of pharmacy retailers listed in Asia, as opposed to the 19.6 times PE multiple incorporated in Caring’s 100% equity value of RM850 million. BIG Pharmacy is also acquiring the remaining 25% in Caring from Motivasi Optima Sdn Bhd, which means Caring will be a wholly-owned unit of BIG Pharmacy upon completion of the proposals. For 7-Eleven, the original cost of investment for Caring group incurred from February to June 2020 amounts to approximately RM423.23 million. It expects RM251.16 million in pro-forma gains from the disposal. Of the RM675 million proceeds, 61.66% or RM416.19 million will be utilised involving 7-Cafe store expansions, followed by repayment of borrowings of RM250 million (37.04%). The proposed disposal requires the approvals of several parties including 7-Eleven shareholders at an extraordinary general meeting. “Upon the completion of the proposed disposal, the company would be able to focus its resources to grow its convenience store segment which is expected to contribute positively to SEM group’s future income,” 7-Eleven said. At market close, 7-Eleven shares rose one sen or 0.51% to RM1.99 on Thursday (Sept 21), with a market capitalisation of RM2.21 billion. 7-Eleven to sell Caring stake at higher price tag of RM675 mil to BIG Pharmacy BY SUFI MUHAMAD theedgemalaysia.com BY IZZUL IKRAM theedgemalaysia.com BY SULHI KHALID theedgemalaysia.com
FRIDAY SEPTEMBER 22, 2023 7 THEEDGE CEO MORNING BRIEF HOME Comintel’s 2Q earnings jump on better performance from construction segment KUALA LUMPUR (Sept 21): Eco World Development Group Bhd’s net profit for the third quarter ended July 31, 2023 (3QFY2023) climbed 43% to RM66.34 million or 2.25 sen per share, from RM46.39 million or 1.58 sen per share a year ago, driven by improved site progress activities and product pricing as well as cost savings upon the finalisation of certain completed projects in phases. Quarterly revenue grew marginally by 7.41% to RM476.85 million from RM443.97 million a year earlier, mainly driven by the improved site progress activities, its filing to the local bourse on Thursday showed. The property developer has declared a second interim dividend of two sen per share, to be paid on Oct 19. This brings the total dividend payout for FY2023 to four sen per share. For the cumulative nine months ended July 31, 2023 (9MFY2023), Eco World’s net profit rose 19.69% to RM186.03 million, from RM155.43 million in the same period last year. However, revenue slipped 6.86% to RM1.38 billion against RM1.48 billion, mainly due to lower contributions from several parcels which were substantially completed in FY2022. On prospects, Eco World said it is on track to achieve its FY2023 full-year sales Eco World Development’s 3Q net profit rises 43%, declares two sen dividend target of RM3.5 billion after the group recorded RM3.06 billion sales in ten months, representing 87.4% of the target. “Our Eco Business Parks [in Iskandar Malaysia in Johor] continue to power ahead, with sales of nearly RM1 billion achieved in ten months, representing 132.4% of FY2022 full-year sales and making up close to one-third of the group’s total sales to-date in FY2023,” said Eco World president and chief executive officer Datuk Chang Khim Wah in a statement. “We believe this strong momentum will continue based on the sustained interest we have been receiving from both local and international industrialists,” he added. Meanwhile, the proposed acquisition of the 403.78-acre land in Kulai, Iskandar Malaysia, will present an opportunity for the group to develop its fifth business park, to be known as Eco Business Park VI. “This acquisition, which is expected to be completed in early 2024, will increase the group’s total industrial landbank to 2,416 acres and provide an estimated additional gross development value of RM1.58 billion,” it said. Shares in Eco World, which has appreciated by 74.6% since the beginning of the year, closed one sen or 0.92% higher to RM1.10 on Thursday, giving the group a market capitalisation of RM3.24 billion. BY ANIS HAZIM theedgemalaysia.com BY SUFI MUHAMAD theedgemalaysia.com Source: Bloomberg Eco World Development Bhd 0 20 40 60 80 0 200 400 600 800 Net profit (RM bil) Revenue (RM mil) FY2022 FY2023 3Q 4Q 1Q 2Q 3Q 46.4 1.8 5762.7 66.3 476.9 444 559.3 484.7 420.8 Source: Bursa Malaysia Comintel Corp Bhd 0 2 4 6 8 10 0 40 80 120 Net profit (RM mil) Revenue (RM mil) 2Q 3Q 4Q 1Q 2Q FY2023 FY2024 22.6 1.6 6.4 5.6 5.7 8.4 64.5 74.2 59.6 92.3 KUALA LUMPUR (Sept 21): Comintel Corp Bhd saw a more than five-fold rise in net profit to RM8.42 million for its second quarter ended July 31, 2023 (2QFY2024), from RM1.57 million a year earlier, on the back of a better performance from its construction segment. Revenue jumped 308.41% to RM92.30 million from RM22.60 million in 2QFY2023, according to the group’s bourse filing. Quarterly earnings per share rose to 2.2 sen, from 1.5 sen per share previously. The higher revenue and profitability was attributed to the group’s wholly-owned construction subsidiary, Binastra Builders Sdn Bhd (formerly known as Total Package Work Sdn Bhd) with the commencement of newer projects and improving progress of construction work activities. The construction segment saw revenue surge to RM89.7 million from RM22.1 million in 2QFY2023, while profit before tax increased to RM11.7 million from RM3.1 million. Cominetel said this segment is expected to continue to deliver positive results and improve the group’s overall results moving forward. For the six months ended July 31, 2023 (1HFY2023), Comintel’s net profit more than doubled to RM14.12 million or 3.7 RM151.84 million, from RM49.97 million. On its prospects, the group noted that Bursa Malaysia had approved its upliftment application from being classified as Practice Note 17 or PN17, effective Sept 5. It also noted that its construction segment has secured two letters of award and a revised letter of award totalling RM291.8 million for subcontract works from Binastra Construction (M) Sdn Bhd. However, the group had subsequently cancelled a letter of award accepted on April 26, 2022 worth RM33.8 million mutually agreed by contracting parties amid unpredictable market conditions, leading to increasing construction costs caused by a nine-month delay, said Comintel. As at July 31, 2023, the group’s outstanding order book stood at RM1.5 billion. “The group will continue to monitor the business environment to ensure prudent fiscal management and sustainable growth moving forward. “Nevertheless, the group is expected to deliver an optimistic performance for the financial year 2024 based on its existing order book and works toward the replenishment of its order book,” added Comintel. Comintel’s shares closed four sen or 3.20% higher at RM1.29 on Thursday, giving the group a market capitalisation of RM493.42 million. sen per share, from RM4.61 million or 3.29 sen per share. Half-year revenue more than tripled to
FRIDAY SEPTEMBER 22, 2023 8 THEEDGE CEO MORNING BRIEF HOME KUALA LUMPUR (Sept 21): Sime Darby Property Bhd has signed a memorandum of understanding (MOU) with Tenaga Nasional Bhd (TNB) to integrate rooftop solar solutions in the group’s townships and developments. In a statement on Thursday (Sept 21), Sime Darby Property group managing director Datuk Azmir Merican said the collaboration is a step towards transitioning the real estate industry towards renewable energy. “It also signifies our commitment to reducing our carbon footprint and playing our role in the nation’s green agenda.” The partnership involves a residential solar pilot project, which includes the leasing of rooftop spaces or implementation of rooftop solar solutions on up to 1,000 existing and future properties in the City of Elmina or other potential townships. Additionally, Sime Darby Property and TNB will explore the implementation of electric vehicle charging infrastructure within townships and/or developments by the group. Both parties will also look into microgrid solutions in townships, managed industrial parks and land banks within Sime Darby Property, read the statement. “Renewable energy involves more than just producing electricity and tackling the issue of finite resources. It is about fostering an environmentally and socially conscious mindset. By pursuing sustainability-focused initiatives, we will support Malaysia’s efforts to meet its clean energy goals and uphold our Purpose to be a Value Multiplier for People, Businesses, Economies, and the Planet,” added Azmir. Sime Darby Property, TNB seal MOU on solar energy initiatives KUALA LUMPUR (Sept 21): Kumpulan Wang Persaraan (Diperbadankan) (KWAP) recorded total unaudited gross investment income of RM3.8 billion in the seven-month period ended July 2023, said KWAP chief investment officer Hazman Hilmi Sallahuddin. Gross fund size of the civil servant retirement fund stood at RM184.5 billion at end-July, Hazman said during the launching of a new fund called Dana Perintis on Thursday. The fund’s last annual report was for the financial year ended Dec 2020. In that year, it recorded a gross investment income of RM6.81 billion, up 12.2% from RM6.07 billion in 2019, with a fund size of RM153.82 billion, up 4.3% from RM147.48 billion. The return on investment (ROI) in 2020 was 4.4%, which is a marginal improvement compared with 4.39% in 2019. “As a long-term institutional investor, KWAP has consistently outperformed the long-term return target of 5% to 6% over a 10-year rolling basis. “And as mentioned last year in our TERAS 5 announcement, we aim to achieve a long-term TWRR (time-weighted rate of return) of 7% from 2025 onwards,” said Hazman. Touching on Dana Perintis, Hazman said the new fund will see KWAP allocate up to RM500 million, and focus on investments into venture capital (VC) funds and startups in Malaysia. The fund aims to invest up to RM250 million each into selected Malaysia-focused VC funds; and direct investment into startups over the course of next 18- 24 months. Read the full story KUALA LUMPUR (Sept 21): UMW Group’s automotive sales increased by 18% in August 2023 with 41,386 units delivered as both UMW Toyota Motor (UMWT) and UMW’s associate Perodua make good their outstanding orders. The group’s auto sales rose by 16% to 271,515 units for the first eight months of 2023 against 233,367 units registered in the same period last year, it said in a statement. UMWT registered stronger August sales with the delivery of 10,275 units, 13% higher than the 9,091 delivered in August 2022. Year-to-date (YTD) August 2023, UMWT registered 67,283 units, recording a 9% growth versus 61,639 units in 2022’s corresponding period, representing a 13.4% market share. The top sellers were Toyota Vios, Hilux and Corolla Cross. UMWT introduced the improved 2023 Toyota Corolla and the Corolla GR Sport variant. It also unveiled the 2023 Lexus RX500h F Sport variant and launched the allnew Lexus RX350 in May 2023, UMW Group said. Meanwhile, Perodua registered 31,111 units in August 2023, 19% higher than the 26,039 units delivered in August 2022, mainly due to improving supply chain and enhanced production and sales operations. YTD August 2023, Perodua’s sales surged to 204,232 units, 19% higher than the 171,728 delivered in the same period in 2022. “Accordingly, Perodua achieved a 40.7% market share YTD August 2023 with top selling models [being] the Bezza, followed by Myvi and Axia,” it said. UMW Holdings Bhd president and group chief executive officer Datuk Seri Ahmad Fuaad Kenali said YTD August 2023, both companies registered higher sales versus the same period a year ago, driven by competitive and exciting new models and promotions. “Based on the outstanding bookings, we are confident that both companies will achieve their 2023 sales targets,” he added. KWAP records RM3.8 bil gross investment income in Jan-July 2023, CIO says UMW Group’s automotive sales up 18% to 41,386 in August 2023 BY CHESTER TAY & CHOY NYEN YIAU theedgemalaysia.com Bernama BY AFAAF ADAM theedgemalaysia.com Hazman Hilmi Sallahuddin SUHAIMI YUSUF/ THE EDGE
FRIDAY SEPTEMBER 22, 2023 9 THEEDGE CEO MORNING BRIEF is your company one of them? honouring Malaysia’s outstanding corporate performers TM Main Sponsor Official Car Supporting Sponsor
FRIDAY SEPTEMBER 22, 2023 10 THEEDGE CEO MORNING BRIEF HOME KUALA LUMPUR (Sept 21): Over £8.7 million (RM45,825,918.13) originating from 1Malaysia Development Bhd (1MDB) was transferred to former prime minister Datuk Seri Najib Abdul Razak’s private AmBank accounts in 2014 by an associate of fugitive financier Low Taek Jho (Jho Low). At the 1MDB-Tanore trial on Thursday, the prosecution’s 47th witness, Bank Negara Malaysia analyst Adam Ariff Mohd Roslan, testified about how this particular amount of money ended up in Najib’s account. He said the £8.7 million was transferred by Vista Equity International Partners Ltd (Barbados) across four tranches in the two months between Oct 17 and Dec 17, 2014. Vista Equity is a company owned and controlled by fugitive Eric Tan Kim Loong, a close associate of Jho Low. Adam, who was testifying before judge Datuk Collin Lawrence Sequerah, showed bank statements and records of Najib’s 880 AmPrivate-Banking-1MY account on the transaction. The funds originated from two loans by 1MDB’s subsidiary 1MDB Energy Holdings Ltd (1MEHL) totalling US$1.225 billion from Deutsche Bank Singapore, which Najib approved. Aside from Najib, funds from 1MEHL were also siphoned to Aabar Investments PJS Ltd (Aabar-Seychelles) — a shell company named after a subsidiary of International Petroleum International Co (IPIC), which 1MDB had dealings with. One of 1MEHL’s loans totalling US$975 million was made available on Sept 1, 2014. On Sept 2, 1MEHL made a utilisation request to Deutsche Bank AG (Hong Kong branch) to draw down US$500 million and to pay US$223.333 million to Aabar-Seychelles’s account. On Sept 29, 2014, 1MEHL made another utilisation request to draw down the remaining US$475 million on Sept 30 and to pay more than US$457 million to the same Aabar-Seychelles’ account. In total, Aabar-Seychelles received more than US$681 million from 1MEHL in two tranches on Sept 3 and Sept 30, 2014. Read the full story 1MDB-Tanore trial: Witness details £8.7 mil money trail to Najib’s account KUALA LUMPUR (Sept 21): Malaysia is expected to face continued challenges to policy-making, despite the conclusion of recent state elections for six of the country’s 13 states, as the unity government comprises parties with diverse ideologies, which could slow reform momentum, according to BMI Country Risk & Industry Research, a unit of Fitch Solutions Group Ltd. Challenges also arise from increased influence of opposition Perikatan Nasional in the country’s political scene, BMI said in a report on Wednesday. “Although the composition of state legislatures does not directly affect the national legislature, the state elections were a bellwether of the electorate’s political mood,” it said. Nonetheless, BMI expects Malaysia’s improved inflationary backdrop and resilient labour market to help keep the nation’s social stability risks low. Malaysia’s consumer price index has been improving since peaking at 4.7% yearon-year in August last year, and has most recently fallen to a 23-month low of 2.0% in July 2023. “The decline in inflation suggests that the central bank’s real policy rate is now in positive territory — a development which since 2006 has typically coincided with the end of the monetary tightening cycle. “Additionally, the labour market has remained relatively robust, with the participation rate sitting at an all-time high of 70.1% as of July 2023,” it said. The research house maintained Malaysia’s short-term political risk index score at 71.7 out of 100, lower than Asia’s regional average (gross domestic product-weighted) of 77.3. “In light of the weaker-than-expected performance of PH (Pakatan Harapan), we believe that the unity government will be inclined to roll out race-based policies that favour the Bumiputeras (ethnic Malays) to shore up support among this core group,” it said. “However, there are two main implications of this. First, doing so would cause the coalition government to backtrack from its commitment to implementing needs-based policies as opposed to race-based policies. “Second, while such policies could prove popular with the support base of the Malaysia’s policymaking challenges remain after sixstate elections, says BMI BY CHESTER TAY theedgemalaysia.com BY TIMOTHY ACHARIAM & TARANI PALANI theedgemalaysia.com once-dominant Barisan Nasional (BN), which is part of the unity government, it could stoke tensions with other members of the coalition government, including Gabungan Parti Sarawak and Gabungan Rakyat Sabah, leading to a slowdown in reforms and/or a policy gridlock,” it added. BMI also noted that there are already “nascent signs” that the unity government could face gridlocks over policy in the future, citing Muar Member of Parliament Syed Saddiq Syed Abdul Rahman’s withdrawal of his support for the unity government, following the public prosecutor’s decision to temporarily drop 47 corruption charges against Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi from BN. Although Syed Saddiq’s withdrawal of support does not threaten Prime Minister Datuk Seri Anwar Ibrahim’s position as the country’s leader, BMI believes that such developments could raise doubts about the PH chairman’s commitment to fighting corruption. “If the case is perceived to be handled lightly, we believe PH would risk losing its current support base, while deepening divisions within the already-fragmented government, and ultimately slowing the pace of Anwar’s reform agenda,” it said. The unity government, which came into power in November 2022, comprised 148 MPs before Syed Saddiq revoked his support, just enough to secure a two-thirds majority in government. Bank Negara Malaysia analyst Adam Ariff Mohd Roslan ZAHID IZZANI/ THE EDGE
FRIDAY SEPTEMBER 22, 2023 11 THEEDGE CEO MORNING BRIEF HOME KUALA LUMPUR (Sept 21): The prosecution in Datin Seri Rosmah Mansor’s money laundering and income tax evasion trial wants the High Court to dismiss her application to strike out the 17 charges against her. The 17 charges against Datin Seri Rosmah Mansor are in order, not defective and with basis, the prosecution said in its bid to dismiss her application at the High Court. The defence’s claim that the charges are not conclusive and did not stipulate any offence is “an error in law”, the prosecution said in an affidavit supporting the dismissal of the application by deputy public prosecutor (DPP) Poh Yih Tinn, dated Thursday. Poh also denied that the charges against Rosmah represent a violation of her constitutional rights, citing a lack of strong facts behind such reasoning. On the four charges under the Income Tax Act, the question on whether the funds in Rosmah’s account is considered chargeable income could be determined under Section 4 of the Anti Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activity — with regards to those who commit money laundering offences, Poh said. “It does not rely on any order, request or assessment of the Inland Revenue Board (LHDN),” the DPP said. Furthermore, it is wrong to say that issues with regards to chargeable income can only be determined by the Special Commissioner of Income Tax (SCIT), Poh said. “Besides this, the claim by the defence that the court is taking over the task of the SCIT is made without basis, as the court would have to consider all 17 charges within the meaning of criminal offences, and within the criminal procedure jurisdiction,” Poh added. “For these reasons, the prosecution has asked the application by the applicant (Rosmah) to strike out the charges be dismissed,” he said. It was earlier reported this month that Rosmah, wife of former prime minister Datuk Seri Najib Razak had applied to strike out her 17 charges by claiming that the charges are baseless, defective, premature and/or did not disclose any legal offence. Rosmah claimed the charges brought against her were for allegedly failing to file her tax returns; however, there was no instruction from the IRB that suggested the amounts stated under the charges were taxable. “I truly believe that the charges stated above are defective, premature and inconclusive because there is no order, instruction, request and/or claim that states that the amounts stated in the charges are subject to the payment of tax under Income Tax Act, 1967,” she said in her affidavit in support. High Court judge K Muniandy has fixed Dec 13 to hear her application to strike out the 17 charges. Rosmah, 71, faces 17 charges, with the first 13 charges related to a money laundering offence under Section 4 of AMLA amounting to RM7.1 million while the 14th to 17th charges concern a failure to declare the said amounts as revenue to the LHDN. Her money laundering and income tax evasion case, which is her second criminal trial, commenced last month, with the prosecution alleging that she does not have an independent source of income and yet made false statements on the money that was deposited into her account. Rosmah has already been convicted with three counts of graft by the High Court with regards to the solar hybrid case involving 369 rural schools in Sarawak, and sentenced to 10 years jail, together with a RM970 million fine, which she is appealing. Prosecution seeking to dismiss Rosmah’s bid to strike out money laundering, income tax evasion charges KUALA LUMPUR (Sept 21): The High Court here will decide on Nov 9 whether to acquit or convict Muar Member of Parliament Syed Saddiq Syed Abdul Rahman on charges of abetting in criminal breach of trust (CBT), misappropriation of property and money laundering. Based on the search in the judicial system on Thursday, Judge Datuk Azhar Abdul Hamid will deliver the verdict at the end of the defence case at 9am. Deputy public prosecutor Datuk Wan Shaharudin Wan Ladin, when contacted, confirmed the date. On March 14 this year, the defence team closed its case after calling four witnesses, including Syed Saddiq. On Oct 28 last year, Syed Saddiq, 30, was ordered to enter his defence on the four charges after the prosecution managed to establish a prima facie (upon initial examination) case against him at the end of the prosecution case. The prosecution closed its case on Sept 27 last year after calling 30 witnesses, who included Syed Saddiq’s parents, father Syed Abdul Rahman Abdullah Asagoff Decision on Syed Saddiq’s CBT, money laundering case fixed for Nov 9 and mother Shariffah Mahani Syed Abdul Aziz, as well as former Armada assistant treasurer Rafiq Hakim Razali. Syed Saddiq is charged as then Bersatu Youth wing or Armada chief, with abetting Rafiq, who was entrusted with RM1 million in funds belonging to the wing, to commit a criminal breach of trust by misappropriating the funds at CIMB Bank Bhd, Menara CIMB KL Sentral, Jalan Stesen Sentral 2 here on March 6, 2020. He is also charged with misappropriating RM120,000 from the Maybank Islamic Bhd account belonging to Armada Bumi Bersatu Enterprise by causing Rafiq Hakim to dispose of the money at Malayan Banking Bhd, Jalan Pandan 3/6A, Taman Pandan Jaya here between April 8 and 21, 2018. He also faces two counts of money laundering involving two transactions of RM50,000 each, believed to be proceeds from unlawful activities, from his Maybank Islamic Bhd account into his Amanah Saham Bumiputera account at a bank in Jalan Persisiran Perling, Taman Perling, Johor Baru, on June 16 and 19, 2018. Bernama BY HAFIZ YATIM theedgemalaysia.com
friday september 22, 2023 12 The E dge C E O m o rning brief home news In brie f Sarawak woman fails to get leave to revoke name as Muslim convert KUALA LUMPUR (Sept 21): A woman from Sarawak on Thursday failed to obtain leave from the High Court here to initiate a judicial review to compel the Federal Territory Registrar of Converts to remove her name from the Register of Converts. Federal counsel Mohammad Sallehuddin Md Ali said the decision was made by judge Datuk Ahmad Kamal Md Shahid in allowing a preliminary objection by the Attorney General’s Chambers to the application filed by the 26-yearold woman. “The court dismissed the [woman’s] application on the grounds that the matter was not subject to judicial review based on Article 121 (1A) of the Federal Constitution. “Only the Shariah Court has jurisdiction to hear the application. The court dismisses the woman’s application with costs of RM3,000,” said Mohammad Sallehudin when contacted after online proceedings on Thursday. Lawyer Iqbal Harith Liang, representing the woman, also joined in the online proceedings. The woman filed the leave application on April 20, naming the Federal Territory Registrar of Converts, the Federal Territory Islamic Religious Council, and the Malaysian government as respondents. The woman, who was born on July 9, 1997 to a Christian mother and father, is seeking a declaration that the Administration of Islamic Law (Federal Territories) Act 1993 (Act 505) gives jurisdiction to the Registrar of Converts to declare a person no longer a Muslim. — Bernama KNM granted reprieve from creditors pending finality of RO extension application KUALA LUMPUR (Sept 21): The High Court here has granted cash-strapped KNM Group Bhd an extension on its temporary restraining order (RO) pending the conclusion of the group’s application for a formal extension. In a filing on Thursday (Sept 21), the financially-troubled oil and gas process equipment maker said the court extended the ad interim (temporary) RO until the disposal of the RO extension application. “The next hearing was fixed on Oct 30, 2023,” the group said, adding it will announce further developments in due course. The Practice Note 17 outfit was first granted a three-month RO back in December last year in conjunction with leave (permission) to call a court-convened meeting with creditors for a proposed scheme of arrangement. In March, the RO was extended a further five months to August. In August, KNM filed the current application to extend the RO and was granted the ad interim RO pending the conclusion of the application. However, the situation revolving around KNM has changed in recent times, as the group currently faces a bid from a group of shareholders looking to take control of its board. — by Izzul Ikram KESM posts first annual loss in FY2023 KUALA LUMPUR (Sept 21): KESM Industries Bhd registered an annual net loss of RM3.13 million for the financial year ended July 31, 2023 (FY2023) compared to a net profit of RM1.67 million in the previous year, dragged by rising costs and a downturn in the semiconductor industry this year. The independent burn-in and test service company said annual revenue declined by 7% to RM228.28 million from RM246.74 million previously, largely due to the absence of revenue from electronic manufacturing services (EMS) which was scaled down, and reduced volumes for burn-in and testing services. The lower revenue, coupled with higher finance and utility costs, resulted in KESM’s first annual loss since its listing in 1994, Bloomberg data showed. For the final quarter ended July 31, 2023 (4QFY2023), the group returned to the black by posting a net profit of RM316,000 from a net loss of RM2.50 million reported in the same period last year (4QFY2022), KESM said in its filing. Quarterly revenue, on the other hand, came in higher by 11% to RM61.69 million from RM55.66 million, fuelled by higher burn-in and testing sales generated from newly invested capital expenditure. — by Sulhi Khalid Abang Johari: Sarawak investing over RM10 bil to develop Bintulu as sour gas hub BINTULU (Sept 21): Sarawak Premier Tan Sri Abang Johari Tun Openg said on Thursday the state is investing more than RM10 billion to make Bintulu a sour gas hub with the development of the Sarawak Integrated Sour Gas Evacuation System (SISGES) in Tanjung Kidurong. He said the development within the Petrochemical Industrial Park would align well with Sarawak’s ambitions to attain developed state status by 2030. “Sour gas used to be considered as not profitable to develop as the processes were expensive, but new technology has reduced the cost considerably,” he said at the ground-breaking ceremony for Phase 1 of the SISGES sour gas hub for Shell’s Rosmari-Marjoram Bintulu Onshore Gas Plant in Tanjung Kidurong. Abang Johari is optimistic that Sarawak’s continental shelf subsea still has huge gas reserves, despite early predictions in the early 1990s that the state’s gas could only last for another 20 years. “More than 30 years on, more and more oil and gas fields are discovered offshore Sarawak, the latest being the six fields in five blocks — SK306, SK411, SK313, SK301B and SK315,” he added. — Bernama SapuraOMV extends Dayang’s maintenance contract to end-2024 KUALA LUMPUR (Sept 21): Dayang Enterprise Holdings Bhd’s Pan Malaysia contract from SapuraOMV Upstream (Sarawak) Inc to provide maintenance, construction and modification services for 2018 to 2023 — Package C (East Malaysia) — has been extended until Dec 31, 2024. In a bourse filing on Thursday, the integrated oil and gas service provider said the company’s wholly-owned subsidiary Dayang Enterprise Sdn Bhd was awarded an extension of one year, five months and 21 days, effective from July 2023. — by Izzul Ikram www.desb.net bernama
FRIDAY SEPTEMBER 22, 2023 13 THEEDGE CEO MORNING BRIEF WORLD (Sept 21): US Federal Reserve (Fed) Chair Jerome Powell made clear Wednesday the central bank is close to done raising interest rates, but his colleagues delivered the message that resonated: Borrowing costs must remain higher for longer amid renewed strength in the economy. After a series of rapid rate hikes over the past 18 months, the Fed can now “proceed carefully”, Powell said — a sentiment he repeated at least a dozen times Wednesday during a press conference that followed the central bank’s decision to leave rates unchanged. In quarterly economic projections released following a two-day policy meeting, 12 of 19 Fed officials said they still expect to raise rates once more this year. The bigger takeaway for investors was the revelation that policymakers see fewer rate cuts than previously anticipated in 2024, in part due to a stronger labour market. The projections also showed they expect inflation to fall below 3% next year, and return to their 2% target by 2026. In other words, the “soft landing” for the US economy that looked more remote three months ago now seems within reach. “They’re basically saying that a soft landing scenario is going to be met with tighter policy,” said Brett Ryan, a senior US economist at Deutsche Bank AG. “That was the main takeaway.” The US economy has so far been resilient against the Fed’s historic tightening campaign, which lifted the target range for the federal funds rate from nearly zero in March 2022 to 5.25% to 5.5% in July, a 22-year high. Consumer spending remains strong and the labour market has been steady, though job growth is starting to moderate. Fed signals higher-for-longer rates with hikes almost finished BY JONNELLE MARTE Bloomberg Powell stressed that policymakers are facing a high amount of uncertainty, and seemed determined not to give markets any reason to rally. Read also: Goldman Sachs pushes its forecast for Fed rate cut to 4Q2024 That strength bodes well for the Fed’s efforts to cool inflation without sending the economy into a recession, but it’s also raised concern at the central bank that the inflation fight could be prolonged. The new projections reflected that. Fed officials now expect their benchmark rate to be at 5.1% by the end of next year, according to their median estimate, up from 4.6% in the last projection round in June. During the press conference, Powell stressed that policymakers are facing a high amount of uncertainty, and seemed determined not to give markets any reason to rally. Treasuries sold off after the decision, with the yields on two-, five- and 10-year US government bonds all rising to the highest in more than a decade. Wednesday’s 0.9% drop for the S&P 500 was the second-worst this year on a Fed day, second only to the 1.7% decline registered in March. “If you were really looking for the worst piece of news, it’s not necessarily that we’re going higher but that we’re staying longer — that’s the new narrative,” said Art Hogan, chief market strategist at B Riley Wealth. “It’s not how high, but how long.” The Fed chief also cautioned that a soft-landing scenario was not yet guaranteed, saying it was not the Fed’s baseline expectation — despite what the latest projections implied. “Ultimately, this may be decided by factors that are outside our control,” Powell said, though he later added that a soft landing is “what we’ve been trying to achieve for all this time.” “Even though the dot plot shows another hike this year, we see a number of potential adverse shocks to growth between now and end-year that could derail that plan. Economic uncertainty and disruptions from the UAW strikes and looming government shutdown may push the Fed to postpone a hike to 2024 — or even nix it completely,” said Anna Wong, chief US economist at Bloomberg Economics. With an array of potential economic headwinds on the horizon — including rising gas prices, a United Auto Workers strike and a looming government shutdown — investors remain skeptical that the Fed will follow through with another rate increase this year. Futures show roughly even odds of more tightening in 2023. Lou Crandall, the chief economist at Wrightson ICAP LLC, said the economic picture may end up less favourable than what policymakers expect for the coming months. “The odds are pretty good that unemployment in the fourth quarter will be higher than they project, and core inflation will be lower,” Crandall said. “The risk of another rate hike is pretty low.”
friday september 22, 2023 14 The E dge C E O m o rning brief world (Sept 21): The Swiss National Bank (SNB) defied expectations of another interest-rate hike, pausing its monetary tightening in a bid to avoid adding constriction onto a stalled economy. Policymakers led by president Thomas Jordan left the key rate at 1.75%, an outcome anticipated by only a small minority of economists surveyed by Bloomberg. “The significant tightening of our monetary policy over recent quarters is countering remaining inflationary pressure,” Jordan said in Zurich. “It cannot be ruled out that further tightening of monetary policy may become necessary.” The franc fell as much as 0.9% to 0.9667 per euro, its biggest drop since May. The move, which contrasts with last week’s increase in the neighbouring euro area, suggests officials are reassured that inflation already below the SNB’s 2% ceiling isn’t in danger of too much re-acceleration. It suggests more concern about growth, not least after recent gains in the franc. The decision “maintains the tension by signalling a tendency towards higher interest rates”, said Karsten Junius, the chief economist of Bank J Safra Sarasin Ltd, who predicted the hold. “This prevents key interest rate cuts from being discussed and priced in next.” Swiss National Bank surprises with rate pause as tightening tames inflation (Sept 21): The Bank of England halted the most aggressive cycle of interest-rate rises in more than three decades amid falling inflation and mounting fears of recession. The central bank held its key rate at 5.25%, ending a series of 14 successive hikes since December 2021, when rates were just 0.1%. Five members of the Monetary Policy Committee voted to leave rates unchanged and four wanted to raise them to 5.5%. Governor Andrew Bailey, who had the casting vote, chose to hold. The pound fell to the weakest since March against the dollar as traders trimmed bets on further interest-rate hikes. Markets were split before the decision, betting on a roughly 50% chance of a vote to hold, after data showed inflation unexpectedly fell in August. Traders are now pricing in less than a full quarter-point increase of further tightening over the coming months. Goldman Sachs and Nomura said on Wednesday that rates have probably already peaked. Sterling traded as much as 0.9% weaker at US$1.2239, taking a slide over the past month to around 4%, the biggest decline across Group-of-10 peers. The decision will come as a relief to millions of households facing the threat of even higher mortgage costs and indebted businesses. It will also be welcomed by Prime Minister Rishi Sunak, who has promised to ease the inflation crisis and improve living standards ahead BOE keeps rates unchanged for first time in almost two years by Philip Aldrick Bloomberg by Bastian Benrath Bloomberg The decision by the SNB, which unveils announcements only once a quarter, widens the gap in rates with its peers. Borrowing costs there have increased by 250 basis points since starting out last year, compared with 450 basis points in the euro area, and even more in the US. Fed, Nordics, BOE The move puts Switzerland in position to keep pausing and let tighter monetary policy feed through the economy in tandem with counterparts around the world, in line with the “higher for longer” stance espoused by Federal Reserve (Fed) chair Jerome Powell. That outlook was reiterated on Wednesday by US policymakers as they kept rates unchanged, and signalled that they’re close to done with hiking. Powell said several times that the central bank can now “proceed carefully”. Sweden’s Riksbank followed through with an expected quarter-point rate hike and left the door open to another move, though its own projections don’t fully anticipate one materialising. In Norway, the central bank also raised rates and sees one more step, most probably in December. of an election expected next year. The BOE, however, signalled that policy was only on pause and it would respond if inflation, which remains more than three times above the 2% target, doesn’t fall as expected. The MPC forecasts consumer-price inflation to hit the target in the second quarter of 2025. “Inflation has fallen a lot in recent months Traders are now pricing in less than a full quarter-point increase of further tightening over the coming months. Read the full story Policymakers led by Swiss National Bank president Thomas Jordan left the key rate at 1.75%, an outcome anticipated by only a small minority of economists surveyed by Bloomberg. Bloomberg and we think it will continue to do so,” Bailey said in a written statement. “That’s welcome news. But there is no room for complacency. We need to be sure inflation returns to normal and we will continue to take the decisions necessary to do just that.” Chancellor of the Exchequer Jeremy Hunt told Bailey in a letter than the MPC has his full support. “The tough action taken by the MPC to squeeze inflation out of the system is working,” Hunt said, adding that the government needed to show fiscal discipline to bolster the bank’s actions. Repeating its former guidance, the committee said rates would be “sufficiently restrictive for sufficiently long” and “further tightening in monetary policy would be required if there were evidence of more persistent pressures.” Like other major central banks, the implication is that rates would remain high for longer. “We are starting to see the tide turn against high inflation, but we will continue to do what we can to help households struggling with mortgage payments,” Hunt said in a statement from the Treasury. “Now is the time to see the job through. We are on track to halve inflation this year and sticking to our plan is the only way to bring interest and mortgage rates down.”
friday september 22, 2023 15 The E dge C E O m o rning brief world JAKARTA (Sept 21): Indonesia’s central bank left interest rates unchanged for an eighth straight month on Thursday, amid renewed pressure on the rupiah currency and bond yields. Bank Indonesia (BI) held the seven-day reverse repurchase rate steady at 5.75%, where it has been since January, as widely expected by 31 economists surveyed by Reuters. Its two other main rates were also kept unchanged. The decision to hold rates was consistent with BI’s stance to ensure inflation stays within target range in 2023 and 2024, BI governor Perry Warjiyo said in a press conference. The inflation target range will be lowered to 1.5% to 3.5% in 2024. The rupiah has fallen gradually against the US dollar in recent weeks to its weakest in six months, amid rising US Treasury yields. Indonesian bond yields have also risen. BI has been trying to balance currency stability with keeping inflation in check and maintaining growth momentum in Southeast Asia’s largest economy as exports fall amid softening commodity prices. The Indonesian currency remained emerging Asia’s best performer. BI began offering its own notes this month in a tweak to its monetary operations, while also aiming to attract capital inflows. It sold US$1.6 billion (RM7.5 billion) worth of notes in its maiden auction on Sept 15. Inflation, which peaked near 6% last year on high energy and food prices, returned to BI’s 2% to 4% target earlier than expected this year. In August, inflation remained close to the midpoint of the range at 3.27%. Bank Indonesia stands pat on rates for eighth monthly review BANGKOK (Sept 21): Thailand’s central bank is monitoring the weak baht, which is not entirely bad for the economy and could help the key export and tourism sectors, the prime minister said in remarks aired on Thursday, as the baht hit multi-month lows. Srettha Thavisin, speaking during a visit to the US, said the government was not interfering in the central bank’s duty. The Thai currency’s depreciation was driven by capital outflows due to interest rate differentials, Srettha told reporters. The US Federal Reserve held interest rates steady and its hawkish stance on monetary policy strengthened the dollar. The baht traded at 36.16 per dollar at 0615 GMT, after hitting a more than 10-month low of 36.32 on Wednesday. The unit has weakened by 4.4% against the greenback so far this year. MANILA (Sept 21): The Philippine central bank kept its key interest rate steady at 6.25% on Thursday, as expected, but signalled its readiness to tighten monetary policy at its next meeting in November if inflation pressures persist. “A rate hike is on the table for November. How big it would be would depend on the data,” Bangko Sentral ng Pilipinas (BSP) governor Eli Remolona told a press conference, during which he ruled out a rate reduction this year “We’re ready to raise if the supply shocks are significant enough.” The BSP’s decision to maintain benchmark rates, now called target reverse repurchase (RRP), for a fourth straight meeting comes after the US Federal Reserve kept rates steady on Wednesday while sketching a stricter policy path moving forward. All but two of the 25 economists in a Sept 12-18 poll by Reuters had expected the central bank to leave its overnight borrowing rate unchanged. Two predicted a hike of 25 basis points. The peso was down 0.4%, as of 0734 GMT, as the Fed’s hawkish signal on monetary policy boosted the US dollar. In its latest consumer price forecasts, the BSP sees inflation averaging 5.8% this year and 3.5% in 2024, higher than earlier projections of 5.6% (2023) and 3.3% (2024). The new projections factor in the potential impact of further adjustments in transport fares and electricity rates. But the BSP said inflation was still likely to revert to the 2% to 4% target range by the last quarter of 2023 in the absence of further supply-side shocks. For 2025, the inflation forecast is unchanged at 3.4%. “A weak baht is not always bad. It helps exports... and more people will want to travel and spend money. We can benefit,” Srettha said. Southeast Asia’s second-largest economy has seen weaker than expected exports, which might fall 1% to 2% this year, with economic growth expected at 2.8%, less than earlier projected. The new government, which took office last month, is planning higher spending to help finance fresh policies to stimulate the economy weighed down by soft demand for exports and low investor confidence. Asked whether a large public borrowing plan would affect fund-raising by the private sector, Srettha said market liquidity remained ample. “There is a lot of liquidity. Don’t worry. It’s not a concern at all,” he added. Srettha’s government also plans to boost growth by attracting more tourists, waiving visa requirements for visitors from China and Kazakhstan for five months. China was a major travel market for Thailand before the pandemic. Thailand, a key Asian travel hotspot, is targeting 28 million foreign arrivals this year and 40 million next year. In 2019, there was a record of 39.9 million foreign tourists, including 11 million from China. The government earlier said it was aiming for five million Chinese tourists this year. Thailand’s weakening baht not all bad for economy — PM Philippine central bank keeps rates steady but sends hawkish signal by Satawasin Staporncharnchai & Chayut Setboonsarng Reuters by Neil Jerome Morales & Mikhail Flores Reuters by Gayatri Suroyo, Stefanno Sulaiman & Fransiska Nangoy Reuters Read also: Indonesia parliament approves US$216 bil state budget for 2024 Read the full story
friday september 22, 2023 16 The E dge C E O m o rning brief world Morgan Stanley ups Brent forecasts on Saudi-Russia cuts, says US$100 per barrel ‘stretched’ Auto strike may spit fuel on US inflation flame by Jamie McGeever Reuters Reuters (Sept 21): Morgan Stanley has raised its Brent oil price forecasts, saying the market could remain under-supplied for several quarters especially after Saudi-Russian output cuts, but said prices above US$100 a barrel would seem “stretched.” The bank increased its fourth-quarter Brent forecast to US$95 a barrel from US$82.5. It also upped its outlook by US$12.5 to US$92.5 a barrel for the first quarter of 2024, by US$10 to US$90 for the second, by US$7.5 to US$87.5 for the third, and by US$5 to US$85 for the fourth. The global benchmark was trading around US$93 a barrel on Thursday. On Tuesday, oil prices reached their highest in 10 months, prompted by extended production cuts from Saudi Arabia and Russia. “With these cuts, fundamentals are clearly tighter-for-longer and prices are well supported,” Morgan Stanley said in a note dated Wednesday, adding prices were well supported around current levels as long as the market remained in deficit. Goldman Sachs on Wednesday said producer group Opec could sustain Brent crude prices in a range between US$80 and US$105 per barrel in 2024, on growing oil demand and extended supply cuts. ORLANDO, Florida (Sept 20): With oil prices at their highest this year and eyeing US$100 (RM469) a barrel again, the last thing US consumers, businesses and policymakers need is another inflationary headache. The fledgling auto workers strike, if it lasts and broadens out, could be just that. Most economists reasonably focus on the temporary blow to US economic output or payrolls from a lengthy strike across the sector. And the economy could contract almost one full percentage point in the fourth quarter, according to Morgan Stanley economists, which would cut their full-year 2023 gross domestic product growth call to 1.4% from 1.7%. But the potential effect on new and used car prices, at a time when inventories remain historically low, combined with a significant wage settlement, could also move the inflation dial. This is a worst-case scenario for the US Federal Reserve (Fed). Policymakers and market participants won’t need reminding of the role supply shocks and shortages of chips, parts and other inputs had in driving inflation to the highest in over 40 years after the pandemic. Soaring used car prices had an outsized impact on US inflation, in particular. That dynamic has reversed over the last year, but disinflationary base effects are fading and could quickly flip to being inflationary in the event of a damaging strike. Michael Feroli, the chief US economist at JPMorgan, is wary. A prolonged nationwide strike could put already-low inventory under heavy strain, posing “significant” upside risk to auto prices. “Such an outcome will present another wrinkle for the ongoing disinflation as it would halt the recent streak of soft readings in the CPI (consumer price index) component for motor vehicles,” he and his team wrote on Friday. Step on the gas... The transportation group accounts for around 16% of the US CPI, and around half of that is the new and used motor vehicles index. The annual rate of used cars and trucks price inflation reached a record high 45% in June 2021, according to one measure from the Bureau of Labor Statistics, while Cox Automotive’s Manheim index of used vehicle prices rose at a peak annual rate of 54% in April that year. Both have been showing annual deflation since late last year, contributing to the slowdown in broader consumer price inflation across the country, but the rate of price declines has been slowing. The United Auto Workers (UAW) strike against the “Detroit Three” automakers General Motors, Ford and Stellantis entered its fifth day on Tuesday. It is the first time ever the union strike has been across all three automakers simultaneously. Fewer than 13,000 of the UAW’s 150,000-strong workforce are involved in the strike over pay and benefits, which is currently centered on one US assembly plant at each company. If no agreement is reached, that could quickly spread in numbers and locations. Detroit’s Big Three accounted for 43% of new cars sold in the US last year, according to Cox Automotive, so the disruption is potentially huge. JPMorgan analysts also warned that a significant wage settlement — the UAW is looking for a 40% increase over four years — will present an upside risk for inflation across the sector as some of that will be passed onto consumers. Read the full story JPMorgan analysts also warned that a significant wage settlement — the United Auto Workers is looking for a 40% increase over four years — will present an upside risk for inflation across the sector as some of that will be passed onto consumers.
friday september 22, 2023 17 The E dge C E O m o rning brief world (Sept 21): Rupert Murdoch has stepped down as the chairman of Fox Corp and News Corp, ending a more than seven-decade career during which he created a media empire spanning from Australia to the US. His son, Lachlan Murdoch, will become the sole chairman of News Corp and continue as the chair and CEO of Fox, the companies said on Thursday. The transition solidifies Lachlan’s role as the leader of the media empire, putting to rest questions of succession within the Murdoch family. The news comes just months after Murdoch, 92, scrapped a plan that would have reunited his media empire by merging Fox and News Corp. Murdoch, who has near-controlling stakes in both companies, will be appointed chairman emeritus of both the companies. In a memo to staff Thursday, Murdoch wrote: “Our companies are in robust health, as am I.” Murdoch, who has six children, has long desired his children to eventually take the reins of the empire. His son James had been CEO of Twenty-First Century Fox prior to the company’s decision to sell its film and television assets to Walt Disney Co for US$71.3 billion (RM334.5 billion), a deal that closed in 2019. James then channelled proceeds from the deal into a private investment firm, Lupa Systems. Lachlan was appointed CEO of the new Fox Corp. Rupert Murdoch steps down as chairman of Fox, News Corp Economic growth remains a big challenge for Germany — finance minister WASHINGTON (Sept 21): The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, but could rebound in the weeks ahead as a partial strike by the United Auto Workers (UAW) union forces automobile manufacturers to temporarily lay off workers because of shortages of some materials. Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 201,000 for the week ended Sept 16, the Labor Department said on Thursday. Economists polled by Reuters had forecast 225,000 claims for the latest week. The labour market remains tight, with claims in the lower end of their 194,000 to 265,000 range for this year. The Federal Reserve held interest rates steady on Wednesday but stiffened its hawkish stance, with a further rate increase projected by the end of the year and monetary policy to be kept significantly tighter through 2024 than previously expected. Since March 2022, the US central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range. Fed chair Jerome Powell told reporters on Wednesday that “the labour market remains tight, but supply and demand conditions continue BERLIN (Sept 21): Economic growth remains a big challenge for Germany, German Finance Minister Christian Lindner said on Thursday. “Growth remains a major challenge,” he said. “We have to strengthen growth in Germany, not through government demand programmes that could fuel inflation, but more on the supply side,” Lindner said at an event organised by Handelsblatt. He said that fighting inflation is a priority for the government, with a “moderately restrictive” fiscal policy, in line with the European Central Bank’s tightening of monetary policy. “It is like a fire - not only the fire is dangerous, also the water to extinguish it could be dangerous,” Lindner said, in reference to expansive fiscal policies that could spur inflation and lengthen the central banking campaign to tame it. The finance minister said that this year, for the first time since the pandemic in to come into better balance”. Job growth and openings have been slowing. The UAW last week launched a targeted strike against Ford, GM and Stellantis, impacting one assembly plant at each company. It has threatened to broaden the work stoppages, which for now only involve about 12,700 of the affected 146,000 UAW members. Though striking workers are not eligible for unemployment benefits, the walkout has snarled the supply chain. Ford last Friday furloughed 600 workers who are not on strike, while GM said it expected to halt operations at its Kansas car plant, affecting 2,000 workers. Chrysler-parent Stellantis said it would temporarily lay off 68 employees in Ohio and expects to furlough another 300 workers in Indiana. The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of September’s employment report. The strike is unlikely to have an impact on payrolls as it started towards the end of the survey week. Workers most likely received pay for that week. Claims fell between the September and August survey period. Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the state of the labor market in September. The so-called continuing claims declined 21,000 to 1.662 million during the week ending Sept 9, the claims report showed. Continuing claims remain historically low, a reminder that labour market conditions are still tight. US weekly jobless claims unexpectedly fall by Lucia Mutikani Reuters by Helen Coster & Aditya Soni Reuters by Maria Martinez Reuters 2020, the debt ratios and the deficit ratio in the national budget were falling. “Despite the turnaround to a moderately restrictive budgetary policy, we have record investments,” he said, in reference to the 2024 budget — the budgetary plan targets €54.2 billion (US$57.77 billion or RM270.84 billion) in investments next year. reuters
friday september 22, 2023 18 The E dge C E O m o rning brief world Hong Kong holds rate as Fed presses pause on hiking cycle (Sept 21): Australia has recorded its first budget surplus since the eve of the 2008 global financial crisis as an ultra-tight labour market and elevated commodity prices swelled the nation’s fiscal coffers. The underlying cash surplus was A$22.1 billion (US$14.2 billion) in the 12 months through June 30 this year, or 0.9% of gross domestic product, easily exceeding the A$4.2 billion windfall predicted in the May 9 budget. Still, the government’s books are expected to slip back into the red as mineral prices retrace and a sharp tightening of monetary policy pushes up unemployment. The center-left Labour government has been forced to bank most of the fiscal windfall to avoid further fueling inflation. It’s trying to act in concert with the Reserve Bank that raised its cash rate to 4.1% in June from a record-low 0.1% in April 2022. The RBA has paused at its past three meetings amid signs that price pressures are beginning to abate. “Our responsible budget management has not just delivered the first surplus in 15 years, it’s also taken pressure off inflation, interest rates and the cost of living,” Treasurer Jim Chalmers said in a statement. “By banking most of the revenue upgrade when inflation was at its peak, our budget strategy has been exactly right for the times and suited to the challenges we confront.” The surplus is the first by a Labour government since 1989-90 when Paul Keating was treasurer. That fiscal position was rapidly unwound as the nation slid into a deep recession in 1991. “Despite the surplus for 2022-23, structural pressures are intensifying rather than easing on the budget and these will take more than one year or one parliamentary term to address,” Chalmers said. In its May budget, the government forecast the books would swing back to a deficit of A$13.9 billion in the current fiscal year, widening to A$35.1 billion, 1.3% of GDP, in 2024-25. Australia confirms budget surplus in 2023, first in 15 years Taiwan flags continued tight monetary policy, trims GDP forecast by Swati Pandey & Ben Westcott Bloomberg by Liang-sa Loh & Faith Hung Reuters by Krystal Chia Bloomberg (Sept 21): The Hong Kong Monetary Authority maintained its base rate at 5.75% on Thursday as the US Federal Reserve paused its cycle of hiking rates. Hong Kong’s borrowing costs have spiked in the last two years as the Fed embarked on an aggressive tightening cycle to combat inflation — the city’s base rate moves in lockstep with the Fed, given the local currency’s peg to the greenback. The Fed on Wednesday signaled interest rates will remain higher for longer and policymakers will proceed cautiously as it assesses incoming data. The HKMA highlighted that outlook in a statement Thursday, saying it’s “premature to conclude whether the US rate hike cycle has been completed.” The monetary authority said Hong Kong financial and money markets were proceeding smoothly, but warned consumers about taking on more debt. “The public should carefully assess and manage the relevant risks when making property purchase, mortgage or other borrowing decisions,” it said. Lending rates HSBC Holdings Plc announced after the HKMA decision that it would not change its best lending rate. The city’s biggest banks had been hiking lending rates earlier this year as the monetary tightening cycle hits liquidity and increases their funding costs. Hong Kong’s higher borrowing costs have weighed on the city’s economy and property market. The one-month Hong Kong Interbank Offered Rate — or Hibor, a reference for mortgage loans — is trading near the highest since 2007. While that rate was little changed on Thursday after the HKMA move, it has jumped 41% so far in September. Homebuyers, meanwhile, have started turning to renting as property sales struggle. HSBC and other local banks raised mortgage rates for borrowers this month, which helps protect their profit margins amid rising Hibor and interest rates. TAIPEI (Sept 21): Taiwan’s central bank on Thursday flagged continued tight monetary policy as it keeps a close eye on inflation, and trimmed its 2023 growth forecast for the export-reliant economy. Taiwan is a major producer of semiconductors used in everything from cars to smartphones and sluggish global demand has affected its many tech manufacturers. With global demand hit by high inflation, rising interest rates and the impact of the Ukraine war on global demand, its economy slipped into recession in the first quarter though it returned to slight growth in the April-June quarter. Taiwan central bank Governor Yang Chin-long told reporters after a quarterly rate-setting meeting that growth would start to pick up from the fourth quarter with global trade recovering next year. However, he warned of risks, including China’s economic slowdown and China-US trade tensions, and that even with inflation projected below 2% for next year Taiwan’s interest rates might need to remain “a little higher” for “a little longer”. “Our first priority is to watch for inflation,” he said. “Our interest rates went up gradually, and will go down gradually, unless the economy drops badly.” The central bank, in a unanimous decision, left the benchmark rate at 1.875%, where it has stood since March, extending a pause in its current round of tightening which began in March of last year. It raised rates five times by a total of 75 basis points to rein in price pressures. Read the full story Reuters
friday september 22, 2023 19 The E dge C E O m o rning brief world China tests new property model in Xi’s flagship city amid crisis (Sept 21): Private equity fund Japan Industrial Partners Inc’s (JIP) successful tender offer for Toshiba Corp paves the way for a ¥2 trillion (US$13.5 billion or RM63.23 billion) buyout that would end the electronics group’s 74-year-long run as a listed entity. Toshiba, whose roots go back to 1875, said on Thursday the JIP-led consortium now holds 78.65% of all its shares. That clears the way for the domestic fund to squeeze out the remaining shareholders, and take full control of the company in what is set to be Japan’s biggest deal this year. The Tokyo-based company’s delisting from the Tokyo Stock Exchange would close a troubled decade at the firm, marked by scandal, crippling losses and clashes with activist shareholders that have slowed the company’s ability to innovate. Governance issues may persist, however. Toshiba’s lenders are asking that ousted chief operating officer Goro Yanase take up a leading role in the management, people familiar with the matter said. Yanase stepped down earlier this year to take responsibility for inappropriate entertainment expense claims. But he was instrumental in paving the way for the take-private deal, and has experience in Toshiba’s nuclear power business — key to any turnaround, the people said. Sumitomo Mitsui Banking Corp and other banks financing the buyout via ¥1.2 trillion in loans are also pushing for their own representatives in leadership positions, said the people, who asked not to be named as the matter is private. There is opposition within the company about Yanase’s return, and the appointment may not take place, the people said. A Toshiba representative said that nothing had been decided at this time, adding that JIP and Toshiba will discuss the company’s management structure after privatisation. Toshiba to go private as US$13.5 bil buyout offer succeeds A lengthy auction process has kept the inventor of the world’s first laptop and of flash memory in limbo during a year of sector-wide change brought about by surging interest in artificial intelligence. In the interim, Toshiba’s chip affiliate Kioxia Holdings Corp has fallen further behind market leaders Samsung Electronics Co and SK Hynix Inc, while talks to merge with Western Digital Corp’s flash memory business dragged on. Toshiba executives and lenders have said privatisation will allow Toshiba to focus on longer-term strategy. The company, whose businesses include nuclear power plants, power semiconductors, batteries and hard-disk drives, has circled through three presidents in as many years. Once celebrated for its technology breakthroughs, Toshiba paid what was Japan’s largest-ever penalty for falsifying financial statements in 2015. It then suffered a disastrous foray into the nuclear business that forced it to take a US$6.3 billion write-down, and sell off its crown jewel memory-chip business, reorganised as Kioxia. It’s also hived off its medical, home appliances and TV operations. Activists began circling the troubled company and, in 2021, it announced plans to split into three units, only to revise that plan in favour of a two-way split in 2022. The chief executive at the time resigned to take responsibility for the chaos, after which the board began soliciting bids to take the company private. by Yuki Furukawa & Mayumi Negishi Bloomberg Bloomberg (Sept 21): China is road-testing a new property policy in an experimental city President Xi Jinping is building outside Beijing to try to stabilise a housing market rocked by an ongoing credit crisis. All homes in the Xiong’an New District, which is about 130km southwest of Beijing, must be built before they can be sold, the official Xinhua News Agency reported on Wednesday, citing the city’s housing administration centre. That’s a major departure from the current pre-sale model common across China that sees homebuyers typically pay developers upfront for apartments. For decades, that system allowed developers to expand at a rapid pace. Beijing’s move to pare back borrowings in the freewheeling real estate sector in recent years, however, has resulted in delays in home-building and a chain of developer defaults. The Xiong’an move awould mean homebuyers can “get immediately what they pay for”, Xinhua said in its report. Described by Xi as a project of “millennial significance”, Xiong’an has been billed as a high-tech city teeming with leading-edge companies, research institutes and worldclass transportation that could rival Shenzhen and Shanghai. In reality, since its blueprint was unveiled in 2017, progress has been slow with many residents and institutions dragging their feet on relocating. “Xiong’an provides clues about the direction of future policies. It’s a reform testbed, and it’s trying out new development models for the real estate market and developers,” said Bruce Pang, the chief economist of Jones Lang LaSalle Inc. “However, other cities may not follow suit in the short term. Xiong’an is like a blank paper, and so it’s a convenient place for trials and explorations.” China has unleashed a steady stream of stimulus measures in recent months to try to reinvigorate sales in the slumping real estate sector, as one of the nation’s biggest developers verges on defaulting. Chinese regional authorities have considered ending the practice of pre-selling homes since at least as early as 2018. Before Xiong’an, the southern island province of Hainan and the southeastern city of Fuzhou published rules against selling apartments before they were finished, but no such curbs have ever been implemented nationally. Analysts said that reducing the property sector’s reliance on debt without leaving buyers caught short will be difficult. “Delivery on payment will be the goal,” said Zhaopeng Xing, a senior China strategist at Australia & New Zealand Banking Group Ltd. “The transition will not be easy. I expect the policy to be applied to low-tier cities first.” Read also: Xi’s purge of handpicked ministers shatters image of stability bloomberg
friday september 22, 2023 20 The E dge C E O m o rning brief world SINGAPORE (Sept 21): The total value of assets seized in Singapore’s biggest money laundering case has swelled to S$2.4 billion (RM8.2 billion), police said on Wednesday. The assets now include cash amounting to more than S$76 million, 68 gold bars, cryptocurrencies of more than S$38 million, more than 110 properties and 62 vehicles worth more than S$1.2 million. Police did not give details of the fresh seizures and how they were found. Last month, 400 police officers ran simultaneous raids across Singapore and arrested 10 foreigners in an anti-money laundering swoop. Police have said the 10 suspects were allegedly “laundering the proceeds of their overseas organised crime activities, including scams and online gambling”. During the raids, police seized S$1 billion worth of assets including bank accounts, S$23 million in cash, luxury homes, cars, bags, watches and two gold bars. The 10 also had various passports from Cyprus, Cambodia, Dominica, China, Turkey and Vanuatu. The amount was updated to S$1.8 billion in early September as investigations led authorities to assets in Swiss banks. The large amounts seized in the case has been the talk of the town in Singapore, which has attracted vast investments and private wealth since the pandemic but is generally know for having low crime rates. Latest figures from the central bank show that total assets under management in Singapore rose 16% in 2021 to S$5.4 trillion, compared with a global increase of 12% to US$112 trillion the same year. Assets seized in Singapore’s money laundering case swell to S$2.4 bil (Sept 21): Singapore banks are increasing scrutiny of some Chinese-born clients with other citizenships, following last month’s crackdown on money laundering involving more than S$2.4 billion (US$1.8 billion or RM8.23 billion) worth of assets that has rattled the Asian financial hub. Some lenders have been reviewing new account openings and transactions with clients of Chinese origin carrying investment-linked passports, people with knowledge of the matter said. At least one international bank is closing some accounts of clients with citizenships from countries including Cambodia, Cyprus, Türkiye and Vanuatu, one of the people said, asking not to be identified as the information isn’t public. Other lenders in the city state have started to evaluate whether to take fresh funds from clients with similar profiles on a caseby-case basis, said the people. The process is taking longer and more questions are being asked, the people added. The moves, part of an extension of Singapore’s existing anti-money laundering framework, are happening after the Aug 15 island-wide raids that saw 10 wealthy people of Chinese origin arrested and charged. Police investigations unveiled more than S$2.4 billion worth of assets that have been seized so far, including cash, cryptocurrencies and properties. That includes bank accounts with a value of more than S$1.13 billion, cryptocurrencies of over S$38 million, as well as luxury watches, bags, jewellery and gold bars, according to a police statement on Wednesday. Prohibition of disposal orders were also issued against more than 110 properties and 62 vehicles worth more than S$1.24 billion, the statement said. Judges have denied bail for the people after prosecutors cited flight risks related to their multiple passports. While they reside in Singapore, many are also alleged to be running illegal gambling businesses in other countries, according to the prosecution. Some of the suspects speak only Chinese but carry many travel documents including from Cambodia, Vanuatu, Cyprus and Dominica. At least 10 local and international banks in Singapore are embroiled in the high-profile scandal that put the spotlight on their effectiveness in countering ill-gotten gains in the system. Parliamentarians in the country raised more than 30 questions in the house this week, from how rigorous their vetting Singapore banks tighten checks of Chinese with other citizenships processes are, to suspicious transaction reports and the impact on the reputation of Singapore as a wealth hub. Credit Suisse and Julius Baer Group Ltd, which had accounts totalling S$125 million with one of the suspects, declined to comment. Citigroup Inc, Oversea-Chinese Banking Corp and United Overseas Bank Ltd, where some of the individuals held funds or were creditors to firms related to them, said the banks work with the authorities and are committed to fighting against money laundering. DBS Group Holdings Ltd said Singapore’s regulatory regime obliges all banks to manage anti-money laundering risk to high standards, but does not oblige them to deny banking facilities or services to clients — new or existing — of any specific origin merely because they hold certain passports. Other risk factors have to be triggered before suspicion is warranted, according to a spokesperson. While banks have to ascertain clients’ nationality to assess jurisdictional risks, “it’s not that simple for banks to know that a customer holds more than one nationality, unless there are additional data points leading them to believe otherwise”, said Radish Singh, Ernst & Young’s financial services risk management leader for Asean. In Parliament, one question was how offences of such magnitude happened despite the city’s robust laws and anti-money laundering frameworks. Another asked how the government will step up checks on those from high-risk “golden passport” jurisdictions, and other questions focused on the procedures for investment entities that receive tax incentives. Read the full story by Low De Wei, Chanyaporn Chanjaroen & Andrea Tan Bloomberg by Xinghui Kok Reuters bloomberg
friday september 22, 2023 21 The E dge C E O m o rning brief world HANGZHOU, China (Sept 21): China hopes to make a splash with the Asian Games, opening on Saturday, but nationwide excitement has been muted as the economy sputters and some locals question the cost of the sporting extravaganza. Delayed a year by Covid-19, the quadrennial games, kicking off in the eastern city of Hangzhou, will be China’s biggest sporting event in over a decade, with more than 12,000 athletes from 45 nations competing in 40 sports. Organisers this week expressed confidence in holding a “magnificent” games, thanks to President Xi Jinping’s “important instructions” and great, broad-based efforts. Analysts agree the event will likely go smoothly, given China’s famously meticulous preparations. Local officials will be aware that Xi previously worked in Hangzhou, is known to like big sporting events and will host a long list of leaders and other VIPs — including Bashar al-Assad on only the second visit by a Syrian president to China since the countries established diplomatic ties in 1956. But enthusiasm in Hangzhou and elsewhere in China is lacking, with some saying the new stadiums and other gleaming facilities reflect misplaced priorities. “After three years of Covid, the economic and social atmosphere in China and the confidence are really low, and for Hangzhou these Asian Games are just a cash-burning project,” said John Yan, founder of the Chinese media firm Score Sports and a leading football commentator in China. “People care more about their own lives, and the Asian Games are not on the top of their list of concerns,” Yan said. “People just don’t care.” Money better spent on youth Organisers have not disclosed spending for the games, though the Hangzhou government has said it spent more than 200 billion yuan (US$30 billion or RM128.37 billion) in the five years through 2020 on transport infrastructure, stadiums, accommodation and other facilities. “It would be better if this money were spent on the common people and on the youngsters,” said Jiang, 69, a Hangzhou resident who asked to be identified only by her surname. “It’s hard to find a job now. Some companies have closed down. It’s really not easy for young people nowadays.” The expected flow of Chinese medals could lift the public mood around the games. Various issues marred the run-ups to Beijing Olympics in 2008 and 2022, but “when the sporting action kicks off, then the narrative very much changes”, said Beijing-based commentator Mark Dreyer, author of a book on China’s sporting ambitions. Still, in an indication of the subdued tone for the Asian Games, state media coverage until this week has been less comprehensive than before the 2022 Olympics — which were much smaller than these games and held under strict Covid restrictions. It is easy to be unaware of the games, some Chinese social media users have written, unless you visit Hangzhou, where the slogans and other promotion are overwhelming. Hangzhou transformed The city in the wealthy province of Zhejiang near China’s financial capital by Dylan Martinez & Martin Quin Pollard Reuters Glum mood overhangs China’s Asian Games — ‘People just don’t care’ Shanghai, known for its picturesque lake, greenery and tea plantations, has been transformed in a huge spruce-up akin to Beijing’s before the 2008 Olympics. Hangzhou’s streets wear bright colours to match games posters, pensioners have received English lessons and officials have adorned some older-looking or road-facing properties with flowers or other decorations. “The impression I have is that over the past year, the entire city has been under construction,” said 42-year-old city-centre resident Wu Lili, an e-commerce business owner. “There’s a saying online: ‘The Hangzhou city government, when encountering even a dog, wishes they could catch it and give it a fresh coat of paint’.” Several residents said they were happy with the improved transport links and hoped for a boost to the local economy. Some saw the games as a welcome sign of opening up to the world amid concerns Xi’s China was taking an inward, national security-focussed shift. “Over the past few years due to the pandemic, our entertainment activities and mental well-being have been suppressed for a long time, so we need such events to boost our confidence,” said a 24-year-old auto sector worker who asked to be identified only as Zhang. Jules Boycoff, a scholar of the politics of sport at Pacific University in the US state of Oregon, said that for China’s authorities, “it’s about registering power at home, but it’s also about putting your best foot forward to a global audience at a time when there’s a lot of scepticism in the West toward China”. Enthusiasm in Hangzhou and elsewhere in China is lacking, with some saying the new stadiums and other gleaming facilities reflect misplaced priorities. Statues of the three mascots of the 19th Asian Games Hangzhou 2022, near the Hangzhou Asian Games Village, in Zhejiang province, China, Sept 20, 2023. reuters
friday september 22, 2023 22 The E dge C E O m o rning brief MARKETS Top 20 active stocks World equity indices Top gainers (ranked by %) Top losers (ranked by %) Top gainers (ranked by RM) Top losers (ranked by RM) NAME VOLUME CHANGE CLOSE YTD MARKET (MIL) (RM) CHANGE CAP (%) (RM MIL) TWL Holdings Bhd 150.82 0.000 0.030 -14.29 140.4 KNM Group Bhd 89.58 0.000 0.120 140.00 485.3 UEM Sunrise Bhd 76.2 -0.030 0.880 245.10 4451.5 EA Holdings Bhd 73.21 0.000 0.005 -66.67 32.3 Top Glove Corp Bhd 65.47 -0.025 0.805 -11.05 6446.6 Ekovest BHD 54.10 -0.005 0.565 66.18 1675.5 My EG Services Bhd 47.70 -0.005 0.825 -4.11 6168.1 Eastern & Oriental Bhd 46.82 0.020 0.650 58.54 1114.0 MQ Technology Bhd 42.04 0.005 0.030 -40.00 41.4 Widad Group Bhd 40.67 0.000 0.500 16.28 1548.2 Velesto Energy Bhd 40.12 -0.010 0.260 73.33 2136.1 Malaysian Resources Corp 39.28 -0.010 0.475 61.02 2122.1 Sarawak Consolidated 37.21 0.000 0.450 210.34 288.1 CN Asia Corp BHD 36.81 0.000 0.200 -18.37 48.9 Meta Bright Group Bhd 35.89 0.000 0.225 32.35 531.1 Iskandar Waterfront City Bhd 35.69 -0.005 0.745 175.93 686.2 Kanger International Bhd 33.53 0.005 0.070 75.00 45.5 Mercury Securities Group Bhd 30.00 -0.005 0.300 0.00 267.9 Netx Holdings Bhd 27.81 -0.010 0.135 125.00 124.1 WCE Holdings Bhd 26.93 0.065 0.790 159.02 2360.3 Data as compiled on Sept 21, 2023 Source: Bloomberg NAME CLOSE CHANGE VOLUME YTD MARKET (%) (‘000) CHANGE CAP (%) (RM MIL) Pegasus Heights Bhd 0.010 100.00 1,530.1 0.00 108.2 AT Systematization Bhd 0.015 50.00 3,535.6 0.00 101.8 TECHNA-X Bhd 0.020 33.33 617.5 -20.00 44.3 Mlabs Systems Bhd 0.020 33.33 760.0 0.00 29.0 G3 Global Bhd 0.025 25.00 428.0 -16.67 94.3 Dolphin International Bhd 0.030 20.00 14,204.7 20.00 40.1 MQ Technology Bhd 0.030 20.00 42036.8 -40.00 41.4 Meridian Bhd 0.105 16.67 877.7 -12.50 23.7 XOX Networks Bhd 0.035 16.67 422.0 16.67 39.7 Komarkcorp Bhd 0.040 14.29 172.0 -27.27 46.2 Tri-Mode System M Bhd 0.350 12.90 5.0 -10.26 58.1 SKB Shutters Corp Bhd 0.725 12.40 7,894.4 90.79 95.7 Pensonic Holdings BHD 0.670 9.84 743.0 39.58 84.2 Cypark Resources Bhd 1.040 9.47 26,194.7 121.28 817.4 WCE Holdings Bhd 0.790 8.97 26,930.1 159.02 2360.3 ATA IMS Bhd 0.385 8.45 24,373.3 71.11 463.1 Sinaran Advance Group Bhd 0.065 8.33 40.0 -13.33 59.5 Signature International Bhd 1.080 8.00 2,143.7 -8.09 685.5 Nylex Malaysia BHD 0.405 8.00 8,815.2 30.65 72.6 ENRA Group Bhd 0.615 7.89 6.5 -0.81 83.0 Data as compiled on Sept 21, 2023 Source: Bloomberg NAME CLOSE CHANGE VOLUME YTD MARKET (%) (‘000) CHANGE CAP (%) (RM MIL) Key Alliance Group Bhd 0.005 -50.00 190.1 0.00 18.4 Fintec Global Bhd 0.005 -50.00 2152.821 -50.00 29.6 JOE HOLDING BHD 0.010 -33.33 3,788.8 -50.00 30.6 Bertam Alliance Bhd 0.095 -20.83 2.5 46.15 23.6 Grand Central Enterprises 0.330 -14.29 11 -5.71 65 BSL Corp Bhd 0.035 -12.50 1105 -48.22 67.6 Bina Puri Holdings BHD 0.035 -12.50 986.9 -12.50 117.9 PUC BHD 0.035 -12.50 610.9 0.00 63.7 Hubline Bhd 0.040 -11.11 5,110.1 0.00 171.6 Smile-link Healthcare Global 0.170 -10.53 66.9 -10.53 42.6 Permaju Industries Bhd 0.045 -10.00 265.2 0.00 87.5 Vizione Holdings Bhd 0.045 -10.00 204.0 -18.18 92.1 Pan Malaysia Holdings Bhd 0.045 -10.00 512.1 -35.71 41.8 Avillion BHD 0.045 -10.00 470.0 -43.75 51.0 Sapura Energy Bhd 0.050 -9.09 14,418.6 42.86 799.0 Malayan United Industries 0.060 -7.69 1,732.6 -20.00 193.5 Trive Property Group BHD 0.060 -7.69 2.7 -14.29 75.8 Classita Holdings Bhd 0.065 -7.14 11,614.5 -82.19 80.1 Netx Holdings Bhd 0.135 -6.90 27,818.1 125.00 124.1 Impiana Hotels Bhd 0.070 -6.67 14827.5 -22.22 53 Data as compiled on Sept 21, 2023 Source: Bloomberg NAME CLOSE CHANGE VOLUME YTD MARKET (RM) (‘000) CHANGE CAP (%) (RM MIL) British American Tobacco 9.230 -0.190 1,047.2 -17.74 2,635.4 Petronas Dagangan Bhd 23.020 -0.180 478.2 0.75 22,869.3 Kuala Lumpur Kepong Bhd 21.300 -0.140 989.7 -4.74 22,970.7 Sime Darby Plantation Bhd 4.350 -0.110 3,493.8 -6.45 30,083.4 Dutch Lady Milk Industries 22.500 -0.100 97.1 -25.60 1,440.0 United Plantations BHD 17.280 -0.080 160.7 15.12 7,167.5 FCW Holdings BHD 1.030 -0.070 15.9 -0.96 257.5 Malaysian Pacific Industries 27.000 -0.060 178.2 -6.12 5,370.2 AEON Credit Service M Bhd 11.340 -0.060 161.6 -9.86 2,895.2 Tenaga Nasional Bhd 10.060 -0.060 3,440.8 4.47 58,220.6 HextarTechnologies Solutions 23.940 -0.060 3.8 40.33 3,079.9 UEM Edgenta Bhd 1.050 -0.060 4,416.5 -7.89 873.2 UWC BHD 3.750 -0.060 241.7 -6.72 4,131.3 Hengyuan Refining Co Bhd 3.290 -0.060 264.2 -6.53 987.0 Grand Central Enterprises 0.330 -0.055 11 -5.71 65 Ralco Corp BHD 0.775 -0.055 150.6 -9.88 39.4 New Hoong Fatt Holdings 3.110 -0.050 10.0 8.36 257.1 FAR East Holdings BHD 3.600 -0.050 1.5 -2.70 2,137.8 Axiata Group Bhd 2.440 -0.050 4,048.5 -21.04 22,397.0 HAP Seng Consolidated Bhd 4.660 -0.050 4789.9 -27.19 11601.9 Data as compiled on Sept 21, 2023 Source: Bloomberg NAME CLOSE CHANGE VOLUME YTD MARKET (RM) (‘000) CHANGE CAP (%) (RM MIL) Heineken Malaysia Bhd 23.900 0.220 661.8 -5.16 7220.1 Imaspro Corp Bhd 5.650 0.210 416.1 -3.42 452 Batu Kawan Bhd 20.400 0.200 4.8 -8.52 8025 Panasonic Manufacturing 19.000 0.140 11.500 -17.0 1154.20 Master-Pack Group BHD 3.140 0.130 200.5 33.62 171.50 Nestle Malaysia Bhd 129.400 0.100 58.1 -7.57 30344.3 NPC Resources BHD 2.000 0.100 0.1 7.53 227.5 Cypark Resources Bhd 1.040 0.090 26194.7 121.28 817.4 ViTrox Corp Bhd 7.580 0.080 12.7 -0.92 7165.5 Signature International Bhd 1.080 0.080 2143.7 -8.09 685.5 Pertama Digital BHD 3.330 0.080 1707.6 89.20 1,459.2 Paragon Union BHD 2.620 0.080 376.4 40.86 219.60 Kluang Rubber Co Malaya BHD 3.890 0.080 20.5 -1.77 241.8 Harrisons Holdings Malaysia 8.580 0.080 5.6 29.41 587.5 Carlsberg Brewery Malaysia 19.880 0.080 299.9 -13.11 6078.3 SKB Shutters Corp Bhd 0.725 0.080 7894.4 90.79 95.7 JF Technology Bhd 1.120 0.070 4968.3 38.27 1038.3 WCE Holdings Bhd 0.790 0.065 26930.100 159.0 2360.30 Yoong Onn Corp BHD 1.610 0.060 345.4 27.78 255.4 United Malacca Bhd 5.100 0.060 39.7 -7.27 1069.8 Data as compiled on Sept 21, 2023 Source: Bloomberg CLOSE CHANGE CHANGE (%) CLOSE CHANGE CHANGE (%) DJIA * 34,440.88 -76.85 -0.22 S&P 500 * 4,402.20 -41.75 -0.94 NASDAQ 100 * 14,969.92 -221.31 -1.46 FTSE 100 * 7,731.65 -52.48 -0.68 AUSTRALIA 7,065.23 -98.10 -1.37 CHINA 3,084.70 -23.87 -0.77 HONG KONG 17,655.41 -230.19 -1.29 INDIA 66,230.24 -570.60 -0.85 INDONESIA 6,991.47 -20.22 -0.29 JAPAN 32,571.03 -452.75 -1.37 KOREA 2,514.97 -44.77 -1.75 PHILIPPINES 6,094.71 53.67 0.89 SINGAPORE 3,202.81 -39.19 -1.21 TAIWAN 16,316.67 -218.08 -1.32 THAILAND 1,514.26 6.36 0.42 VIETNAM 1,212.74 -13.37 -1.09 Data as compiled on Sept 21, 2023 * Based on previous day’s closing Source: Bloomberg CPO RM 3,677.00-43.00 OIL US$ 92.60-0.93 RM/USD 4.6915 RM/SGD 3.4303 RM/AUD 3.0062 RM/GBP 5.7683 RM/EUR 4.9979