THE STAR, TUESDAY 4 AUGUST 2020
US Dollar Index continues to decline
Greenback weakens against major world currencies
Points
102.00
100.00
98.00
96.00
94.00
Aug 4, 2019
Source: Bloomberg
Ringgit rises on
USD weakness
Greenback has lost nearly 10% since March
By GANESHWARAN KANA
ganeshwaran@thestar.com.my
PETALING JAYA: The global reserve curren-
cy - the US dollar - has been losing steam over
the past several months and has lost nearly
10% of its international value, as measured
by the US Dollar Index, since its year-to-date
peak in March.
The greenback continues to slip on a down-
ward trend but that has put pressure on
exporters in Malaysia that rely on dollar
receipts.
The stronger ringgit comes as a boon for
importers purchasing items and services
denominated in the US dollar but it is a bane
for exporters who sell their products in US
dollar terms.
Among the exporters that are typically
affected by the stronger ringgit are chip, glove
and furniture makers.
StarBiz Special
Speaking to StarBiz, Rakuten Trade
Research vice-president Vincent Lau said the
exporters in the electrical and electronics
segment could likely be affected by the strong-
er ringgit, although the impact is unlikely to
be major.
“As for the glove players, while they trans-
acts substantially in US dollar, I don’t see a
material impact on their earnings.
“This is because the average selling prices
for the gloves have increased sharply over
past few months and the future orders have
been locked in at specific prices.
“The impact of currency fluctuations would
be immaterial,” he said.
The US dollar, which makes up almost 62%
93.55
93.55
Aug 3, 2020
graphics
CURRENCY
of all known central bank foreign exchange
reserves as of March 31, has continued to
depreciate against key currencies since late
March 2020 with the US Dollar Index, an
index of the value of the greenback relative to
a basket of foreign currencies, falling by
9.03% in a span of just less than five months.
That is one of the sharpest falls of the dollar
index in recent times, which saw the ringgit
appreciated to RM4.2220 compared with
RM4.4470 to the dollar on March 23.
The index fell below the 100 threshold in
late March this year and has continued to
trend southwards since.
As of press time yesterday, the index is at
93.55.
> TURN TO PAGE 2
Singapore may
allow foreign
banks to create
digital-only
units
SINGAPORE: The Monetary Authority of
Singapore (MAS) said it plans to revise rules
governing foreign banks with a substantial
local presence that may allow them to open
digital-only banking subsidiaries.
Under the enhanced framework, the MAS
will consider granting an additional full
banking license to foreign lenders which
substantially exceed its Significantly Rooted
Foreign Bank criteria, the central bank said
in a statement.
“This will enable them to have the same
flexibility as Singapore-incorporated bank-
ing groups to establish subsidiaries, includ-
ing with joint-venture partners, to operate
new or alternative business models such as
a digital-only bank,” the statement said.
Banks around the world have been shut-
ting branches and moving their services
online, a trend that will likely be accelerat-
ed by the Covid-19 pandemic.
Last year, the MAS announced plans to
award as many as five new digital banking
licenses to non-banks, a move that is expect-
ed to create a new generation of rivals for
the traditional lenders.
The enhanced framework “will strength-
en the ability of SRFBs to complement the
local banks as anchors to Singapore’s finan-
cial system,” the MAS said.
In order to determine if the foreign bank
substantially exceeds the criteria, the MAS
said it will take into account factors such as
whether a significant portion of global key
appointment holders are based in the coun-
try, the creation of a substantial number of
jobs or counting a local group as a major
shareholder.
The MAS also said that the local subsidi-
ary of Standard Chartered Plc is the first
bank to qualify as an SRFB.
Under the scheme, which was announced
in 2012, Standard Chartered will be able to
open as many as 50 places of business
across the city state, of which 35 can be
branches.
In a statement, Standard Chartered said it
welcomed the move and would invest an
additional S$5mil (US$3.6mil) to boost tal-
ent development and re-skilling.
The bank will review its strategy “with a
view to invest more and further deepen our
presence in Singapore,” Patrick Lee, chief
executive officer of Standard Chartered
Bank Singapore, said in the statement. —
Bloomberg
2 News
StarBiz Special
ManagePay CEO welcomes
new strategic partner
Fund-raising to strengthen its financial technologies
By THOMAS HUONG
huong@thestar.com.my
KUALA LUMPUR: ManagePay Systems Bhd
(MPay) has proposed to undertake a private
placement of up to 20% of the total number
of its issued shares to raise funds to strength-
en its financial technologies, including the
development of systems for a licensed digi-
tal bank.
Loss-making MPay is a provider of end-
to-end electronic payment solutions for
banks and financial institutions, mer-
chants and card issuers.
In a filing with Bursa Malaysia on July
30, MPay said the issue price of the private
placement would be determined later,
based on the volume weighted average
market price of MPay shares for the five
market days prior to the price-dixing date,
with a discount of not more than 10%.
Based on an indicative issue price of
RM0.1275 per placement share, the gross
proceeds would amount to RM18.12mil.
Nearly half of the proceeds will be used
for a financial technology platform, as well
as developing and customising systems for
a licensed digital bank.
Another 27.4% of the proceeds would be
for point-of-sale terminal projects, and
another 20.4% for vertical payment solu-
tions which focuses on park-and-pay man-
FBM KLCI down on record high volume
By ROYCE TAN
roycetan@thestar.com.my
PETALING JAYA: The stock market kicked
off August on the wrong footing with strong
selling, as investors took on a pessimistic
front following a global surge in coronavirus
(Covid-19) cases which led to various econom-
ic concerns.
The benchmark FBM KLCI dropped 31.14
points or 1.94% yesterday, even as the
exchange saw a record high trading volume
of 13.12 billion shares.
It all leads to one thing – the earnings sea-
son is here – and investors are realising their
gains and closing their positions as they brace
for the unprecedented quarterly results of the
second quarter, which took on the full blow of
the movement control order (MCO).
The barometer index extended its losses
from a rocky political situation last Thursday,
opening below the 1,600-point mark at
1,595.01 points at 9am yesterday.
It was all down south from then on, which
saw the FBM KLCI closing at 1,572.47 points.
Rubber glove giants Top Glove Corp Bhd
and Hartalega Holdings Bhd hit their all-time
highs of RM26.88 and RM20.50 to add 5.23
points to the index, but it was not strong
enough to sustain the weight brought by 27
other constituents of the FBM KLCI.
The only other advancer in the 30-stock
index was KLCC Property Holdings Bhd,
which added 10 sen or 1.28% to RM7.90.
The top decliners were PPB Group Bhd
which erased RM1.14 to RM18.56, Dialog
Gold soars to record high as virus fears lift demand
BENGALURU: Gold prices surged to an all-
time high yesterday, as fears about the eco-
nomic fallout from rising Covid-19 cases
boosted demand for the safe-haven metal,
although gains were capped by an uptick in
the United States dollar.
Spot gold was steady at US$1,974.29 per
ounce by 0508 GMT, after hitting a record
high of US$1,984.66 in early Asian trade.
US gold futures rose 0.3% to US$1,992.20.
“The sentiment across markets is deteriorat-
ing. First of all, rising infection rates are a real
concern for the globe and a real support for
“This is a very
strategic move to
bring onboard a
strong partner to
strengthen our
technologies and
financial position.”
Datuk Chew Chee Seng
agement systems and a health-tracking
application.
MPay also stated that the private place-
ment allowed the company to raise funds
without incurring interest expenses, as
compared to bank borrowings.
Post-private placement, group managing
director and CEO Datuk Chew Chee Seng –
who is the largest shareholder – would see
his 25.36% stake dropping to 21.13%.
“This would dilute my own sharehold-
Group Bhd down 19 sen to RM3.60 and Hap
Seng Consolidated Bhd, down 44 sen to
RM8.51.
The rising number of Covid-19 cases
sparked fears of a second wave and fresh
lockdowns, which were currently being con-
sidered by many countries after it was imple-
mented in several cities.
This weighed on the oil prices, as investors
fretted over a renewed situation of oversup-
ply as the Organisation of the Petroleum
Exporting Countries (Opec) and its allies start
to ease production cuts.
Brent crude oil dropped 25 cents to
US$43.27 per barrel as at press time, while the
West Texas Intermediate (WTI) was down 33
cents to US$39.94 a barrel.
All these developments got investors scram-
bling for shelter in technology counters for
their 5G theme play, healthcare-linked stocks
and gold.
Gold climbed to its all time high of
US$1,988.40 an ounce during intraday trading
yesterday and eased to US$1,968.52 as at
press time.
The red hot volume on Bursa Malaysia yes-
terday saw RM8.24bil worth of shares chang-
ing hands on the back of a negative market
breadth with 707 losers compared to 505
gainers, while 294 remain unchanged.
Fortress Capital Asset Management chief
executive officer Thomas Yong told StarBiz
that they were not seeing any shift in trends
except for some price consolidation as the
earning reporting season commences.
Rakuten Trade Research vice-president
gold prices. Given that, it is also driving the US
dollar higher,” said Michael McCarthy, chief
strategist at CMC Markets.
Coronavirus cases continued to surge in the
US and stood at over 17.96 million globally.
Rising Covid-19 cases and simmering
US-China tensions have dented hopes for a
swift economic recovery, driving inflows into
safe-haven assets such as gold, which has
climbed 30% so far this year.
“Gold also saw safe-haven demand as the
federal unemployment bonus expired on
Friday, which would affect US consumer
E-WALLET
ing.
“As such, this is a very strategic move to
bring onboard a strong partner to strength-
en our technologies and financial posi-
tion,” Chew told StarBiz.
He said the company was in talks with a
few strategic parties, and aims to complete
the private placement within this year.
To recap, on July 27, MPay had announced
that it was teaming up with Singapore-
based Passion Venture Capital Pte Ltd (PVC)
to apply for a licence to operate a digital
bank in Malaysia.
MPay said its subsidiary, ManagePay
Services Sdn Bhd, had entered into a joint
venture (JV) with PVC to set up a company
that would be applying for the digital bank
from Bank Negara.
MPay will own a 51% stake in the JV
company, while the remaining 49% will be
held by PVC.
Under the agreement, MPay said PVC is
required to deposit or raise funds of close
to RM100mil for the JV company within
three months from the date of agreement.
MPay’s shares closed two sen higher at
15.5 sen yesterday, with some 59.77 million
shares being traded.
Vincent Lau said it was not entirely a bad sign
for the index to drop on a record high vol-
ume.
“The tech index is up, the Ace Market is up
and the small caps are up. All is not lost, it is
more of a rotational play.
“It is not a major concern because there is
no broad-based selling. Investors are just
starting to move towards tech-related stocks.
“The Nasdaq is at its all-time high, but the
Dow is not, so the situation is not peculiar to
Malaysia,” said Lau.
Penny stocks dominated the most actively
traded list yesterday, led by ACE-listed MD
Technology Bhd, which jumped 10 sen or
83.33% to 22 sen with 811.22 million shares
being done.
Malaysian Pacific Industries Bhd was the
top gainer after adding RM2.02 or 15.3% to
close at RM15.22.
AirAsia X Bhd, which is in a net liability
position, coupled with the posting of its worst
quarterly net loss ever last Thursday, saw the
counter shaving 1.5 sen or 21.43% to 5.5 sen.
This also dragged AirAsia Group Bhd down,
which lost four sen to 60 sen.
Banking counters were all in the red except
for Affin Bank Bhd which remained
unchanged. Oil and gas and construction
counters were also mostly in the red.
Regional markets were mainly lower
except for Japan’s Nikkei 225 and South
Korea’s Kospi, which advanced 2.24% and
0.07%, respectively.
The Jakarta Composite Index was the worst
performer after it fell 2.78% yesterday.
income and spending and the US central bank
would thus remain dovish,” Phillip Futures
analysts said in a note.
US lawmakers struggled to hammer out a
new stimulus plan. White House chief of staff
Mark Meadows said on Sunday he was not
optimistic on near-term deal for coronavirus
relief bill. Limiting gold’s advance, the dollar
index rose 0.3%, having touched its lowest
level since May 2018 last week. A weaker dol-
lar, also considered a rival safe haven, makes
gold cheaper for holders of others currencies.
— Reuters
STARBIZ, TUESDAY 4 AUGUST 2020
Ringgit has
appreciated
5.06% since
late March
> FROM PAGE 1
The ringgit is a clear beneficiary as the US
dollar comes under intense pressure, largely due
to the continuing Covid-19 cases, massive dose of
monetary stimulus, lower US Treasury yields
and weak economic outlook.
Despite no major improvements in economic
fundamentals, the Malaysian currency has
appreciated by about 5.06% against the green-
back since March 23.
Kenanga Research said that this was on the
back of Covid-19 vaccine optimism and relative-
ly stable Brent crude price, while further ampli-
fied by the dovish US Federal Reserve amid
escalating US-China tensions.
However, it added that the ringgit is expected
to trend lower this week on continuation of
broader US dollar bounce after the US Federal
Reserve meeting last week.
“It is also partly due to euro and pound ster-
ling profit taking following an extended rally.
“Nonetheless, the US dollar rebound is expect-
ed to be short-lived as the US recovery momen-
tum loses steam, coupled with surging Covid-19
cases and weak US economic data,” it said.
Bank Islam chief economist Mohd Afzanizam
Abdul Rashid believes that the weakness of the
US dollar is partly attributable to the shift of
investor interest from the greenback to other
safe haven currencies such as euro, which saw
considerable gains recently
This could affect the ringgit’s performance
against the other major global currencies, mov-
ing forward.
“We have seen the ringgit weakening against
the euro and pound sterling. Perhaps, the recent
announcement on European fiscal stimulus of
1.8 trillion euros has bolstered the positive view
on the euro, which resulted in the weakening of
the ringgit. In the immediate terms, euro and
pound sterling have appreciated quite consider-
ably and it would continue to do so in light of
negative data points coming out from the US,”
stated Afzanizam.
Year-to-date, the ringgit has weakened against
severalkeyregionalcurrenciessuchasSingapore
dollar (0.92%), Chinese yuan (2.91%) and
Japanese yen (6%), in terms of spot returns.
However, the ringgit rose by 2.19% against the
Indonesia rupiah and 0.97% against the Thai
baht.
Kenanga Research said in a note that the ring-
git is projected to depreciate marginally by 0.13%
to RM4.245 against the US dollar this week, based
on its exponential moving average technical
analysis. On a long-term basis, Kenanga Research
expects the ringgit to weaken against the US dol-
lar and touch RM4.302 by the end of fourth
quarter of 2020 (4Q20).
Meanwhile, AmBank Group chief economist
Anthony Dass expects the US dollar-ringgit
exchange rates to tread water this year, but
strengthen moving into 2021.
He foresees the local note to breach below the
RM4.2-mark against the US dollar and hit RM4.14
by the end of next year.
Dass, who is also a member of the Economic
Action Council secretariat, said in a note that the
ringgit will also stand to gain from the firmer
Asian currencies, benefiting from the interest
rate as well as growth differentials between the
region with industrial economies.
“More so should the US recovery heads into
trouble from rising virus cases and renewed
local lockdowns and the Federal Reserve
embarks on more quantitative easings to stimu-
late the economy.
“This would result in asset reallocation in
which this region is likely to benefit, especially
with China expected to be the first major econo-
my to emerge from a severe economic contrac-
tion.Thus, the region’s currencies are expected to
appreciate by 0.5% in the next three months and
continue to climb around 1% in 12 months’ time,
in spot terms.
“The ringgit would also benefit from the
appreciation,” he pointed out.
Watch the video
thestartv.com
STARBIZ, TUESDAY 4 AUGUST 2020
Uncertainties weigh
on banking stocks
End of loan moratorium still a concern
By INTAN FARHANA ZAINUL
intanzainul@thestar.com.my
PETALING JAYA: Banking stocks continue to
be battered down despite the surge in loan
growth in June due to unabated concerns
over the impact on financial institutions
when the blanket six-month loan moratorium
ends in September.
Shares in Public Bank Bhd closed 44 sen
lower at RM16.56 apiece yesterday, while
Malayan Banking Bhd (Maybank) and CIMB
Group Holdings Bhd fell 17 sen and 13 sen to
RM7.50 and RM3.46, respectively.
Hong Leong Bank Bhd, on the other hand,
plunged 70 sen to RM14.30, while RHB Bank
Bhd declined by 10 sen to RM4.92.
Loan approvals and applications in June
have exceeded analysts’ expectations thanks
to the cheap lending cost.
This year, Bank Negara went full-throttle to
boost the Malaysian economy and cut interest
rate by four times due to the coronavirus
(Covid-19) fallout.
In July, the central bank cut its overnight
policy rate (OPR) to 1.75%, the lowest since
2004.
The cut in interest rate could impact banks’
earnings moving forward and potentially
result in higher loan loss provisions due to the
end of the blanket moratorium.
Maybank IB Research said the overall loan
growth in June was higher than expected as
sentiment improved from the partial relaxa-
tion of the movement control order (MCO)
and the stimulus package announced by the
government to buffer the economy from the
Covid-19 crisis.
It said the banks’ loan growth grew 4.1%
year-on-year (y-o-y) in June, which is higher
than its estimation of 2% for the year.
Interestingly, the banks’ asset quality
improved in June to 1.46% in gross impaired
Sunway REIT to keep income distribution ratio
PETALING JAYA: Despite the challenging
outlook, Sunway Real Estate Investment Trust
(REIT) would maintain its income distribu-
tion payout of at least 90% for the financial
year ending June 30, 2021 (FY21).
The manager of the REIT, Sunway REIT
Management Sdn Bhd, said it remained cau-
tious on the outlook for FY21 due to the
uncertainties surrounding global economic
recovery.
The manager said it would continue to
focus on rebuilding the business segments
which have been adversely impacted by the
pandemic while strengthening its balance
sheet and expanding income stream via
yield-accretive acquisition and prudent capi-
tal management.
In addition, the manager plans to capitalise
on the window of opportunity to undertake
phased refurbishment of Sunway Resort
Hotel in FY21.
“We believe the refurbishment is timely as
Sunway REIT has sufficient capacity, support-
ed by rooms inventory at Sunway Pyramid
Hotel and Sunway Clio Hotel to support the
Malaysian manufacturing sector continues to recover
KUALA LUMPUR: The recovery in the
Malaysian manufacturing sector continued in
July and firms expect market demand to
strengthen over the coming year, supporting
overall confidence in the 12-month outlook
for production.
In a note, IHS Markit said that after rising at
a joint record pace in June, output continued
to expand in the latest survey period, with
trends in new orders much improved since
the nadir of the Covid-19 downturn in April.
“That said, the ongoing effects of the pan-
Covid-19
Road to
y
recovery
loans (GIL) from 1.55% in May.
Maybank IB expected the banks’ asset qual-
ity to remain at the same level until September
due to the loan moratorium as consumers
and SMEs have their credit positions frozen
for now.
“As such, the current GIL numbers do not
fully reflect the actual economic situation,” it
said in a note to clients.
AmInvestment Bank Research said house-
hold loans gained traction to 3.5% y-o-y from
higher levels of mortgages and loans for the
purchase of securities through stronger dis-
bursements.
Meanwhile, non-household loan growth
was unchanged at 4.9% y-o-y.
“Loan disbursements have improved from
the low levels in April and May 2020,”
AmInvestment said in a report.
On loan application, the research house
said the banks’ loan applications rebounded
to 8% y-o-y due to higher applications for
passenger cars, residential property loans,
credit cards and personal loans.
This compared to a contraction of applica-
tion of 39% y-o-y in May 2020. Loan approval
in June has improved significantly to 12.7%
y-o-y in June compared to a contraction of
54.4% in May.
“With the dovish statement by Bank Negara
in the recent monetary policy committee
statement, we are expecting another OPR cut
of 25 basis points in the second half of this
year to 1.50%,” AmInvestment said.
Analysts are mainly neutral on the targeted
recovering demand of domestic travellers
while cross-border restriction persists,” it said
in a statement.
Sunway REIT yesterday announced a final
income distribution of 2.38 sen per unit,
which brings the total income distribution for
FY20 to 7.33 sen per unit, representing at least
90% of the distributable income to unithold-
ers for the year in review.
Sunway REIT’s net property income fell
30.2% to RM77.6mil for the fourth quarter
ended June 30, 2020, from RM111.2mil in the
corresponding quarter last year.
For the full year, its net property income
was 5.2% lower at RM416.8mil, compared
with RM439.7mil in FY19.
During the quarter in review, Sunway
REIT slid into a net loss of RM13.5mil from
a net profit of RM178mil, while revenue fell
27.9% to RM104.9mil from RM145.6mil pre-
viously.
For the full year, Sunway REIT posted a
net profit of RM208.2mil, down 46.1% from
RM386.4mil in the preceding year, while
revenue fell 4% to RM556.9mil from
demic meant that firms continued to operate
below capacity and therefore expressed fur-
ther caution around hiring, particularly in the
face of rising input costs.
“The headline IHS Markit Malaysia
Manufacturing Purchasing Managers’ Index
(PMI) – a composite single-figure indicator of
manufacturing performance – posted 50.0 in
July, down marginally from 51.0 in June but
still well above the readings seen during the
worst of the Covid-19 downturn and above
the survey’s long-run average of 49.0,” it said.
BANKING
loan moratorium replacing the blanket mora-
torium starting October.
However, UOB Kay Hian Research warned
that the large-scale targeted moratorium
starting October could lag GIL formation and
lead to overhang in the banking sector’s per-
formance.
“We expect the overall industry GIL ratio to
potentially peak by end-2021,” it said.
UOB Kay Hian reckoned that the banking
sector would post a more meaningful recov-
ery from the second quarter of 2021
onwards.
“While it is too early to gauge the overall
level of customers that would require the
targeted loan assistance when the automatic
loan moratorium ends in September, certain
banks have recently provided guidance of up
to 30%.”
Last month, Prime Minister Tan Sri
Muhyiddin Yassin announced that the blan-
ket loan moratorium would be replaced with
a targeted moratorium in October for individ-
uals who have lost their jobs and who have
yet to find new jobs.
The targeted loan moratorium will be for
three months and a further extension could
be granted if individuals are still unsuccessful
in securing jobs.
UOB Kay Hian said the banking sector is
trading at 0.85 times 2021 forecast price-to-
book ratio, which is only slightly below the
Global Financial Crisis low of 0.95 times and
broadly correlates with its current 2021 sec-
tor return on equity of 7.5%.
“We think it is too early to upgrade the sec-
tor as asset quality uncertainties persist, with
banks still unable to accurately estimate the
level of provisions required post-loan morato-
rium in end-September,” it said.
RM580.3mil previously.
Overall, Sunway REIT’s performance was
dragged by lower income from the retail and
hotel segments amid the restrictions and loss
of business during the various phases of the
nationwide movement control order to con-
tain the spread of the Covid-19 virus.
However, Sunway REIT continued to see
growth in the office and services segments
during the year.
Sunway REIT’s manager said while it
appeared that the majority of the nations had
troughed in second quarter 2020, the eco-
nomic recovery path might be patchy due to
uncertainties associated with prolonged pre-
cautionary household and business expendi-
tures as well as cautious employment mar-
kets.
“Global growth is projected to rebound to
5.4% in 2021, alongside the strengthening of
consumption and investment activities. Risk
to recovery remains elevated with vulnerabil-
ity to resurgence of the pandemic, which may
eventually necessitates the reactivation of
containment measures,” it said.
IHS Markit said manufacturing production
rose for the second month running in July,
with respondents linking higher output to
signs of an improving trend in new orders
following an easing of the movement control
order.
However, some respondents indicated that
demand remained fragile as the pandemic
continued to impact the sector, and this was
particularly the case with regards to new
export orders, which softened to a greater
extent than in June. — Bernama
News 3
Supermax’s listing
of bonus issue
shares gets okay
KUALA LUMPUR: Bursa Securities has
approved the listing and quotation of
Supermax Corp Bhd’s 1.36 billion new
shares under the company’s proposed
bonus issue.
The glove maker said in a statement that
the regulators had given the approval on
July 30. Supermax’s bonus issue is one new
share for every one share held at a date to
be determined.
Its share price has rallied in recent
months to record highs, together with
other glove makers, as the Covid-19 coro-
navirus pandemic continues to worsen.
DBhd
redesignates
Azman as MD
PETALING JAYA: Damansara Realty Bhd
(DBhd) has redesignated Azman Tambi
Chik as its group managing director, effec-
tive Aug 1.
Azman was appointed the property and
construction company’s group chief execu-
tive officer on May 11 this year.
Azman would bring more than 30 years
of experience to the board, with extensive
knowledge in corporate strategy, planning,
business development, legal, procure-
ment, operations, as well as the acquisition
of new business within the fields of inte-
grated facilities management, technology,
food and beverages, and hospitality.
Unisem
net profit more
than doubled
KUALA LUMPUR: Unisem (M) Bhd’s net
profit has more than doubled to
RM33.95mil for the second quarter ended
June 30, 2020, from RM14.45mil in the cor-
responding period last year.
The semiconductor manufacturer
attributed its earnings growth to higher
sales volume as well as the appreciation of
US dollar against the ringgit.
During the quarter in review, Unisem’s
revenue rose 10.3% to RM310.08mil from
RM281.12mil in the corresponding period
a year ago on higher sales volumes.
Earning per share rose to 4.67 sen from
1.99 sen a year ago.
Penjana can help
SMEs achieve
quick recovery
KUALA LUMPUR: The National Economic
Recovery Plan (Penjana), which was
announced by the government in June to
aid businesses affected by Covid-19, can
help small and medium enterprises (SMEs)
in achieving recovery.
This is based on a survey conducted by
SME Corp Malaysia involving 982 respond-
ents recently, which found that 17% of
SMEs were confident their business could
recover within three months, aided by
Penjana.
SME Corp chief executive officer Rizal
Nainy said of the 40 initiatives under the
short-term plan, 24 initiatives worth
RM14.5bil were viewed as being able to
boost the activities of SMEs hit by the coro-
navirus pandemic.
“The majority of the 17% of SMEs that
expected to recover in the (three-month)
period are from the food and beverage
sector,” he told a media conference on
SMEs’ performance for 2019. —Bernama
4 Insight
Comment
ANTHONY DASS
TODAY, businesses are shaken up by Covid-
19. The pandemic has amplified the demand
for companies to address complex supply
chains and become more transparent. And
the growing focus now is on how businesses
are responding to this pandemic.
There are growing environmental, politi-
cal and social pressures for the world to find
a more sustainable and responsible path
towards development. Organisations are
expected not only to apply socially responsi-
ble practices but also to become responsible
business leaders. More organisations are
expected to establish and operate ethical
value chains and run their processes with
integrity.
In short, it is all about bringing renewed
attention to the importance of corporate
transparency on sustainability issues.
This is somewhat akin to the 1966 World
Cup. Brazil, although the winner of the pre-
vious two tournaments, were eliminated in
the first round. Sadly, their star player Pelé
failed to perform as he was fouled frequent-
ly and flagrantly. It was a point in time many
felt the glory days of Brazil are over.
But four years later, Brazil won the World
Cup. This time with grace and style. The
1970 team is still widely regarded not only
as the best team but also the most beautiful
team with a unique attacking style. And Pelé
was named player of the tournament.
The question is how did Brazil turn
around after one World Cup? The answer is
innovation by building a cohesive team and
it required leadership, both in management
and on the field.
Since the pandemic has raised the need
for businesses to address complex supply
chains and become more transparent, the
growing focus now is on how businesses are
responding to this pandemic.
Emphasis is on board composition and
quality, environmental risks and opportuni-
ties, corporate strategy and capital alloca-
Big pharma shouldn’t be too greedy
By MIHIR SHARMA
INTELLECTUAL property is a convenient
fiction.
It is a right enforced by state power and
international agreements, one that’s even
more fragile than other forms of property
rights since it’s not tangible. We choose to
believe this fiction because we also believe
that intellectual property adds to general
welfare. It permits innovation and growth,
and supports writers, artists, inventors – and
pharmaceutical companies.
But crises upend beliefs and we are in a
crisis at the moment. We should all hope the
tradition of treating intellectual property as
a real thing survives the pandemic. That
hope must be especially keen among the
companies most at risk if the myth breaks
down: the pharma industry.
Nothing is more likely to test this consen-
sus than hints of profiteering off the war
against Covid-19. A Financial Times report
that the US-based company Moderna Inc has
sought to price its vaccine candidate around
US$50-US$60 per course, for example, has
shaken public health establishments across
the world. The story also suggested that
while Moderna might offer developing
countries a lower price, rich countries would
get privileged access to the vaccine.
Let me tell you the consequences if that
happens and Moderna’s vaccine performs
better than its cheaper competitors: The
patent on the vaccine will be widely ignored.
The consensus on intellectual property,
painstakingly built up over time and spread
worldwide over the past two decades, will
be busted.
I don’t want to single out Moderna here. It
doesn’t have a single successful commercial
drug, nor any other Phase 3 candidates; its
need to make money off this vaccine is argu-
ably acute. Larger drug companies are dif-
ferent. Yet Pfizer Inc’s CEO recently said that
Responsible business
post-Covid-19
tion, compensation that promotes long-term
growth, and human capital management.
In short, it is all about bringing renewed
attention to the importance of corporate
transparency on sustainability issues. It
short, it is time to relook at business models.
The model should focus on “sustainability”
which then looks at resilience, reforms and
re-imagination. The 1970 World Cup final
should provide some food for thought.
Hence, there is a need for companies to
understand how they are responding now
and how they should respond in the future.
Here, there is a need for consistency and
completeness besides accountability. Such
focus will help provide sustainability against
shocks.
While managing Covid-19’s immediate
impacts will be the top priority for business-
es, reporting historical environment, social
and governance (ESG) data and perfor-
mance remains essential.
A slight delay of this year’s reporting is
understandable, yet businesses must still
strive for the same level of coverage as pre-
vious years and continue to improve their
disclosures, moving forward, with the aim
to ensure their performance on key social
issues are even more thoroughly examined
than usual.
Besides, accountability is vital in this new
reality. Reports should provide sustaining
account as to how businesses are respond-
ing to the pandemic. The degree to which
companies do this now or in the future will
depend on which part they are in their
reporting cycle.
Regardless of which cycle they are in,
businesses need to explain decisions made
during this time and make forward-looking
Access pool: A woman walks underneath a WHO sign in Geneva. WHO has asked those
with relevant intellectual property to sign up to the Covid-19 Technology Access Pool,
which will make vaccines broadly available across the world but too few have. — AFP
calls for companies not to consider making a
profit on their Covid-19 vaccines were
“fanatic and radical.” (AstraZeneca PLC and
Johnson & Johnson have promised a not-for-
profit effort on their Covid-19 vaccines, so
Pfizer clearly has an odd definition of “fanat-
ic and radical.”)
If a vaccine proves too expensive or diffi-
cult to obtain, those who seek exorbitant
profits off of it will be scrutinised far more
closely than bankers were after the 2008
crash. Actions like those that have already
allowed insiders to pocket US$80mil will
provoke public revulsion, even if those
trades were pre-scheduled. Calls to regulate
sectors that take for granted intellectual
property protections will grow exponential-
statements about how they intend to help
“build back better” in the future.
Numbers must be backed by narratives.
Reduction in business operations and travel
due to the pandemic virus will likely reduce
greenhouse gas emissions and other envi-
ronmental impacts. Similarly, Covid-19 will
impact many other metrics such as diversity,
employee engagement and supply chain
labour compliance.
Going forward, it will be essential for busi-
nesses to provide a narrative that identifies
what change in historical performance
relates to Covid-19 factors and what change
results from previously existing plans –
numbers on their own will be impossible for
readers to interpret. It will also be important
to provide a forward-looking narrative
explaining their potential trajectory once
Covid-19 is behind us.
While reputation is an important driver of
focus, business continuity, economic inclu-
sion and public safety considerations are
also critical. Given the growing attention
across the board from investors to media,
companies will need to increasingly focus
on social issues to demonstrate their respon-
siveness to the top priorities of the day.
Collaborations with industry peers to ensure
comparable Covid-19 disclosures is vital.
Today, sustainability reporting is more
important than it has ever been, and looking
forward, it will be critical to understand
how Covid-19 may impact sustainability
reporting over the long term.
To emulate Brazil as the 1970 World Cup
champion, businesses need to re-examine
the material assessment and its integration
into enterprise risk management. There
must be a significant increase in connectivi-
ly. Those demands won’t be fanatical or
radical, but mainstream.
It will be hard enough to preserve the
myth of intellectual property within rich
countries. Once international capital flows
are involved, it’ll be impossible. Cash-
strapped governments around the world are
not going to pay tens of billions for vaccines
needed to save the lives of their citizens. Any
attempts to collect using the traditional trad-
ing and legal architecture will be ignored –
and will indeed lead to those institutions
being seen as discredited or even immoral.
There is a lesson here that goes beyond
the pandemic. If we are not sufficiently
careful over the next decade, one likely
economic future consists of tech lords, data
STARBIZ, TUESDAY 4 AUGUST 2020
ty between sustainability and financial
reports.
Digitalisation will offer important insights
into the real impact of companies and their
operations on society and the environment.
Technology will help monitor the applica-
tion of environment, social and governance
(ESG) with the aim to invest more into sus-
tainable products.
While the ESG issues that investors were
looking at prior to Covid-19 still holds, the
pandemic has placed a heightened impor-
tance and increased scrutiny on how busi-
nesses address the “S” in ESG. Focus is on
treatment towards its employees, suppliers
and the communities in which they operate
while naming and shaming good and bad
actors along the way.
While the Covid-19 pandemic has caused
unprecedented disruption, to build back
stronger just like the 1970 World Cup cham-
pion Brazil did will need a more integrated,
comparable and standardised reporting.
Such reporting can meet the new infor-
mation needs brought to light by the pan-
demic and strengthen business deci-
sion-making, risk management processes
and overall performance in the long term.
And the question of whether or not the
reporting field truly moves forward will
depend on the level to which financial and
sustainability reporting converges and on
whether reporting standards and regulation
accelerate this convergence.
Anthony Dass is chief economist/head at
AmBank Research and adjunct professor
UNE, Australia. He is also a member of the
EAC Secretariat. The views expressed here
are the writer’s own.
czars and algorithm owners sitting in the
US or in China soaking up rents and pay-
ments from consumers in the rest of the
world. That is simply unsustainable. Asian,
African and even European governments
will step in and prevent those streams of
payments from being made. Global intellec-
tual property requires the consent and
enforcement of every state, not just one
government. That consent will not be given
if the capital flows involved appear to be
one-way and permanent.
A world without global intellectual prop-
erty would be one of constant electronic
warfare. State-backed hacking, such as
China apparently tried with Moderna this
week, would be a constant threat. Nor would
companies enjoy a comfortable relationship
with their own governments, who would see
them less as engines of growth and more as
storehouses of national wealth and security.
The days before copyright were tough.
When the Murano glassmakers’ industrial
processes were considered state secrets in
the Republic of Venice, the doges would kill
any artisan who left the island.
That isn’t a world we want to live in. It’s
up to pharma companies and rich-country
governments to ensure that we’re not forced
to do so. The World Health Organisation has
asked those with relevant intellectual prop-
erty to sign up to the Covid-19 Technology
Access Pool, which will make vaccines
broadly available across the world. Too few
have.
Perhaps, as some pharma companies
have done, IP holders can make it clear they
will only seek to profit from their vaccines
once the pandemic is over. A little patience
would serve them – and the world – well in
the long run. — Bloomberg
Mihir Sharma is a Bloomberg Opinion col-
umnist. The views expressed here are the
writer’s own.
STARBIZ, TUESDAY 4 AUGUST 2020
Measured deployment
Telcos that roll out 5G in Asean to be affected
TELCO
By B K SIDHU
bksidhu@thestar.com.my
PETALING JAYA: Telecoms companies that
roll out 5G in Asean will have no major reve-
nue opportunity in the next three years, as
deployment will be more measured.
“We see most risk in Thailand, where telcos
may jostle for 5G leadership, and slight earn-
ings dilution in Malaysia. 5G may be slightly
positive for Singapore telcos as it may help
stabilise competition.
“Without 5G till 2024, Indonesia’s data-led
earnings growth story remains the simplest
and best among Asean-4 (Malaysia, Thailand,
Indonesia and Singapore), in our view,’’ CGS-
CIMB said in a note.
They expect Asean-4 telcos to start the
deployment of 5G networks in 2020-21.
“South Korean telcos serve as a cautionary
tale, as their financial year 2019 (FY19) profit-
ability worsened, given a surge in 5G-led
capital expenditure (capex).
The Malaysian telecoms regulator, the
Malaysian Communications and Multimedia
Commission (MCMC), has yet to issue any
spectrum for 5G although it has identified
several bands, including 3.5GHz for 5G.
But players are ready to roll out 5G in select
locations as they conducted various tests last
year.
How spectrum will be awarded will be
closely watched. Earlier attempts in June to
issue several blocks of spectrum to some play-
ers were revoked as soon as they were
announced. The abrupt revocation was due
to legal and technical obstacles and the award
lacked transparency with no tender bid
Malaysia’s first AI-powered SME financing app
KUALA LUMPUR: RHB Banking Group has
launched the RHB Financing (SME) Mobile
App, billed as the first artificial intelligence (AI)-
powered “customer self-initiated” SME financ-
ing mobile app in Malaysia.
The new mobile app automates the custom-
er on-boarding process and adds a new dimen-
sion of digitalisation to the process of submit-
ting financing applications.
The app enables customers to interact with
RHB’s relationship managers via a mobile app
and submit applications remotely and securely,
without having to visit a bank branch.
Naza TTDI appoints new chief executive officer
PETALING JAYA: Naza TTDI Sdn Bhd, the
property arm of the Naza Group, has
appointed Daniel Lim Hin Soon (pic) as
chief executive officer effective Aug 3.
Lim’s last posting before joining Naza
TTDI was as Sunway Integrated Properties
Sdn Bhd’s senior executive director.
He has spent over 28 years in property
development, and held senior executive
positions with leading property develop-
ers.
Lim holds a Bachelor of Engineering
(Civil) with First Class Honours, and a
Master ’s Degree in Business
Administration, both from the University
Aneka Jaringan gets Bursa Malaysia’s approval for listing
PETALING JAYA: Piling and foundation spe-
cialist Aneka Jaringan Holdings Bhd has
obtained Bursa Malaysia’s approval to pro-
ceed with its initial public offering (IPO) on
the ACE Market.
Aneka Jaringan and its subsidiaries are
involved in foundation construction for
buildings, elevated highways and rail infra-
structure, as well as basement construction
for underground car parks.
In a statement, Aneka Jaringan managing
director Pang Tse Fui said, “One of our differ-
entiating factors is the ability to apply our
“The aspiration is to have closer to a
100Mbps minimal average Internet speed.
30Mbps may be too slow.”
Industry executive
called. A review of the spectrum requirement
and award methods is said to be underway.
Also under review is the National
Fiberisation and Connectivity Plan (NFCP)
targets for a minimum internet speed of
30Mbps and 98% coverage of populated
areas, said an industry executive.
Input from players has been sought via a
lab series set up by MCMC since mid-July to
the middle of this month.
“The Covid-19 pandemic has shown the
importance of providing enough speed and
access so that people can remain connected
and conduct their business online. This is the
new normal and previous targets must be
reviewed,’’ he added.
The NFCP is basically a plan that maps up
the nationwide digital connectivity goals.
Among the NFCP targets include availability
of broadband with an average speed of
30Mbps in 98% of populated areas and gigabit
availability in all state capitals by 2023.
“The aspiration is to have closer to a
100Mbps minimal average internet speed. It
may be a big jump but in a digitalised envi-
ronment, 30Mbps may be too slow.
“Similarly, the coverage of populated areas
may be increased to 100% instead of 98%,’’
“The RHB Financing (SME) Mobile App allow
customers to submit financing applications
remotely, where they are also able to receive
faster approval on their financing applications.
This innovative app is powered by AI, machine
learning and big data capabilities, featuring
facial recognition and real-time application
processing capabilities,” said Jeffrey Ng, who is
RHB Banking Group’s head of group business
and transaction banking.
Ng added that the “new normal” business
environment caused by the Covid-19 pandemic
has shifted customer preferences towards
of Singapore.
“Lim will be responsible for the overall
strategic development and direction for
technical knowledge and experience to pro-
vide alternative designs in foundation and
basement construction, which reduce the
project cost for our clients.
“We have won numerous projects based on
our technical skills and knowledge, as well as
our experience in undertaking technically
complex projects. To-date, we have complet-
ed a total of 137 foundation and basement
construction projects.”
He also said the IPO was timely for the
group to capture the upswing in the construc-
tion sector, when the economy recovers.
said the executive.
Communications and Multimedia Minister
Datuk Saifuddin Abdullah recently said a con-
certed effort was needed to expand coverage
and improve quality of broadband services
apart from optimising resources such as opti-
cal fiber and broadband spectrum to improve
the national digital connectivity.
Meanwhile, CGS-CIMB said that 5G rollout
in Malaysia could cost RM7.5bil.
“While industry collaboration and selective
3.5GHz/wider 700MHz rollout will help, we
do not rule out a 15%-25% increase in telcos’
FY21-FY25 capex.
“Coupled with upfront payments and annu-
al licence fees for new 5G spectrum, our FY21-
FY22 core earnings per share for Malaysian
telcos may be hit by 7%-11%, with return of
invested capital remaining flattish to slightly
declining,’’ it said.
It estimates that Maxis Bhd, Digi.Com Bhd
and Celcom Axiata Bhd may each have to pay
RM590mil upfront fees and annual fees of
RM53mil for 5G spectrum.
Telekom Malaysia Bhd and U Mobile may
have to pay RM431mil and RM159mil in
upfront fees and annual fees of RM37mil and
RM16mil, respectively.
remote loan application as opposed to tradi-
tional face-to-face meetings. The app can pro-
vide SMEs with fast term loans at competitive
rates, without the need for collateral.
The app also provides eligible business
owners the convenience of applying for RHB
BizPower Relief Financing of RM50,000 to
RM1mil for a maximum tenure of up to seven
years. Since the launch of the SME Online
Financing web portal in 2018, RHB has seen
5,000 submissions. RHB aims to finance
RM500mil to support small businesses in the
next 12 months via the new app.
the property business,” said SM Faliq SM
Nasimuddin, the deputy executive chair-
man and group managing director of
Naza TTDI.
“We have bold ambitions to accelerate
our growth strategy and Lim’s prior expe-
rience in the industry will be a great asset
to have in capitalising on the ever-chang-
ing market conditions,” added SM Faliq.
Some of Naza TTDI’s iconic projects are
the Taman Tun Dr Ismail township in
Kuala Lumpur, Platinum Park in the heart
of the Golden Triangle and the Malaysia
International Trade and Exhibition Centre
– the largest exhibition centre in Malaysia.
Pang added that “the bulk of our proceeds
will be utilised for the expansion of our fleet
of construction machinery and equipment in
Malaysia. Part of our overall strategy is to
increase our capacity and capabilities in
Malaysia while expanding our operations in
Indonesia, as well as exploring opportunities
in other regional markets.”
Aneka Jaringan’s IPO comprises a total of
139.890 million shares.
Alliance Investment Bank Bhd is the princi-
pal adviser, sponsor, underwriter and place-
ment agent for the IPO.
News 5
EXCHANGE RATE
Bank Negara’s best available quotations by commer-
cial banks of Kuala Lumpur at 5pm on Aug 3, 2020
UNITS OF FOREIGN CURRENCY PER UNIT OF MALAYSIAN RINGGIT
Buying OD Selling OD
US dollar
Sterling:
Singapore dollar:
Yen 100:
0.2366
0.1805
0.3251
24.9775
0.2369
0.1808
0.3257
25.0142
Euro: 0.2008 0.2011
Chinese Renminbi:
Ringgit Malaysia per foreign currency
1.6507 1.6528
OPENING RATES BY MAYBANK ON AUG 3, 2020
SELLING BUYING BUYING
TT/OD TT OD
1 US Dollar .......................... 4.3040 4.1770 4.1670
1 Australian Dollar ............. 3.0830 2.9590 2.9430
1 Brunei Dollar ................... 3.1260 3.0340 3.0260
1 Canadian Dollar............... 3.2070 3.1190 3.1070
1 Euro................................... 5.0660 4.9000 4.8800
1 New Zealand Dollar ........ 2.8610 2.7550 2.7390
1 Singapore Dollar ............. 3.1260 3.0340 3.0260
1 Sterling Pound................. 5.6320 5.4530 5.4330
1 Swiss Franc ...................... 4.6830 4.5750 4.5600
100 UAE Dirham .............118.5800 112.4000112.2000
100 Bangladesh Taka......... 5.1710 4.8320 4.6320
100 Danish Krone.............69.7100 64.1300 63.9300
100 Hongkong Dollar.......56.1400 53.3300 53.1300
100 Indian Rupee ............... 5.8400 5.4800 5.2800
100 Indonesian Rupiah...... 0.0306 0.0275 0.0225
100 Japanese Yen ............... 4.0540 3.9260 3.9160
100 Norwegian Krone......48.3700 44.4900 44.2900
100 Pakistan Rupee ...........2.6200 2.4500 2.2500
100 Philippine Peso............ 8.8900 8.3700 8.1700
100 Qatar Riyal ...............119.5400 113.4800113.2800
100 Saudi Riyal ...............116.0500 110.1700109.9700
100 South Africa Rand .....26.1400 23.6000 23.4000
100 Sri Lanka Rupee .......... 2.3800 2.1900 1.9900
100 Swedish Krona ..........50.4300 45.9200 45.7200
100 Thai Baht....................14.3700 12.7500 12.3500
Banks extend
targeted loan
repayment
assistance
PETALING JAYA: Major banks have
announced plans to extend targeted loan
repayment assistance for individuals and
small and medium-sized enterprises (SME)
once the six-month loan moratorium ends on
Sept 30, 2020.
CIMB Bank Bhd and CIMB Islamic Bank
Bhd, for instance, yesterday said the group
had employed data analytics to identify those
potentially most affected and will be proac-
tively engaging these customers with regards
to the bank’s targeted repayment assistance
programme post-moratorium.
Public Bank Bhd also announced it had
developed a loan repayment assistance pro-
gramme to support retrenched customers or
those facing salary reductions, as well as SME
customers with cash flow constraints due to
the Covid-19 pandemic.
In a statement, CIMB group said an SMS
would be sent to more than 300,000 individu-
als and 10,000 SMEs from today, advising its
customers to follow the simple instructions
and complete their applications by Aug 20,
2020.
Under the programme, individual custom-
ers/borrowers who have lost their jobs since
Jan 1, 2020, and who remain unemployed,
would be given a three-month payment relief,
announced the bank.
Individual customers/borrowers who have
suffered a decline in income would be eligible
for a commensurate reduction of monthly
payments for at least six months, which
would include hire purchase financing,
where affected customers would be offered
revised monthly payments, together with an
extension of tenure
Lastly, it said affected SMEs, corporates and
individuals would be offered several options
including an extension of the existing relief
programme, profit/interest servicing only,
possible extension of the loan/financing ten-
ure to enable lower monthly instalments and
amending other terms and conditions of the
loan/financing where appropriate.
Meanwhile, Public Bank managing director
and chief executive officer Tan Sri Tay Ah Lek
said the bank’s repayment assistance packag-
es have been carefully structured, taking into
consideration our customers’ temporary cash
flow constraints.
“These packages will enable our customers
to gradually readjust their financial positions
over an extended period of time,” he said in a
statement yesterday.
The bank will offer a three-month exten-
sion of the loan moratorium starting Oct 1,
2020 to customers who have lost their jobs in
2020 and are currently unemployed.
6 News
PROPERTY
PETALING JAYA: The impact of the Covid-
19 pandemic is expected to be temporary
for YTL Hospitality Real Estate Investment
Trust (YTL REIT), with its business set to
normalise once the crisis is over.
AmInvestment Bank Research, in a report
yesterday, said YTL REIT has master leases
on properties in Malaysia and Japan that
provide steady incomes.
“At the current price, the stock offers a
potential upside of over 20%. Maintain
‘buy’ on YTL REIT,” it said.
The research house is, however, lowering
its payout ratio to 90% from 100%, follow-
ing management’s guidance.
“We make no changes to our 2021 and
2022 numbers while introducing 2023 dis-
tributable income forecasts at RM136.9mil.
YTL REIT’s 2020 financial year revenue
fell by 13.1% year-on-year mainly due to
travel restrictions in Australia, which have
impacted the tourism and hospitality busi-
ness in the country.
“However, this was mitigated by busi-
nesses in Malaysia and Japan which are
largely unaffected due to their master lease
arrangements,” said AmInvestment Bank.
According to the research house,
Malaysian properties contributed a reve-
nue and net property income (NPI) of
RM140.2mil and RM132.9mil respectively in
its current financial year.
“The stronger revenue and NPI was main-
ly attributed to additional rentals recorded
from JW Marriott Hotel KL following the
refurbishment which was completed in
mid-2019.
“Japanese properties’ 2020 revenue and
NPI surged by 13.6% and 15.4%year-on-
KPJ upgraded TDM completes 70% stake purchase of THP-YT
to ‘outperform’,
analysts
positive on
stake disposal
PETALING JAYA: PublicInvest Research
has upgraded its call on KPJ Healthcare
Bhd to “outperform” from “neutral” with a
target price of 95 sen.
The brokerage said it is positive on KPJ’s
proposed disposal of its 80% stake in PT
Khidmat Perawatan Jasa Medika (KPJM)
for around RM28mil to Irfan Jasri and
Annie Trisusilo.
It said the exercise would enable the
group to monetize the investment and
redirect its resources to other areas.
The proposed disposal is part of a
restructuring exercise of KPJ hospital
operations in Jakarta, that would allow the
group to fully comply with the licensing
and regulatory requirements of the
Indonesian authorities.
“The disposal price per share of around
RM340,000 per share was valued at two
times of KPJM’s net tangible asset value
and was agreed between all parties on a
willing buyer willing seller basis.
The group has entered into two separate
share sale agreements with Irfan Jasri and
Annie Trisusilo.
“We highlight that Annie Trisusilo is the
current acting medical director of KPJ’s
other hospital in Indonesia, RS Medika
Bumi Serpong Damai,” Public Invest
Research noted.
The research house said that KPJM,
which operates hospitals in Indonesia
namely, RS Medika Permata Hijau and RS
Medika Bumi Serpong Damai, contributed
profit before tax of merely RM636,000 in
the first quarter of its financial year 2020.
As such, PublicInvest Research is not
making any changes to KPJ Healthcare
Bhd’s financial year 2020 (FY20)-FY22 fore-
cast earnings.
Coronavirus impact on
YTL REIT seen temporary
Analysts say company has steady income from M’sia, Japan
“However, this (impact on Australian
operations) was mitigated by businesses in
Malaysia and Japan which are largely
unaffected due to their master lease
arrangements.”
AmInvestment Bank
year respectively to RM28.7mil and
RM24.1mil respectively, contributed by
Green Leaf Niseko Village Hotel that was
acquired in September 2018.”
However, Australian properties’ revenue
and NPI tumbled 22.3% and 25.7% to
RM257.6mil and RM78.3mil respectively,
said AmInvestment Bank, mainly due to the
impact of the Covid-19 outbreak that affect-
ed the global tourism and hospitality busi-
nesses.
PETALING JAYA: TDM Bhd has completed
the acquisition of a 70% equity in THP-YT
Plantation Sdn Bhd, effectively increasing
TDM’s total planted area in Terengganu
from 31,346 ha to 33,653 ha.
As THP-YT is now a subsidiary of the
group, TDM now assumes control of the
management and operations of the 2,594.5
ha Bukit Bidong Estate.
In a press release yesterday, TDM chair-
man Raja Datuk Idris Raja Kamarudin said
the acquisition is part of the group’s overall
strategy to improve the average age profile
of the oil palms and reduce fluctuation in
revenue.
“Under our business development plan,
the group is always looking for prospective
brown field ventures with the goal of
Lotte Chemical expected to be profitable in H2
PETALING JAYA: Lotte Chemical Titan
Holding Bhd (LCTH) is likely to be profitable
in the second half of this year (2H20) given
the product spread is still healthy and profita-
ble for the group, Maybank IB Research said.
The brokerage said although the polymer
spread fell from its peak of US$640 per tonne
in end-March, the present spread of US$550
per tonne is “still profitable” for LCTH.
“We think the spread could gradually sof-
ten from August on lower plant turnaround
activities in the region and China-led new
supply.
“Additionally, plant utilisation rate in the
Maybank Indonesia’s net profit strengthens 7%
KUALA LUMPUR: Bank Maybank Indonesia
Tbk’s profit after tax and minority interest
(PATAMI) rose by 7% year-on-year to 809.7
billion rupiah during the first half of 2020
ended June 30 (1H2020).
The bank attributed the performance to the
improvement in its fee-based income, which
rose by 1.4% to 1.2 trillion rupiah in June
2020, as well as sustained strategic cost man-
agement.
“On a positive note, the Australian prop-
erties participated in the Australian govern-
ment’s programme for self-isolation guests
and remained in operations.”
The research house noted that YTL REIT’s
debt-to-total assets ratio remains stable at
40% compared with 39% last year, as a
result of higher investing activities, adding
however that this was still below the regula-
tory threshold of 50%.
“At the current level, we believe YTL REIT
achieving earnings-accretive acquisitions,
both within the plantation as well as the
healthcare sector.
“TDM is strategically positioning itself to
stay competitive in highly challenging mar-
ket conditions,” he said.
The 70% equity interest in THP-YT
Plantation was acquired from TH
Plantations Bhd, with Yayasan Terengganu
as the owner of the remaining 30% stake in
the company. Raja Idris added that the
Bukit Bidong Estate, which comprises three
parcels of plantation land located in Setiu,
Terengganu, has a younger oil palm age
profile of between two to nine years old.
He noted that the acquisition was part of
TDM’s plan to expand its plantation locally
and gain a larger planted area in
second half of this year would be stable at
around 85%. The next turnaround activity
will take place in July 2021,” it noted.
Meanwhile, Maybank IB Research expects
that LCTH’s earnings for the third quarter
ending Sept 30, 2020 (3Q20) be weaker quar-
ter-on-quarter in the absence of the substan-
tial inventory write-back.
“We maintain our earnings forecasts for
the financial years (FY) ending Dec, 31, 2020,
to 2022 and expect a profitable 2H20 as the
present spread is still healthy.
“Our target price is retained at RM2.10,
which is based on an unchanged two times
“The loan-to-deposit ratio (LDR-Bank only)
was at a healthy level of 94.2 %, while its
liquidity coverage ratio (LCR-Bank only) stood
at 152.4 % as of June 2020 - well above the
mandatory minimum of 100%.
“Net interest margin improved to five % as
at June 2020 compared with 4.8 % in June
2019, mainly supported by the reduction in
cost of deposit as a result of disciplined pric-
ing and better funding management, ” it said
STARBIZ, TUESDAY 4 AUGUST 2020
still has some room to gear up for future
acquisitions.”
Meanwhile, Maybank Investment Bank
(Maybank IB) Research said it is raising its
2021 and 2022 net profit by 20% and 9%
respectively, after mainly adjusting for the
company’s 2020 results (namely foreign
exchange, interest costs and selective cost
savings from the rental variation adjust-
ments) and Australian hotels’ earnings.
“Subsequently, we cut our 2021 and 2022
gross distribution per unit by 55% and 52%
to 2.6 sen and 3.5 sen respectively, after
accounting for the rental variation adjust-
ments (namely lower distributable income)
and lower dividend payout ratio of 90% per
annum.”
For YTL REIT’s Australian hotels, Maybank
IB said occupancies and earnings were
largely attributed to guests that are under-
going mandated Covid-19 quarantine/ hotel
isolation for 14 days upon entering the
country.
“Positively, we understand that YTL
REIT’s Australian hotels have remained
among the preferred hotels for the isolation
and we believe this would sustain its near
term earnings,” it added.
Terengganu.
Additionally, Bukit Bidong Estate is locat-
ed within the vicinity of TDM’s existing mill
in Sungai Tong.
As such, the acquisition is expected to
optimise the processing capacity and effi-
ciency of fresh fruit bunch (FFB), further
reducing the mill processing cost per metric
tonne.
“TDM believes that the strategic value
creation to be derived from the acquisition
will translate into operational efficiencies
thus improving profitability in the long
run,” said Raja Idris.
TDM’s wholly-owned subsidiary TDM
Plantation Sdn Bhd is certified by the
Roundtable on Sustainable Palm Oil (RSPO)
and Malaysian Sustainable Palm Oil (MSPO).
enterprise value to earnings before interest
and taxes based on FY21,” it said.
The core net profit for 2Q20 was RM150mil
excluding the unrealised forex loss of
RM63mil, which was a sharp rebound from
core net loss of RM222mil in 1Q20.
“This brought 1H20 core net loss to RM72mil
and was within our forecast as we expect a
profitable 2H20,” Maybank IB Research said.
Meanwhile, the research house is keeping a
“hold” call on Lotte as the near-term earnings
could be unexciting, but the stock has deep
value with its FY21E price-to-book value ratio
at 0.4 times.
in a statement.
Maybank Indonesia said overhead costs
were managed effectively, declining by 4.6 %
to three trillion rupiah in June 2020 due to
continued cost management initiatives across
business lines and support units, coupled
with reduction in general and administration
costs as the bank implemented work from
home arrangements following the Covid-19
pandemic.— Bernama
STARBIZ, TUESDAY 4 AUGUST 2020
Indonesia allows oil and gas investors to pick their own contracts
JAKARTA: Indonesia announced
over the weekend that it had made
revisions to a 2017 law that will
give oil and gas (O&G) investors
more flexibility when choosing
their contract options for explora-
tion.
The revisions, which came into
effect on July 16, allow contractors
to choose between different shar-
ing contracts including the “cost
recovery” and “gross split” sys-
tems in an effort to boost invest-
ment.
Indonesia adopted the “gross
split” scheme for O&G production
deals in 2017, in which contractors
Philippine economy fears
Part two of virus curbs dashes hopes of fast recovery
PHILIPPINES
MANILA: The Philippines stock
market tumbled yesterday after the
government reimposed coronavi-
rus lockdown measures in and
around Manila in response to fresh
outbreaks, dashing hopes of a swift-
er economic recovery.
The restrictions, due to take effect
today, are being reinstated after a
group of doctors and nurses warned
that the healthcare system could
collapse as a result of surging Covid-
19 cases.
“It’s a bitter but necessary pill
given the plight of our medical
frontliners,” said Francis Lim, pres-
ident of the Management
Association of the Philippines. “We
hope the government will deep dive
into our Covid-19 strategy and find
more effective ways to execute it.”
The Philippine economy had
been one of Asia’s fastest growing
before the pandemic but is now on
the brink of recession. The main
Asia gasoline profits burn away to nearly nothing
SINGAPORE: Asia’s gasoline refin-
ing margins nearly burned up in
July, dropping to just above zero in
the worst profit performance for
refined fuels over the month, as a
new wave of coronavirus infections
walloped demand recovery and
swelled supplies.
Gasoline had staged a stunning
comeback in June as some econo-
mies started to reopen, with its
margins in Asia returning to premi-
ums against crude oil from steep
discounts in April and May.
By end-July, though, Asian petrol
premiums to Brent had dropped to
four cents a barrel from US$2.37 on
July 1. Margins for benchmark 10
parts-per-million (ppm) gasoil rose
cents to US$6.86 over the same peri-
Japan’s economy shrinks at same pace in first quarter
TOKYO: Japan’s economy shrank at
the same pace as previously esti-
mated in the first quarter, accord-
ing to a further revision of data that
continued to show the country was
in a recession before the pandemic
took its heaviest toll.
Gross domestic product (GDP)
shrank an annualised 2.2% in the
first quarter compared with the
final three months of 2019, the
Cabinet Office reported yesterday,
with business investment showing
more resilience than expected.
Economists had forecast a 2.8%
“The government is officially allowing flexibility for
investors to choose the form of O&G contracts.”
Ministry of Energy and Mineral Resources
shoulder the cost of exploration
and production in exchange for
retaining a bigger portion of the
O&G they recover.
That represented a shift from
the “cost recovery” scheme used
Halted: A man walks by docked fishing boats in the city of Navotas in
the Philippines. The Philippine economy was one of Asia’s fastest grow-
ing before the pandemic but is now on the brink of recession. — AP
stock index fell as much as 3.9%
yesterday, its lowest in more than
two months.
Quarterly growth data is due on
od.
Unlike gasoil, or diesel, typically
used for the transport of manufac-
turing and farming goods and other
industrial activity, gasoline’s main
function is to power cars.
This makes it vulnerable when
lockdown measures cripple
demand.
“The relative demand recovery in
gasoline is being held back by con-
tinued restrictions on personal
mobility, as compared to die-
sel-dominated commercial and
industrial activity which is return-
ing more quickly,” said Philip Jones-
Lux, energy market analyst at con-
sultancy JBC Energy.
Other fuels also fared better over
July, with the discount for very low
contraction following a rare finance
ministry move to update capital
spending data last week after initial
survey results were deemed insuffi-
cient given a low response rate
from companies dealing with the
pandemic.
An official at the Cabinet Office
said the smaller-than-expected
capex revision shows that the sam-
pling issues had already been partly
accounted for in the prior GDP esti-
mate.
“What I’m seeing now is that cap-
ital investment is holding up better
previously, in which the govern-
ment reimbursed the exploration
and production costs borne by the
contractors in exchange for a
higher share of companies’ O&G
earnings.
Thursday and economists expect a
deeper contraction compared with
the 0.2% contraction decline in the
first quarter as the pandemic-in-
sulphur fuel oil narrowing, and jet
fuel and naphtha margins falling
35% and 26.5%, respectively.
China pumping fuel into Asia,
when demand in key consuming
countries the United States and
Indonesia is weak, also exerted
pressure, said KY Lin, spokesman
for Taiwan’s Formosa Petrochemical
Corp, a major supplier of gasoline
and middle distillates for the region.
China’s gasoline exports for the
first-half of 2020 jumped 39% com-
pared with the same period last
year, and its export volumes may
not slow as domestic demand gets
hammered by the coronavirus and
summer floods.
As for the US, the world’s largest
gasoline consumer, its imports from
than I had expected,” said Masaki
Kuwahara, an economist at Nomura
Securities.
“Companies have to invest in
research and development (R&D)
and information technology in
order to deal with the coronavirus.
We see a big drop in machinery
investment, but long-term invest-
ments like R&D haven’t fallen
much.”
Monday’s backward-looking data
comes before another growth
report due mid-month that’s fore-
cast to show Japan’s economy
“The government, through the
Ministry of Energy and Mineral
Resources, is officially allowing
flexibility for investors to choose
the form of O&G cooperation con-
tracts,” the energy ministry said in
duced lockdown shuttered busi-
nesses and sapped domestic con-
sumption, a main driver of growth.
“We reiterate that the Philippines
is indeed headed into a severe crash
landing with the probability of the
economy returning to its former
glory any time soon now declining
by the day,” said Nicholas Mapa,
economist at ING bank.
The country recorded a sin-
gle-day record of 5,032 new infec-
tions on Sunday, taking total con-
firmed cases of Covid-19 to around
103,000.
Case numbers have grown expo-
nentially since authorities relaxed
a previous lockdown in June and
the Philippines is now close to
overtaking Indonesia as the coun-
try with the highest number of
infections in Southeast Asia.
The government announced late
on Sunday it was placing metro
Manila and nearby provinces such
as Laguna, Cavite, Rizal and
Bulacan under so-called “Modified
Enhanced Community Quarantine”
for two weeks from today. —
Reuters
Europe last month dropped by 56%
from a year earlier to 890,000
tonnes, Refinitiv Eikon data showed.
That could mean that European
gasoline gets pushed into Asia, Lin
said.
Storage is relatively full, though,
and Indonesia, Asia’s top gasoline
buyer, has also been keeping its
import volumes low. Its monthly
average imports from January to
July at 7.7 million barrels is down
27% from the same period last year,
data from Refinitiv Oil Research
showed.
“We see gasoline demand remain-
ing potentially more affected than
gasoil or marine fuel through the
rest of the year,” said Jones-Lux. —
Reuters
shrank by more than 20% in the
second quarter, the most in records
going back to 1955.
Recent gains in retail sales and
industrial production suggest
growth began to rebound after a
nationwide state of emergency was
ended in late May, but analysts cau-
tion the recovery is fragile.
Widening virus outbreaks in the
US and other key markets darken
the trade outlook and rising case
numbers in Japan’s biggest cities
threaten jobs and consumer spend-
ing at home. — Bloomberg
Foreign News 7
a statement on Saturday.
“This change is to provide legal
certainty and increase investment
in upstream O&G business activi-
ties,” it added, referring to the
exploration and drilling of new
wells.
Under the revised law, expiring
contracts no longer have to be
converted to gross split produc-
tion sharing contracts from cost
recovery contracts.
In the case where state oil com-
pany PT Pertamina or its affiliates
are appointed, the ministry will
determine the cooperation con-
tract. — Reuters
India likely
to cut rates
despite
inflation risk
MUMBAI: India’s worsening eco-
nomic outlook as coronavirus cases
soar has raised the chance the cen-
tral bank will cut interest rates at its
policy review on Thursday, in spite of
inflationary pressures.
Around two-thirds of economists
in a Reuters poll expect the Reserve
Bank of India (RBI) to cut the repo
rate by another 25 basis points (bps)
on Aug 6 to a record low of 3.50%,
and once more next quarter.
“High inflation has added confu-
sion to RBI’s policy outlook, but given
the state of aggregate demand, we
forecast the RBI will continue eas-
ing,” said Rahul Bajoria, economist at
Barclays who expects a 25-bp cut.
Annual retail inflation rose in June
to 6.09% from 5.84% in March,
remaining above the RBI’s medi-
um-term target range of 2%-6%.
The RBI’s recent policies have
focused on financial stability and the
need to support growth despite the
price target.
The country was placed under one
of the strictest lockdowns in the
world in late March for over two
months to halt the spread of the coro-
navirus. The government gradually
eased restrictions in June although
infections continue to rise.
The poll showed most analysts
expect the economy to contract 20%
in the June quarter versus the April
forecast of a 5.2% fall and remain in
negative terrain until the December
quarter.
For the full year 2020/21, the econ-
omy is likely to shrink 5.1%, which
would be its weakest performance
since 1979, a sharp contrast to the
1.5% expansion forecast in April.
Apart from rate cuts, Upasna
Bharadwaj, economist at Kotak
Mahindra Bank, expects liquidity
and regulatory measures from the
RBI to address demand shocks and
financial market dislocations.
“RBI may look to widen the policy
corridor to 75bps by easing reverse
repo by a higher quantum,” she said,
adding that though they expect a
25-bp rate cut, it may not be effective
in the current environment.
The RBI has already reduced the
repo rate by a total of 115bps since
February, on top of the 135bps in an
easing cycle last year, from 6.50%,
responding to slowing growth.
Some economists, however, feel it
may be prudent for the RBI to pause
in August before resuming its
rate-cutting cycle once inflation has
stabilised. Weakness in growth ver-
sus above-target inflation, improving
indicators and concerns over infla-
tion expectations will put the RBI in a
tough spot, said DBS economist
Radhika Rao. — Reuters
8 Foreign News
Early signs of turnaround across S. Korean manufacturing sector
SEOUL: South Korea’s manufacturing activity
shrank at a much slower pace in July, signal-
ling that a gradual recovery in demand is
gaining momentum on easing lockdowns,
although the resurgence in infections
remained a risk.
The IHS Markit purchasing managers’
index (PMI) rose to 46.9 in July from 43.4 in
June, marking the highest reading since
January. But that was still below the 50
threshold that separates growth from con-
traction.
The headline index reflected slower rates
of decline in major sub-indexes such as out-
put, new orders and export orders but those
still remained low by historical standards.
“July data provides early signs of a turna-
round across the South Korean manufactur-
ing sector ... helped by reopening internation-
al supply chains and a gradual recovery in
demand in key areas such as automotive
production,” IHS Markit economist Joe Hayes
said.
A gauge of expectations for manufacturing
output over the next 12 months jumped to
49.0, just below the threshold, but still much
higher than 45.7 in June.
Japan’s Seven & i to buy
Marathon’s gas stations
Deal will help firm shift focus beyond Japan
JAPAN
BENGALURU: The Japanese owner of
7-Eleven convenience stores has agreed to
buy Marathon Petroleum Corp’s Speedway
gas stations for U&S$21bil, brushing aside
coronavirus concerns to return to the table
five months after initially baulking at the
deal.
The deal will help Seven & i Holdings Co
Ltd shift focus beyond Japan, where its
stores and supermarkets face a shrinking
population, slow economic growth and
tough price competition.
It boosts its 7-Eleven store count in the
United States and Canada to about 14,000,
adding to a portfolio fattened just three
years earlier with a US$3.3bil purchase
from Sunoco LP – furthering its conveni-
ence store lead over Canada’s Alimentation
Couche-Tard Inc.
Shares in Seven & i nevertheless fell 4.8%
yesterday in Tokyo on worries about a price
just US$1bil lower than what the company
reportedly turned down in March.
At that time, analysts and investors said the
price was too high given concerns about a
pandemic-induced global economic slow-
down. Oil prices and fuel consumption have
fallen as more people work from home and
avoid travel.
Seven & i president Ryuji Isaka said the
China factory activity expands at fastest pace in nearly a decade
BEIJING: China’s factory activity expanded at
the fastest pace in nearly a decade in July as
domestic demand continued to improve after
the coronavirus crisis, though export orders
and employment remained weak, a private
business survey showed.
The Caixin/Markit Manufacturing
Purchasing Managers’ Index (PMI) rose to
52.8 last month from June’s 51.2, marking
the sector’s third consecutive month of
growth and the biggest jump since January
2011.
It also beat analysts’ forecasts for a more
modest improvement of 51.3. The 50-mark
separates growth from contraction on a
monthly basis.
But exports, which account for nearly
40% of the economy, are still the biggest
concern.
South Korea joined Asian peers Japan,
Thailand and Singapore in recession, after
the economy marked its worst decline since
the Asian Financial Crisis in the second
quarter.
“Perhaps the strongest signal that demand
levels had fallen short of expectations was the
largest rise in stocks of finished goods since
the start of 2009 ... manufacturers maintained
a bias towards price discounting and contin-
ued to take a cautious view on their staffing
numbers,” Hayes said.
The sub-index for finished goods inventory,
which is often attributed to weaker-than-ex-
pected sales, jumped at the fastest pace in
11½ years.
To further reduce costs, firms cut staff for a
15th straight month in July, though at a slower
rate.
Monday’s survey came after factory pro-
duction jumped at the fastest rate since 2009
in June and much quicker than expected,
adding to hopes that the worst of the corona-
virus impact has passed. — Reuters
“We made the management decision that
these assets will be a source of our growth
in five years, 10 years down the road.”
Ryuji Isaka
retailer decided that expanding in the United
States was still beneficial given a growing
population and potential for convenience
stores, regardless of the pandemic’s hit to
consumer spending.
“The coronavirus is not going to go on for-
ever,” Isaka told a conference call following
the deal announcement. While he declined to
discuss specifics on why the company
returned to the deal table, he said: “We made
the management decision that these assets
will be a source of our growth in five years, 10
years down the road.”
He said the retailer wanted to bolster food
offerings at the US stores, in the same way its
Japanese 7-Eleven stores have become popu-
lar for their ready-to-heat meals and boxed
lunches.
The 7-Eleven brand started in the United
States, but the Japanese affiliate became far
more successful as its 24-hour opening poli-
cy and franchise system proved a perfect
match with a dense population and late-
The generally upbeat findings echoed an
official survey on Friday, adding to evidence
that the world’s second-largest economy is
getting back to its feet faster than expected
from the coronavirus shock, which has now
been largely brought under control.
“The supply and demand sides both
improved, with relevant indicators main-
taining strong momentum,” Wang Zhe, sen-
ior economist at Caixin Insight Group, wrote
in a note accompanying the Caixin survey
release.
“We still need to pay attention to the weak-
ness in both employment and overseas
demand,” Wang said.
China announced unprecedented emer-
Improved data: An employee works at Hyundai Card Corp credit card factory in Seoul.
South Korea’s IHS Markit purchasing managers’ index rose to 46.9 in July from 43.4 in June,
marking the highest reading since January. — Bloomberg
night work culture.
The global chain is now owned by Seven &
i, one of Japan’s biggest retail groups with a
market capitalization of around US$27bil.
The deal comes after Marathon last year
launched a sweeping restructuring, including
a spin-off of Speedway, under sustained pres-
sure from activist investor Elliott
Management.
Marathon said it expected the deal,
approved by the boards of both firms, to close
in the first quarter of 2021 and generate after-
tax proceeds of about US$16.5bil which it
spend on existing debt.
The largest US oil refiner by volume also
said the deal included a 15-year fuel supply
agreement for about 7.7 billion gallons a year
associated with the Speedway business.
Seven & i forecast US$475mil to US$575mil
worth of synergies through the third year of
the deal’s close, and compound annual growth
of over 15% in 7-Eleven’s operating income.
— Reuters
gency measures early in the year to mitigate
the economic damage from the health crisis,
which had caused weeks of disruptions as
most regions imposed strict lockdowns.
Growth rebounded in the second quarter
after a record contraction in the first quarter,
but analysts are looking for signs that the
recovery is being fuelled by more than just
temporary, pent-up demand and state-led
stimulus.
The Caixin survey showed both factory
output and total new orders recorded the
strongest increase in July since January 2011,
and the gauge for output prices rose at the
fastest pace in nearly two years, signalling
future producer inflation that could help
STARBIZ, TUESDAY 4 AUGUST 2020
Bank of Thailand
seen holding
key rate at
record low
BANGKOK: Thailand’s central bank is widely
expected to leave its key interest rate
unchanged at a record low after three cuts
this year to help cushion the economic impact
of the coronavirus pandemic, a Reuters poll
showed.
In the poll, 16 of 18 economists predicted
the Bank of Thailand’s (BoT) Monetary Policy
Committee (MPC) would hold its one-day
repurchase rate at 0.50% for a second straight
meeting.
The other two economists saw a 25 basis-
point cut to a fresh record low of 0.25%, citing
economic shrinkage, falling consumer prices
and a stubbornly strong baht. Most analysts
think policymakers may want to save some
ammunition while assessing risks and the
effects of earlier support measures.
“There are fixes needed with previous
measures that have been rolled out, such as
the drawdown in soft loans,” said Kobsidthi
Silpachai, head of capital market research at
Kasikornbank. “It is the distribution of low
rates that need to be addressed”.
Economic activity has picked up in recent
weeks as a result of the government’s largely
successful containment of Covid-19 so far,
meaning there are “no pressing reasons for
the BoT to use up its remaining ammunition,”
HSBC said in a note.
The BoT has forecast South-East Asia’s sec-
ond-largest economy will shrink by a record
8.1% this year but recently said there had
been some improvement after the lockdown
was eased.
Economist Takit Chardcherdsak at Asia
Plus Securities said the MPC might ease policy
in the fourth quarter because of “unknown
factors”. — Reuters
boost firms’ profits, the survey showed.
However, export demand remained weak,
with the sub-index for new export orders
falling for the 7th month, albeit at a slower
rate. The Caixin survey is believed to focus
more on smaller exporters than the larger
official survey.
Many manufacturers are still facing
reduced or cancelled overseas orders, and the
re-imposition of virus restrictions in parts of
the United States and other countries could
slow down a global recovery.
The survey also showed Chinese factories
cut payrolls for the seventh month to reduce
costs, although job shedding moderated as
sales improved. — Reuters
STARBIZ, TUESDAY 4 AUGUST 2020
ADB sees pandemic slashing global remittances by over US$100b
MANILA: Remittances across the world
could decline by US$108.6bil this year as job
losses mount and employers trim payrolls
amid a Covid-19 pandemic that has devastat-
ed economies, according to a report by the
Asian Development Bank.
Money sent to Asia, where about a third of
migrant workers worldwide come from,
could fall by US$54.3bil, or about a fifth of
baseline remittances, the Manila-based lend-
India bond buyers tighten grip
This comes as balance sheets of companies deteriorate at worst pace ever
INDIA
MUMBAI: With the health of Indian compa-
nies’ balance sheets deteriorating at the worst
pace ever, investors are demanding more
protection.
One way they are doing that is by buying
local-currency bonds whose interest increas-
es every time their credit ratings are down-
graded. The number of such notes sold
jumped to a record in the quarter through
June, making up 102 out of the 513 bonds
issued, according to Bloomberg-compiled
data. And sales remained strong in July.
Indian borrowers are trying to address
investor concerns that businesses will deteri-
orate further after prolonged stay-at-home
restrictions brought the economy to a stand-
still.
Such bonds are sold overseas too in coun-
tries including Israel and New Zealand, but
issuance from India has far surpassed the rest
of the world in recent years.
Coffee prices
seen rising
slightly by end-
2020 despite
higher surplus
NEW YORK: Coffee prices, both for arabica
and robusta futures, are seen rising slightly
by the end of 2020 from current values
despite an overall view of a larger surplus in
the 2020-21 season, a Reuters poll of nine trad-
ers and analysts showed on Monday.
Arabica futures are seen finishing the year
at US$1.20 per pound, 0.9% higher than the
settlement on Friday, while robusta futures
are seen at US$1,390 per tonne at end-Decem-
ber, 3.42% up from last week’s settlement.
“Challenging times for many commodities,”
said futures strategist Stephen Platt, citing the
influence of stimulative policies in one side
and the impact in demand caused by the coro-
navirus pandemic in the other.
“The virus has likely helped consumption
of lower quality coffee in key consumers
including Brazil while decline in institutional
sales in industrialized consumers being par-
tially offset by higher consumption at home,”
he said. The experts see a global coffee sur-
plus growing from 1.85 million 60 kg bags in
2019-20 to 5 million bags in 2020-21, mostly
due to a larger supply of arabicas amid weak-
er demand for the high-quality variety. Coffee
shops around the world, which stayed closed
for months, mostly use arabicas.
A European-based broker sees currencies
playing a roll in pricing, believing the
Brazilian real has touched a bottom during
the pandemic and should recover, which
would limit future coffee sales from the No. 1
producer and support prices. — Reuters
er said in the report released yesterday.
Remittances to Asia and the Pacific, which
amounted to US$315bil in 2019, help fuel the
consumption-led growth for some of the
region’s developing economies, including
the Philippines.
“The Covid-19 pandemic is expected to hit
remittances hard in Asia and the Pacific,” the
ADB report said.
The countries facing “more severe” effects
“Investors will continue to demand such
covenants as many companies are expected
to be downgraded after lockdowns hit
business operations big time.”
Murthy Nagarajan
“Investors will continue to demand such
covenants as many companies are expected
to be downgraded after lockdowns hit busi-
ness operations big time,” said Murthy
Nagarajan, head of fixed-income at Tata Asset
Management Ltd.
“Bond buyers need to protect themselves in
this dynamic situation and will seek tighter
bond terms.”
The phenomenon flags broader concerns
about debt in India, even as stimulus steps
Decline of Orchard Road shows Singapore’s pain
SINGAPORE: A walk down Orchard Road
shows just how badly the coronavirus pan-
demic has hit Singapore’s famed shopping
strip.
Gone are popular restaurants like
Modesto’s, which shut last month after 23
years. Also missing are the queues of Chinese
tourists outside Chanel and Louis Vuitton.
Malls along the 2.4 km stretch, once one of
Asia’s top shopping meccas, are dotted with
empty stores.
On a recent midweek afternoon, the num-
ber of shop staff idly dusting shelves or play-
ing with their mobile phones rather than
greeting customers is notable.
“It’s the worst crisis for Singapore and
Orchard Road,” said Kiran Assodani, who has
run her custom tailor shop in one of the older
malls for 35 years. The alterations outlet,
which caters to both tourists and locals, has
seen sales drop by 90% since the virus out-
break. “I don’t know if the shops can weather
this storm.”
Orchard Road’s malaise is a microcosm of
the city-state’s pain.
After initial success in containing Covid-19,
an outbreak swept through scores of dormito-
ries housing foreign workers, prompting a
two-month partial lockdown that’s sending
the economy toward its worst-ever recession.
Global travel restrictions are robbing
Singapore of around US$20bil in tourism
receipts and the domestic market is too small
to make up the shortfall.
Originally the site of fruit, nutmeg and pep-
per farms in the early 19th century that gave
the strip its name, Orchard Road’s transfor-
mation into a glitzy shopping hub - the first
department store opened in 1958 - mirrored
Singapore’s own growth from a relatively
sleepy trading outpost to one of the world’s
wealthiest nations.
Now, it’s tracing the economy’s decline.
are those where the share of remittances to
the gross domestic product and per capita
remittances are high, such as Tonga, Samoa
and other Pacific nations, it said.
Georgia, Kyrgyzstan and Tajikistan, which
send a large number of seasonal and long-
term migrants mainly to Russia and Europe,
will also be hard-hit, along with Nepal and
the Philippines, the report said.
“The worst case scenario assumes that the
drive a rally in credit markets.
The central bank last month warned that
the bad loan ratio of lenders could swell to the
highest level in more than two decades.
In July, 50 bonds with so-called credit rating
protection metrics were sold, compared with
just four a year earlier.
In some cases, issuers can benefit as well.
Just as they promise to pay more in case of a
downgrade, some notes let companies lower
coupons if their bond grades are raised.
Italian restaurant Modesto’s survived the
SARS outbreak and the Asian and global
financial crises during its more than two dec-
ades on Orchard Road, but buckled under the
coronavirus. Instead of renewing his lease,
owner Ashok Melwani decided to cut his loss-
es and close for good.
“If I renewed, I was signing up for a roller-
coaster in the dark,” said the 62-year-old, who
also closed a second Modesto’s outlet nearby.
“I may bleed and bleed with no end in
sight.”
The downturn has hit luxury and bar-
gain-basement retailers equally hard.
Robert Chua, who runs a discount luggage
store in Far East Plaza, reckons he can last
about another two months. He used to take in
around S$25,000 a month selling suitcases
and backpacks to mostly American, European
and Chinese tourists. Now, a S$300 day is a
good one, and some days there are no custom-
ers at all.
“Everyday I come to the store feeling sad,”
said the 50-year-old. Inside his account books
he keeps three S$50 notes -- a Chinese super-
stition meant to keep money flowing in, to no
avail. “I can’t sleep thinking about the expens-
es I have to pay.”
His S$6,000-a-month rent resumes this
month after rental rebates provided by the
government and some landlords ended in
July.
At least 20 stores in Far East Plaza, which is
part owned by the billionaire family behind
RB Capital, are empty, ‘For Rent’ stickers opti-
mistically plastered on their shutters.
A few blocks away at the more upmarket
Ngee Ann City, part of Starhill Global REIT’s
portfolio, it’s a similar story. Several shops are
closed, including a Japanese restaurant and
linen-fashion retailer British India.
“It’s never been this bad and I’ve been
working in retail since 1994,” said Nana
Foreign News 9
domestic outbreak control and resumption
of economic activities take a year’s time,” it
said.
“Uncertainty looms about the timing of
full recovery, even as lockdowns are lifted.”
Developing Asia, a group of 45 countries in
the Asia-Pacific region, is forecast to clock up
its weakest growth in nearly six decades this
year, the lender said in its Asian Development
Outlook report issued in June. — Reuters
That helped sales of such securities gain
traction in 2016, when the credit quality of
Indian companies was improving on support-
ive government policies.
Before that, offerings of the bonds had
been sparse since their introduction in India
in 2005.
One example of such debt was sold in June
by Tata Power Co, part of India’s largest con-
glomerate.
Those AA rated bonds have a clause that
the 8.21% coupon rate would be raised by 25
basis points for each step of a rating down-
grade and vice versa.
If the rating were to fall to A- or below, the
notes would be called back before their
August 2023 maturity.
There have been no rating changes since
issuance.
The boom in such notes comes amid a
broader rush to raise funds in the debt mar-
ket, after bond yields recently hit record lows.
“Issuers are raising big amounts from the
bond market because they want to lock in
lower borrowing costs, but investors are wor-
ried about the credit quality,” said Nagarajan
at Tata Asset Management. — Bloomberg
Sahamat, the manager of Japanese clothing
store Fray I.D. “Before the crisis, I’d be busy
entertaining customers but I now spend more
time in the backroom doing stock taking.”
To be sure, Orchard Road was already los-
ing its luster before the coronavirus hit. The
Shoppes at Marina Bay Sands has drawn
away wealthy tourists and domestic consum-
ers alike with luxury retailers like Christian
Louboutin, Fendi and Gucci, and fine dining
restaurants such as Cut by Wolfgang Puck.
More cost-conscious shoppers meanwhile
are heading to suburban malls flush with
high-street brands like Uniqlo, Zara and
Topshop, and no longer see the need to ven-
ture to Orchard Road.
“Before the pandemic, Orchard Road had
already seen a decline in foot traffic and
sales,” said Wong King Yin, a lecturer in mar-
keting at Singapore’s Nanyang Technological
University.
“Only when international tourism has fully
resumed, the economy has recovered and
everyone is willing to spend, and when
Orchard Road is able to offer unique experi-
ences more than just shopping, then the dis-
trict can attract people like it did during its
peak,” she said.
There have been repeated attempts to reju-
venate the area.
CapitaLand Ltd’s futuristic Ion Orchard
mall was opened in 2009 and shoppers can
get everything they need -- from luxury jewel-
ry and fashion to affordable brands like
Swarovski. There’s also a huge basement food
court showcasing fast food and Singapore
street delicacies. The strip has also dabbled in
midnight shopping, monthly pedestrian
nights, and a S$40mil makeover to widen
sidewalks.
“The experiences introduced still aren’t
able to ‘wow’ consumers,” Wong said. —
Bloomberg
10 Foreign News
LONDON: HSBC Holdings PLC warned its bad
debt charges could blow past a previous esti-
mate to US$13bil this year and said its profits
more than halved, as the coronavirus pan-
demic hammered the bank’s retail and corpo-
rate customers worldwide.
The results from Europe’s biggest bank by
assets yesterday reinforced the trend of lend-
ers across the world increasing their buffers
to absorb souring loans at a time when com-
panies - from aviation to retail and hospitality
sectors - are reeling from the impact of Covid-
19.
HSBC reported a pre-tax profit of US$4.32bil
for the first six months this year, lower than
the US$5.67bil average of analysts’ forecasts.
The bank increased its estimate of the total
bad debt charges it could take this year to
between US$8bil and US$13bil from US$7bil-
US$11bil, reflecting worse-than-expected
actual losses in the second quarter and expec-
tations of a steeper decline in the economy.
“What we have seen this quarter is quite a
sharp shift in economic outlook for the global
economy, the famous ‘V’ has got a lot sharper
and as a result we have materially increased
our provisions,” chief financial officer Ewen
Stevenson told Reuters.
HSBC’s business in Britain has been hit par-
ticularly hard, Stevenson said, as it took a
US$1.5bil charge against expected credit loss-
es.
While the bank’s results were bolstered like
those of its US and European peers by higher
revenues from fixed income trading, analysts
said investors were likely to be disappointed
by the higher forecast bad debt charges.
Its Hong Kong listed shares dropped as
much as 4.7% yesterday afternoon, outpacing
SocGen
posts second
quarterly
loss in a row
PARIS: Societe Generale SA (SocGen) report-
ed on Monday a €1.26bil (US$1.48bil) sec-
ond-quarter loss, as it booked a writedown on
the value of its trading business that it seeks
to revamp.
France’s third-biggest bank by market capi-
talization said it would reduce the risk profile
of its trading unit in a shift costing €200mil to
€250mil in lost revenue, though it pledged to
maintain its equity structured products busi-
ness.
SocGen has struggled to perform in busi-
nesses it wants to keep, such as equities trad-
ing, in a blow to efforts of chief executive
Frederic Oudea to boost profitability.
It surprised investors with a first-quarter
loss after revenue was wiped out at its equity
trading division due to the coronavirus out-
break.
Second-quarter revenue fell 80% in equity
trading, and rose 38% in fixed income trad-
ing. “The Group will continue to adapt its
activities to the new post-COVID crisis envi-
ronment, extending in particular the efforts
to reduce costs,” Oudea said in a statement.
SocGen’s investment bank has been tradi-
tionally weighted toward equities trading
than fixed income, and for decades has been
a top player in equity derivatives belying its
relatively small size. It had an over 10% mar-
ket share in equity structured products in
2015-2018, SocGen said citing Coalition data.
SocGen said as a result of its review, it
would “maintain worldwide leadership in
equity structured products” and “derisk”
auto-callable products while developing a
new generation of products.
Investors facing record-low yields have
been increasingly chasing higher returns via
complex derivatives, such as auto-callable
notes, or autocalls. The activity is lucrative in
good times but can leave banks vulnerable to
volatility and increased hedging costs during
times of crisis.
The bank said a review of the financial
trajectory of its Global Markets and Investors
Services (GIMS) unit, which includes fixed
income and equity trading, led to the impair-
ment of related goodwill of €684mil and
deferred tax assets of €650mil. — Reuters
HSBC warns loan
losses could hit US$13bil
Banking group’s profit falls more than half
“What we have seen this quarter is quite a
sharp shift in economic outlook for the glob-
al economy, the famous ‘V’ has got a lot
sharper and as a result we have materially
increased our provision”.
Ewen Stevenson
a fall in the local benchmark, to their lowest
since March 2009.
The bank’s credit impairment provisions in
the first-half soared to US$6.9bil, compared to
US$1bil in the same period a year earlier. It
had set aside US$3bil to cover loan losses in
the first quarter.
Goldman, Bank of America left off Ant IPO
NEW YORK: Goldman Sachs Group Inc and
Bank of America Corp were left off Ant
Group’s upcoming stock sale in Hong Kong
because of their past work with rivals of its
affiliate Alibaba, according to people familiar
with the matter.
Bankers have been told by senior execu-
tives at Alibaba Group Holding Ltd., which
owns a third of Ant, that they should refrain
from doing deals for its competitors if they
want business from Jack Ma’s sprawling
empire, the people said.
Ant has kicked off plans to go public in
Hong Kong and Shanghai in offerings that
could top Saudi Aramco’s record US$29bil
IPO.
The directive shows that Wall Street banks
are having to make early bets on which firms
to stick with in China, especially as jugger-
nauts like Alibaba and Tencent Holdings Ltd.
extend their tentacles into hundreds of busi-
nesses in finance, transportation, retail and
entertainment.
“The duopoly issue is not unique to China,
but the scale and scope of Alibaba and
Tencent’s business operations create an
excruciating dilemma for investment banks,”
said Andy Mok, a senior research fellow at the
Center for China and Globalization in Beijing.
“Alibaba and Tencent’s businesses are so
big, you can risk being blocked out of a signif-
icant future revenue stream.”
While bankers everywhere have to be care-
ful doing work for their clients’ rival firms,
Chinese conglomerates are taking it to a new
level.
Heineken cautious on outlook after June pick-up
BRUSSELS: Heineken saw a gradual recov-
ery in its business after global Covid-19
lockdowns in April, but uncertainty over the
future impact of the pandemic left it unable
to give a forecast for the rest of the year.
The world’s second-largest brewer said it
took a more cautious view than sector lead-
er Anheuser-Busch InBev, which said it had
been encouraged by the global recovery in
beer demand in June.
New Heineken chief executive Dolf van
den Brink said business had improved to
June, but this was partly due to restocking,
particularly in territories such as Mexico, its
largest market, where brewing was forced
to halt in April and May.
“We are a bit concerned that people would
Impairment charges included a US$1.2bil
writedown on the value of software it owns,
mainly in Europe, it said.
While HSBC’s core capital ratio, a key meas-
ure of financial strength, rose to 15% at the
end of June thanks to favourable regulatory
changes, the bank warned the metric would
Even though banks have firewalls to ensure
separate teams handle deals for the likes of
Alibaba and Tencent, that’s proving to not be
enough, the people familiar said.
Chinese clients are much more likely than
their counterparts in the US or Europe to
demand non-compete commitments as a
show of loyalty, and to ensure that sensitive
strategies don’t land in the hands of competi-
tors. And with fewer deals to go around,
bankers in the hyper-competitive Chinese
market have little choice but to comply.
Though minor distribution roles on Ant’s
Hong Kong IPO are still up for grabs, those
don’t offer the out-sized fees that banks can
expect from leading the sale.
“Competition has increased and Chinese
issuers have gotten strong bargaining power,”
said Bob Dodds, who worked as an invest-
ment banker at China International Capital
Corp before setting up DRP Capital Ltd to
advise on China-related deals.
Goldman and Bank of America’s recent
work with Alibaba rivals include US$7.7bil in
stock sales for Tencent-backed Pinduoduo Inc
and JD.com Inc in the last two years, helping
these companies build their war chests to
take on their larger competitor in the hotly
contested e-commerce arena.
The two banks have reaped at least
US$70mil from advising Pinduoduo and
JD.com on stock deals, according to data com-
piled by Bloomberg.
The figure doesn’t include the undisclosed
fees of a US$1bil bond sale by Pinduoduo in
September and the US$4.5bil secondary list-
see the ... rate of June and extrapolate that
going forward,” Van den Brink, who took
charge at the Dutch brewer on June 1, told
Reuters.
The company said Europe, Mexico and
South Africa had led the sales decline, while
its large Vietnam market fared better.
South Africa has re-instated an alcohol
ban, while Mexico, the country with the
world’s third-largest number of Covid-19
fatalities, had tighter lockdowns in some
regions.
The maker of Europe’s top-selling lager
Heineken, as well as Tiger and Strongbow
cider, had issued preliminary first-half
results in mid-July showing it sold 11.5% less
beer compared with the previous year and
STARBIZ, TUESDAY 4 AUGUST 2020
likely decline this year as falling credit ratings
hit its risk-weighted asset ratio.
Its revenues fell 9% in the six-month peri-
od, as global interest rate cuts and declining
market values on assets in investment bank-
ing and insurance outweighed higher trading
income.
HSBC is continuing to review its long-term
dividend policy, CEO Noel Quinn said in a
statement.
The bank earlier this year halted payouts in
response to a regulatory request in Britain,
infuriating many of its retail investors who
rely on it for income, particularly in Hong
Kong.
Quinn told Reuters the bank’s staff head-
count has fallen by some 4,000 this year after
it restarted a redundancy programme that
was put on ice after the coronavirus out-
break.
The bank is aiming to cut costs by 3% this
year from that restructuring as well as lower
employee spending on travel and other items
during the pandemic, he said. — Reuters
ing by JD.com in June.
Representatives at Goldman and Bank of
America declined to comment. Ant and
Alibaba declined to comment in separate
emailed statements.
Ant is aggressively competing with
Tencent’s WeChat Pay to maintain its domi-
nance of China’s US$29 trillion mobile pay-
ments space. It has been pitching digital pay-
ment services to the local arms of KFC Holding
Co and Marriott International Inc as it trans-
forms its Alipay app into an online mall for
everything from loans and travel services to
food delivery.
Alipay’s share of mobile payments has
increased for three consecutive quarters, ris-
ing to 55.1% in the fourth quarter, according
to consultant iResearch.
Tencent has 38.9% of the market. Ant hired
Citigroup Inc., JPMorgan Chase & Co, Morgan
Stanley and CICC to lead its Hong Kong IPO.
The sale is expected to raise more than
US$10bil and could value the firm at
US$200bil, people familiar have said. Ant
hasn’t selected banks for the Shanghai por-
tion, though global firms will probably be left
out because lead underwriters for any IPO on
the tech-focused Star board must buy shares
in the deal.
Banks leading the Ant IPO in Hong Kong
have fewer conflicts. While Morgan Stanley
earned US$6.4mil for a junior role in
Pinduoduo’s stock sale last year - about half of
Goldman’s haul - Citigroup and JPMorgan
weren’t involved in those deals, Bloomberg
data shows. — Bloomberg
suffered a sharp drop in revenue as con-
sumers opted for cheaper brews.
Heineken’s operating profit fell by about
half and the brewer took 548 million euros
(US$644mil) of impairments, largely for its
operations in Papua New Guinea and
Jamaica, resulting in an overall net loss.
Europe’s largest beer seller said it had
seen beer sales rise by double-digit percent-
ages in stores, but fall by up to 40% or 50%
in bars and restaurants.
Profitability of store sales was also lower
as consumers bought multi-packs, and costs
of producing canned and bottled drinks
were higher than kegs, though Heineken
said its premium brands had won share in
most markets.— Reuters
STARBIZ, TUESDAY 4 AUGUST 2020
JPMorgan sees virus fallout stoking Middle East deals into 2021
DUBAI: The financial fallout from the coro-
navirus pandemic will keep fuelling debt
issuance from the Middle East into 2021,
while also stoking mergers and acquisitions
(M&As) as companies seek to consolidate,
according to JPMorgan Chase & Co.
Growth in lending by the bank, coupled
with fees from arranging bond and M&A
deals, would drive the US company’s opera-
tions in the region, Karim Tannir, JPMorgan’s
joint-senior country officer for the Middle
East and North Africa, said in an interview.
The United Arab Emirates and Saudi Arabia
will be the main drivers.
The first six months saw US$72bil of bond
issuance from the region, the busiest start yet,
with JPMorgan among the top arrangers,
according to data compiled by Bloomberg.
Governments have been tapping debt mar-
kets to shore up finances battered by a slump
in oil prices and as lockdowns to curb Covid-
Melbourne braces for
more business closures
Tougher restrictions on industries set to bite economy
MELBOURNE: Australia’s second-biggest city
Melbourne already under night curfew has
announced fresh restrictions on industries,
including retail and construction, as it steps
up desperate efforts to contain the spread of a
resurgent coronavirus.
From tomorrow night, Melbourne will
close retail, some manufacturing and admin-
istrative businesses as part of a six week lock-
down which is expected to hit 250,000 jobs,
roughly the number already impacted.
The state of Victoria declared a “state of
emergency” on Sunday due to a surge in com-
munity transmissions.
Australia has fared better than many coun-
tries, with 18,361 coronavirus cases and 221
deaths, but now risks losing control of the
virus in Victoria state which has imposed the
country’s harshest movement restrictions to
date.
Neighbouring states of New South Wales
and South Australia have also stepped up
precautions.
“As heartbreaking as it is to close down
places of employment ... that is what we have
to do in order to stop the spread of this wildly
infectious virus,” Victoria’s state premier
Daniel Andrews told a news conference.
“Otherwise we are not in for six weeks of
restrictions we’ll be in for a six month stint.”
Production at meatworks will be cut by one
third and workers will be kitted out in protec-
tive gear, while construction activities will
also be scaled back.
Supermarkets will remain open along with
restaurant takeaway and delivery services,
but many other retail outlets will close.
Andrews announced A$5,000 (US$3,570)
payments for affected businesses and flagged
more announcements over penalties, enforce-
ments and education today. Schools will move
to remote learning from tomorrow.
“This is a very tough day, and there are
many more of those to come before we get to
the other side of this,” Andrews said.
CoreLogic: Australian house prices fall for third month in July
SYDNEY: Australian home prices eased for a
third straight month in July as the reimposi-
tion of a coronavirus lockdown in Victoria
weighed on the Melbourne market and con-
sumer sentiment generally.
Data from property consultant CoreLogic
out yesterday showed home prices across the
nation fell 0.6% in July, from June when they
dropped 0.7%. Values were still up 7.1% on
July last year reflecting the market’s pre-pan-
demic strength.
Prices in the capital cities fell 0.8% in July,
“The financial sector, consumer retail, real
estate, tourism – all these sectors are ripe
for consolidation.”
Karim Tannir
19 weigh on their economies.
Interest in the region is helped by curren-
cies that are pegged to the dollar, good sover-
eign credit ratings and the absence of capital
controls, Tannir said. Abu Dhabi National Oil
Co, the state-owned energy producer, has
attracted billions of dollars from the likes of
Brookfield Asset Management Inc, BlackRock
Taking a hit: A display thanking general practitioners is displayed at a tram stop in
Melbourne. From tomorrow night, Melbourne will close retail, some manufacturing and
administrative businesses as part of a six week lockdown. — Bloomberg
Restrictions announced on Sunday include
curfew from 8pm to 5am that will be in place
for six weeks, barring the city’s nearly five
million people from leaving their houses
except for work or to receive or give care.
“This is devastating ... nobody wanted it to
get to this,” Treasurer Josh Frydenberg told
Nine News television.
“There is only one way out and that is to
stem the tide of new cases. This is a big kick in
the guts to thousands of small businesses
right across the state,” he added.
Victoria makes up about a quarter of the
national economy.
but again were still 7.9% higher on the year.
Sydney saw values drop 0.9% in July, while
Melbourne fell 1.2% and Brisbane 0.4%.
“The impact from Covid-19 on housing val-
ues has been orderly to-date, with CoreLogic’s
national index falling only 1.6% since the
recent high in April and housing turnover has
recovered quickly after it’s sharp fall in late
March and April,” said CoreLogic’s head of
research Tim Lawless.
“Record low interest rates, government
support and loan repayment holidays for dis-
Inc, KKR & Co, and Singapore’s wealth fund
by selling stakes in its assets.
Takeovers would also drive transactions,
he said. JPMorgan shares top spot on the M&A
MENA league table with Morgan Stanley.
“The financial sector, consumer retail, real
estate, tourism – all these sectors are ripe for
consolidation,” Tannir said. “Some of the
The state reported 429 new cases yesterday,
down from 671 new infections on Sunday, but
13 more deaths was the second highest daily
death toll.
With an eye on how quickly the virus swept
through Victoria, bordering states announced
fresh precautionary measures.
New South Wales, which had 13 new infec-
tions overnight, strongly recommended the
use of masks in all indoor venues, while South
Australia, with two fresh cases, reduced gath-
erings inside the home to 10 people from 50,
and said only those seated at venues could be
served alcohol. — Reuters
tressed borrowers have helped to insulate the
housing market from a more significant
downturn.” The Reserve Bank of Australia
has cut rates to just 0.25% and is expected to
reiterate its willingness to do more if needed
at a policy meeting today.
The conservative government of Prime
Minister Scott Morrison is also under intense
pressure to come up with fresh stimulus as
restrictions in Melbourne get ever tighter.
The housing market had been one of the
few bright spots in the economy pre-pandem-
Foreign News 11
deals we will see may not have been driven
by Covid-19, but that is now going to acceler-
ate consolidation.”
JPMorgan is advising Saudi Arabia’s National
Commercial Bank on its takeover of local rival
Samba Financial Group, which will follow a
spate of deals in the region’s fragmented finan-
cial-services industry. It also advised on Abu
Dhabi National Energy Co’s asset-transfer deal
with Abu Dhabi Power Corp.
While initial public offerings have slowed
following the Covid-19 outbreak, a “few trans-
actions” may be announced before the end of
2020, Tannir said, declining to give details.
Cash-flush sovereign wealth funds have
been a source of deal flow. Saudi Arabia’s
Public Investment Fund in May said it bought
stakes in companies including BP Plc, Boeing
Co, Facebook Inc and Walt Disney Co during
the worst of the market rout in March. —
Bloomberg
Investors rethink
‘60/40’ as low
bond yields
test portfolios
NEW YORK: The staple US portfolio of 60%
equities and 40% fixed income proved resil-
ient this year, but strategists are now consid-
ering alternatives to government debt after
some bond yields reached historic lows.
Sanford C. Bernstein recommends taking
more risk by favouring stocks and gold, and
argues the negative correlation between
equities and fixed income is likely to unwind.
Morgan Stanley said corporate bonds may be
the best alternative to sovereign notes for
curbing portfolio volatility and providing a
level of income.
“I don’t think bonds can provide the stand-
ard historical returns investors are used to,”
said Andrew Sheets, Morgan Stanley’s chief of
cross-asset strategy in London.
“The starting yield is at a point where that
type of return is just not possible. Investors
are going to have to lower expectations of
60-40 portfolios, and will have to look else-
where for what can be in the 40%.”
Blending stocks and bonds, a decades-old
investment staple to balance risk and reward,
is being tested by ultra-low yields. Five-year
Treasury yields fell to a record after the
Federal Reserve last week delivered a dovish
message of support for the coronavirus-strick-
en US economy.
The S&P 500 index is up about 1.3% in 2020
after rallying sharply from March’s pandem-
ic-induced plunge. Governments and central
banks have provided US$11 trillion in stimu-
lus and other support, including slashing
borrowing costs and deploying unconven-
tional policies to counter the impact of the
health crisis.
Investors don’t have many other options to
generate income aside from dividend stocks,
with the gap between US dividend yields and
bond yields at the widest in more than six
decades, said Inigo Fraser Jenkins, head of
global quantitative strategy at Sanford C.
Bernstein in London. “If asset prices are high
maybe income is more important, but then
how to find that income?” he said. “We think
the end result is investors will have to take
more risk.” — Bloomberg
ic as booming prices bolstered consumer
wealth. The housing stock was valued at
A$7.2 trillion (US$4.97 trillion) in March
before the market took a turn for the worse.
Lawless cautioned that with fiscal support
set to taper from October and repayment hol-
idays expiring at the end of March next year,
the medium-term outlook was dark.
“Urgent sales are likely to become more
common as we approach these milestones,
which will test the market’s resilience,” he
added. — Reuters
12 Foreign News
BoE avoids repeat of
2008 schism for now
Split widens on Britain’s post-Covid economic prospects
LONDON: Bank of England (BoE) officials
may be increasingly diverging on the pros-
pects for Britain’s post-Covid economy, but
that disagreement hasn’t yet become a schism
on how to respond.
A widening split over the speed of the
recovery from the country’s worst growth
shock in living memory looks unlikely to
prompt much of a debate over the mone-
tary-policy response for now. That’s despite
chief economist Andy Haldane’s dissenting
vote against expanding bond purchases in
June.
The sense of alignment is very different to
the 2008 global financial crisis, when officials
led by then-Governor Mervyn King clashed
robustly both on the economic outlook and
the response to it, even casting simultaneous
votes to raise and cut interest rates. As the
turmoil deepened, the disagreement played
out in a public spat that left the institution
bruised.
By contrast, relative unity on the Monetary
Policy Committee (MPC) this time round may
provide more certainty to investors that offi-
cials are ready to keep stimulus taps running
for as long the economy needs it. By helping
to drive down bond yields, the BoE’s actions
are also reassuring for the government,
which has ramped up borrowing to fund
emergency spending.
“There seems to be a division between dif-
ferent members on how the recovery is pro-
gressing,” Nomura International Plc econo-
mist George Buckley said. “But I suspect there
is probably not going to be much division
when it comes to the next vote.”
Under governor Andrew Bailey, the BoE is
US companies leap over low profit hurdle
NEW YORK: A record high percentage of
United States companies are beating analysts’
forecasts this earnings season, giving inves-
tors a glimmer of hope in what is still expect-
ed to be the slowest profit period since the
financial crisis.
More than halfway through second-quar-
ter earnings, 82.1% of companies reporting
have surpassed profit expectations, which
would be the highest in the history of Refinitiv
IBES data going back to 1994.
What’s more, the size of the beats is well
above what is typical. S&P 500 companies
have beaten earnings expectations by a
whopping 21.7%, also set to be the highest on
record since 1994, based on Refinitiv’s data as
of Friday.
The latest big boost to numbers came late
last week, when results from Facebook and
trillion-dollar market value companies Apple,
Amazon.com and Google parent Alphabet
surpassed forecasts.
In many cases, estimates had been lowered
so much ahead of earnings season that they
were easier to beat, strategists said. Still, the
results bolster the case for investors betting
that the impact of coronavirus-led lockdowns
and layoffs on companies’ bottom lines may
not be quite as dire as previously believed.
Oil dips below US$40 with Opec+ starting to unwind cuts
SINGAPORE: Oil edged below US$40 a barrel
in New York as Opec and allied producers
started supplying more crude to a global mar-
ket where many countries are still struggling
to contain the coronavirus.
Opec+ will pump about 1.5 million barrels
more this month than in July as it starts to
unwind its historic virus-driven output curbs,
with Russia already having lifted its output
sightly last month. The increase in supply
comes as virus cases accelerated in California,
a lockdown is being reimposed in Manila, and
Australia’s second-biggest city instituted a
curfew to stem the spread.
Meanwhile, tensions between Washington
Soaring aid: A bird flies past The Bank of England in London. Its updated outlook for the
UK economy may offer clues on further stimulus. — Reuters
already buying an additional £300bil
(US$393bil) of bonds as part of its emergency
virus response, and economists expect it to
top that up by another £50bil before the end
of the year.
Policy makers are expected to stand pat on
both interest rates and asset purchases when
they announces their next decision on Aug 6.
More interesting will be the bank’s updated
outlook for the economy, which may offer
clues on the likelihood of further stimulus.
Some disagreement among the members of
the MPC is inevitable, given they are dealing
“What it’s saying is there are pockets of
absolute strength in corporate America,” said
Quincy Krosby, chief market strategist at
Prudential Financial in Newark, New Jersey.
Tech results in particular suggest “there is
spending going on globally,” she said.
The S&P 500 is up nearly 4% since results
began in mid-July, putting it 3.4% from its
February record closing high.
To be sure, the pace of the market’s rebound
off the March lows has slowed in recent
weeks, with earnings coming in as the US sees
a resurgence in virus cases in many areas and
economic numbers remain bleak.
Second-quarter S&P 500 earnings – expect-
ed to have dropped 33.8% from a year ago –
are still set to be the low point for earnings
this year and the biggest quarterly decline
since the financial crisis.
Data on Thursday showed jobless claims
rose last week, while the economy took its
biggest hit on record in the second quarter.
Strategists at BofA Global Research wrote
in a recent note that while margins are “track-
ing a hair above expectations,” they are still
expected to collapse and comments from
companies suggest more job cuts ahead.
Still, some companies have managed bet-
ter-than-expected results for the second quar-
and Beijing continued to simmer, with United
States Secretary of State Michael Pompeo flag-
ging measures against “a broad array” of
Chinese-owned software deemed to pose
national-security risks.
Oil has rebounded from a plunge below
zero in April, but the rally has stalled near
US$40 a barrel with rising infections raising
concerns about a sustained recovery in con-
sumption. It’s a precarious time for producers
to be adding more supply to the market, with
Royal Dutch Shell Plc and Exxon Mobil Corp
predicting there may not be a full demand
recovery until next year.
“Demand is in question,” said Michael
with historically elevated levels of uncertain-
ty.
One gauge tracked by economists at the
BoE – forecaster disagreement – surged
almost 2,000% from January to its peak.
But the variations are relatively nuanced,
focused on what time horizon to gauge the
economy’s prospects.
Haldane has emphasised high-frequency
data such as payment transactions and Google
searches, which he says are broadly corrobo-
rated by official GDP figures. He describes the
recovery as “so far, so V.” — Bloomberg
ter.
Investors have been particularly keen to
hear from technology companies, the most
heavily weighted sector in S&P 500 earnings.
With results in so far from 36 of the 71 tech
companies in the S&P 500, second-quarter
earnings for the S&P 500 tech sector now are
seen growing 1.4% from a year ago versus an
8% decline estimated on July 1, Refinitiv’s data
shows.
The S&P’s healthcare index has also seen
big improvements since July 1, thanks to
strong results from UnitedHealth Group, drug-
makers like Pfizer and others. Analysts now
expect healthcare earnings to have increased
1.1% compared with a 15.1% decline forecast
at the start of July, according to Refinitiv.
“The second quarter of 2020 was a quarter
with more uncertainty in it than I have ever
seen in my life. Managements for the most
part suspended guidance, so had the world
kind of flying blind as to what the second
quarter would bring,” said Peter Tuz, presi-
dent of Chase Investment Counsel in
Charlottesville, Virginia.
And, “it’s brought results that are generally
better than the worst imaginable. ... Things
are a little bit more positive than many people
thought.” — Reuters
McCarthy, chief market strategist at CMC
Markets Asia Pacific in Sydney, adding that
the easing of the Opec+ cuts had already been
priced in. “We have also got concerns about
the rising tensions between US and China.”
Pompeo’s comments suggest a possible
widening of US measures beyond TikTok, the
popular music-video app owned by ByteDance
Ltd, one of China’s biggest tech companies.
President Donald Trump told reporters Friday
that he plans to ban TikTok from the US, but
his decision hasn’t been announced. Pompeo
signaled he expects a Trump announcement
“shortly.” Chinese newspapers slammed a
potential ban on TikTok.
STARBIZ, TUESDAY 4 AUGUST 2020
Shell Australia
acquires Select
Carbon
SYDNEY: Royal Dutch Shell’s Australia
unit says it will buy environmental servic-
es firm Select Carbon as it seeks to cut back
its emissions and expand its low-carbon
and renewable power business.
Shell did not disclose a value for the
deal, but said it will help in contributing
towards the company’s ambition of being a
“net-zero emissions energy business by
2050 or sooner.”
Last year, Shell made its first foray into
Australia’s competitive power sector with
a A$617mil (US$441mil) takeover offer for
ERM Power. It has made a number of large
investments in renewables and electric
vehicle technologies. — Reuters
No to extension
of VAT cut
BERLIN: German Finance Minister Olaf
Scholz has said he was opposed to an
extension of a temporary cut of the value
added tax (VAT) meant to stimulate the
pandemic-hit economy, public broadcast-
er SWR reported.
“It’s important to say at the beginning
when it will end,” Scholz was quoted as
saying.
Berlin hopes its stimulus package,
worth more than €130bil (US$153bil)
including a VAT cut to boost domestic
demand, will help the economy return to
growth. — Reuters
Genex Power
clinches deal
from J-Power
SYDNEY: Australia’s Genex Power Ltd
said yesterday that Japan’s J-Power would
invest as much as A$25mil (US$17.8mil),
finalising a deal that secures funding for
Genex’s equity component of the Kidston
pumped hydro project.
The deal, which had to be renegotiated
after delays last year, helps puts the pro-
ject back on track. In March this year,
Genex also lined up Energy Australia to
buy power from the project, after a fail-
ing to reach a similar deal last year.
J-Power will gain between 15% and
19.99% of Genex’s enlarged share capital
under the deal. It will also be able to nom-
inate a director to Genex’s board and will
provide certain technical services in the
operational stages of the project.
Pumped hydro acts like a giant battery,
pumping water uphill when energy is
abundant and releasing it to create power
at night or on a windless day. — Reuters
Lord & Taylor
files for
bankruptcy
NEW YORK: Venerable US retailer Lord &
Taylor filed for Chapter 11 bankruptcy on
Sunday, becoming the latest in a growing
list of storied names to do so amid the
ongoing coronavirus outbreak that has
crippled the retail sector.
The company estimated both assets and
liabilities in the range of US$100mil to
US$500mil, its filing in the US Bankruptcy
Court for the Eastern District of Virginia
showed. A storied department store chain
founded in 1826, billed as the oldest in the
US, Lord & Taylor had been exploring
other options as well as filing for bankrupt-
cy. Big names that already filed for Chapter
11 include J Crew Group, JC Penney and
Neiman Marcus in May. — Reuters