Domestic News
1. Scomi-linked companies’ share trade suspended
Trading in the shares of Scomi Group Bhd, Scomi Energy Services Bhd and Scomi Engineering Bhd has been suspended this afternoon.
In separate filings to Bursa Malaysia, the three companies said the suspension of trading was due to a pending announcement.
Scomi Group shares were suspended from 2.57pm today, Scomi Engineering from 2.58pm and Scomi Energy from 2.59pm.
Trading in both Scomi Group and Scomi Engineering shares will be suspended till 5pm on Aug 21 (Monday).
At press time, it is not known when Scomi Energy’s suspension will end.
Scomi Group has a 65.6% stake in Scomi Energy and a 72.3% stake in Scomi Engineering.
2. Foreign insurers in Malaysia face push to find local partners
Foreign insurers in Malaysia face push to find local partners
Singapore’s Great Eastern Holdings and three other wholly foreign-owned insurance companies that dominate the multi-billion-dollar sector in Malaysia are facing a strict set of deadlines to pare down their holdings to local partners to conform with the country’s strict ownership laws.
Based on a directive issued in April by the central bank, Bank Negara, the four companies have until the end of this month to submit the identity of the prospective parties that will take over the minimum 30 per cent shareholding in their respective operations, said senior industry executives and government officials.
The directive stipulated that the negotiations for the divestment with the targeted parties must be completed before the end of the year, and should those talks fail to materialise, the foreign insurance companies must opt for the listing of their businesses on the local stock exchange.
Plans for initial public offerings must be submitted to the Securities Commission, the country’s capital markets watchdog agency, before the end of January next year.
Bank Negara, the country’s top financial regulator that supervises the insurance sector, also notified the financial institutions that failure to meet all conditions by the middle of next year would result in punitive action which industry executives said would not preclude the suspension of their operating licences.
The move on foreign insurers to comply with the minimum 30 per cent local participation in their businesses was first mooted in the late 1980s under the government’s financial sector rationalisation plan.
But the four big players — AIA, Great Eastern, Prudential and Tokio Marine — had sought deferments because of the difficulty in finding suitable partners.
In some instances, Bank Negara handed down special dispensations to foreign insurance companies that stepped in to take over troubled domestic operators.
Malaysia’s insurance sector represents a key segment in the country’s financial system, with fund assets accounting for roughly 5.2 per cent of the financial system.
According to Bank Negara, combined assets in the insurance and the syariah-compliant takaful industry hit RM277 billion (S$88 billion) last year, up 5 per cent from the preceding year, while total premiums and contributions rose by 4.4 per cent to RM61.3 billion during the same period.
Industry executives noted that Bank Negara’s determined push to force foreign insurance companies to meet the minimum local shareholding spread of 30 per cent this time around is aimed at consolidating the fragmented sector filled with local and foreign players in the life and general segments of the business.
Bankers also noted that the plan could also inject some much- needed excitement to Malaysia’s listless stock market should the foreign companies opt for the listing route to meet the central bank’s demands.
Industry executives estimate that the combined value of the four main insurance players could be as much as RM130 billion.
Tokio Marine and Great Eastern have already appointed investment banks to advise them on the divestment of their 30 per cent interest to local parties.
BNP Paribas has been engaged by Tokio Marine, while Great Eastern is said to have tapped the services of Malaysia’s CIMB to handle its divestment plans.
3. Lotte Chemical Titan share price up 4.15% on new coverage
Lotte Chemical Titan Holding Bhd’s shares rose 4.15% in afternoon trade, after Citi analyst Horace Chan initiated coverage with a Buy recommendation.
As at 3.30pm, the petrochemical group’s share price was up 21 sen at RM5.27, with 8.94 million shares traded. It was the sixth top gainer on Bursa Malaysia.
In a report by Bloomberg, Chan predicted Lotte Chemical Titan to trade at RM6.1 within a year, implying a 21% increase from the last close.
The new target is 13% below the consensus average of RM6.99 and is at the low end of forecasts ranging from RM6.10 to RM7.85, the report said.
Analysts lowered their consensus one-year target price for the stock by 23% in the past three months, Bloomberg added.
Nomura has also initiated coverage on the stock, with a Buy call.
Lotte Chemical Titan Holding now has six Buy recommendations, with a target price range of between RM6.10 and RM7.85.
International News
1. TOCOM hits 3-month high on Shanghai gains, higher metals prices
Benchmark Tokyo rubber futures rose to their highest in near three months on Thursday, driven by a surge in Shanghai futures and other commodities such as steel and base metals, but shed some of its earlier gains on profit-taking.
The Tokyo Commodity Exchange (TOCOM) rubber contract for January delivery finished 2.9 yen higher, or 1.4%, at 217.2 yen (US$1.98) per kg. Earlier in the session, it touched 220.3 yen, the highest since May 26.
“An overnight jump in Shanghai futures prompted buys in early trade in Tokyo,” said Jiong Gu, analyst, Yutaka Shoji Co.
The most-active rubber contract on the Shanghai futures exchange for January delivery rose 180 yuan to finish at 16,435 yuan (US$2,463) per tonne, after rising to a high of 16,990 yuan.
“A surge in prices of steel and its raw materials in China, along with base metals, gave a further push to Shanghai future, then the TOCOM,” Gu added.
Chinese steel futures jumped more than 2% on Thursday to snap a four-day losing streak amid a firm outlook for demand in the world’s top consumer, fuelling a rally in steelmaking raw materials iron ore and coking coal.
London copper, aluminium and zinc rose to multi-year highs on Thursday, leading a broad-based rally in metals, on expectations that China’s reform of its metals industry will curb supply against a background of robust demand.
“The recent rise in synthetic rubber prices amid expectations for lower supply due to China’s stricter environment rules over the synthetic rubber plants also lifted natural rubber prices,” Gu said.
The front-month rubber contract on Singapore’s SICOM exchange for September delivery last traded at 153.8 US cents per kg, up 0.3 cent.
2. Hong Kong democracy leader defiant as three jailed for months
An appeals court jailed three leaders of Hong Kong’s democracy movement for six to eight months on Thursday, dealing a blow to the Chinese-ruled city’s youth-led push for universal suffrage and prompting accusations of political interference.
Joshua Wong, 20, Alex Chow, 24, and Nathan Law, 26, were sentenced last year to non-jail terms including community service for unlawful assembly, but Hong Kong’s Department of Justice applied for a review, seeking imprisonment.
Wong was jailed for six months, Chow for seven months and Law for eight months. Law had been the city’s youngest ever democratically elected legislator before he was stripped last month of his seat by a government-led lawsuit.
The three appeared stern but calm as their sentences were delivered by a panel of three judges.
The former British colony, which has been governed under a “one country, two systems” formula since it was returned to Chinese rule in 1997, was rocked by nearly three months of mostly peaceful street occupations in late 2014, demanding Beijing grant the city full democracy.
The so-called “Umbrella Movement” civil disobedience movement, that drew hundreds of thousands of protesters at its peak, was triggered after Wong and his colleagues stormed into a courtyard fronting the city’s government headquarters.
They were later charged with participating in and inciting an unlawful assembly.
Just before sentencing, a defiant Wong told around one hundred supporters who thronged into the High Court lobby, some weeping, that he had no regrets and urged them to keep fighting for full democracy.
“I hope Hong Kong people won’t give up. Victory is ours. When we are released next year I hope we can see a Hong Kong that is full of hope. I want to see Hong Kong people not giving up. This is my last wish before I go to jail.”
Wong also told Reuters earlier that Hong Kong’s democratic movement was facing its “darkest era” and that he’d lost confidence in the city’s vaunted legal system, long considered one of the best in Asia.
The Department of Justice said in an earlier statement that the trio were not convicted for exercising their civil liberties, but because their conduct during the protest included “disorderly and intimidating behaviour”.
It added there was “absolutely no basis to imply any political motive”.
Critics disagreed.
“The outlandish application seeking jail time is not about public order but is instead a craven political move to keep the trio out of the Legislative Council, as well as deter future protests,” China director at Human Rights Watch, Sophie Richardson, said in a statement on Wednesday.
Hong Kong enjoys a free judiciary, unlike on the mainland where the Communist Party controls the courts which rarely challenge its decisions.
The jail terms will curtail the political ambitions of the trio, barring them for running for seats in the legislature for the next five years.
In recent months, dozens of protesters, mostly young people, have been jailed for their roles in various protests, including a violent demonstration that the government called a riot in early 2016.
3. Japan reports trade surplus in July as exports rise again
Japan posted a trade surplus for a second consecutive month in July as exports continued to grow. Imports surged again, the latest sign that domestic demand is recovering.
Highlights
Exports rose 13.4% from a year earlier (estimate 13.2%).
Imports increased 16.3% from a year earlier (estimate 17.1%).
The trade surplus was 418.8 billion yen (US$3.81 billion) (estimate +327.1 billion yen).
Export volume rose 2.6% from a year earlier, a sixth consecutive monthly gain.
Key Takeaways
The July data offer an early look at how trade might affect the Japanese economy in the current quarter. Exports had been fueling an expansion in recent quarters, but domestic demand drove growth in the three months through June, with the economy expanding at an annualized rate of 4%, projected as the best rate among Group of Seven economies.
That domestic demand has been reflected in surging imports in recent months, though the impact on inflation via a weaker currency has been muted. Price gains are still far short of the Bank of Japan’s 2% goal.
Economist Views
“I expect external demand to rebound in the third quarter because you don’t see any region with fundamental weakness when you look at the global picture,” said Hiroaki Muto, chief economist at Tokai Tokyo Research Center.
“A drop in momentum in the second quarter was a one-off thing and won’t continue,” Muto said.
“Exports will likely return as the main driver of Japan’s economy in the third quarter,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities Inc. in Tokyo. “We are still in doubt about a recovery led by domestic demand.”
“The global economy is expanding and the yen is still in weaker territory, though it has gotten a bit stronger in recent days, so the environment is supportive of Japanese exports,” Maruyama said.
Other Details
Exports to China rose 17.6% from a year earlier.
Shipments to the US increased 11.5%.
Those to the EU rose 8.3%.
Import volume gained 3.2% in July from a year ago, increasing for a fifth consecutive month.
Source: The Star & TheEdgeMarkets