Domestic News
1. Malaysia Q2 c/a surplus rises to 9.6 bil ringgit
Malaysia’s current account surplus grew to 9.6 billion ringgit (US$2.24 billion) in the second quarter, from 5.3 billion ringgit in the previous three months, due to a larger goods surplus and smaller services and primary income deficits, the government said on Friday.
Portfolio investment saw a net inflow of 16 billion ringgit, compared with outflows of 31.9 billion ringgit in the first quarter.
Foreign direct investment fell to 8.3 billion ringgit in April-June, compared with 17 billion ringgit in the first quarter, data from the Department of Statistics showed.
2. Amendments to building by-laws needed for full IBS adoption, say builders
The Master Builders Association Malaysia (MBAM) said amendments need to be made to the Uniform Building By-Laws (UBBL) before the government can impose the mandatory usage of industrialised building system (IBS), in order to make IBS construction more economical.
MBAM honorary adviser and past president Datuk Ng Kee Leen said the UBBL covers the standards for the measurements of building parts.
Currently, each local authority has its own standards under the UBBL, making it a hassle to construct using the IBS method as suppliers will have to manufacture different components based on the requirements of different localities.
“Every local council has their own UBBL, with different measurement standards. Since IBS has standard sized panels and components, they (the authorities) will need to change the law to follow one standard,” he said at a press conference following the MBAM Affiliate Dialogue 2017 earlier today.
Ng said this has been in discussion over the past decade or so, but no significant developments have been made.
MBAM president Foo Chek Lee said standardisation of the requirements will be important to achieve economies of scale in the usage of IBS components.
“Since IBS uses standard-sized panels and all that, they will need to amend the law to follow one standard. Basically it goes back to the economies of scale.
“If everything follows the same standards of measurement, it will be easier and more economical to build. On the other hand, it will not be economical to manufacture IBS components if different localities enforce different standards,” he said.
Meanwhile, MBAM secretary-general Dennis Tan Soo Huang cited the example of Singapore, which has been leading the Asean region in IBS usage. He said the uniform standards used in the island state have made it easier to use IBS.
“This is one of the reasons why Singapore has been so successful in their implementation of IBS in their construction sector. They enforce the same standards across the board, making it easier to meet the requirements,” he said.
Besides the change in guidelines, Foo said the slow rate of adoption of IBS in Malaysia is also due to manpower issues, on shortage of skilled local workers.
He said MBAM has taken steps to address this by providing training for IBS valuers and supervisors.
“We need to train more skilled workers for the implementation of IBS, not only in terms of installation but also design and manufacturing systems. Unless this is done, we may find some hiccups in the implementation of IBS,” he said.
Another issue is the costs of heavy lifting equipment — needed to support construction using IBS components — which Foo said is expensive at the moment.
“The existing equipment we are using now is not sufficient to cater for IBS components and the cost of procurement is quite high at the moment.
“The government should look into how they can lower the tax on these equipments to encourage the adoption of IBS in the local industry,” he added.
3. RHB Islamic partners CGC to provide new Islamic financing scheme for Bumiputera SMEs
RHB Islamic Bank Bhd today signed a strategic partnership with Credit Guarantee Corp (CGC) to become Malaysia’s first bank to provide Wholesale Guarantee Islamic (WG-i) Bumi, a financing scheme for Bumiputera SMEs.
In a statement released today, RHB Islamic Bank managing director Datuk Adissadikin Ali said the initiative is a proof of RHB’s commitment to provide better financing options and facilities that are sustainable for SMEs in expanding and growing their businesses.
“As the demand of the business landscape evolves, we are cognizant that we need to continuously improve and innovate our products and services to cater to our customers’ business needs,” he said.
CGC president and chief executive officer, Datuk Mohd Zamree Mohd Ishak, said the WG-i Bumi with RHB marks another milestone in the financing of Bumiputera SMEs in the country.
“We are confident that more banks will collaborate with CGC for guarantee services to reduce risk on the books of financial institutions and freeing up capital to allow increased capacity for more SME financing,” he said.
With WG-i, SMEs can leverage on the guarantee provided by CGC on a portfolio basis, which in turn will create opportunities for better cash flow management for the SMEs as compared to the traditional product offerings available in the market, the statement read.
Seventy-two existing Islamic Bumiputera SME customers under the SME portfolio will benefit from this scheme, conforming to the predetermined eligibility criteria set by both CGC and RHB Islamic, it added.
International News
1. Australia’s citizenship crisis spreads, key Senator under a cloud
Australia’s widening citizenship crisis entangled a seventh politician on Friday, a key independent senator whose support is critical for Prime Minister Malcolm Turnbull to pass legislation through a hostile Senate.
Senator Nick Xenophon said he may hold dual citizenship, Australian and British, which would make him ineligible to sit in parliament. He said he was checking if his father’s birth in Cyprus makes him British, as well as Australian.
“The great irony here is that my father left Cyprus in 1951, in order to get away from British occupation of Cyprus. The suggestion that I could be a British citizen is something that would absolutely horrify my father…,” Xenophon told The Australian newspaper.
Xenophon, whose eponymous party holds two key balance-of-power seats in the upper house, has stymied government media law reform plans and criticised the government’s reluctance to order a sweeping inquiry into the nation’s banking sector.
The citizenship crisis, based on a 116-year-old law which demands an elected lawmaker only have Australian citizenship, has rocked the Australian parliament, ensnaring three government members, three Green party MPs and Xenophon.
Turnbull’s one-seat majority in the lower house is in jeopardy after Deputy Prime Minister Barnaby Joyce on Monday said he may be ineligible for parliament due to New Zealand citizenship by descent. His father was born in New Zealand.
Joyce has since relinquished New Zealand citizenship, but is awaiting a High Court ruling, along with several other politicians who believe they may have dual citizenship.
The High Court will begin hearings into Joyce’s eligibility on Aug 24. Should he be ruled ineligible, Turnbull would be forced to rely on independents to pass legislation.
If the lawmakers under a citizenship cloud are ruled ineligible by the High Court, there will need to be by-elections held in their seats. If Joyce failed to win re-election in his rural seat, Turnbull would face a hung parliament.
Turnbull’s government is struggling in opinion polls and would not wish to be tested at the ballot box at this time.
Australia’s foreign minister has accused New Zealand’s Labour Party of conspiring to bring down the Australian government by revealing Joyce’s New Zealand ancestry.
Under Section 44 of Australia’s constitution “a subject or a citizen of a foreign power” is barred from office.
One government senator, Matt Canavan, discovered his mother obtained Italian citizenship on his behalf, while another, Fiona Nash, said she is a Briton, because her estranged and long-dead father was born in Scotland.
Turnbull told reporters in Canberra on Friday that he expects the High Court to keep the dual-national MPs in office.
“Section 44 was designed, as the court has said, to prevent politicians having conflicts of loyalties or split allegiances, that’s a quote from one of the judgments,” Turnbull said.
“I’m very confident that the court will find that Fiona Nash, Barnaby Joyce and Matt Canavan are not disqualified from sitting in the parliament.”
2. Investors flee stocks for bonds, gold as US tax cut hopes fade
World stocks were set for a second day of losses on Friday after an exodus of US executives from presidential business councils dealt a fresh blow to hopes of tax reform, hammering Wall Street and filtering through to Asia and Europe.
Investors fled instead into German and US Treasury bonds and bought gold for the third day in a row, as the appeal of such top-notch assets grew further due to a deadly attack that killed at least 13 people in Barcelona.
Markets have been dismayed by US President Donald Trump’s latest controversial comments on violence that flared in Charlottesville, Virginia, after a white nationalist protest.
Several business leaders have since resigned from his advisory councils and a White House official said plans for a council on infrastructure had been dropped.
These events, which also alienated some of Trump’s Republican allies, have dashed hopes for tax cuts and infrastructure spending, campaign promises that fuelled much of this year’s gains in world stocks, emerging markets and commodities.
Equities worldwide are still on track to end the week in the black as fears ebbed earlier in the week that the United States and North Korea were headed for a nuclear standoff.
But with New York’s equity indexes all tumbling on Thursday to multi-week lows, MSCI’s index of Asian shares outside Japan fell 0.6% on Friday, emerging stocks lost half a percent and MSCI’s world index, which tracks shares in 46 countries, slipped 0.3% to one-week lows.
“In a week where we started by worrying about nuclear war, markets have quickly moved on from this, with yesterday’s weak session more of a response to fears that Mr Trump’s strategy for the economy and business is falling apart and later the terrible terrorist attack in Barcelona,” Jim Reid, a strategist at Deutsche Bank, told clients in a note.
The pan-European STOXX 600 index opened 0.9% lower. Losses were led by travel and leisure as investors reacted to the Barcelona attack by selling shares in airlines such as Ryanair, EasyJet and Spanish airport firm AENA.
US equity futures signalled a weaker opening on Wall Street too.
Equity weakness is heaping more pressure on the US dollar, pushing it down 0.5% against the yen, the lowest in a week and approaching one-year lows of 108.13 yen hit in April.
ING Bank analysts predicted the dollar would remain pinned near current levels, at the expense of the yen.
“Tail risks such as geopolitics, protectionism and the unwind of easy central bank money all provide valid reasons to remain cautious in chasing risk,” they told clients.
“Dollar/yen continues to capture this nervousness and could move down towards the 109.00 level.”
The euro edged up 0.2% to the dollar, after tumbling on Thursday to a three-week low of US$1.1662 after minutes of the European Central Bank’s July 20 policy meeting showed the bank was worried about the currency rising too much.
ING saw the ECB’s euro concerns as justified and expects the bank to proceed cautiously while unwinding stimulus, in turn limiting the upside to European bond yields.
Yields have fallen in recent days following the ECB comments and amid the dash for defensive assets, with 10-year Bunds at a one-week low of 0.41% while 10-year Treasuries traded just off one-week lows hit on Thursday.
The turmoil also benefited gold, with spot prices for the metal rising 0.4% to the highest in more than two months and on track for its second week of gains.
Brent crude futures rose 0.35%, rising off three-week lows hit on Thursday as the dollar continued to weaken and signs appeared that supply is becoming tighter in the world’s biggest energy consumer, the United States.
3. Barcelona attack dents travel stocks as global sell-off spreads to Europe
European travel stocks fell sharply in early trading on Friday, after a deadly attack in tourist hotspot Barcelona, with investors also increasingly concerned the Trump administration was fraying at the seams.
As a global sell-off spread, the pan-European STOXX 600 was down 0.9% by 0725 GMT, with blue-chips down 1%, following falls in Asian and U.S. stocks overnight. All European sectors were in the red.
Travel and leisure stocks led losses, down 1.4%, with airlines the worst-performing, as investors dropped stocks exposed to tourist flows.
Easyjet, Ryanair, British Airways owner IAG and Lufthansa were down 1.9% to 2.7%.
Spanish airport company AENA fell 2% after Thursday’s attack, in which a suspected Islamist militant drove a van into crowds in central Barcelona, killing 13 people.
Spanish stocks underperformed peers, falling 1.4%, with Melia Hotels among top weights.
“As we’ve seen over the last couple of years in Europe, these kinds of atrocities affect tourism and will hit airline earnings,” said Neil Wilson, analyst at ETX Capital.
The risk-off moves also hit banks, down 1%, with Deutsche Bank and BNP Paribas among the worst performers.
Though company news was thin on the ground, earnings drove some moves.
Dutch storage firm Vopak fell 4.5%, after it said profit would be 5% to 10% lower this year than last, due to lower occupancy rates.
Irish construction firm Kingspan Group jumped 7%, the top gainer after it reported its trading profit grew 6% in the first half and said the Brexit vote had not had a measurable impact on UK business.
Fiat Chrysler fell 1.3%, after Guangzhou Automobile denied it was planning to take over the Italian carmaker. Speculation over a potential Chinese buyer had sent its shares soaring this week.
Some stocks with the biggest results-driven losses in the previous session, recovered ground: Vestas Wind and Wienerberger gained 2.8% and 3.8%.
Meanwhile Straumann, the top gainer on Thursday after a profit beat, fell back 3.5% as investors moderated their enthusiasm.
The European earnings season is drawing to a close, with 86% of second-quarter company reports through.
Some 60% of these have beaten or met expectations and earnings estimates were trending up, though they were still negative overall, after being revised down sharply since the start of earnings season due to concerns about a stronger euro.
“In contrast to the pattern of the last several years in which earnings have routinely disappointed lofty analyst expectations, this year, analysts have been overly bearish and earnings have surprised to the upside,” said Jon Ingram, portfolio manager at JP Morgan Asset Management.
Source: The Star & TheEdgeMarkets