China to lose US$720 billion after Monday (Highlights from TheEdge 4th & 5th Feb)

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4th Feb

Malaysia
  • In the latest AirAsia corruption saga, Tony Fernandes has been reappointed from CEO to non-executive director, and Kamarudin from executive chairman to non-executive chairman for a two-month period. According to Security Commission (SC), upon confirmed breach of securities law, they are both punishable with imprisonment and fine. For context, Airbus has allegedly bribed $50million to both of them to influence their decisions in purchasing aircraft. Tony and Kamarudin said ‘We won’t harm the companies we spent our lives to build’.
  • Datasonic bagged another RM7million worth contract to supply the Immigration Department with technology support that can be used in foreigner e-gate for face recognition system at Malaysia-Singapore entry and exit points. The group expect the contract to contribute positively towards its future earnings. A new major shareholder Azlan Abdul Kadir has emerged after Abu Hanifah disposed most of his shares on Dec 31st 2019.
  • Glove counter has retreated from its peak since the counter surged to a peak amidst Wuhan virus where investors believed demand of gloves will increase. Nevertheless, Malaysian Rubber Glove Association said it received urgent demand requests from China for more gloves. Utilization rate is currently at 88% and it can be ramped up to 95% to meet China’s request.
  • F&N announced its 1Q20 net profit to gain 4.5% y-o-y to RM128 million from RM122 million. The group said its stronger quarter is to be accounted to its better contributions from both its Malaysian and Thai operations which saw a revenue improvement of 10%. F&N Malaysia profit however fell 7% due to higher raw material cost and earlier phasing of marketing activations for the new festive season, together with a higher marketing expenses incurred after new product launch.
  • January’s Purchasing manager’s Index (PMI) has fallen to 48.8 from 50.0 on December, as Malaysia’s export plummeted for the first time in three months. Previously, Malaysia has hit its 15-month high in December as export order increased. It is expected that the PMI will continue to fall in February as export order fall due to Wuhan virus outbreak. Almost all countries in Asia has reported a negative PMI with South Korea falling to 49.8 from 50.1, Vietnam to 50.6 from 50.8, China from 51.5 to 51.1. Taiwan is the sole country which its PMI has increased to 51.8 from 50.8. For context, PMI of 50.0 means no increment or decrement in export.
  • Bursa recorded its largest weekly foreign outflow in eight weeks, as global investors cash out RM660 million amidst Wuhan virus outbreak.

Globally
  • Iran will be launching another satellite despite US accusing that it can be possibly used for long-ranged nuclear missile development. US has imposed sanctions on Iran following 2018 Washington’s withdrawal to curb Iran’s nuclear program.
  • China oil demand has plunged 20% since the outbreak of Wuhan virus. It is deemed as a black swan event for the oil market as OPEC considers cutting production to help prevent oil prices from further falling.  China is the world’s largest oil importer and consumer and the price of Brent, the global oil benchmark has fallen more than 10% since Jan’20 after Wuhan virus began to receive attention at its seriousness. Citigroup said the impact of Wuhan virus seem to be worse than expected as they cut their forecast for oil and other commodities.

5th Feb

Malaysia
  • Good news for palm oil as Pakistan said it will compensate for any loss in export resulted from the India’s threat to ban palm oil import. Last year, Proton opened its first manufacturing assembly plant in Pakistan. Both countries also signed a treaty on extradition to strengthen its bilateral relations by enhancing security and combat against transnational crimes.
  • Fernandes and Kamarudin are urged to step down as Airbus’s bribery allegation continue to press on AirAsia’s share price. Its shares dipped to RM1.15 yesterday, as EPF sold its stakes for RM77 million.
  • Malaysia’s trade surplus ballooned to RM138 billion in 2019, as annual imports shrank by 3.5% as compared with a 5% growth in 2018. Intermediate goods which account for 55% of total import, increased by a sole margin of 1%.  Taking up 11% of total imports, capital goods fell 11% as lower imports particularly aircraft since the incident of Boeing MAX 737. Malaysia is highly import-dependant on China for its manufactured goods and transport equipment. While there are concerns that China will not be able to fulfil its phase 1 US trade deal due to Wuhan virus, technology sector might take a huge hit in mid-2020 accounted by global uncertainties.
  • Malaysia’s total trade is down 2.5% in 2019, accounted by lower exports and imports due to global economy slowdown as geopolitical and other uncertainties continue to cloud the market. China’s trade recorded a significant increase together with UAE, Indonesia and the US as Malaysia benefitted from the trade war.
  • SerbaDinamik bagged 12 contracts in Malaysia worth USD$78 million dollar in Malaysia, Oman (Arab Country) and Indonesia. The contracts include mainly operation and maintenance, engineering procurement and commissioning (EPC), and other support services. To recap, Serba Dinamik targeted RM15 billion orderbook this year as it expects US-China trade tension to subside.
  • Eversendai, the engineering services company has secured six projects worth RM323 million. Its order book to-date is RM1.87 billion.
  • CIMB’s Net Interest Margin (NIM) is expected to be compressed by 3-4 basis points. Originally, it is expected that loan growth will offset the impact of a lower NIM. As coronavirus outbreak continues, economy growth should fall in the upcoming months and bank’s bottom line is expected to be affected.
  • Dayang’s subsidiary had been awarded a three-year Carigali-PTTEPI Operating Co Sdn Bhd (COPC) contract in integrated gas field developments. Meanwhile, Genetec also added RM38.5 million to its orderbook in January, mainly contributed from its automotive sector customers and minority from its E&E manufacturing customers.
  • Sime Darby Motor’s BMW lost its eight-year streak of record sales as total vehicles delivered decreased 19% in 2019 as compared to 2018. Nevertheless, it remains as leading electromobility provider in Malaysia as they delivered more than 17,000 electric cars since 2015. BMW Group Malaysia will continue its commitment to maintain its position as market leader.
  • First case of Malaysian man was tested positive for Wuhan virus yesterday, bringing total number of cases to 10.
  • Pos Malaysia likely to turn black in the upcoming quarters, as POS continue to address its tariff rebalancing mechanism for a sustainable and economical road map. The group also aims for an organic top-line growth, driven by rapid expansion of e-commerce within Malaysia. In my opinion, mailing industry is a dying industry and DRBHICOM should target to sell it to Khazanah, EPF or any national sovereign fund if they are looking to expand further.

 Globally
  • China’s stock market stabilized after losing US$720 billion on Monday, after reopening its market 10 days since Wuhan virus.
  • More rate-cut might be coming as central banks in Asia fear Wuhan virus crisis might slow down tourism, travel and confidence across the region. Australia kept its interest rate unchanged the yesterday, citing “it is still too early”. Philiphines and Thailand are also expected to announce its rate cut tomorrow, as central banks aim to mitigate the impact of Wuhan virus to the domestic economy.
  • Calsberg A/S announced a lower earning growth forecast ahead of Wuhan virus outbreak spiraling in Asia. Business environment is more susceptible to volatility with the virus’s impact to China still remain unknown. China is one of the world’s largest alcohol consumer, taking 26% of global alcoholic beverage volumes.
  • Tesla’s shares hit record high of US$900, as it surged 15% fueled by the technology giant Panasonic for its automotive battery venture. Panasonic’s share rose 10%, with some other suppliers’ share also closed higher. Tesla reported its quarter report last week with confidence to produce more than 500,000 vehicles this year. The only thing that is always hindering Tesla is the difficulty in building a Tesla model, and this always lower the actual amount produced by Tesla previously.


Disclaimer: This is simply to note down the major incidents that I should take note in TheEdge NewsPaper. I cover as much local news as possible and do not include global news that do not interest me. Please subscribe and read the original TheEdge for more information.

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