Economy
EU: Mersch says ECB measures no overture for government-bond buying. The European Central Bank‟s decision to start buying asset-backed securities isn‟t a door opener to government-bond purchases, Executive Board member Yves Mersch said. ABS purchases “can neither be equated with a broad-based program of quantitative easing, nor is it an overture for such an opera,” Mersch said. “It almost goes without saying that the purchase of government bonds would raise not insignificant institutional, instrumental and legal questions.” (Bloomberg)UK: Carney can’t escape housing as debt colors policy. Bank of England Governor Mark Carney can‟t get away from the housing market. As he argues there is no immediate need to raise interest rates, central to his case is the mountain of debt financing property. Home loans account for almost 90% of the GBP1.5trn (USD2.3trn) owed by UK households. In London, where the average home costs GBP500,000, first-time buyers are paying almost nine times their annual income to get onto the housing ladder. Such figures explain why Carney says rate increases when they come will be “gradual and limited.” (Bloomberg)
India: Rajan channels Fischer with India central bank restructure plan. India‟s central bank chief, Raghuram Rajan is seeking to focus the Reserve Bank of India‟s mission on price stability, diversify its management and encourage staff to specialize their skill-sets. To achieve this he‟ll have to win over unions opposing employment of outsiders, combat lawmakers looking to tighten oversight of financial regulators and convince a government seeking to boost growth to curb its budget deficit. (Bloomberg)
China: Premier seeks to reassure investors amid antitrust probes. Premier Li Keqiang pledged to open China more to outside investment and encourage innovation, seeking to counter concerns of a chill after a spate of antitrust probes targeted foreign companies. The government will attract more imports, punish intellectual-property violators and treat foreign and domestic companies equally, Li said. With the remarks, Li expanded on Sep 9 comments in which he said foreign companies have only been the target of 10% of Chinese anti-monopoly probes. (Bloomberg)
Markets
AirAsia: Welcomes Malaysia Airlines overhaul. AirAsia boss Tan Sri Tony Fernandes said he “welcomes” the Government‟s overhaul of Malaysia Airlines (MAS), which he believed would benefit both his group and the national carrier. “It seems Khazanah Nasional really wants MAS to be run commercially. We welcome that. It‟s good to have two strong airlines,” he said. He said there was now too much crossover (in terms of routes), which was inefficient, and that MAS had been able to price it fares aggressively and beyond its means because it had the support of the Government. Fernandes said he hoped the restructuring would result in a healthy aviation industry and less taxpayer money being used to prop up the ailing MAS. (StarBiz)Tomei: GPMI to become Tomei’s wholly-owned unit. Tomei Consolidated has proposed to acquire 39% equity stake in Gemas Precious Metals Industries SB (GPMI) for RM2.96m, which will see the latter become a wholly-owned subsidiary of the company. Two of its directors and shareholders, Datuk Ng Yih Pyng and Ng Sheau Chyn, were also appointed directors of GPMI. GPMI‟s principal activities are designing and manufacturing of jewellery, including gold and silver chains and refining of gold and jewellery. “This will allow the group to fully enjoy the long-term benefits generated by GPMI while providing the group full control over the management of GPMI,” it said. (StarBiz)
Petronas Dagangan: Seeking new markets. Petronas Dagangan is exploring new overseas markets for its liquefied petroleum gas and lubricant businesses. MD and CEO Mohd Ibrahimnuddin Mohd Yunus said the company has a presence in Thailand, Vietnam and the Philippines and is evaluating other markets in the region. “We will look at the returns that the new markets can bring to the shareholders. We will evaluate other markets that have the potential to contribute to the company. “We have embarked on „regional play since late 2012 through our operations in the three countries. “We will continue to look out for expansion opportunities,” he said. (Business Times)
Power (Neutral): Death knell to Malaysia's power sector reforms. The fact that even Tenaga Nasional (TNB) is proposing the planting up of a 1,000MW gas-fired power plant from the Energy Commission (EC) is another case in point supporting the view that energy reforms initiated in October 2012 are no longer in force. Considering that the utility giant was the main proponent for reforms in the power sector that hinged on the EC conducting open tenders for awards to build new power plants, its stance now means there is no cheer leader for reforms in the power sector to bring down the cost of electricity. Sector reforms in power picked up pace in 2011 driven by specialpurpose agency MyPOWER Corp whose previous head honcho, Datuk Abdul Razak Abdul Majid, is now the EC chairman. (StarBiz)
Auto: Car prices lower post-Goods and Services Tax. Average car prices are expected to fall by between 1% and 3% after the implementation of the Goods and Services Tax (GST) in April 2015, according to the Malaysian Automotive Institute (MAI). MAI CEO Madani Sahari said the agency recently conducted a price-simulation to determine how vehicle prices would be impacted by GST. “The prices of most models should drop by between 1% and 2% post GST,” Madani said. He said the final price of cars was determined by the car companies and not the Government. The 6% GST will replace the current sales tax of 10%. (StarBiz)
MARKET UPDATE
US stocks regained some strength overnight, led by a rally in the shares of Apple Inc. which gained 3.1% following the unveiling of a few new products. Significant economic data releases were scant for the day, but others later this week may show unemployment benefit claims declining, retail sales numbers improving and consumer confidence gaining strength. For the day, the Dow Jones Industrial Average was 0.3% higher while the S&P 500 rose 0.4%. The Nasdaq Composite rose a sharper 0.8%.European investors treaded warily ahead of the Scottish independence vote, while also questioning the effectiveness of the European Central Bank‟s stimulus actions and in being too little too late to prevent the continent from sliding into another recession. Most benchmarks closed largely unchanged for the day, with Spain and Germany‟s indices closing 0.1% lower. Italy‟s FTSE MIB and Germany‟s DAX were 0.04% lower while UK‟s FTSE 100 inched 0.02% higher.
Asian markets were a different story altogether however, spooked by leads from the West on the potential earlier-than-anticipated interest rate hike, sending the Hang Seng Index and Jakarata Composite Index tumbling 1.9% and 1.0% lower respectively. Elsewhere around the region, the Straits Times Index and FBM KLCI declined 0.1% and 0.2%. China‟s Shanghai Composite Index was 0.4% lower despite Premier Li Keqiang‟s assurances that the country‟s economy will not see a “hard landing” and can still achieve its main growth target of about 7.5%.
It‟s been reported that the Energy Commission is contemplating extending soon-to-expire Power Purchase Agreements (PPA) of certain parties to overcome the country‟s power supply shortage following some hiccups by existing awardees in completing their projects on time. A big beneficiary of this, should it be the case, would be YTL Power International, probably the only amongst the first-generation operators which has not had its PPA extended for its Paka and Pasir Gudang plants. There may yet be some life in this one!! Eastern & Oriental (E&O) has seen the emergence of a new substantial shareholder in the form of the Employees Provident Fund after it reported acquiring an additional 2m shares to bring its shareholding in the company to 5.21%. Simultaneously, it also announced the cessation of Libra Strategic Opportunity Fund (owned by the ECM Libra Financial Group) after it disposed another 3.4m shares to bring its shareholding below the 5% threshold. At its peak, the value of its shareholding in E&O alone made up close to 75% of its current market capitalization of RM274.6m. Recall back in 2012 when it announced the sale of its investment bank, the group retained certain assets (amongst of which is this) which had a market value of RM183.4m as at 31 May 2012. Should they have all been retained and assuming they were small-cap equity investments, that portfolio could be worth some RM293m today. Surely there must be some value to its other businesses?
Source: PublicInvest Research - 11 Sep 2014
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