Bank Negara welcomes renminbi as global reserve currency

Bank Negara Malaysia (BNM) has welcomed the International Monetary Fund's (IMF) latest move in adding China's renminbi (RMB) as a reserve currency, saying it would contribute much to stability in the international monetary system.

BNM Governor Tan Sri Dr Zeti Akhtar Aziz said the development is very welcome and going forward, will see other currencies increase in significance as a reserve in the monetary system.

"Of course, the US dollar will still be the dominant currency, but having others like the euro, yen, sterling and now yuan (RMB), is an important development," she told the media after officiating the "Iclif Leadership Energy Summit Asia 2015", here on Tuesday.

Zeti said BNM was the first central bank globally to have received the Qualified Foreign Institutional Investor (QFII) status from the China authority in 2011, and has had the RMB as its reserve. 

"We already have the RMB at a level that we are comfortable with. We will access it and as the market grows in size, there will be an opportunity for further investments," she added. 

The IMF announced on  Monday that the RMB or yuan will join the fund's basket of reserve currencies, namely the US dollar, euro, the yen and pound.

 The last change made to the basket was in 2000, when the euro replaced the German mark and the French franc.

 Zeti said the IMF's move will help pave the way for broader use of the RMB in trade and finance.

"The announcement of a clearing bank in Malaysia for the RMB earlier was a major move, and with the QFII status, it will support its further use in settling trade and investment transactions.

"On our part, we are promoting awareness among importers and exporters on how they can benefit from greater use of the RMB, and not be subject to the volatility of the "third currency" in bilateral trade.

"At the Asean level, for those countries that have significant trade with China, I do believe they will use the RMB as the trade currency, because in doing so, it will not expose them to the volatility of the third currency," she added.

Meanwhile, in her speech when officiating the Iclif event, Zeti highlighted that central bankers need to excel as risk managers in knowing what can go wrong and preparing for the worst that is yet to come. 

"It involves building the buffers to prepare for the unexpected events before they happen. 

"When I am asked the question of how we are going to manage 'the lift off', namely the normalisation of interest rates by the US Federal Reserve, my response is, it is not what we will do now, but what we have done before that will see us through this period.

"It is not only the buffers that have been built, but the capability that has been developed to allow us to better intermediate, and thus absorb the shock in withstanding volatile financial flows that are already occurring in anticipation of this eventuality," she added

source: The Star

Malaysians capitalising on London’s property investment

Malaysia is among the countries that is capitalising the lucrative and transparent real estate market in London, United Kingdom. “Clarity in British rules and regulations has made it easy for foreign investors to transact in the United Kingdom,” said Knight Frank LLP, a leading independent global property consultancy, in a statement today.

Among the recent Malaysia-related deals was the sale of the Employees Provident Fund’s prime office – One Sheldon Square - in Paddington to a UK REIT British Land for £210 million (RM1.14 billion) at a 4.5 per cent yield.

In 2013, Kumpulan Wang Persaraan bought the Richard Rogers-designed skyscraper, 88 Wood Street, from the National Pension Service of Korea for £200 million (RM927.11 million) reflecting a 5.8 per cent yield.

Others included the purchase of a government building by Tabung Haji for £205 million (RM1.11 billion). In addition, tax regime and long lease terms in the United Kingdom gives investors a more secured investment environment, it said, adding that investors were able to access accurate market information about particular assets.

“London is one of the largest and most dynamic cities in the world, and therefore offers a wide range of investment opportunities. It has the ability to evolve and create new submarkets,” the statement added.

Economic risk for Malaysia's banking sector revised to stable: S&P's

Standard & Poor's Ratings revised its economic risk trend for Malaysia's banking sector to stable from negative, saying the industry risk trend remains stable. It also revised the outlook for AmBank, RHB Bank and RHB Investment Bank to stable from negative.



"Our stable outlooks on Malaysian banks factor in our expectation that these banks will maintain their satisfactory financial profiles even as the domestic economy slows," the rating agency said. It added that successive government measures since 2010 to counteract the stimulatory effect of low interest rates on consumer borrowing and home prices have been effective.

"In particular, the more stringent measures introduced in 2014 to curb property speculation have reined in prices. "In our base case, we expect these steps to help keep the year-on-year inflation-adjusted rise in property prices to 4 per cent or less over the next 18-24 months.

" S&P's said the Malaysian economy has lost some momentum due to a weak energy sector, tighter domestic spending due to the implementation of goods and services tax (GST), and uncertainties in global demand. It expects an increase in credit losses from historically low levels but overall, it expects the credit risk of Malaysian banks to remain manageable.

"Malaysian banks have been building up capital and provisioning buffers in the good years, which will mitigate some downside risks." The outlook action today was from BBB+ negative to stable for AmBank (BBB+), RHB Bank (BBB+) and RHB Investment (BBB+). S&P's also affirmed the stable ratings on four other banks – Public Bank (A-), Malayan Banking Bhd (A-), CIMB Bank (A-) and CIMB Investment Bank (A-).

In assessing Malaysia's potential exposure to economic imbalances due to household debt and the property market, Standard & Poor's looked for ‘consistent indications’ that increases in housing prices and consumer debt are moderating. "In our view, the impact of recent government and regulatory policy initiatives will curtail potential systemic risk arising from the household sector. " It expects the unemployment rate to remain slow and policy rates to remain stable, which would support the debt repayment ability of the household sector.

AirAsia shares drop to five-year low

AirAsia Bhd’s (AirAsia) shares tumbled to the lows of RM1.73 region yesterday over concerns about overdue payments by related parties.

At closing it reached RM1.81 with 33.09 million shares traded.

Nevertheless, AirAsia Bhd’s (AirAsia) fundamentals has been viewed as intact and its operations are expected perform well, buoyed by better supply-demand balance and the restructuring at Malaysian Airlines, analysts
say.

Despite being the weakest performing Asia Pacific airline stock for the week, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) remains confident that AirAsia’s Malaysian operations will perform well; buoyed by better supply-demand balance.

It also pointed out the restructuring at Malaysian Airlines will provide significant benefits to AirAsia.

Meanwhile, AirAsia saw its share price declining during the week, due to talks of an independent report that accuses AirAsia of accounting anomalies and values the company at RM1.20 per share.

“None of the issues raised in the report is new and we and the analyst community have already deliberated it meticulously. Nonetheless, the market panic has set in,” Maybank IB Research commented.

“We believe AirAsia’s accounts are transparent and Pricewaterhouse Coopers (PwC) is a respectable auditing firm.

“The auditors have approved the latest 2014 accounts without any qualification. Separately, we have always highlighted our concerns regarding the RM2,862 million owed by related parties – some of which are overdue.

“These are mostly aircraft lease payments owed to the parent in addition to working capital,” the research team added.

It retained its ‘buy’ call for the stock as well as its earnings forecasts and target price of RM2.45 (pegged to nine-folds FY15 price earnings ratio, 30 per cent discount to global LCC average).

It noted, “We have conducted a worse-case scenario analysis, which are to write off the loans to related parties.

“This is to establish a floor valuation for the stock.

“The total loan to related parties was RM2,862 million as at end of March-2015. This equates to RM1.03 per share or 61 per cent of shareholders equity.

“Assuming the entire amount is written off – an outcome that we deem improbable – this will cut shareholders equity to RM1,804 million or a book value (BV) of RM0.65 per share.

“This will also push up AirAsia’s net gearing level to 6.1-folds from 2.5-folds currently, surpassing the previous peak of 4.4-folds during the stormy 2008 global financial crisis (GFC).

“At such stretched levels, it may potentially trigger debt covenants and become an impediment to future borrowings.”

ECER draws RM84 bln private investments as of November

The East Coast Economic Region (ECER) has attracted RM84 billion in private investments as of November this year, said the East Coast Economic Region Development Council (ECERDC).

The investments, representing a return of 14 times to the government and 76 per cent of ECER’s target of RM110 billion worth of investments by 2020, are expected to create 92,313 jobs, ECERDC said in a statement yesterday.

“The manufacturing cluster is the biggest contributor with investments valued at RM46.3 billion, followed by tourism (RM14.1 billion), bio-economy (RM7.4 billion) and oil, gas and petro-chemicals (RM5.2 billion,” it said.

The government has allocated about RM6 billion under the Ninth Malaysia Plan (9MP) and Tenth Malaysia Plan (10MP) to implement high-impact projects in the economic region, it said.

All 67 projects and programmes under the 9MP have been implemented, while 26 projects and programmes under the 10MP have been completed with 20 at various stages of implementation, it added.

ECERDC held a meeting at Menara Parlimen here yesterday chaired by Prime Minister Datuk Seri Najib Tun Razak, who is also the council’s chairman.

In the same statement, Chief Executive Officer Datuk Seri Jebasingam Issac John said despite the challenges ECERDC faced in attracting investments to ECER earlier in the year, it has continued to boost these efforts with the cooperation of the relevant government agencies.

“There have been obvious improvements in the third and fourth quarters of this year, and this year alone the ECER has attracted investments totalling RM12.5 billion, exceeding the target of RM12 billion,” he said.

ECER’s industrial parks, such as the Malaysia-China Kuantan Industrial Park, Pekan Automotive Park, Kertih Biopolymer Park, Kuantan Integrated Biopark, Gambang Halal Park and Pasir Mas Halal Park, have continued to attract investments due to their competitive advantages, he said.

Cumulative investments to these industrial parks currently stand at RM19.54 billion and could create 22,377 new jobs, ECERDC said.

source: Utusan Borneo

Islamic finance sector in 2016 is expected to increase

Islamic finance sector is expected to grow to 14 percent next year despite the country's economic situation is not very encouraging.

Vice-President (Academic) of the University Global Islamic Finance (INCEIF), Datuk Dr. Syed Othman Alhabshi said this is because Islamic finance still has potential for growth in the country as growth at the global level is still high.

He said that from 2008 to 2013, Islamic finance has grown by an average of 17 percent per year and growth next year will slow down a bit because of the slow economy.

"I believe the sukuk will be the driver of this growth will be in addition to Islamic banking is expanding rapidly. Malaysia will also continue to be the leader in sukuk in the next year.
"In addition, Wealth Management is also expected to be one of the top growing and will be the focus," he said.

He was speaking after the launch of the book 'SRI (Sustainable and Effective Responsibility) and Case for Funds of Islam' by BNP Paribas Wealth Management Centre of Islamic and INCEIF (CIWM) here today.

Also present were the Chairman of BNP Paribas Malaysia, Datuk Abdullah Mat Noh and Promotion Unit Director of the Malaysia International Islamic Financial Centre (IFC), Nik Mohamed Din Nik Musa.

The book held by a joint venture between CIWM and MIFC to create awareness and sustainable relationship between sharia-compliant investments. Meanwhile, Syed Othman said economic growth in the third quarter of this year is not so favorable and expect the same thing in the next quarter.

Edra: Ringgit rebounded

Based on the model of exchange rates, the ringgit should hover at RM3.70 against the US dollar (US) without negative sentiment was affected mainly the issue of 1Malaysia Development Berhad (1MDB) since August.

According to MIDF Research, many believe that the ringgit will be recovered in the event of negative sentiment has subsided, supported by the global economy and financial markets are beginning to stabilize.

On this evening, the ringgit rebounded when it closed at RM4.2420 from RM4.3010 yesterday, after 1MDB agreed to sell energy assets Edra Global Energy Bhd. (Edra) to the General Nuclear Power Corporation (CGN Group) amounted to RM9.83 billion, in addition to the recovery of global crude oil prices.

"It is recognized in the financial market, the ringgit was under pressure due to negative sentiment, especially since a hot issue 1MDB around August. But the question is, what are the conditions necessary to look back retroactively applicable sentiment?

"However, the achievements earned it fair 1MDB scrutinized, whether financial markets will define it as a 'solve' the problem and help to reduce the negative sentiment in the market," he said in a brief statement on the economy yesterday.

CGN Group signed a Share Sale and Purchase Agreement (SSPA) with 1MDB to acquire a 100 percent stake in Solar Edra Sdn. Bhd., Edra Energy Sdn. Bhd., Powertek Energy Sdn. Bhd., Jimah Teknik Sdn. Bhd., Jimah O & M Sdn. Bhd., Mastika Lagenda Sdn. Bhd. and Tiara Land Sdn. Bhd.
President and Group Executive Director 1MDB, Arul Moto described the purchase by CGN Group takes a commitment of foreign direct investment (FDI) into the country and reflects their confidence in the Malaysian economy.

Meanwhile, HLIB Research analyst Daniel Wong said in a research note, there is some concern whether CGN Group is allowed to own 100 per cent of energy assets in Malaysia or the company needs to reduce its stake to local partners in the future.

He said the admission CGN Group in the energy sector of the country only control 3,640 gigawatt (GW) or 15.6 percent of power capacity in Peninsular Malaysia, with the majority still controlled by Tenaga Nasional Berhad (54.9 percent) and Malakoff (21.3 percent).

"But, CGN Group energy assets subject to the terms and conditions of the power purchase agreement (PPA) is tight, to protect the interests of both parties (CGN Group and BNP). So, not sure whether CGN Group allowed to own 100 per cent of the country's energy assets, "he said.

He said, in terms of benefits to the country as well, CGN Group has expertise in nuclear energy, which allows Malaysia to venture into the sector in the future.

"We believe this news (Edra asset sales) would provide relief to the park after the share price under pressure due to concerns about TNB had to pay more and expect the stock price will respond positively," he said.

source : Utusan Malaysia