S&P drops debt downgrade warning for Catalonia

WASHINGTON: Ratings agency S&P on Friday dropped the downgrade warning for the debt of the Catalan region of Spain, saying the provincial government’s financial situation was stable even while the political confrontation persists.

S&P Global Ratings also affirmed Catalonia’s B+/B rating and maintained the negative outlook given the “deterioration of the relationship” between Madrid and the new provincial government, elected last week.

While political tensions remain a “major hurdle” to debt payments, S&P removed the region’s debt from the CreditWatch negative, which was imposed in early October, meaning a downgrade was now no longer seen as an imminent threat.

The ratings agency Fitch had also put a warning on Catalan government debt in October as tensions with Madrid escalated amid the region’s push for independence.

“Despite continued political tension, Catalonia’s budgetary execution continues to improve and the region continues to receive liquidity support from the central government to service long-term debt, while rolling over its short-term debt as it comes due,” S&P said in a statement.

But the agency cautioned that the outlook remained negative, reflecting “the possible adverse impact on Catalonia’s ability to fully and timely service its debt because of ongoing political tension.”

S&P said it saw no indication of how the impasse could be resolved and that the situation was likely to “drag on in the medium to long term.”

Catalonia’s new separatist leader, Quim Torra, was sworn in last week ending nearly seven months of political limbo in the northeastern Spanish region.

The region had been under direct rule from Madrid since the central government deposed Catalan president Carles Puigdemont following a failed declaration of independence on October 27.

Catalonia is a major engine for growth, accounting for around 19 percent of the country’s GDP, and the confrontation was Spain’s worst political crisis in decades. — AFP

New US tariffs a headache for foreign automakers

NEW YORK: US President Donald Trump’s threat to impose steep tariffs on auto imports will hit foreign automakers that export a large number of vehicles to the US market, but many also manufacture cars domestically.

Most of these brands, such as Mercedes and BMW as well as Nissan, Honda and Volkswagen, have at least one auto plant on US soil, where they employ tens of thousands of workers.

These automakers have invested billions of dollars in their US facilities. Toyota and Mazda announced at the start of the year plans to build a US$1.6 billion joint facility in Alabama that will be capable of producing 300,000 vehicles a year.

Volvo Cars, which plans to open a plant in South Carolina by the end of the year, has warned that new import duties would affect its investment plans.

US auto market

In 2017, about 17.2 million vehicles were sold in the United States, according to AutoData, which compiles figures from manufacturers and dealers.

Nearly 8.7 million of these were imports, according to the Center for Automotive Research, mostly from Mexico and Canada — partners in the North American Free Trade Agreement — as well as from Japan, Germany and South Korea.

Since the start of this year, the share of domestically-manufactured autos sold in the US has fallen to 50.1%, down from 51.1% over the same period in 2017, according to Edmunds.com.

At least 82% of Volkswagens sold in the US were imports, according to Edmunds, as well as 55% of Toyotas, 57% of Hyundais, 70% of Mercedes-Benz and 68% for BMW.

On the other hand, more than half the cars sold in the US by the “Big Three” in Detroit were made locally: 80% for Ford, 60% for General Motors and 55% for Fiat Chrysler.

Honda is the sole foreign automaker manufacturing a large majority of its locally-sold cars in the United States.

Major exporter

The US auto industry is the largest US manufacturing sector which employs about eight million workers, directly or indirectly through related industries.

It also is one of the largest export sectors, according to the American Automotive Policy Council, an industry body representing the major US manufacturers, General Motors, Ford and Fiat Chrysler, and foreign automakers.

Auto exports virtually doubled between 2009 and 2015 to US$137.7 billion from US$74.1 billion, according to AAPC, supporting 771,000 US jobs.

BMW and Daimler, maker of the Mercedes-Benz, notably send US-built cars to the European Union and China.

BMW, which says its Spartanburg, South Carolina plant is the world’s largest, exported 70% of the 371,284 autos manufactured at the site last year, or about 272,346, representing about US$10 billion in total exports.

Domestic manufacturing

Toyota, which employs more than 36,000 people, has 10 factories at locations in Alabama, California, Mississippi and Texas. It produces 1.2 million cars and sells 2.4 million, according to 2017 figures, with the difference made up by imports.

Honda, which employs 4,000, has factories in Alabama, George, Indiana and Ohio and produces 1.2 million, selling 1.6 million.

German giant Volkswagen, which has a Tennessee factory with the capacity to produce 150,000 units annually, did not disclose production figures but sold 339,679 autos. It employs 2,444 workers.

Daimler maintains auto plants in Alabama, Indiana, and South Carolina and has 4,900 local workers. In 2017, it produced more than 286,000 cars and sold 337,246.

BMW, which employs nearly 9,0000 workers, produced 371,284 automobiles in 2017 in the US, and sold 305,685.

Nissan maintains two factories in Mississippi in Tennessee and produced 930,000 autos, selling US$1.6 million. It employed 14,400 workers.

Auto imports

Volkswagen luxury brands Audi and Porsche have no US factories and as a result import all the vehicles sold in the US market. In 2017, Audi sold 226,511 units while Porsche brought 55,420 to market. — AFP

Wall Street sees split finish amid energy dip, political uncertainty

NEW YORK: Wall Street had a split finish on Friday, as energy shares slid and continued whiplash from geopolitical headlines weighed on the Dow and S&P 500 while the Nasdaq rose.

The lackluster finish came amid light trading volume ahead of a three-day holiday weekend, the traditional start of the US summer when many market players are on vacation.

Despite suffering a string of highly volatile sessions, all three major indices managed to end higher for the week thanks the rally Monday.

The benchmark Dow Jones Industrial Average fell 0.2% to close the week at 24,751.44, and broader S&P 500 lost the same amount to end at 2,721.26.

But chipmakers, including Broadcom Inc., which gained 2.7 percent, lifted the Nasdaq by 0.1% to finish at 7,433.85, putting the tech-heavy index up 0.7% for the week.

Some of Friday’s declines were driven by falling energy stocks, dragged lower on reports Saudi Arabia and Russia could increase production to replace falling output in Venezuela and Iran.

Exxon Mobil fell two percent while Chevron lost 3.5%.

“The OPEC members and their partners are beginning to discuss the possibility to increase their production which is quite bearish for oil prices and the energy sector,” Peter Cardillo of Spartan Capital told AFP, referring to the Organization of the Petroleum Exporting Countries.

But Quincy Krosby, chief market strategist at Prudential Financial, said that more than reacting to oil’s woes, traders were seeking to reduce their exposure to global uncertainties ahead of the holiday weekend.

“Energy stocks are much smaller in the S&P 500 than they have been in the past,” he told AFP.

“You don’t want to stay in the market for a long weekend with the uncertainties surrounding North Korea as well as the situation in the middle-east with Iran,” he said.

“You don’t want to be vulnerable.”

President Donald Trump on Friday raised the possibly of pressing ahead after all with a June summit with North Korea, barely 24 hours after abruptly calling the meeting off.

That news followed quickly on the Trump administration’s announcement it was considering imposing duties on auto imports, which threatens to disrupt a crucial North American industry and anger major US trading partners who are already in fraught trade talks with Washington.

Markets will be closed on Monday in observance of Memorial Day. — AFP

Ringgit to extend downward momentum

KUALA LUMPUR: The ringgit will likely extend its downward trend against the US dollar next week to between 3.96 and 4.00, mainly driven by external factors, said analysts.

OANDA Head of Trading in Asia-Pacific Stephen Innes said the ringgit was looking for a possible test of 4.00, subject to the significant US dollar momentum with external factors to drive momentum where the emerging market currencies, in general, continued to be under pressure.

“Meanwhile, oil prices look very heavy both from a fundamental and technical perspective, suggesting that we may be coming to an end in the bull market run.

“And this could weigh on the ringgit sentiment. The potential increase in OPEC (Organisation of the Petroleum Exporting Countries) output due to global concerns over Venezuela and Iran supplies could lead to a breakdown in OPEC/Non-OPEC compliance.

“While I don’t believe it will, I need to guard against the possible outcome and reduce some long oil risk next week,” he told Bernama.

Meanwhile, FXTM Global Head of Currency Strategy and Market Research Jameel Ahmad said the upcoming week would likely be a quieter one for the Malaysian economy as there would be very low volume of economic data scheduled from next week.

“I would personally keep a close eye on how investors would behave towards the US dollar as the ongoing resurgence in the greenback has pressured emerging market currencies over the past couple of weeks, while the cancelled US-North Korea Summit also has the potential to impact the local currency.

“If investor appetite towards risk reduces following this development, it could provide less buying demand for emerging market assets such as the ringgit,” he told Bernama.

Jameel added that the US dollar-ringgit movement was largely dependent on how external factors impact investor sentiment towards emerging market currencies but the market could not necessarily rule out a future return for the ringgit to above 4.00-level against the greenback if investors were to adopt a risk-off stance.

“In the event that investor sentiment remains the same as it has done over the past week, the ringgit could also continue to trade in the same range as for the past week, as it is showing resilience towards defending itself around these levels,” he added.

The ringgit was traded mixed throughout the week in the aftermath of the 14th general election and in line with the oil market movement, as well as concern over the possible US interest rate hike with the release of US Federal Reserve minutes this week.

On a Friday-to-Friday basis, the local note fell against the greenback to 3.9790/9830 from 3.9700/9740.

It declined against the Singapore dollar to 2.9721/9753 from 2.9523/9557 and depreciated against the yen to 3.6348/6391 versus 3.5769/5815.

However, the local note strengthened vis-a-vis the British pound to 5.3128/3197 from 5.3516/3577, and increased against the euro to 4.6606/6665 from 4.6751/6806 previously. — Bernama

Bursa Malaysia to trend higher towards 1,800-1,820 level next week

KUALA LUMPUR: Bursa Malaysia is expected to trend higher towards the 1,800-1,820 level next week, after retreating back to 1,750 level this week on heavy selling in the heavyweights due to overreaction to the debt level announcement, dealers said.

Hermana Capital Bhd Chief Executive Officer and Chief Investment Officer Datuk Dr Nazri Khan Adam Khan said the government’s recent announcement that the national debt exceeded RM1 trillion sparked concern among investors on its ability to manage economy.

However, he said the concern began to subside after the government announced a series of plans to generate income, including promising to review all mega projects and adopting cost-cutting measures.

“As we can see, their (investors) overreaction has found a relief, which saw the local index rebounded to as high as 23 points on Friday.

“Chinese investors’s recent statement, in which they expressed confidence and looking forward to continue their businesses under the new government, has also provided some support to the market and would likely continue well into next week,” he told Bernama.

However, he said that the global economic tension would likely limit the local market gains next week, with regional investors watching closely on the development of the US-China trade talks.

“There are also renewed concerns among investors after US President Donald Trump cancelled his upcoming summit with North Korean leader Kim Jong Un,” he added.

For the week-just-ended, Bursa Malaysia closed mostly lower on sustained selling momentum in selected heavyweights, as well as situational counters.

Bursa Malaysia started off the first day of trading mixed, before beginning to retreat between Tuesday and Thursday, after Finance Minister Lim Guan Eng announced that the national debt had exceeded RM1 trillion or 65 per cent of gross domestic product.

On a Friday-to-Friday basis, the benchmark FTSE Bursa Malaysia KLCI was 57.10 points lower at 1,797.40 from 1,854.5.

The FBM Emas Index eased 322.44 points to 12,540.78, the FBMT100 Index lost 314.68 points to 12,348.68, the FBM 70 slid 111.75 points to 14,840.62, and the FBM Emas Syariah Index fell 337.34 points to 12,608.30.

The FBM Ace declined 195.49 points to 5,189.61.

On a sectoral basis, the Finance Index dropped 448.73 points to 17,879.56, the Industrial Index went down 90.48 points to 3,213.41 and the Plantation Index reduced 78.13 points to 7,844.11.

Weekly turnover narrowed to 12.90 billion units worth RM15.95 billion from 20.14 billion units worth RM21.61 billion.

Main market volume decreased to 8.17 billion shares worth RM15.19 billion from 13.97 billion shares worth RM20.6 billion.

Warrants turnover declined to 3.07 billion units valued at RM519.62 million versus 3.67 billion units valued at RM523.83 million.

The ACE market volume reduced to 1.55 billion shares worth RM233.17 million from 2.46 billion shares worth RM472.54 million.

Gold futures contract on Bursa Malaysia Derivatives is expected to be rangebound next week on lack of market moving news, said a dealer.

Phillip Futures Sdn Bhd dealer Kiang Jia Ling said the market would likely be under pressure, tracking the weak trend overseas over US President Donald Trump’s decision to call off a meeting with North Korean leader Kim Jong Un, triggering safe-haven buying.

On a Friday-to-Friday basis, May 2018 jumped 40 ticks to RM167.05 per gramme, while June 2018, July 2018 and August 2018 increased 36 ticks each to RM167.65, RM168.05 and RM168.15 a gramme, respectively.

Weekly turnover decreased to nine lots worth RM150,270 against 18 lots worth RM301,155 from the previous week, while open interest was slightly higher at 49 contracts from last week’s 46 contracts. — Bernama

Gold futures ends higher

KUALA LUMPUR: Gold futures contract on Bursa Malaysia Derivatives closed higher today as investors turned to the precious metal after US President Donald Trump cancelled a planned meeting with North Korea leader Kim Jong-Un, said a dealer.

Phillip Futures Sdn Bhd Dealer Kiang Jia Ling said the decision taken by Trump triggered safe-haven buying.

Gold is deemed as a safe-haven investment during political and financial uncertainties.

May 2018 rose seven ticks to RM167.05 a gramme while June 2018, July 2018 and August 2018 all increased two ticks each to RM167.65, RM168.05 and RM168.15 a gramme, respectively.

Turnover rose five lots, worth RM83,645, compared with Thursday’s one lot, valued at RM16,755, while open interest was higher at 49 contracts from 45 contracts on Thursday.

At 5pm, the price of physical gold was 99 sen higher at RM161.52 a gramme. — Bernama

Ringgit closes flat against US dollar

KUALA LUMPUR: The ringgit closed a little changed against the US dollar today on lack of fresh buying interest, said a dealer.

At 6pm, the local unit was quoted at 3.9790/9830 against Thursday’s close of 3.9790/9820.

The dealer said investors remained in a cautious mode on the back of various factors, including declining oil prices and US bond yield, as well as US President Donald Trump’s decision to call off a planned meeting with North Korean leader Kim Jong-Un.

Meanwhile, the local unit was mixed against a basket of currencies.

The ringgit strengthened against the British pound to 5.3128/3197 from 5.3287/3339 on Thursday and increased against the euro to 4.6606/6665 from 4.6666/6709.

It declined against the Singapore dollar to 2.9721/9753 from 2.9656/9685 and eased against the yen to 3.6348/6391 from 3.6265/6299. — Bernama

MyEG rubbishes MACC probe claims

PETALING JAYA: MyEG Services Bhd has denied rumours that it is being investigated by the Malaysian Anti Corruption Agency (MACC).

“The board reiterates that the company is not the subject of any investigation whatsoever, past or present, being carried out by MACC on it or on any of its directors,” it said in a filing with the stock exchange.

Citing the allegations are completely baseless and fictitious, MyEG stressed that the board takes a serious view of the spreading of erroneous rumours and accordingly, appropriate action has been taken against the irresponsible acts, including the lodging of a report with the Royal Malaysian Police.

“Any material developments pertaining to the company or its board have been and will continue to be disclosed in a timely manner through official proper channels.

“In this respect, the public is advised to disregard any information about the company or its board that are unverified and not released through the proper channels.” 

MyEG’s share price closed 3 sen or 3.77% lower at 76.5 sen on some 106.39 million shares traded, being the second most actively traded stock.

Sime Darby’s net profit falls 80.49% in Q3 on lower interest income

PETALING JAYA: Sime Darby Bhd’s net profit plunged 80.49% to RM135 million in the third quarter ended March 31, 2018, from the RM692 million reported a year ago, due to additional interest income in the earlier period.

Revenue for the period grew 5.43% to RM8.29 billion from RM7.87 billion in the same quarter last year.

Amid a backdrop of uncertainty in the global economy, Sime Darby expects the group’s performance for the financial year ending June 30, 2018 to be satisfactory.

“We remain focused on our core sectors and shall continue to explore opportunities to accelerate growth and drive our businesses forward. On 3 May, we officiated the opening of the new BMW engines assembly facility in Kulim, Kedah. It is a testament to our capabilities and the strength of our relationship with BMW. The assembly of BMW engines in Kulim will increase the local content of our cars, making them more cost competitive,’ said group CEO Jeffri Salim Davidson in a statement.

For the first three quarters of the year, Sime Darby’s net profit fell 5.95% to RM1.76 billion from RM1.87 billion, while revenue increased 10.34% to RM25.25 billion from RM22.89 billion.

Sime Darby’s share price rose 3% to close at RM2.76 with 20.57 million shares done.

IHH Healthcare’s Q1 net profit nosedives 87.82% on forex losses, higher costs

PETALING JAYA: IHH Healthcare Bhd’s net profit plummeted 87.82% to RM57.24 million in the first quarter ended March 31, 2018 against the RM470.05 million recorded a year ago, due to foreign exchange losses arising from the weakened greenback and the incremental depreciation, amortisation and finance costs incurred from the opening of the two new hospitals in March 2017, as well as the absence of a one-off disposal gain.

Revenue for the period under review grew 6.34% to RM2.85 billion from RM2.68 billion, driven by organic growth from existing operations, and the continuous ramp up of Gleneagles Hong Kong Hospital and Acibadem Altunizade Hospital, both of which were opened in March 2017.

IHH expects pre-operating costs and start-up costs of new operations to partially erode its profitability during the initial stages, which it seeks to mitigate by ramping up patient volumes in tandem with phasing in the opening of wards at these new facilities in order to achieve optimal operating leverage.

“In addition, significant currency volatility against the group’s reporting currency may affect the comparability of the group’s financial performance across periods. The group constantly reviews its portfolio of investments with a view of rebalancing them to optimise returns,” its board of directors said.

IHH said it continues to believe in the sustained demand for quality private healthcare in its home markets – Malaysia, Singapore, India and Turkey, and key growth market of Greater China.

“This is based on shifting favourable population demographics and a fast-growing middle and upper class in its home and key markets, as well as its centres of excellence in established medical hubs. The group will continue to draw on its rapid growth over the past few years to enhance service offerings at existing hospitals. It will also ramp up newer hospitals to further optimise operating leverage, consolidate acquired assets and prepare for the progressive opening of its slate of greenfield and expansion projects,” it noted.

In a separate stock exchange filing, IHH said it has issued a second extension letter to the board of directors of Fortis Healthcare Ltd, in which it has extended the acceptance period until 11.59 pm on June 30, 2018.

Worth to note is that the previous enhanced revised proposal expired on May 15, after which IHH issued a letter to the board of Fortis extending the acceptance period until 11.59 pm on May 29.

IHH’s share price gained 1.29% to close at RM6.26 with 9.31 million shares changing hands.