Disusun oleh Perpustakaan, UPP

Edaran Terhad

●31hb Dis 2016 - 03hb Jan 2017●

Berita Hariaa

3 1 DEC 2016

GETAH 14 SEN23 Disember

'im fi

asaran getah Malaysia ditutup W lebih tinggi pada hari urus niaga terakhir 2016 selepas disokong oleh kenaikan harga minyak m entah, ka­ta peniaga.

Dilaporkan bahawa harga minyak AS meningkat pada perm ulaan urus niaga Asia pada hari Jum aat walau- pun kenaikan yang tidak dijangkakan dalam simpanan minyak m entah se- perti yang dilaporkan oleh Pentad- biran Maklumat Tenaga AS.

Katanya, pasaran tem patan yang lebih baik ini juga adalah seiring de- ngan corak menaik yang direkodkan oleh niaga hadapan pasaran seran- tau.

‘Teningkatan perm intaan daripada syarikat kereta di China mungkin m em beri sokongan kepada harga,” ka­tanya.

Pada waktu tengah hari, harga fi- zikal rasm i Lembaga Getah Malaysia bagi gred tayar SMR 20 menokok se- banyak 14 sen kepada RM8.710 dan lateks pukal meningkat 2.5 sen kepada RM6.450 sekilogram.

• Harga penutup tidak rasmi bagi gred tayar SMR 20 melonjak sebanyak 3.5 sen kepada RM8.845 sekilogram manakala lateks pukal bertam bah se­banyak 1.5 sen kepada RM6.45 se­kilogram. BERNAMA

Berita H artal

3 1 DEC 2016

catat

c? Perjanjian GPEC.negara bukan OPEC

pengeluaran

K Singa^iira

H arga m inyak berada da­lam landasan untuk m en- catatk an peratus kenai- kan tahunan tertinggi sejak 2009

berikutan peijanjian yang dica- pai antara Pertubuhan Negara Pengeksport Petroleum (OPEC) dan negara bukan OPEC untuk m engurangkan ouput minyak m entah.

Niaga hadapan minyak m entah Amerika Syarikat (AS), West Texas intermediate (WTI) meningkat 23 sen kepada AS$54.O0. Niaga bul an hadapan Mac bagi minyak m entah; Brent pula menokok 31 sen ke­pada AS$57.l6.

Niaga hadapan Brent mening- kat klra-kira 53 peratus tahun ini, manakala niaga hadapan WTI m e­nokok kira-kira 46 peratus.

Kenaikan dalam pasaran mi- nyak tahun irii adalah yang ter- tinggi sejak rali 2009, apabila Brent dan W tt masing4haSing mening­kat 78 peratus dan 71 peratus.

Dalam satu isyarat bahawa pe- ngsluar m em ituhi p ^b th n gan ou­tput, Oman memberitahu beberapa pelan^annya bahawa ia akan me­ngurangkan peruntukan sebanyak lima peratus pada Mac depan.

la bagaimanapun tidak menya-

takan jika pemotongan bekalan akan diteruskan selepas itu .:

Pasaran juga tidak mengendah kan kenaikan luar jangkaan in­ventor iirunyak m entah AS, yang m eningkat 614,000 tong pada m inggu; berakhir 23 Disember 2016, lapor: data yang dikeluarkanoleh Pentadbiran naga

Maklumat Te-

Turun 2.1 juta tongPenganalisis menjahgkakan penm runan 2.1 ju ta toiig minyak m en­tah dalam tem poh itu.

Namun begiui, kenaikan dalam simpanan minyak m entah data EIA itu adalah lebih kecil ber- banding data Institut Petroleum Amerika (API) dikeluarkan Rabu lain yang menunjukkan terdapat pertam bahan 4.2 juta tong sim­panan minyak mentah AS dalam

tempoh sama.Simpanan bahan api petrol su-

sut 1.6 ju ta tong, berbanding jang­kaan penganalisis yang dibuat oleh Reuters yang mengunjurkan kenaikan 113 ju ta tong.

Pasaran dijangka tnemberi tum- puaii terhadap penarikan balik mengejutkian stok produk dan me- ngambil pandangan yang lebih bulis terhadap kontrak W Il, kata peniaga.

Harga minyak akan meningkat sedikit demi sedikit kepada AS$60 satu tong sebelum akhir 2017, la­por pungutan suara Reuters yang dikeluarkan kelmarin.

Kenaikan berikutnya akan di- hadkan oleh nilai dolar yang ku- kuh, pemuliban output minyak AS dan kemungkinan OPEC tidak me- m atuhi peijanjian pemotongan output.

p g f

3 1 DEC 2016

Challenging 2016 but outlook stays bullishCAUTIOUSLY OPTIMISTIC: Analyst says domestic economy to remain growth driver next year

AM IR HISYAM RASID AND FAR AH A D IU A

KUALA LUMPUR btjwnediaprin5a.com.my

TUI! local stock exchange was tipped for li brighter 2016 bin, due to global uncertainties, it

lost steam to end the year more than 50 points, or 3,56 per cent, off the 2015 mark.

However, analysts and economists, rem ain b u llish abo u t Bursa Malaysia’s outlook next year, given the country’s economic resilience.

MIDI-' Amanah investment Rank Bird chief economist Dr Kamarud- din Mohd Nor said Malaysia's do­mestic economy would remain the main driver,

He said private consumption was growing at healthy pace and various infrastructu re projects in the pipeline would inject significant multiplier effect into the domestic economy while, at the same time, creating employment.

"Upward trajectory of commodity prices will also be supportive of Malaysia's economic growth in 2017. Moreover, our external sector is ex­pected to perform better next year.'' Kamaruddin told Business Times yesterday.

This year's highlights have been dominated by Britain's exit from the

European Union (known as Brexit), Donald Trump's surprise win in the United Srates presidential election. China's weakening economy, soft oil prices and other external develop­ments. which have impacted Bursa Malaysia and other global stock

. markets.The F'TSH Bursa Malaysia KLCI

(HIM KLCI) settled at 1,641.73 points yesterday, the Iasi trading day of the year, making it one of the worst per­formers among Asia Pacific’s stock exchanges.

The benchmark index, however, ended 3.80 points higher than Thursday’s dose of 1.637.93.

Yesterday’s close was a far cry from the close of 1,692.51 on De­cember 31 last year. Thu index had also recorded a historical high of L862.SO on April 21 last year.

The first quarter of this year saw the FBM KLCI, which tracks the top 30 companies, stay above the 1,700- point level to close at 1,718 points,

MIDF Research said foreign funds turned net buyer of local equities with a net Inflow of RM4.4 billion in the quarter.

“Inflows for March was ai the highest since April 2013. The ringgir also continued to strengthen against US dollar to close the quarter at RM3.93 despite moderating crude oil prices," it said.

Analysts then were confident of

Donald Trum p's victory in the United States presidential election last month sent global markets, in­cluding Bursa Malaysia, into a period o f high volatility am id uncertainties over how Ins economic policies.

the key index breaching 1,800 points by the end of the year.

The FBM KI.C1. however, dipped below 1,700 points beginning April amid weak investors’ sentiment.

MIDF Research said the prior sen­timent continued as the ringgit weakened to above the RM4 level against the greenback.

A stranger US dollar has sent ring­git to multi-year lows in recent days.

MiDF Research said the People’s Bank of China's continuous attempt to weaken yuan and reports that som e banks in Shanghai had s;opped accepting shares of smaller listed companies as collateral for loans had spooked the Chinese mar­ket, triggering circuit breakers and halting equity trading.

“In addition, escalating tension between .Saudi Arabia and Iran un­derscored geopolitical risks in the Middle Fast, resulting in the FBM KLCI, as with other world's major

MIDF Amanah investment Bank Bhd ch ie f economist Dr K am aruddin Mohd N or says private consumption in Malaysia is still growing at healthy pace.

The local currency is expected to gradually strengthen next y ea r amid better commodity prices ns wdi greater clarity on the direction o f US policies.

markets, succumbing to selling pres­sure during the opening weeks of 2016." it said in a note.

Markets were then spooked after British citizens unexpectedly voted to exit the EU, causing the plunge in tile British pound and the UK bendi- mark index FTSUIOO. which record­ed 11 and nine per cent decline, re­spectively, in the subsequent market day.

The FBM KLCI fell to 1.630 points the following week, in tandem with other markets' indexes.

In response to rising risks from Brexit, Bank Negara Malaysia cut its Overnight Policy Rate bv 25 basis points. MIDF Research said this pro­vided a breather to the market.

But Trump’s victory last month sent global markets into a period of high volatility amid uncertainties over how his presidency would af­fect the US’s current economic poli­cies and global economic dimate.

As a result, the FBM KLCI declined

to below 1,620 points for the first time since June.

On the local currency, Kamarud­din said the research house expect­ed the ringgit to gradually strength­en next year amid better commodity prices as well greater clarity on the direction of US policies.

“We are also banking on the stable economic growth for our main trad­ing partners like China which lends support to our export.”

MIDF is cautiously optimistic about the prospect next year as lack of clarity in US future policies is expected to cause further uncertain­ties to the market.

“Once more details are available, we can gauge tbe extent of which these major events will possibly im­pact Malaysia. Judging by the cur­rent momentum, I am sanguine that I he local market and the domestic economy, will perform better in 2017.” he said.

Bank Islam Malavsia Bhd chief

NST

3 1 DEC 2016economist Mohcl Afzanizam Abdul Rashid said at the current juncture, there were multiple factors at play and all seemed to point to a pes­simistic or rather a cautious view on what might unfold next year.

“At best, we think the market will reassess once the US president-elect takes office on January 20, and how he would implement the next course of action will dictate the market di­rection. So if there is disappoint­m ent in the p o licy d ire c tio n , chances' are, the market might see some corrections,” he said.

Afzanizam said the bank expected investment thesis in Malaysia to be­come more selective, with the theme revolving around industries or com­panies that would benefit from the weak ringgit'.

Naturally, export-oriented indus­tries will be the key beneficiaries given that their revenue streams are in US dollar.

“And some of the players have beefed up their production capacity, allowing them to cater for higher demand going forward like in the case of rubber gloves.

“In addition, we also see a lively activity in the tourism sector with tourists arrivals for the first eight month of 2016 stands at 17.6 million, representing an increase of 3.8 per cent from the same period last year.

“Therefore, this will create de-

The market w/iil reassess once the US president-elect takes office on January 20, and how he would implement the next course of action will dictate the market direction."

Mohcl Afzanizam Abdul RashidC hief economise,B ank Islam M alaysia Bhd

mand for aviation, accommodation, food and beverage and, perhaps, healthcare as the players are also hoping to increase their revenue from medical tourism.”

Afzanizam said the oil and gas sector could also see some respite after a deal to reduce oil production in the first half of next year.

“But bear in mind that the excess capacity is still prevalent in the sec­tor and perhaps, a longer invest­ment horizon is needed when con­sidering investment in. the sector.”

Afzanizam said despite that, the bank hoped the government would reconsider its fiscal consolidation strategy.. “We have seen consumer senti­

ment remain weak based oh the Consumer Sentiment Index whereby it continue to hover below 100 points level for nine quarters in a row.”

He added that the fiscal position could range between a deficit of 4,8 per cent "of gross domestic product (GDP) and a surplus of 3.2 per cent of GDP provided that investment ratio was more than 23 per cent of GDP in order to have positive effects on growth.

“We believe that we are in this category and therefore, the govern­ment can afford to slow down its quest to achieve a balanced budget by 2020 as GDP growth is expected to be below potential in the imme­diate terms,” he added.

N8T

3 1 DEC 2016

GDP growth likely to be 4pc next year, says MARC

RUPA DAMQDARAM

KUALA LUMPUR: Malaysian Rating Corporation Bhd (MARC) has pro­jected the economy to grow at 4.0 per cent next year, with domestic demand to continue supporting growth.

Private investment will still pro­vide the m om entum and offset slower growth in private consump­tion due to a weaker job market.

In its economic outlook for 2017, the rating agency said although the jobless rate had climbed to 3.S per cent in the third quarter of this year, it did not foresee a sharp deterioration in consumer spend­ing growth in the near term.

“The lag effect of a weaker job market will likely cause pri­vate consumption to moderate next year w h i l e s t r i n g e n t credit assessm ent will result in weaker loan growth, espe­c i a l l y to h o u s e ­holds,” said chief economist Nor Za- hidi Alias.

The ringgit faces the risk of re­maining weak in the short term, but is unlikely to continue in the medi­um term.

“On balance, we think there is still room for further depreciation in the ringgit against the greenback, al­though the weakness will not likely continue in the medium term.”

With approximately 48 per cent of Malaysian Government Securities (MGS) held by foreign investors at

the end of last month, there is risk if the selloff persists in the short term.

MARC expects foreigners to of­fload about 20 to 25 per cent of their current holdings.

The overnight policy rate (OPR) will likely remain unchanged due to the downward pressure on the ring­git against the US dollar.

"The decision to discourage the use of non-deliverable forward to hedge against the ringgit in the off­shore market suggests that the au­thorities are trying to curb excess volatility in the ringgit that may im­pact onshore rates.

“Even in the ab­sence of downward pressure on the ringgit, we do not think Bank Negara Ma la ys ia would tinker with the OPR too much as there are concerns over an overstretched level of household debt.”

Even if there is a reduction, it will be limited to 25 basis

points only to minimise the ringgit’s volatility.

On the fiscal side, MARC said the targeted budget deficit of 3d per cent of gross domestic product (GDP) this year and 3.0 next year would remain challenging as expenditure cuts will exert additional pressure on head­line GDP growth.

On inflation, MARC expects the consumer price index to climb to 2.5 -3.0 per cent next year on cost pressures due to possible further subsidy rationalisation.

c „ The lag effect ofa weaker job

market wifi likely cause private consumption to moderate nextyear..."

Nor Zahicli AliasC hief economist,M alaysian Rating C orporation Bhd

W O T

3 t DEC 2016

Initiatives support exporters to be global championsKUALA LUMPUR: Malaysia External Trade Development Corporation (MA- TRADE) has always been devoted to accelerating national exports.

The national trade promotion agen­cy's role is even more important as the nation braces through a modest eco­nomic growth.

MATRADE was set up under the In­ternationa! Trade and industry Ministry to promote Malaysia’s export and en­able local companies to carve new fron­tiers in global markets.

"in this regard, we have planned a set of high-impact initiatives to accelerate import. The main aim is to enhance market access in high-value markets and greenfield markets.

"We want to develop local talents to be world-class exporters through var­ious activities," said MATRADE chief executive officer Datuk Dzulkifli Mah­mud in a statement.

The agency provides various services — trade promotion, market intelli­gence, exporters development pro­grammes, trade advisory, business matching — to support Malaysian com­panies sell their products and services overseas.

This year saw MATRADE organising 150 programmes, including those fo­cused on high-value sectors such as electrical and electronics, oil and gas, medical devices, engineering, informa­tion and communications technology, machinery and maintenance, repair and overhaul.

MATRADE aspires to make the coun­try an export-driven nation, which is why it is key for the country to have its Trade Promotion Organisation. The main purpose of this is to ensure all initiatives carried out to prom ote Malaysian products and services world­wide are more focused.

"We function as a link for Malaysian businesses with international buyers, and the business community as a whole {from both government and pri­vate sector)," Dzulkifli added.

MATRADE has designed p ro ­grammes and high-impact initiatives suited for different types of businesses.

For example, the Mid-Tier Companies Development Programme (MTCDP) aims to develop 50 exports companies every year from 2014 until 2020 to become regional and global champi­ons.

Programmes for MTCDPs will em­phasise on companies to be more re­silient and competitive both regionally and internationally.

The Going Export {GoEx) Programme, meanwhile, is targeted at f irs t-tim e ex­porters or existing exporters venturing into new products or new markets.

The programme is to pro­vide customised and compre­hensive assistance-on steps to export such as linkage to ex­pertise. buyers and trade f i­nancing.

The GoEx programme will provide end-to-end export fa ­cilitation through structured planning and technical advi­sory.

Small and m edium enterprises (SMEs) will also benefit from " eTRADE’', a programme under Digital Malaysia and led by MATRADE, which is targeted to help 25,000 SMEs attract global buyers as well as to promote and sell online through the Internet by 2020.

Through this programme, Malaysian SMEs would be able to have an online

presence in international leading e- marketplaces. This increase SMEs mar­ket penetration and internationalise Malaysian branding.

This programme will ben­efit SMEs through trainings on online marketing and e- commerce related topics. Qualifying SMEs will be is­sued a RM 2,500 e-voucher fo r p a rtic ip a tio n in the eTRADE programme.

MATRADE has 46 over­seas offices worldwide that function as an intermediate between Malaysian market and international business­es.

"Our Trade Commission­ers will help Malaysian com­panies identify the market

opportunities and inform them the market's rules and regulations. In gen­eral, we provide consultations for Malaysian exporters to accommodate their export venture overseas," he said.

MATRADE has also helped build awareness and encourage Malaysian companies to leverage on the free trade agreements (FTAs) signed by Malaysia.

In 2014, FTA countries contribut­ed 64.7 per cent o f Malaysia's total exports in 2014 and almost 49 per cent o f exports to FTA partner coun­tries were through preferential ac­cess.

"By coordinating the participation of Malaysian companies in various trade promotional programmes overseas, such as trade missions, specialised marketing missions as well as inter­national trade fairs, local companies will be able to explore business op­portunities in the global market. This, in turn, will help in building the 'Made in Malaysia' brand globally," said Dzulk­ifli.

Today, Malaysia is part o f many bi­lateral and regional FTAs. Bilateral FTAs have been concluded with Japan, Pak­istan, New Zealand, India, Chile, Aus­tralia and Turkey while Asean regional FTA’s have been signed with China, South Korea, Japan, India, Australia, New Zealand and the latest, Turkey.

For more details, visit www.ma- trade.90v.my and for companies keen to e x p o r t , v is i t w w u /.b e y o n d n a - tions.com.my.

MATRADE c h ie f executiveo fficer D a tu kDzulkifliMahmud

EXCHANGE RATE T h * S t , r 3 | QEC ?H 1RBank Negara's best available quotations by commercial bankso f Kuala Lumpur at 5pm on Dec 30, 2016UNITS OF FOREIGN CURRENCY PER UNIT OF MALAYSIANRINGGIT

Buying OD Selling ODUS dollar: 0 .2 2 2 8 0 .2 2 3 0Sterling: 0 .1 8 1 3 0 .1 8 1 5

Singapore dollar 0 .3 2 2 4 0 .3 2 2 6

Y e n 100 : 26.0858 2 6 .1 1 6 6

Euro: 0 .2 1 1 7 0.2120Chinese Renminbi: 1 .5 4 7 9 Ringgit Malaysia per foreign currency

1 .5 4 9 6

OPENING RATES BY MAYBANK ON DEC 30, 2016

SELLING BUYING BUYINGTT/OD TT OD

1 US D o lla r....................... ......... 4.5415 4.4265 4,41651 Australian D o lla r........ . ......... 3.2990 3.1930 3,17701 Brunei D o lla r................ ......... 3,1510 3.0540 3.04601 Canadian Dollar............ ......... 3.3760 3.2780 3.26601 Euro................................ ......... 4.8040 4.6640 4.64401 New Zealand D olla r.............. 3.1860 3.0630 3.04701 Papua N Guinea Kina ............ 1,5370 1.2930 1.27701 Singapore D o lla r......... ......... 3.1505 3.0540 3.04601 Sterling Pound.............. ......... 5.5820 5.4470 5.42701 Swiss Franc................... .........4.4640 4.3520 4.3370100 UAE D irham .............. .....125.4700 118.7100 118.5100100 Bangladesh Taka...... .........5,8390 5.5070 5,3070100 Danish Krone............ .......66.4100 60.9700 60,7700100 Hongkong Dollar...... .......59.4200 56:2300 56.0300100 Indian Rupee............ .........6.8160 6.3800 6.1800100 Indonesian Rupiah.,,,.........0.0351 0.0316 0.0266100 Japanese Yen............ ..........3.9190 3.7900 3.7800100 Norwegian Krone__ .......54.4300 49,9400 49,7400100 Pakistan Rupee........ .........4.4200 4,1400 3.9400100 Philippine Peso......... .........9.3400 8.7800 8.5800100 Qatar Riyal................ ....126.2200 120.0600 119,8600100 Saudi Riyal................. ....122.6400 116,4300 116.2300100 South Africa Rand.... .......34.4300 31.6900 31.4900100 Sri Lanka Rupee....... ........ 3,1300 2,8600 2,6600100 Swedish K rona......... .......51.7700 47.0500 46.85001.00 Thai Baht.................... ...... 13.5400 11.4600 11.0600

Global stocks set for best year since 2013Euro spikes as the USdollar-rally fizzles

Going up: The euro rallied as much as 1.6% before paring its advance to 0.6% and trading at

MOSCOW: Global stocks were set to close a tumultuous year with the biggest gain since 2013, even as European and Japanese equi­ties angled for their first annual decline in five years.

The euro spiked higher as the dollar rally continued to fizzle and commodities advanced in thin end-of-year trading.

The MSCI All-Country World Index was lit­tle changed, though set for 5.7% advance for the year.

Japan’s benchmark Topix index and the Stoxx Europe 600 index were set for the first yearly decline since 2011.

A gauge of the dollar shifted lower after reaching the highest level in more than a decade earlier this week, and raw materials headed for the best week in four.

The year for financial assets started on a sour note from the first day of trading, with the MSCI World gauge tumbling 2% .

China-fueled turmoil sent stock markets from Tokyo to India into bear markets in the first two months of 2016.

Oil reached a 13-year low while the dollar, slid to its weakest level in a year.

The second half of the year surprised many analysts, as financial markets powered past the Brexit shock while Donald Trump’s presidential victory provided an unexpected boost.

“2016 was perhaps one of the biggest roll­er-coasters driven by political events,’’ said Dmitri Petrov, a strategist at Nomura International Pic in London.

"It’s not so much the actual realised vola­tility of asset markets, but volatility of mar­ket view around the global macro and policy outlook that made it exceptional.’’

CurrenciesThe euro rallied as much as 1,6% before

paring its advance to 0.6% and trading at US$1.0554. The yen fell 0.4% to 116.97 per dollar, erasing an earlier advance of 0.4%.

The currency was up more than 20% for the year in August, but has pared that to 2.8%.

The Bloomberg Dollar Spot Index slipped 0.3% after dropping 0.5% Thursday, although it remains up 2.8% for the year.

The pound was on track for a monthly decline versus the dollar, its ninth this year and wrapping up its steepest annual drop since the global financial crisis of 2008, Sterling was on track for a more than 16%

US$1.0554.- ERA

drop against the dollar this year and was the worst performing Group-of-10 currency in 2016 despite the recent stabilisation.

StocksThe Stoxx Europe 600 Index fell 0.3% in a

second day of losses.The gauge is set to end the year with the

first annual loss since 2011, The UK’s FTSE 100 Index is heading for one of the best per­formances among western-European mar­kets in 2016, thanks to a slumping pound that boosted its exporters and a rally in com­modity producers.

The measure fell. 0.3% yesterday, after closing at a record earlier this week. Benchmarks of Italy, Portugal and Denmark are poised to be the biggest losers of the year, down at least 10%.

The MSCI Asia Pacific Index was little changed, up 2,2% for the year, its first annu­al gain since 2013. S&P 500 Index futures rose 0.2%.

The index is up 10% this year.

CommoditiesThe Bloomberg Commodity Index, which

measures returns on raw materials, climbed, 0.2%, putting it on course for a 12% advance. This would be the first increase since 2010. Crude futures were little changed at US$5 3.81 a barrel, after Thursday’s 0.5% decline. Prices are up about 45% this year. Supply cuts from

the Organisation of the petroleum export­ing countries and other producing nations next month are intended to stabilise the market and reduce swelling global invento­ries. Gold’s 0.1% advance to US$1,159 an ounce extended its rally into a fifth day, the longest since Nov 4. The metal is up more than 9% for the year.

BondsThe yield on 10-year Treasury notes was lit­

tle changed at 2.48% after dropping three basis points Thursday. It slid to 2.46% earlier in the week, the lowest since Dec 14. - Bloomberg

The Stir 3 1 DEC 2016

THE RINGGIT CONUNDRUM

jg£v The overwhelming view in | f the market is that it willf probably get worse before it H L

gets better for the ringgit, W f g M IL J peven as recent measures by

Bank Negara cools down speculative attacks on the currency. Analysts have pointed out that Malaysia's relatively low foreign-exchange reserves and

higher-than-average level of foreigner ownership of Government bonds means that the ringgit remains vulnerable to potential outflows. In the meantime,

while the weaker currency makes exports cheaper to foreign buyers, local manufacturers

are beginning to struggle with higher imported input cost. There is also inflation worries, as the price of imported goods, including fruits

and vegetables, goes up.

BACK ABOVE US$50

MONETARY POLICY DIVERGENCE

The US Energy Information Administration estimates that US

and Brent crude oil prices will average US$51 per barrel and US$52 per barrel,

respectively, in 2017.

US$56UP U W DEC 2016

Analysts foresee a diverse picture in 2017 for monetary policy across the globe. The consen­

sus in the market is that the US Federal Reserve will further raise interest rates next year, tightening

its policy at an accelerated pace, as the economy continues to get stronger.

BREAKOUTSTOCKS

US$37JAN 2016 Corporate earnings growth in

2017 may yet be stronger than what was seen this year on a favoura­

ble economic outlook and higher commodity prices. This, according to MIDF Research, increases the probability of the

stock market breaking out from its current lacklus- _ _

tre sideways \performance.

Rest of the world

■* _v.

BANK NEGARA'S TRILEMMA

But elsewhere in the world, central banks inEurope and much of Asia are likely to The central bank policycontinue with their loose monetary options are curtailed by 1policy, as economic growth remains the constraints of the

subdued. impossible trilemma, ^ ^ Bwhich restricts the

policymaker's control to only two of the following three goals:

1) stable exchange rates; 2)independent monetary policy; and 3) free movement of capital. While there is a trade-off between control and

stability versus liberalisation, CIMB Research believes that the central bank will continue to

pursue a policy mix that does not impede long-term trade and investment flows.

Bank Negara can afford one (25-basis-point rate cut in 2017, if

financial conditions are conducive.

ConsumerTRUMP'S WHITE

HOUSE

President-elect Donald Trump plans to spend more on B . . . B

infrastructure and cut j j w A 11 H f taxes to boost the US

economy. If his inflationary policy causes higher US yields

and a stronger US dollar, the outflow from emerging markets could be more

pronounced. But the market's number one worry about Trump is his

anti-trade campaign talk. If imple­mented, that could lead to a

trade war between the US and its major trading partners.

The People’s Bank of China may tighten capital controls at

home to stabilise the yuan. The yuan path in 2017 will be dictated not only by

the prospects of China’s economy, but also by political factors such as its trade relation­

ship with the US.

US$3.99 trillion

CHINA’S FOREX RESERVES

US$3trillion

ELECTION WATCH

Prime Minister Datuk Seri Najib .

Tun Razak A sparked talk of a ■ snap GE in 2017 ■after he told top ®

Umno party delegates in November to prepare for

early polls. A GE, however, isnot due until 2018. Also, 2017 is set to

become a busy election period in Europe. The fear is that the elections in Europe

are increasingly becoming a showdown between the political

establishment and populist opportunists.

VOTE

3& continue to cause wilt

i m m

sicl filnWrT H i'-.1 it *1 »I; 1R* JiMt]* i {tiSalliu

r̂ Tyigiyi Stilti][£J£*i

Jj2ftVilli■ '

r u b b e r o \ n r r on icKUALA LUMPUR " ! C J 10The Malaysian rubber market ended higher on the last trading day of 2016 yesterday supported by an increase in crude oil prices, a dealer said.

It was reported that US oil prices rose in early Asian trade yesterday despite an unexpected rise in crude stocks reported by US Energy Information Administration,

He said the better local market was also tracking the uptrend on the regional futures markets.

‘‘Better demand from car companies in China might lend support to the prices,” he said.

At noon, the Malaysian Rubber Board’s official physical price for tyre-grade Sivtk 20 rose 14 sen each to 871.0 sen and latex-uvbulk gained 2,5 sen to 645.5 sen a kg.

The unofficial closing price at 5pm for tyre-grade SMR 20 improved 3.5 sen to 884.5 sen a kg whde latex-in-bulk added 1.5 sen to 645.0 sen a kg. - BernamaSMR PRICES FROM MRB IN SEN A KILO: DEC 30Offer Price Noon sell Closing sell

Sen/Kg US Cents/Kg Sen/Kg US Cents/KgSMR CV 1016.50 229.90 1018.00 230,25SMR L 977,50 221.10 978,50 221.30SMR 5 383,00 199.70 396.00 202.65SMR GP 880.00 199,05SMR 10 873.00 197.45 886.00 200.40SMR 20 871.00 197.00 884.00 199.95CENTRIFUGED LATEX - LOCAL PRICE (ISO 2004) IN MALAYSIAN 5EN/KG(WET)Offer Price Noon sell Closing sellLatex in bulk 645.50 645.00Note: Effective from Jan 2, 2014, MRB will publish only the sellers'offer price.

FARM GATE LATEX PRICE:Latex CuplumpLow High Low High

. (sen/kg) (sen/kg)Peninsular 700.00 800.00 350.00 382.00Sabah 740.00 740.00 320.00 385,00Sarawak - - 292.00 365.00

US$Low High

Sabah 340.00 410.00Sarawak 310.00 585.00Source: Malaysian Rubber Board

AT AG LAM CECOMMODITIES (DEC 30)

Tin (per tonne)Gold (per gramme)CPO Futures (per tonne) Jan US$ CPO Futures (per tonne)

Rubber (per kg) SMR 20

Latex

DEC 29Nymex Oil Feb (per barrel)

US$20,950

RM161.61

RM3.218

US$717.25 871.00 sen

645.50 sen

US$53.77

+US$150 +RM1,55

+RM22

+14 sen

+2.5 sen

-US$0,29

Back in th e Tbcs"rw U V » r \ H I I l a l 1 C ] j A N 2 0 1 /

black? Not yetTough year ahead for the economy, warn experts.By DANIAL ALBAKRIstar2(althestarxom.rny

THIS year is looking to be just as financially challenging as 201(i was. if not more so.

Malaysians will need to continue keeping dose tabs on their finances in order to weather the tenuous eco­nomic environment,

As global markets continue to slow, especially with the downturn in lihina, Malaysia’s economic prospects as an export-oriented country contin­ue to weaken.

But the situation, while worrying, is not yet disastrous.

At ground level, the outlook for the average Malaysian remains rather testing as the cost of living continues to rise and incomes stagnate.

Federation of Malaysian Consumers Association (Forma) sec­retary-general Datuk Paul Selvnra] believes that "things are going to get a lot tougher'', especially when look­ing at the situation on the global front, with international trade slack­ing.

With less trade being conducted worldwide, he says countries like Malaysia that depend substantially on trade will export less and find it more difficult to draw investments to their industries,

"This of course will bring lower economic growth to many countries and will create an issue of opportuni­ties for first-rime job seekers,”Selvaraj says.

He adds that employees are seeing their promotions and increments stagnating as well.

“So on the income side, we see many challenges ... (and with} the cost of living also going up, this means a tougher time for consum­ers.’’ he says.

However, when looking at tite big picture, Malaysia's outlook does not appear overwhelmingly dire.

“For 2017, we are expecting a high­er gross domestic product (GDP) growth of 4.4% compared with 2016's estimate of 4 1%. Tl\is falls within die Government's estimate of 4% to S%,” says Manokaran Mottain, chief econ­omist at Alliance Bank Malaysia Bhd.

However, he warns there are still headwinds to the country's GDP growth.

This is mainly due to muted exter­nal demand weighing down Malaysia's trade sector and trade bal­ance. as well as bearish consumer sentiments.

"Given subdued external trade.GDP growth moving forward will depend on strong domestic demand." says Manokaran.

He adds that the Government's pol­icies in Budget 2017 suggest it is still committed to fiscal consolidation by targeting this year’s fiscal deficit to remain at .1% of GDP and debt levels at below 55% of GDP.

With a higher totai fiscal deficit expected for 2017, however, Manokaran says that GDP growth would need to come in at 4.6% to the meet this target.

That's 0.2 points higher than the expected growth.

Manokaran acids that Malaysia's trade balance is expected to remain at a surplus.

"Since 2012, Malaysia’s exports-to- imports ratio 1ms been sustained at

around 1:13. which provides a good buffer against slipping into a trade deficit," says Manokaran.

He adds that the Government expects the surplus to be smaller at RM8ft,3bil this year compared with 201fi’s estimate of RM91.4bll.

And even for the average Maiaysian consumer, it is not all doom and gloom.

The Goods and Services Tax (GST) is slated to remain at 6%, allaying fears that the Government may increase it in an attempt to cover the revenue shortfall in the oil and gas industry in 2016 due to the drop in oil prices.

Private consumption growth in the third quarter of 2016 rebounded to 6,1% from a low 4.1% in the same time period in 2015, showing signs of a recovery following the implementa­tion of the GST,

“1 think the impact of GST has more or less stabilised. People have accepted it and it has been embedded into many of the products sold," says Fomca’s Selvaraj.

It is the other factors that will sig­nificantly impact prices, such as the recent slump of the ringgit following Donald Trump's victory in the US presidential election.

“A fall in the ringgit means a major increase in the cost of imports. Since a big part of our food is imported, this means more expensive food,” he says.

Selvaraj also commends the Government’s resolution to increase the amount of affordable housing as stipulated in Budget 2017.

“Definitely, the Government's involvement in directly increasing affordable housing is a very positive , step forward.” he says, though he adds that the Government should also regulate private developers' housing prices.

Most of these private developments are only targeting high-income groups and not those in the middle income segment, he adds.

In terms of what average Malaysians could do to get through the next year more easily, Selvaraj suggests that they educated them­selves on how to properly manage their finances.

"We still have a lot of young work­ers who buy a car despite the fact that they are not able to afford one. Or they misuse their credit cards, which brings a lot of financial stress later.

“So we need to focus on consumer education and financial education to empower consumers to better man­age their finances,” Selvaraj says.

On this end. he says that Malaysians cannot solely rely on 1 Malaysia People’s Aid (BRIM) to help them overcome their financial obstacles.

"As a one-off payment, BRIM may help people at a certain time, blit it is not comprehensive. It is not helpful in the long term,” he says.

Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan is somewhat more upbeat about Malaysia’s eco­nomic prospects, saying that some analysts believe Malaysia is "already at the bottom of the barrel" and there is “no other way but up".

“However, in view of the current difficult economic situation, the job

" mmmu' r i ~i r i ~|

Rate worry; With the ringgit's fall against the US dollar, impart costs will rise and that means more expensive food. — Photos: Filepics

market may still be quite soft.” he says.

“With the rising costs of doing busi­ness arising from the new minimum wages rates, the increased Socso (Social Security Organisation) thresh­old clause, and the volatile currency rate, the ability of employers to cre­ate new jobs - especially mid-level jobs - will be very much restricted," says Shamsuddin.

He explains that employers, mainly small and medium enterprises, are struggling to implement the mini­mum wage.

The recent hike hum the Minimum Wage Order 2016 in July last year has also compounded the issue.

“The minimum wage policy mainly benefits the more than 2.1 million legal foreign workers in the country,” he argues.

These would be mainly foreign workers in low-skill occupations that make up 75% of non-Malaysian work­ers employed here.

Shamsuddin also expects Malaysian firms to continue facing skill shortages in the labour market, saying that the country is short of people with vocational and technical skills.

“At least S0% of future jobs are expected to be skills-based. Without an adequate number of workers who are trained in this area, employers will continue to face difficulties," he says.

"The world is undergoing its fourth industrial revolution and it is expect­ed that at least half of existing jobs today will be obsolete within the next two decades, while new jobs that may not yet exist today will be created,” he says, adding that tire Government needs to be proactive in charting the future of the country's industries,

"If Malaysia doesn't urgently act now, we will be left behind,’’ he says.

Manokaran Mottain: 'For 2017, we are expecting n higher gross domestic product growtl ... compared wi 2016’s estimat

'OUR ECONOMIC PLAN IS WORKIN

Prime Minister Da Ink Seri Nq/ib Kazak taking the M PT after launching Phase One of the MPTSungai Buhh-Kajang Line from Sungai lluloh to Seniantan recently. PIC RV 5 AIRIEN MAF1S

PM says policies, resilience helped nation through turbulent times

FAREZZA HANUM RASHID KUALA LUMPURnFWS@nst.cnm.my________

DESPITE, a period of great uncertainty and change across the world last year, the Malaysian government has remained steadfast in its com­

mitment to build a safer, more pros­perous and more equitable society, said Prime Minister Datuk Seri Najib Rnxak.

In his New Year message yester­day. Najib said the government was successful in keeping the budget delicit, inflation and unemployment low.

“The resilience we have been building in our economy has seen us

< through times of global turbulence. Our economic plan is working.

“Our estimated growth rate of 4.5 per cent to 4.5 per cent for this year is one that developed countries in Eu tripe and North America can only dream of." he said in a statement published on his website, www.nn jibrazak.com.

This growth, said Najib. was re­ported by the International Mone­tary Fund (IMF), which concluded that the Malaysian economy contin­ued to perIbriii well despite head­winds.

Me said IMF had praised (lie gov­ernment for implementing policies of diversification, exchange rale flex­ibility and deepened financial mar­kets. reforms for female labour participation, improvement of edu­

cation quality, productivity enhance meat, infrastructure investment, and promoting research and develop me nr.

Independent assessments such as these, added Najib. were conducted bv the world's top experts and re­flected the true picture ol'Malnysia.

“(They are) contrary to the smear campaigns of those who have been trying to sabotage the country's economy for their selfish political ob­jectives.

“ I urge Malaysians not to Tail for lies. Fake news and the proliferation of false stories have become a world wide phenomenon, and are a grave problem in our country as well," he said.

Although the fMF report and gross domestic product growth figures

m ig h t seem rem o te to m any Malaysians, Najib assured the public that the government was committed to casing die burden of those who struggled to afford a decent life for their families.

“This is why in the 2017 Budget, We focused on the needs of the Bottom 40 and Middle 40 groups, and an­nounced measures t o ensure that no one is left behind, from new afford­able housing, to tax relief, and nu­tritional food packages for hundreds of thousands of school children.

“Our efforts to improve the well- being of Malaysians are underlined by a commitment to good gover­nance. I thank those in our civil ser­vice for the work they have done and continue to do to improve efficiency, and ensure (hat government alloca­

tions are used in the most mean­ingful manner."

Najib, who is also finance minister, added that the government's large- scale infrastructure projects would help the country achieve sustainable growth that could be shared equi­tably iti the long run.

1 lc said the launch of the Mass Rapid Transit and the third phase or the Light Rail Transit, as well as pro­jects. such as Rapid Pengcrang, Ban­dar Malaysia. Tun Rnzak Exchange, the Pan-Bbrneo Highway and the Kuala Lumpur-Singapore 1 ligh Speed Rail, would create job opportunities and stimulate local economies.

“The Pan Borneo Highway, for hi­st ah ce. w ill noL on ly connect Serudong in Sabah to Scmnnlnn in Sarawak, it will also help re energise

towns along the way.“ 1 am determined to see this pro­

ject through as 1 know the number of communities, many of whom i have visited, that will benefit from it."

He said Malaysia last year had con­tinued to speak out against extrem­ism and radicalisation.

The government, said Najib, had successfully requested a gathering of Asean foreign ministers to discuss possible solutions to (lie Rohingya conflict in Myanmar.

l ie said Malaysia remained com rnitted to supporting the quest for peace in the Middle East when it adopted a resolution against illegal settlements i;n Palestinian territories by the United Nations Security Coun­cil.

On the home front, he said, the police and armed services had suc­cessfully prevented attacks by the Islamic Slate (!S) terror group after Malaysia suffered its first iS-tinkcd attack in June.

"I would like to thank oui* police and armed forces lor their efforts in assuring Malaysians that the govern­ment will always be vigilant.

“We will always prioritise the se­curity and welfare of the rakyat."

In his message, Najib expressed his gratitude to the 14th Yang di- Pcrtuan Agong. Tuanku Abdul Hal­im Mu’ndzam Shah, for his service to the country and welcomed Sultan Muhammad V as the 15th Yang cli- Pertuan Agong.

l ie also lauded the spirit of unity shown by Malaysians through the successes of the country's athletes in the. Rio de Janeiro Olympic and Par Olympic Games.

“ i took pride in the way Malaysians came together to support the national team. It was a reflection o fl Malaysia.

“1 ask Malaysians to be united in this spirit, and i wish you a happy, sale and prosperous New Year.”

Economic uncertainty set to dominate 2017 J4N m

Plain speaking YAP LEIUG KUEN

starbiz@thestar.corn.my

AGAINST the prospects for the ringgit, would the country’s econom ic growth hold up this

.year, or potentially slip to below 4%?Views range from positive to cautious, “If

crude palm oil prices still rise, then the gross domestic product (GDP) growth may sur­prise on the upside, m eaning a growth rate of 4,5% is possible," said Pong Teng Siew, head of research, InterPacific Securities.

“With US growth prospects and recovery of US consumption, along with President­elect Donald Trum p’s infrastructure spend­ing, we look forward to seeing growth in our exports.

“Together with continued domestic spend­ing, we hope to achieve an economic growth of 45% ,” said Danny Wong, CEO, Areca Capital.

There are external and domestic head­winds that can derail our growth prospects,

“Externally, Trum pnom ics, higher US interest rates and a stronger US dollar will likely define this year, which, will manifest in financial and exchange rate volatility.

“On the domestic front, households and. businesses will have to endure adjustments induced by the weak ringgit, continued high cost of living and cost of doing business

amidst cautious sentim ent,” said Lee Heng Guie, executive director, Socio Economic Research Center.

Lee puts chances of economic growth slip­ping to 4% at about 30%.

"Amidst cautious sentiment, consumers are expected to spend in a discretionary manner, supported by moderate income growth and higher cash handouts for the targeted household groups.

“The ongoing implementation of public infrastructure and transportation projects should help to support investment.

“However, private investment is expected to grow unevenly due to a cautious invest­ment approach on worries over the volatili­ty of the ringgit and trying economic condi­tions,” said Lee.

The expectation is for real GDP growth by 4.3%, almost the same rate of growth that was estimated for 2016.

“After two years of slowing economic growth, the local economy is in for another challenging year in 2017.

“Faced with uneven export growth, sus­taining the strength of domestic demand, especially private consumption and invest­ment, is vital to deliver the government’s growth target of 45% for 2017,” said Lee.

The International Energy Agency (IEA) has brought forward the dateline for the easing of the crude oil supply glut to the middle of the year.

How does this improve the prospects for oil price and what could derail this potential uptrend?

“If all agreed producers adhere to the deal to cut production, oil price may see support.

“US shale production may return quickly if oil price trends above US$70 per barrel,” said Wong. “Shale oil technology is improv­ing by leaps and bounds.

The latest technology indicates that they can break even at US$27 per barrel,” said Pong.

No doubt there could be a pickup in shale oil production, but shale oil production will likely resum e strongly if its producers believe that oil price increases can sustain long enough to make it worthwhile for them to drill again, noted Nor Zahidi Alias, chief economist, Malaysian Rating Corporation.

“Since it will take time for them to arrive at that conclusion, I believe that there is some room left for further increases in crude oil prices beyond US$55 per barrel,” said Zahidi.

From a historical perspective, Brent crude oil prices have remained too low for too long, noted Zahidi.

"Prices are still currently lower than their two standard deviations below the long his­torical mean.

Although some do not believe that prices will eventually revert to their long term mean, Brent prices may even rebound to somewhere betw een one and two standard deviations below their mean (US$5560 per barrel).

Standard deviation is a measure of the dispersion of a set of data frbm its mean.

“Despite the warning on waning demand

in recent years, crude oil remains an impor­tant global commodity,” said Zahidi.

“With a combined production cut of about 1.8 million barrels per day (bpd), the ELA’s forecast of an elimination of excess supply by the first half of the year may become a reality.

"The fact that Saudi Arabia hinted it may even cut production to more than agreed, to below 10 million barrels per day, suggests its determination to ensure that the deal works this tim e,” noted Zahidi.

The Organisation of Petroleum Exporting Countries (Opec) had agreed to slash output by 1.2 million bpd per day from yesterday, with top exporter Saudi Arabia cutting as much as 486,000 bpd, and indicating that Riyadh may cut even deeper, if necessary.

Producers from outside the 13-country group had also agreed to reduce output by558.000 bpd, short of the initial target of600.000 bpd but still the largest contribution by non-OPEC ever, according to a B ioom berg report. Underpinned by moderate global demand amidst adjustments in supply, oil prices are expected to average between US$5560 per barrel, said Lee, adding that further strengthening of the US dollar on expectations of US interest rate hikes could put pressure on oil prices.

Among other factors, Thomas Yong, CEO of Fortress Capital, sees full compliance on the production cut as unlikely.

Columnist Yap Leng Kuen sees danger in manip­ulating prices.

Pepper market turns hot again nCommodity's price on the rise as global supply tightensBy JACK WONG starbiz@thestar.com, my

KUCHING: A leading pepper exporter, who was bearish about the market due to plunging prices two months ago, has now turned bull­ish because of unexpected positive develop­ments brought about by declining supplies and inclement weather.

Nguong Aik (Kuching) Sdn Bhd director William SC Yii said the latest developments have resulted in a complete change in the market scenario to bullish from bearish mode, resulting in the recovery of global pep­per prices.

He said tire global supply has become limit­ed as Indonesia, the world’s second largest pepper producer, had sold its entire new harvests.

Indonesia is estimated to have harvested between 28,000 tonnes to 30,000 tonnes, which were significantly higher titan the pro­duction in 201.5.

According to International Pepper Community (IPC) weekly reports .Indonesia's black and white pepper prices have increased by some 10% in the past one month or so.

By mid-December.the report said the mar­ket had firmed up further as prices in most producing countries continued, with their uptrend, likely due to stocks in producing countries had limited.Towards the year-end holidays, the market slowed down with limit­ed trading activities.

In Brazil.the IPC said the output of recent harvest was not as good as estimated earlier.

“From India, it was reported that the har­vest is delayed due to unfavourable weather condition and that output of current harvest would be lower than earlier estimation," added IPC.

Yii said Vietnam, the world's No. 1 produc­er and exporter, was hit by severe storms and heavy rains in the past month or so, andtthe adverse weather had slowed down internal logistic in transporting pepper to warehous­es. Also pepper shipments scheduled for December have to be delayed to this month or next.

“Vietnam's new crop which normally comes in February may delay to end-March

Spicy commodity: According to International Pepper Community weekly reports, Indonesia's black and white pepper prices have increased by some 10% in the past one month or so.

due to the Chinese New Year celebrations (end-January to February),” he told StarJJiz.

Vietnam, which contributes more than 30% of global production, was reported to have raised exports by 31,5% to nearly 145,000 tonnes worth US$1.2bil in the first nine months of last year against the January- September 2015 period.

Yii said unexpectedly, there was a bigger demand for the spice from China in December because winter had come earlier.

As all these factors had influenced price trend,he said global prices for both white and black pepper had improved by about US$600 per tonne from recent lows.

For normal FAQ, global white pepper cur­rently fetches around US$10,000 per tonne while it is between US$6,900 and US$7,000 per tonne for black pepper.

Likewise, he said domestic prices had recovered from their November lows - RM28,500 per tonne for Kuching Grade 1

white pepper and RM17.000 per tonne for black pepper. Last Friday, the white and black pepper rebounded to RM30.000 and RM18,500 per tonne respectively based on Malaysian Pepper Board’s (MPB) published rates.

"Exporters,especially those on short cover- ing,are paying much higher than the MPB’s published prices to get supply as this is off harvest season. For the white,they have been paying up to between RM32.000 and RM33,000 per tonne and up to RM22,000 per tonne,” said Yii.

According to trim, local pepper exporters normally sell forward by three to six months.

In 2016,domestic pepper market was vola­tile. The year started with Kuching Grade 1 white and black pepper staying at all-time high of RM50,000 per tonne and RM30,000 per tonne respectively.

The record prices were maintained for nearly six months before correction for the six-year bull run set in .The price drop was especially drastic in November.

Year-on-year, domestic white pepper price slumped by RM20,000 per tonne or 40% in 2016 while the black by RM11,500 per tonne or about 38%.

The run up in prices started in 2009 when domestic white and black pepper were hover­ing around RM11,300 per tonne and RM6,500 per tonne respectively.

“I see bullish market in the first quarter this year (2017).Global white pepper is expected to trade between US$9,600 and US$10,600 per tonne (current about US$10,000 per tonne) and black pepper between US$6,500 and US$7,500 per tonne (US$6,900-US$7,000 per tonne),” said Yii.. He said for the past decade,global pepper demand had exceeded supply.

According to IPC 2016’s projection, global consumption for the year is 463,000 tonnes against production of 414,000 tonnes, result­ing in a supply deficit of 49,000 tonnes.

Nguong Aik,which has been in fire pepper trade business for about 30 years, exported more than 2,000 tonnes of pepper last year to countries in the Middle East, Europe, South Korea, Japan, Singapore and Peninsula Malaysia.

THE EDGE2 JAN 2017

Furniture stocks to return to the sweet spotBY TAN SIEW MUNG

Most furniture stocks have remained in the doldrums in the past year. However, the US economy is now on the path to recovery,which bodes well for Malaysia's furniture makers.

In December 2016, Poh Huat Resources Holdings Bird announced an im­

pressive set of earnings that beat expectations. The Johor-based furniture maker posted a re­cord-high revenue of RM535.22 million for the full year ended Oct 31,2016 (FY2016)—17.9% high­er than theyear before.The growth was thanks to sustained demand for the group’s products from the US and Canada, it says.

Although the stock rebounded to an ll-month high of RM1.76 on Dec 27 following the announcement of the stellar results, it had fallen 16% year to date.

Indeed,among the furniture counters, more than two-thirds fell from their peaks in the beginning of 2016, Latitude Tree Holdings Bhd was the biggest loser, falling 34%. It was fol­lowed by Federal Furniture Holdings (M ) Bhd and SHH Resources Holdings Bhd, which fell 21% and 18% respectively.The few exceptions were Sern Kou Resources Bhd, which gained 70%, Lii Hen Industries Bhd (23% higher) and Jaycorp Bhd (up 18%).

However, the tide is likely to turn. Fund managers and analysts say the US furniture market is expected to improve in 2017. Coupled with the weaker ringgit against the US dollar, these catalysts may bring furniture counters back in favour.

"Although there are catalysts,furniture stocks have not yet recovered — most of them are still laggards,” KAF Investment Funds Bhd chief in­vestment officer Gan Kong Yik tells The Edge.

He opines that a stronger ringgit against the US dollar at the start of 2016 may have caused investors to shun ex port-oriented counters, including furniture players, “There was selling pressure in export players. Investors had an­ticipated the ringgit to continue to strengthen against the US dollar, but it didn’t happen.”

Gan does not foresee the ringgit strengthen­ing much in the near term.

The US dollar rose 16.06% against the ring­git last Thursday — at 4.4B50 to the greenback — from the year’s low of 3.87 in April. Most of the products of furniture players are priced in US dollars.

in addition to the potential foreign exchange gains, these companies may start to see some exciting revenue growth as the US economy gains momentum.

Apart from the upward trend in US housing starts, economic policies that w ill be imple­mented by US President-elect Donald Trump are expected to benefit the country’s economy in the coming years.They include the massive rebuilding of infrastructure, tax cuts and the creation of jobs.

"The industry outlook is positive — local export should benefit from the recovery o f the US economy. I see more upside than downside

The US is seeing an upward trend In housing starts, which could benefit Malaysia's furniture makers

Latitude Tree Holdings1000 W W - ™ ™

■ Dec294.90

for furniture makers now, and they are in a sweet spot,” TA Securities analyst Ooi Beng Hooi tells The Edge,

According to the US Department of Com­merce, housing starts in the country surged 25.5% to a seasonally adjusted annual rate (SAAR) o f 1.32 million units in October 20IS — the highest level since August 2007. However, they unexpectedly fell 18.7% the following month to an SAAR of 1.09 million units.

Nevertheless, this is not a concern for Ooi. Based on the six-mo nth and one-year trends,

new housing starts in the US remain positive, he points out.

Gan concurs, saying furniture makers' rev­enue will be better in 2017 as Americans may spend more on furniture.This is because with more job creation, disposable income w ill in turn increase.

Both Gan and Ooi are unfazed by the new US president's potential protectionist meas­ures. Gan says any protectionist measure, if implemented, w ill only affect low-priced Chi­nese products. To him, Malaysia’s furnitme

Furniture stocks' performanceSTOCK PRICE/

EARNINGS RATIO (TIMES)

DIVIDEND YIELDm

RETURN ON EQUITY (*/.)

NET MARGIN (%) NET GEARINGm

■ SHARE PRICE (DEC 29,2016)

(RM)

YEAR-TO-DATE GROWTH (%)

Latitude Tree Holdings Bhd 7.28 2.45 14,56 8.66 net cash 4.90 -34.1

SYF Resources Bhd 8.09 1.90 15.32 8.06 35.83 0,53 -17.46Poh Huat Resources Holdings Bhd 7.89 4.63 22,24 8.79 net cash 1.71 -15.61I II Hen Industries Bhd 7.89 6,92 32.62 11.95 net cash 3.19 23.21Eurospan Holdings Bhd 24,92 0.00 2.40 2.24 net cash 0.64 -1172Jaycorp Bhd 8.73 7.41 15.62 7.37 net cash 1.34 17.61Sern Kou Resources Bhd NA NA -0 .09 -0 .05 47.23 1.08 70.08SHH Resources Holdings Bhd 8.95 6.13 10.88 8.79 net cash 1.63 -18.48Homeritz Corp Shd 10.01 4.81 26.22 17.79 net cash 0,95 -14.09SWS Capital Bhd 38.88 0.90 5.73 2,77 3.77 1.12 -11,81Federal Furniture Holdings (M) Bhd 10.85 1.42 12,68 4.90 5.46 0,66 -21.43

players may benefit by filling the gap left by these products.

Ooi points out that domestic furniture pro­duction in the US is relatively small compared with industry demand. Therefore, the US gov­ernment still needs to rely on foreign furniture makers, including those from Malaysia.

Furniture makers w ith a strong balance sheet will be more attractive to investors.Thus, Poh Huat remains analysts’ top pick in the in­dustry. Other potential plays include Lii Hen.

“Poh Huat looks good from every angle (rev­enue growth, cash position,valuation,dividend yield and so on). Lii Hen also looks cheap and continues to pay dividend. Its valuation and yield also meet investors’ criteria,” says Gan.

A quick glance at the furniture players re­veals that Lii Hen’s return on equity (ROE) is the highest at 33%. It is followed by Homeritz Corp Bhd and Poh Huat,which have an ROE of 26% and 22% respectively.

Lii Hen's revenue grew 13.26% year on year to RM454.95 million in the nine months ended Sept 30, 2016, w h ile its net profit surged 39.8% y-o-y to RM54.32 m illion . Under­pinned by its record-high revenue, Poh Huat's FY2016 earnings also expanded 20% y-o-y to RM47.06 million.

Most furniture companies are in a net cash position. For instance, Poh Huat’s net cash Stood at RM42.67 million as at Oct 31, 2016, while Lii Hen’s was at RM82.95 million as at Sept 30 the same year.

Both counters are about eight times their res­pective price-earnings ratios (PER) As for dividend yield, Lii Hen offers 6.92% and Poh Huat, 4.63%.

Gan and Ooi opine that investors prefer coun­ters that pay dividend on a quarterly basis,espe­cially when die market is tough.

It is worth noting that Latitude has one of the lowest PERs of about 7.28 times. However, its dividend yield (2.46%) is less attractive than Lii Hen’s and Poh Huat’s.

Homeritz also looks attractive based on its financial data. Although its PER is higher than its peers' (10.1 times), it has the best margin, which is 17.79%. The counter also offers a divi­dend yield of 4.81%.

Poh Huat's strong earnings momentum in the fourth quarter of 2016 w ill likely continue in the first quarter of 2017 as the US econo­my improves, say financial controller Lee Ing Tiong.and Hoh Ming Fatt from the company's strategy and corporate services department.

The management tells The Edge that the company saw its orders increase to US$9 mil­lion between August and December 2016, from ' US$7 million theyear before.More than 80% of its turnover comes from North America.

As the management had spent RM18 million to increase Poh Huat's capacity in its Vietnamese plant last year, it expects capital expenditure inFY2017 to normalise to RMS million, which willbe mainly for production upgrading.

The facility, which was damaged by a fire, saw its production normalise in the last quarter of 2016. The full recovery of the Vietnamese plant will be reflected in FY20i7’s earnings.

The management also expects Poh Huat's overall utilisation rate to increase by about 10% in FY2017, from 75% currently, as the US market recovers.

The group is aiming for a 1% improvement in its profit before tax margin in FY2017, from 10.27% at present.lt expects to achieve this by exploring products that offer better margins.

As for its newA$4,25 million (RM13 million) warehouse in Australia, Poh Huat only expects meaningful contribution in one to two years’ time.

The group recently completed the acquisition of the warehouse and is in the midst of shipping products there. Operation is expected to start in the middle of 2017, and the group will work with local partners to market their products.

To conserve cash, the management says it has no plans to adopt a dividend policy. How­ever, it is still targeting to distribute 40% of Poh Huat’s net profit as dividend in FY2017. B

T H E E D G E

2 JAN 2017Ringgit stabilises but closes year at record lowBY BEN SHANE UM

Bank Negara Malaysia’s efforts over the past few weeks have certainly helped to stabilise the ringgit by reducing volatility.

Exporters have been asked to convert the bulk o f their export

proceeds back to the local currency, w h ile speculative activity in the offshore non-de- liverable forwards (NDF) market has been curbed. On top o f that, Bank Negara is also setting up a fram ework w ith the central banks o f Thailand and Indonesia to facilitate settlement o f bilateral trade in local curren­cies, bypassing the need for US dollars as an intermediary currency.

But there is little that the central bank can do about the persisting strength o f the US dollar.As at Dec 30,2016, the ringgit closed at 4.4862 against the dollar, ending the year at an all-time low.

It may not be the best way to end 2016, but the outlook for the ringgit is relatively optimistic. Economists' consensus estimates show that the ringgit w ill end 2017 at 4.33 against the US dollar.

“ I expect the ringgit to strengthen to 4.2 to 4.3 against the US dollar by the enti of the year. And even at those levels, I believe the ringgit w ill still be undervalued," veteran economist Dr Yeah Kim Leng tells T h e E dge.

Yeah is a member of Bank Negara’s Mone­tary Policy Committee and dean of the school of business at Malaysia University of Science and Technology.

" I f we can maintain our current account surplus, and if commodity prices stay at least at the current levels, there will be strong sup­port for the ringgit to strengthen to those levels. [Shouldj commodity — crude oil and crude palm oil especially — prices strength­en further, the ringgit may do even better,” he adds.

As It stands, Brent crude oil prices have recovered 56.56% to a 1.5-year high of US$57.08 a barrel as at Dec 30. In fact, oil prices are back at end-2014 levels. Meanwhile, crude palm oil futures rose 25.4% in 2016 to close at RM3,117 a tonne, a level not seen since 20U.

However, these fundamentals seem to have less bearing on the ringgit. Hence, Bank Negara's measures are focused on addressing demand for the ringgit in the money market.

The most notable is its ruling that compels resident exporters to convert 75% of proceeds back to the local currency (w ith the option to reconvert to meet foreign currency obliga­tions). In December alone, the central bank reported RM2 billion in net trade inflows.

Bank Negara announced, "December data indicated that about 57% o f the proceeds were reconverted".This means about RM860 million of foreign currency was converted to ringgit last month.

But this figure is relatively small com­pared w ith the da ily average volum e of US$9 billion of foreign-exchange transactions in December,based on Bank Negara data.

Nonetheless, the intraday vo la tility of the ringgit decreased by more than half to average 90 points in December, compared with an average o f 228 points in November, notes Bank Negara.

Interestingly, the spread between the on­shore ringgit rate and the offshore NDF rate has stabilised. As at Dec 30, the three-month NDF rate was 4.5074, only 0.02 higher than the onshore rate.

As part o f its continued efforts to reduce dependence on US dollars, Bank Negara has also signed bilateral agreements w ith the Thai and Indonesian central banks to set up a local currency settlement framework.

It signed the agreement w ith Thailand earlier las t year. In mid-December, however, both countries expanded the framework to include Indonesia.

MOHDlZWAN MO l fd> MaZAMITHC ELXlE

Net foreign fund flows■ Net foreign buying {s<Mng j In M abyslan equities (P M bfl)

At face value, increasing the relevance o f regional currencies in trade is a move in the right direction to reduce reliance on US dollars as an intermediary trade currency.

Thai and Indonesian products make up 10.3% o f Malaysia’s total imports, and are

w orth RM70.2 b illion . Ma- Economlsts laysian products exported toexpect the the two countries make upringgit to end 9.1% of its total exports, worth2017 better KM69.63 billion.

In practice, however, it may not be so easy to wean exporters and import­ers from using US dollars.

“The new measures are not likely to have an impact in the near term. Just look at the adoption of the renminbi in trade w ith China — it is growing, but still very Jslow). And the renminbi is a much larger currency [than the baht and rupiah]," explains an RHB economist.

He adds that China has been trying to en­courage the use of the renminbi in bilateral trade for the past three years.

BURSA MALAYS (A, UN Ml

"prelMhRry estimate

Ringgit vs USD NDF spread has narrowed

OLOOMBCAC

US Dollar Index and ringgit vs USD (normalised)115.......................

— Jflnftglt VJ USO’ T !'• • USDoflarM«x•-*- IT-

95 ............ ......................... ........■- June 9 . ' ■ Dec 30

2016 ...2016...-

It is estimated that overall, 60% to 70% of global trade is still transacted in US dollars.

“The trouble is, i f an exporter agrees to settle in rupiah, baht or renminbi, his raw materials may be transacted in US dollars. The mismatch creates even more foreign currency risk,” he explains.

The US dollar is simply too engrained in international supply chains for exporters to change overnight. Nonetheless, eco nomists say Bank Negara’s efforts are timely, even i f they may not bear fruit in the short term.

Against this backdrop, it is interesting to note that the exodus of foreign capital also decelerated in December.

Net foreign selling in the equities mar­ket fe ll in December to RM946.3 m illion, compared with RM1.19 billion a year ago. In contrast, net foreign selling in November was a whopping RM3.92 billion.

The December data for foreign holdings in Malaysian government bonds has not been released yet, but anecdotal evidence suggests that net foreign selling has also decelerat­ed. Foreign holders sold RM19.B9 billion in Malaysian bonds issued by both the corpo­rate and government sectors last November.

In fact, the flow o f foreign money might even be reversed in the coming months.

“Excessive US dollar strength is going to work against growth in the US economy and some people have already begun to realise this. Together w ith rising yields in the US,- it could put a dampener on growth after the first quarter (this] year. Even if President Don­ald Trump undertakes expansionary policies to stimulate growth, those w ill take time," explains the economist.

Yeah adds that the US dollar has overshot its fundamentals and should correct in the coming months.

Last week, the US Dollar Index, which is weighted against a basket of other major cur­rencies, eased 0.82% to 102.17 points, down from a high o f 103.01 points.

Against this backdrop, the yield gap cou­pled w ith the undervalued ringgit w ill make Malaysian assets more attractive, says the RHB economist.

RHB’s house v iew is that the ringgit w ill strengthen to 4.2 against the US dollar.This is based on a forecast GDP growth of 4% for 2017 (compared w ith 4.1% last year), and in­flation of 2.5% (compared w ith 2% last year).-

However, that forecast hinges heavily on expectation that the 14th general election w ill be concluded in the first half o f 2017, explains the economist.

Leading up to the elections, uncertainty w ill increase and spur more volatility in the market, as well as the ringgit. But once that is over and the dust has settled, economists expect the ringgit to stay on course to end the year better. B

fieri ta Hartal

3 JAN

f iF T A H A 7 -5 senV J L - I n l I 2 Januari 2017

Pasaran getah Malaysia di- jangka meningkat lebih

tinggi pada minggu ini berikutan nilai ringgit yang lemah berban- ding dolar AS, yang akan mena- rik rriinat pembeli.

Menurut seorang peniaga, ringgit yang lebih rendah men- jadikan komoditi itu lebih me- narik, seterusnya memperoleh permintaan baharu daripada pembeli., Untuk m inggu yang baru berakhir, urus niaga dijalankan bercampur-campur selepas ter- jejas oleh ketidakstabilan harga komoditi lain seperti minyak mentah dan kacang soya, serta penyusutan ringgit.

Dari Jumaatke Jumaat, harga rasmi Lembaga Getah Malaysia untuk SMR 20 naik sebanyak 7-5 sen kepada RM8.71 sekilogram dan susu getah pukal naik 1.5 sen kepada RM6.455 sekilogram.

Harga penutupan tidak ras­mi pada jam 5 petang bagi SMR 20 meningkat sebanyak 12 sen kepada RM8.84 sekilogram, ma- nakala susu getah pukal me- nambah 0.5 sen kepada RM6.45 sekilogram. BERN A M A

EMPLOYMENT OPPORTUNITIES

NST3 JAN 2017

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3 h - h

But country lags behind many emerging m arkets in term s of productivity, says World Bank report

Cornier Federation of Malaysian Manufacturers president Tan Sri Saw ChooBoon suggests labour laws be made more flexible.

RUPA DAMODARAN KUALA LUMPURimpabancrji@mediapnma.com.my

MALAYSIA has created more employment op­portunities than many emerging markets, yet it

lags behind most of them in terms of productivity, especially since the global financial crisis.

formal worker training level is also lower than the Asean average, while small firms face problems innovating to adapt skills, according to the latest World Bank report analysing pro­ductivity trends in Malaysia.

At a panel discussion after the re­cent launch o f the Malaysia Econom­ic Monitor's “Quest for Produc tivity Growth" report, panelists said there was a mismatch in the pro-* ductivity levels across various sec tors, and between large firms and small firms.

'fhc large presence of foreign workers in the Malaysian workforce has also distorted the overall pic tore.

According to the report, only 19 per cent of Malaysian firms provide formal worker training, slightly- less

than the Ascan average and far be­low the rates of high-income and the Organisation for Economic Cooper­ation and Development economies and China.

Malaysia's productivity level also varies across the different sectors of the economy.

its Information and communica­tion technology, oil and gas, chem­icals, finance, banking and insurance, and the utility sector were compa­rable fo developed countries, said Datuk Yogeesvaran Kumaraguru, deputy director-general (macro) at the Economic Planning Unit.

The sectors which are wanting in terms of productivity are in the retail and wholesale, which form a big por­tion of the economy.

Accelerating annual Total factor Productivity growth to 2,(1 per cent, a target o f the 11th Malaysia Plan, would boost Malaysia's gross domes­tic product (GDP) per capita, but the country would still reach just 40 per cent of the projected GDP per capita of high-income countries by 2050.

Former federation of Malaysian Manufacturers(FMM)president Ian Sri Saw Choo Boon suggested that labour laws be made more flexible to

resolve conflicts, mediation and ar­bitration process while the quality of labour courts needs to be improved too.

“The labour input has increased over the past years, but it is due to foreign labour. The over-depen­

dence on foreign workers is a key issue which must be addressed in the recommendations.”

He pointed out that the financial sector's high ranking in terms o f training for workers was due to the central bank's ruling that two per

cent of the annual budget be set aside for training.

World Bank lead economist Dr Julio E. Revilla said as Malaysia head­ed towards a developed nation sta­tus, firms should learn to “face the market” if they want to improve ef­ficiency levels.

Exporting firms have been doing well and their productivity levels are well above the level of neighbouring countries.

“What’s bringing it down is the smaller firms which are based in the services sector. Efficiency is the best way to improve the productivity level and that can be done if firms are forced to face the market.”

Malaysia Productivity Corp direc­tor-general Datuk Mohd Razali Hus­sain said in the past, training was seen as important to improve the productivity level.

But now “intervention” is impor­tant via productivity tools which have to be used continuously and improved from time to time.

“Another area of opportunity is re sorting to sharing best practices to address the gap between export and non exporting companies, large ver­sus small firms.”

Ringgit expected to remain volatileRinggit perform ance against select currencies in 2016By IZWAN IDRIS 1 ‘J r . 01**

izwan@tbestar.com.nny ^ J/ifvj 2017

PETALING JAYA: A rating agency estimated that as much as a quarter of foreign funds in the bond market would leave the country, if sentiment on local assets were to worsen, heaping pressure on the ringgit.

This put the potential outflow from the bond market at RMSSbii, based on the total foreign ownership of bonds of RM220M1 as at the end of last November.

The report by Malaysian Rating Corp Bhd (MARC), which focused on the country's eco­nomic prospects for 2017, also highlighted the fickle nature of hot money flows and their impact on the real economy.

Foreign investors had pumped in a record amount of money into the Malaysian bond market in 2016, pushing their holdings of ringgit-denominated bonds to an all-time high of RM240bil in October.

But the surprise US presidential election win by Donald Trump in November had reversed the flow. His campaign of boosting spending on more infrastructure projects, reducing taxes and imposing tariffs on imports are causing global investors to lose their appetite for risks.

“The global bond market is expected to bear the brunt of the anticipated policies of Trump and speedy rate hikes by US Federal Reserve,” said economists at MARC in their outlook for 2017.

The sell-off by foreign investors in November bad caused the ringgit's sharp depreciation against the US dollar in the past two months, reversing its earlier gains.

“There is a risk of the ringgit remaining weak if the sell-offs persist in the short term,” MARC said.

The worries were premised on the still higher-than-average foreign holdings in the local bond market compared with neighour- ing countries.

MARC said its bond outflow estimate is premised on the fact that a bigger chunk of foreign holdings in the bond market now comprised “longer-term investors” such as central banks and pension funds.

“Judging from past experience, we do not rule out the possibility of foreigners offload­

ing about 20%-25% of their current holdings, which is less than 50%-70% reduction of their holdings during the previous cycles/’ it said.

Previous episodes of sell-offs in the last two financial crisis in 1998 and 2008 when the level of foreign holdings of Malaysian Government Securities (MGS) was halved in months.

To counter the outflow threat and to shore up the local currency, Bank Negara had made some policy adjustments including making it compuls ary from last December for compa­nies to convert the bulk of their exports pro­ceeds to the ringgit.

The ringgit exchange rate had weakened significantly against the US dollar over the past four years, failing faster than most regional currencies over the same period.

In early 2013, the exchange rate for one US dollar was RM3.10.

Today, it has weakened to RM4.48 and some forex analysts, including those at Nomura, are predicting that the ringgit could fail to around 4.70 against tire greenback, before recovering.

The ringgit exchange rates against a host of

regional currencies had also depreciated in recent years.

This weak outlook for the ringgit means there is slim chance for the Bank Negara to further reduce its overnight policy rate (OPR) in 2017.

Further reduction in the OPR, if it happens in 2017, would only be limited to 25 basis points, MARC said, as the central bank’s mon­etary stance has to be tailored to minimise the volatility of the ringgit.

Notwithstanding external factors, the coun­try’s domestic outlook continues to be chal­lenging.

Recent statistics revealed that it is the first time since 1999 that total revenue in the first nine months of 2016 has declined (-6.4%) while expenditures increased (+2.1%).

Prior to this, MARC said, the drop in reve­nue had always been accompanied by a decline in expenditure.

“Overall, we think that achieving the budget deficit target of 3% of gross domestic product (GDP) in 2017 remains a challenging task, especially when nominal GDP growth is not expected to improve dramatically/' it said.

Sun

3 JAN 2017

'Living wage a must'> ivl ftJC: Workers shouldbe paid enough, not subsist mi borrowecfincome

BY RAJVINDER SINGHnewsdesk@thesundaily,com

IPiTfAUNCI JAVA: Workers in the country are not being paid the right amount to manage the increasing cost o f living, the country's top trade unionist has claimed

Newly-elected M TU C general­secretary J. Solomon (pix) said a large population o f workers are living on borrowed income, adding that last year Bank Negara announced the nation’s household debt was 89.9% o f the gross domestic product.

“I believe it is much higher. W e are also the highest in Asia. The nation cannot take comfort o f the fact that since workers are employed, it is alright for them to be highly in debt.

“A nation in debt.is like a bubble that

can burst at any time,” he told theSun in a recent interview.

He said workers must be paid a living wage, a wage that is high enough to meet a normal standard o f living.

He said a living wage affords the earner and or his family the most basic cost o f living without need for government support or poverty programmes.

‘W ith a living wage, an individual can take pride in work and enjoy the decency o f a life beyond poverty, beyond an endless cycle o f working and sleeping, beyond the ditch o f poverty wages.

“M TU C appreciates the fact that the government has implemented the minimum wage, however, the amount o f RMi.ooo is not sufficient and has not taken into consideration the Goods and Service Tax and the rising cost o f controlled goods,” he said.

He said the National Wages Consultative Council is supposed to review the minimum wage every two years taking into consideration all factors relating to economy, but workers were denied a revision o f the minimum wages for 18 months as the review o f RMi,ooo was only effective on July 1 last year.

Solomon said the minimum wage for Peninsular Malaysia is RMi.ooo and RM 920 for Sabah,

Sarawak and Labuan, which is still inadequate given the rapidly increasing cost o f living.

He added that the minimum wage should be revised to RM i ,5oo and standardised between Sabah, Sarawak and Peninsular Malaysia.

He also added that when the minimum wage is implemented, the salaries o f other workers should also be elevated proportionately as the increase in prices post the minimum wage will affect these groups o f workers.

fieri ta Hartal

3 JAN

f iF T A H A 7 -5 senV J L - I n l I 2 Januari 2017

Pasaran getah Malaysia di- jangka meningkat lebih

tinggi pada minggu ini berikutan nilai ringgit yang lemah berban- ding dolar AS, yang akan mena- rik rriinat pembeli.

Menurut seorang peniaga, ringgit yang lebih rendah men- jadikan komoditi itu lebih me- narik, seterusnya memperoleh permintaan baharu daripada pembeli., Untuk m inggu yang baru berakhir, urus niaga dijalankan bercampur-campur selepas ter- jejas oleh ketidakstabilan harga komoditi lain seperti minyak mentah dan kacang soya, serta penyusutan ringgit.

Dari Jumaatke Jumaat, harga rasmi Lembaga Getah Malaysia untuk SMR 20 naik sebanyak 7-5 sen kepada RM8.71 sekilogram dan susu getah pukal naik 1.5 sen kepada RM6.455 sekilogram.

Harga penutupan tidak ras­mi pada jam 5 petang bagi SMR 20 meningkat sebanyak 12 sen kepada RM8.84 sekilogram, ma- nakala susu getah pukal me- nambah 0.5 sen kepada RM6.45 sekilogram. BERN A M A

Disusun oleh Perpustakaan, UPP

Edaran Terhad

●31hb Dis 2016 - 03hb Jan 2017●

Berita Hariaa

3 1 DEC 2016

GETAH 14 SEN23 Disember

'im fi

asaran getah Malaysia ditutup W lebih tinggi pada hari urus niaga terakhir 2016 selepas disokong oleh kenaikan harga minyak m entah, ka­ta peniaga.

Dilaporkan bahawa harga minyak AS meningkat pada perm ulaan urus niaga Asia pada hari Jum aat walau- pun kenaikan yang tidak dijangkakan dalam simpanan minyak m entah se- perti yang dilaporkan oleh Pentad- biran Maklumat Tenaga AS.

Katanya, pasaran tem patan yang lebih baik ini juga adalah seiring de- ngan corak menaik yang direkodkan oleh niaga hadapan pasaran seran- tau.

‘Teningkatan perm intaan daripada syarikat kereta di China mungkin m em beri sokongan kepada harga,” ka­tanya.

Pada waktu tengah hari, harga fi- zikal rasm i Lembaga Getah Malaysia bagi gred tayar SMR 20 menokok se- banyak 14 sen kepada RM8.710 dan lateks pukal meningkat 2.5 sen kepada RM6.450 sekilogram.

• Harga penutup tidak rasmi bagi gred tayar SMR 20 melonjak sebanyak 3.5 sen kepada RM8.845 sekilogram manakala lateks pukal bertam bah se­banyak 1.5 sen kepada RM6.45 se­kilogram. BERNAMA

Berita H artal

3 1 DEC 2016

catat

c? Perjanjian GPEC.negara bukan OPEC

pengeluaran

K Singa^iira

H arga m inyak berada da­lam landasan untuk m en- catatk an peratus kenai- kan tahunan tertinggi sejak 2009

berikutan peijanjian yang dica- pai antara Pertubuhan Negara Pengeksport Petroleum (OPEC) dan negara bukan OPEC untuk m engurangkan ouput minyak m entah.

Niaga hadapan minyak m entah Amerika Syarikat (AS), West Texas intermediate (WTI) meningkat 23 sen kepada AS$54.O0. Niaga bul an hadapan Mac bagi minyak m entah; Brent pula menokok 31 sen ke­pada AS$57.l6.

Niaga hadapan Brent mening- kat klra-kira 53 peratus tahun ini, manakala niaga hadapan WTI m e­nokok kira-kira 46 peratus.

Kenaikan dalam pasaran mi- nyak tahun irii adalah yang ter- tinggi sejak rali 2009, apabila Brent dan W tt masing4haSing mening­kat 78 peratus dan 71 peratus.

Dalam satu isyarat bahawa pe- ngsluar m em ituhi p ^b th n gan ou­tput, Oman memberitahu beberapa pelan^annya bahawa ia akan me­ngurangkan peruntukan sebanyak lima peratus pada Mac depan.

la bagaimanapun tidak menya-

takan jika pemotongan bekalan akan diteruskan selepas itu .:

Pasaran juga tidak mengendah kan kenaikan luar jangkaan in­ventor iirunyak m entah AS, yang m eningkat 614,000 tong pada m inggu; berakhir 23 Disember 2016, lapor: data yang dikeluarkanoleh Pentadbiran naga

Maklumat Te-

Turun 2.1 juta tongPenganalisis menjahgkakan penm runan 2.1 ju ta toiig minyak m en­tah dalam tem poh itu.

Namun begiui, kenaikan dalam simpanan minyak m entah data EIA itu adalah lebih kecil ber- banding data Institut Petroleum Amerika (API) dikeluarkan Rabu lain yang menunjukkan terdapat pertam bahan 4.2 juta tong sim­panan minyak mentah AS dalam

tempoh sama.Simpanan bahan api petrol su-

sut 1.6 ju ta tong, berbanding jang­kaan penganalisis yang dibuat oleh Reuters yang mengunjurkan kenaikan 113 ju ta tong.

Pasaran dijangka tnemberi tum- puaii terhadap penarikan balik mengejutkian stok produk dan me- ngambil pandangan yang lebih bulis terhadap kontrak W Il, kata peniaga.

Harga minyak akan meningkat sedikit demi sedikit kepada AS$60 satu tong sebelum akhir 2017, la­por pungutan suara Reuters yang dikeluarkan kelmarin.

Kenaikan berikutnya akan di- hadkan oleh nilai dolar yang ku- kuh, pemuliban output minyak AS dan kemungkinan OPEC tidak me- m atuhi peijanjian pemotongan output.

p g f

3 1 DEC 2016

Challenging 2016 but outlook stays bullishCAUTIOUSLY OPTIMISTIC: Analyst says domestic economy to remain growth driver next year

AM IR HISYAM RASID AND FAR AH A D IU A

KUALA LUMPUR btjwnediaprin5a.com.my

TUI! local stock exchange was tipped for li brighter 2016 bin, due to global uncertainties, it

lost steam to end the year more than 50 points, or 3,56 per cent, off the 2015 mark.

However, analysts and economists, rem ain b u llish abo u t Bursa Malaysia’s outlook next year, given the country’s economic resilience.

MIDI-' Amanah investment Rank Bird chief economist Dr Kamarud- din Mohd Nor said Malaysia's do­mestic economy would remain the main driver,

He said private consumption was growing at healthy pace and various infrastructu re projects in the pipeline would inject significant multiplier effect into the domestic economy while, at the same time, creating employment.

"Upward trajectory of commodity prices will also be supportive of Malaysia's economic growth in 2017. Moreover, our external sector is ex­pected to perform better next year.'' Kamaruddin told Business Times yesterday.

This year's highlights have been dominated by Britain's exit from the

European Union (known as Brexit), Donald Trump's surprise win in the United Srates presidential election. China's weakening economy, soft oil prices and other external develop­ments. which have impacted Bursa Malaysia and other global stock

. markets.The F'TSH Bursa Malaysia KLCI

(HIM KLCI) settled at 1,641.73 points yesterday, the Iasi trading day of the year, making it one of the worst per­formers among Asia Pacific’s stock exchanges.

The benchmark index, however, ended 3.80 points higher than Thursday’s dose of 1.637.93.

Yesterday’s close was a far cry from the close of 1,692.51 on De­cember 31 last year. Thu index had also recorded a historical high of L862.SO on April 21 last year.

The first quarter of this year saw the FBM KLCI, which tracks the top 30 companies, stay above the 1,700- point level to close at 1,718 points,

MIDF Research said foreign funds turned net buyer of local equities with a net Inflow of RM4.4 billion in the quarter.

“Inflows for March was ai the highest since April 2013. The ringgir also continued to strengthen against US dollar to close the quarter at RM3.93 despite moderating crude oil prices," it said.

Analysts then were confident of

Donald Trum p's victory in the United States presidential election last month sent global markets, in­cluding Bursa Malaysia, into a period o f high volatility am id uncertainties over how Ins economic policies.

the key index breaching 1,800 points by the end of the year.

The FBM KI.C1. however, dipped below 1,700 points beginning April amid weak investors’ sentiment.

MIDF Research said the prior sen­timent continued as the ringgit weakened to above the RM4 level against the greenback.

A stranger US dollar has sent ring­git to multi-year lows in recent days.

MiDF Research said the People’s Bank of China's continuous attempt to weaken yuan and reports that som e banks in Shanghai had s;opped accepting shares of smaller listed companies as collateral for loans had spooked the Chinese mar­ket, triggering circuit breakers and halting equity trading.

“In addition, escalating tension between .Saudi Arabia and Iran un­derscored geopolitical risks in the Middle Fast, resulting in the FBM KLCI, as with other world's major

MIDF Amanah investment Bank Bhd ch ie f economist Dr K am aruddin Mohd N or says private consumption in Malaysia is still growing at healthy pace.

The local currency is expected to gradually strengthen next y ea r amid better commodity prices ns wdi greater clarity on the direction o f US policies.

markets, succumbing to selling pres­sure during the opening weeks of 2016." it said in a note.

Markets were then spooked after British citizens unexpectedly voted to exit the EU, causing the plunge in tile British pound and the UK bendi- mark index FTSUIOO. which record­ed 11 and nine per cent decline, re­spectively, in the subsequent market day.

The FBM KLCI fell to 1.630 points the following week, in tandem with other markets' indexes.

In response to rising risks from Brexit, Bank Negara Malaysia cut its Overnight Policy Rate bv 25 basis points. MIDF Research said this pro­vided a breather to the market.

But Trump’s victory last month sent global markets into a period of high volatility amid uncertainties over how his presidency would af­fect the US’s current economic poli­cies and global economic dimate.

As a result, the FBM KLCI declined

to below 1,620 points for the first time since June.

On the local currency, Kamarud­din said the research house expect­ed the ringgit to gradually strength­en next year amid better commodity prices as well greater clarity on the direction of US policies.

“We are also banking on the stable economic growth for our main trad­ing partners like China which lends support to our export.”

MIDF is cautiously optimistic about the prospect next year as lack of clarity in US future policies is expected to cause further uncertain­ties to the market.

“Once more details are available, we can gauge tbe extent of which these major events will possibly im­pact Malaysia. Judging by the cur­rent momentum, I am sanguine that I he local market and the domestic economy, will perform better in 2017.” he said.

Bank Islam Malavsia Bhd chief

NST

3 1 DEC 2016economist Mohcl Afzanizam Abdul Rashid said at the current juncture, there were multiple factors at play and all seemed to point to a pes­simistic or rather a cautious view on what might unfold next year.

“At best, we think the market will reassess once the US president-elect takes office on January 20, and how he would implement the next course of action will dictate the market di­rection. So if there is disappoint­m ent in the p o licy d ire c tio n , chances' are, the market might see some corrections,” he said.

Afzanizam said the bank expected investment thesis in Malaysia to be­come more selective, with the theme revolving around industries or com­panies that would benefit from the weak ringgit'.

Naturally, export-oriented indus­tries will be the key beneficiaries given that their revenue streams are in US dollar.

“And some of the players have beefed up their production capacity, allowing them to cater for higher demand going forward like in the case of rubber gloves.

“In addition, we also see a lively activity in the tourism sector with tourists arrivals for the first eight month of 2016 stands at 17.6 million, representing an increase of 3.8 per cent from the same period last year.

“Therefore, this will create de-

The market w/iil reassess once the US president-elect takes office on January 20, and how he would implement the next course of action will dictate the market direction."

Mohcl Afzanizam Abdul RashidC hief economise,B ank Islam M alaysia Bhd

mand for aviation, accommodation, food and beverage and, perhaps, healthcare as the players are also hoping to increase their revenue from medical tourism.”

Afzanizam said the oil and gas sector could also see some respite after a deal to reduce oil production in the first half of next year.

“But bear in mind that the excess capacity is still prevalent in the sec­tor and perhaps, a longer invest­ment horizon is needed when con­sidering investment in. the sector.”

Afzanizam said despite that, the bank hoped the government would reconsider its fiscal consolidation strategy.. “We have seen consumer senti­

ment remain weak based oh the Consumer Sentiment Index whereby it continue to hover below 100 points level for nine quarters in a row.”

He added that the fiscal position could range between a deficit of 4,8 per cent "of gross domestic product (GDP) and a surplus of 3.2 per cent of GDP provided that investment ratio was more than 23 per cent of GDP in order to have positive effects on growth.

“We believe that we are in this category and therefore, the govern­ment can afford to slow down its quest to achieve a balanced budget by 2020 as GDP growth is expected to be below potential in the imme­diate terms,” he added.

N8T

3 1 DEC 2016

GDP growth likely to be 4pc next year, says MARC

RUPA DAMQDARAM

KUALA LUMPUR: Malaysian Rating Corporation Bhd (MARC) has pro­jected the economy to grow at 4.0 per cent next year, with domestic demand to continue supporting growth.

Private investment will still pro­vide the m om entum and offset slower growth in private consump­tion due to a weaker job market.

In its economic outlook for 2017, the rating agency said although the jobless rate had climbed to 3.S per cent in the third quarter of this year, it did not foresee a sharp deterioration in consumer spend­ing growth in the near term.

“The lag effect of a weaker job market will likely cause pri­vate consumption to moderate next year w h i l e s t r i n g e n t credit assessm ent will result in weaker loan growth, espe­c i a l l y to h o u s e ­holds,” said chief economist Nor Za- hidi Alias.

The ringgit faces the risk of re­maining weak in the short term, but is unlikely to continue in the medi­um term.

“On balance, we think there is still room for further depreciation in the ringgit against the greenback, al­though the weakness will not likely continue in the medium term.”

With approximately 48 per cent of Malaysian Government Securities (MGS) held by foreign investors at

the end of last month, there is risk if the selloff persists in the short term.

MARC expects foreigners to of­fload about 20 to 25 per cent of their current holdings.

The overnight policy rate (OPR) will likely remain unchanged due to the downward pressure on the ring­git against the US dollar.

"The decision to discourage the use of non-deliverable forward to hedge against the ringgit in the off­shore market suggests that the au­thorities are trying to curb excess volatility in the ringgit that may im­pact onshore rates.

“Even in the ab­sence of downward pressure on the ringgit, we do not think Bank Negara Ma la ys ia would tinker with the OPR too much as there are concerns over an overstretched level of household debt.”

Even if there is a reduction, it will be limited to 25 basis

points only to minimise the ringgit’s volatility.

On the fiscal side, MARC said the targeted budget deficit of 3d per cent of gross domestic product (GDP) this year and 3.0 next year would remain challenging as expenditure cuts will exert additional pressure on head­line GDP growth.

On inflation, MARC expects the consumer price index to climb to 2.5 -3.0 per cent next year on cost pressures due to possible further subsidy rationalisation.

c „ The lag effect ofa weaker job

market wifi likely cause private consumption to moderate nextyear..."

Nor Zahicli AliasC hief economist,M alaysian Rating C orporation Bhd

W O T

3 t DEC 2016

Initiatives support exporters to be global championsKUALA LUMPUR: Malaysia External Trade Development Corporation (MA- TRADE) has always been devoted to accelerating national exports.

The national trade promotion agen­cy's role is even more important as the nation braces through a modest eco­nomic growth.

MATRADE was set up under the In­ternationa! Trade and industry Ministry to promote Malaysia’s export and en­able local companies to carve new fron­tiers in global markets.

"in this regard, we have planned a set of high-impact initiatives to accelerate import. The main aim is to enhance market access in high-value markets and greenfield markets.

"We want to develop local talents to be world-class exporters through var­ious activities," said MATRADE chief executive officer Datuk Dzulkifli Mah­mud in a statement.

The agency provides various services — trade promotion, market intelli­gence, exporters development pro­grammes, trade advisory, business matching — to support Malaysian com­panies sell their products and services overseas.

This year saw MATRADE organising 150 programmes, including those fo­cused on high-value sectors such as electrical and electronics, oil and gas, medical devices, engineering, informa­tion and communications technology, machinery and maintenance, repair and overhaul.

MATRADE aspires to make the coun­try an export-driven nation, which is why it is key for the country to have its Trade Promotion Organisation. The main purpose of this is to ensure all initiatives carried out to prom ote Malaysian products and services world­wide are more focused.

"We function as a link for Malaysian businesses with international buyers, and the business community as a whole {from both government and pri­vate sector)," Dzulkifli added.

MATRADE has designed p ro ­grammes and high-impact initiatives suited for different types of businesses.

For example, the Mid-Tier Companies Development Programme (MTCDP) aims to develop 50 exports companies every year from 2014 until 2020 to become regional and global champi­ons.

Programmes for MTCDPs will em­phasise on companies to be more re­silient and competitive both regionally and internationally.

The Going Export {GoEx) Programme, meanwhile, is targeted at f irs t-tim e ex­porters or existing exporters venturing into new products or new markets.

The programme is to pro­vide customised and compre­hensive assistance-on steps to export such as linkage to ex­pertise. buyers and trade f i­nancing.

The GoEx programme will provide end-to-end export fa ­cilitation through structured planning and technical advi­sory.

Small and m edium enterprises (SMEs) will also benefit from " eTRADE’', a programme under Digital Malaysia and led by MATRADE, which is targeted to help 25,000 SMEs attract global buyers as well as to promote and sell online through the Internet by 2020.

Through this programme, Malaysian SMEs would be able to have an online

presence in international leading e- marketplaces. This increase SMEs mar­ket penetration and internationalise Malaysian branding.

This programme will ben­efit SMEs through trainings on online marketing and e- commerce related topics. Qualifying SMEs will be is­sued a RM 2,500 e-voucher fo r p a rtic ip a tio n in the eTRADE programme.

MATRADE has 46 over­seas offices worldwide that function as an intermediate between Malaysian market and international business­es.

"Our Trade Commission­ers will help Malaysian com­panies identify the market

opportunities and inform them the market's rules and regulations. In gen­eral, we provide consultations for Malaysian exporters to accommodate their export venture overseas," he said.

MATRADE has also helped build awareness and encourage Malaysian companies to leverage on the free trade agreements (FTAs) signed by Malaysia.

In 2014, FTA countries contribut­ed 64.7 per cent o f Malaysia's total exports in 2014 and almost 49 per cent o f exports to FTA partner coun­tries were through preferential ac­cess.

"By coordinating the participation of Malaysian companies in various trade promotional programmes overseas, such as trade missions, specialised marketing missions as well as inter­national trade fairs, local companies will be able to explore business op­portunities in the global market. This, in turn, will help in building the 'Made in Malaysia' brand globally," said Dzulk­ifli.

Today, Malaysia is part o f many bi­lateral and regional FTAs. Bilateral FTAs have been concluded with Japan, Pak­istan, New Zealand, India, Chile, Aus­tralia and Turkey while Asean regional FTA’s have been signed with China, South Korea, Japan, India, Australia, New Zealand and the latest, Turkey.

For more details, visit www.ma- trade.90v.my and for companies keen to e x p o r t , v is i t w w u /.b e y o n d n a - tions.com.my.

MATRADE c h ie f executiveo fficer D a tu kDzulkifliMahmud

EXCHANGE RATE T h * S t , r 3 | QEC ?H 1RBank Negara's best available quotations by commercial bankso f Kuala Lumpur at 5pm on Dec 30, 2016UNITS OF FOREIGN CURRENCY PER UNIT OF MALAYSIANRINGGIT

Buying OD Selling ODUS dollar: 0 .2 2 2 8 0 .2 2 3 0Sterling: 0 .1 8 1 3 0 .1 8 1 5

Singapore dollar 0 .3 2 2 4 0 .3 2 2 6

Y e n 100 : 26.0858 2 6 .1 1 6 6

Euro: 0 .2 1 1 7 0.2120Chinese Renminbi: 1 .5 4 7 9 Ringgit Malaysia per foreign currency

1 .5 4 9 6

OPENING RATES BY MAYBANK ON DEC 30, 2016

SELLING BUYING BUYINGTT/OD TT OD

1 US D o lla r....................... ......... 4.5415 4.4265 4,41651 Australian D o lla r........ . ......... 3.2990 3.1930 3,17701 Brunei D o lla r................ ......... 3,1510 3.0540 3.04601 Canadian Dollar............ ......... 3.3760 3.2780 3.26601 Euro................................ ......... 4.8040 4.6640 4.64401 New Zealand D olla r.............. 3.1860 3.0630 3.04701 Papua N Guinea Kina ............ 1,5370 1.2930 1.27701 Singapore D o lla r......... ......... 3.1505 3.0540 3.04601 Sterling Pound.............. ......... 5.5820 5.4470 5.42701 Swiss Franc................... .........4.4640 4.3520 4.3370100 UAE D irham .............. .....125.4700 118.7100 118.5100100 Bangladesh Taka...... .........5,8390 5.5070 5,3070100 Danish Krone............ .......66.4100 60.9700 60,7700100 Hongkong Dollar...... .......59.4200 56:2300 56.0300100 Indian Rupee............ .........6.8160 6.3800 6.1800100 Indonesian Rupiah.,,,.........0.0351 0.0316 0.0266100 Japanese Yen............ ..........3.9190 3.7900 3.7800100 Norwegian Krone__ .......54.4300 49,9400 49,7400100 Pakistan Rupee........ .........4.4200 4,1400 3.9400100 Philippine Peso......... .........9.3400 8.7800 8.5800100 Qatar Riyal................ ....126.2200 120.0600 119,8600100 Saudi Riyal................. ....122.6400 116,4300 116.2300100 South Africa Rand.... .......34.4300 31.6900 31.4900100 Sri Lanka Rupee....... ........ 3,1300 2,8600 2,6600100 Swedish K rona......... .......51.7700 47.0500 46.85001.00 Thai Baht.................... ...... 13.5400 11.4600 11.0600

Global stocks set for best year since 2013Euro spikes as the USdollar-rally fizzles

Going up: The euro rallied as much as 1.6% before paring its advance to 0.6% and trading at

MOSCOW: Global stocks were set to close a tumultuous year with the biggest gain since 2013, even as European and Japanese equi­ties angled for their first annual decline in five years.

The euro spiked higher as the dollar rally continued to fizzle and commodities advanced in thin end-of-year trading.

The MSCI All-Country World Index was lit­tle changed, though set for 5.7% advance for the year.

Japan’s benchmark Topix index and the Stoxx Europe 600 index were set for the first yearly decline since 2011.

A gauge of the dollar shifted lower after reaching the highest level in more than a decade earlier this week, and raw materials headed for the best week in four.

The year for financial assets started on a sour note from the first day of trading, with the MSCI World gauge tumbling 2% .

China-fueled turmoil sent stock markets from Tokyo to India into bear markets in the first two months of 2016.

Oil reached a 13-year low while the dollar, slid to its weakest level in a year.

The second half of the year surprised many analysts, as financial markets powered past the Brexit shock while Donald Trump’s presidential victory provided an unexpected boost.

“2016 was perhaps one of the biggest roll­er-coasters driven by political events,’’ said Dmitri Petrov, a strategist at Nomura International Pic in London.

"It’s not so much the actual realised vola­tility of asset markets, but volatility of mar­ket view around the global macro and policy outlook that made it exceptional.’’

CurrenciesThe euro rallied as much as 1,6% before

paring its advance to 0.6% and trading at US$1.0554. The yen fell 0.4% to 116.97 per dollar, erasing an earlier advance of 0.4%.

The currency was up more than 20% for the year in August, but has pared that to 2.8%.

The Bloomberg Dollar Spot Index slipped 0.3% after dropping 0.5% Thursday, although it remains up 2.8% for the year.

The pound was on track for a monthly decline versus the dollar, its ninth this year and wrapping up its steepest annual drop since the global financial crisis of 2008, Sterling was on track for a more than 16%

US$1.0554.- ERA

drop against the dollar this year and was the worst performing Group-of-10 currency in 2016 despite the recent stabilisation.

StocksThe Stoxx Europe 600 Index fell 0.3% in a

second day of losses.The gauge is set to end the year with the

first annual loss since 2011, The UK’s FTSE 100 Index is heading for one of the best per­formances among western-European mar­kets in 2016, thanks to a slumping pound that boosted its exporters and a rally in com­modity producers.

The measure fell. 0.3% yesterday, after closing at a record earlier this week. Benchmarks of Italy, Portugal and Denmark are poised to be the biggest losers of the year, down at least 10%.

The MSCI Asia Pacific Index was little changed, up 2,2% for the year, its first annu­al gain since 2013. S&P 500 Index futures rose 0.2%.

The index is up 10% this year.

CommoditiesThe Bloomberg Commodity Index, which

measures returns on raw materials, climbed, 0.2%, putting it on course for a 12% advance. This would be the first increase since 2010. Crude futures were little changed at US$5 3.81 a barrel, after Thursday’s 0.5% decline. Prices are up about 45% this year. Supply cuts from

the Organisation of the petroleum export­ing countries and other producing nations next month are intended to stabilise the market and reduce swelling global invento­ries. Gold’s 0.1% advance to US$1,159 an ounce extended its rally into a fifth day, the longest since Nov 4. The metal is up more than 9% for the year.

BondsThe yield on 10-year Treasury notes was lit­

tle changed at 2.48% after dropping three basis points Thursday. It slid to 2.46% earlier in the week, the lowest since Dec 14. - Bloomberg

The Stir 3 1 DEC 2016

THE RINGGIT CONUNDRUM

jg£v The overwhelming view in | f the market is that it willf probably get worse before it H L

gets better for the ringgit, W f g M IL J peven as recent measures by

Bank Negara cools down speculative attacks on the currency. Analysts have pointed out that Malaysia's relatively low foreign-exchange reserves and

higher-than-average level of foreigner ownership of Government bonds means that the ringgit remains vulnerable to potential outflows. In the meantime,

while the weaker currency makes exports cheaper to foreign buyers, local manufacturers

are beginning to struggle with higher imported input cost. There is also inflation worries, as the price of imported goods, including fruits

and vegetables, goes up.

BACK ABOVE US$50

MONETARY POLICY DIVERGENCE

The US Energy Information Administration estimates that US

and Brent crude oil prices will average US$51 per barrel and US$52 per barrel,

respectively, in 2017.

US$56UP U W DEC 2016

Analysts foresee a diverse picture in 2017 for monetary policy across the globe. The consen­

sus in the market is that the US Federal Reserve will further raise interest rates next year, tightening

its policy at an accelerated pace, as the economy continues to get stronger.

BREAKOUTSTOCKS

US$37JAN 2016 Corporate earnings growth in

2017 may yet be stronger than what was seen this year on a favoura­

ble economic outlook and higher commodity prices. This, according to MIDF Research, increases the probability of the

stock market breaking out from its current lacklus- _ _

tre sideways \performance.

Rest of the world

■* _v.

BANK NEGARA'S TRILEMMA

But elsewhere in the world, central banks inEurope and much of Asia are likely to The central bank policycontinue with their loose monetary options are curtailed by 1policy, as economic growth remains the constraints of the

subdued. impossible trilemma, ^ ^ Bwhich restricts the

policymaker's control to only two of the following three goals:

1) stable exchange rates; 2)independent monetary policy; and 3) free movement of capital. While there is a trade-off between control and

stability versus liberalisation, CIMB Research believes that the central bank will continue to

pursue a policy mix that does not impede long-term trade and investment flows.

Bank Negara can afford one (25-basis-point rate cut in 2017, if

financial conditions are conducive.

ConsumerTRUMP'S WHITE

HOUSE

President-elect Donald Trump plans to spend more on B . . . B

infrastructure and cut j j w A 11 H f taxes to boost the US

economy. If his inflationary policy causes higher US yields

and a stronger US dollar, the outflow from emerging markets could be more

pronounced. But the market's number one worry about Trump is his

anti-trade campaign talk. If imple­mented, that could lead to a

trade war between the US and its major trading partners.

The People’s Bank of China may tighten capital controls at

home to stabilise the yuan. The yuan path in 2017 will be dictated not only by

the prospects of China’s economy, but also by political factors such as its trade relation­

ship with the US.

US$3.99 trillion

CHINA’S FOREX RESERVES

US$3trillion

ELECTION WATCH

Prime Minister Datuk Seri Najib .

Tun Razak A sparked talk of a ■ snap GE in 2017 ■after he told top ®

Umno party delegates in November to prepare for

early polls. A GE, however, isnot due until 2018. Also, 2017 is set to

become a busy election period in Europe. The fear is that the elections in Europe

are increasingly becoming a showdown between the political

establishment and populist opportunists.

VOTE

3& continue to cause wilt

i m m

sicl filnWrT H i'-.1 it *1 »I; 1R* JiMt]* i {tiSalliu

r̂ Tyigiyi Stilti][£J£*i

Jj2ftVilli■ '

r u b b e r o \ n r r on icKUALA LUMPUR " ! C J 10The Malaysian rubber market ended higher on the last trading day of 2016 yesterday supported by an increase in crude oil prices, a dealer said.

It was reported that US oil prices rose in early Asian trade yesterday despite an unexpected rise in crude stocks reported by US Energy Information Administration,

He said the better local market was also tracking the uptrend on the regional futures markets.

‘‘Better demand from car companies in China might lend support to the prices,” he said.

At noon, the Malaysian Rubber Board’s official physical price for tyre-grade Sivtk 20 rose 14 sen each to 871.0 sen and latex-uvbulk gained 2,5 sen to 645.5 sen a kg.

The unofficial closing price at 5pm for tyre-grade SMR 20 improved 3.5 sen to 884.5 sen a kg whde latex-in-bulk added 1.5 sen to 645.0 sen a kg. - BernamaSMR PRICES FROM MRB IN SEN A KILO: DEC 30Offer Price Noon sell Closing sell

Sen/Kg US Cents/Kg Sen/Kg US Cents/KgSMR CV 1016.50 229.90 1018.00 230,25SMR L 977,50 221.10 978,50 221.30SMR 5 383,00 199.70 396.00 202.65SMR GP 880.00 199,05SMR 10 873.00 197.45 886.00 200.40SMR 20 871.00 197.00 884.00 199.95CENTRIFUGED LATEX - LOCAL PRICE (ISO 2004) IN MALAYSIAN 5EN/KG(WET)Offer Price Noon sell Closing sellLatex in bulk 645.50 645.00Note: Effective from Jan 2, 2014, MRB will publish only the sellers'offer price.

FARM GATE LATEX PRICE:Latex CuplumpLow High Low High

. (sen/kg) (sen/kg)Peninsular 700.00 800.00 350.00 382.00Sabah 740.00 740.00 320.00 385,00Sarawak - - 292.00 365.00

US$Low High

Sabah 340.00 410.00Sarawak 310.00 585.00Source: Malaysian Rubber Board

AT AG LAM CECOMMODITIES (DEC 30)

Tin (per tonne)Gold (per gramme)CPO Futures (per tonne) Jan US$ CPO Futures (per tonne)

Rubber (per kg) SMR 20

Latex

DEC 29Nymex Oil Feb (per barrel)

US$20,950

RM161.61

RM3.218

US$717.25 871.00 sen

645.50 sen

US$53.77

+US$150 +RM1,55

+RM22

+14 sen

+2.5 sen

-US$0,29

Back in th e Tbcs"rw U V » r \ H I I l a l 1 C ] j A N 2 0 1 /

black? Not yetTough year ahead for the economy, warn experts.By DANIAL ALBAKRIstar2(althestarxom.rny

THIS year is looking to be just as financially challenging as 201(i was. if not more so.

Malaysians will need to continue keeping dose tabs on their finances in order to weather the tenuous eco­nomic environment,

As global markets continue to slow, especially with the downturn in lihina, Malaysia’s economic prospects as an export-oriented country contin­ue to weaken.

But the situation, while worrying, is not yet disastrous.

At ground level, the outlook for the average Malaysian remains rather testing as the cost of living continues to rise and incomes stagnate.

Federation of Malaysian Consumers Association (Forma) sec­retary-general Datuk Paul Selvnra] believes that "things are going to get a lot tougher'', especially when look­ing at the situation on the global front, with international trade slack­ing.

With less trade being conducted worldwide, he says countries like Malaysia that depend substantially on trade will export less and find it more difficult to draw investments to their industries,

"This of course will bring lower economic growth to many countries and will create an issue of opportuni­ties for first-rime job seekers,”Selvaraj says.

He adds that employees are seeing their promotions and increments stagnating as well.

“So on the income side, we see many challenges ... (and with} the cost of living also going up, this means a tougher time for consum­ers.’’ he says.

However, when looking at tite big picture, Malaysia's outlook does not appear overwhelmingly dire.

“For 2017, we are expecting a high­er gross domestic product (GDP) growth of 4.4% compared with 2016's estimate of 4 1%. Tl\is falls within die Government's estimate of 4% to S%,” says Manokaran Mottain, chief econ­omist at Alliance Bank Malaysia Bhd.

However, he warns there are still headwinds to the country's GDP growth.

This is mainly due to muted exter­nal demand weighing down Malaysia's trade sector and trade bal­ance. as well as bearish consumer sentiments.

"Given subdued external trade.GDP growth moving forward will depend on strong domestic demand." says Manokaran.

He adds that the Government's pol­icies in Budget 2017 suggest it is still committed to fiscal consolidation by targeting this year’s fiscal deficit to remain at .1% of GDP and debt levels at below 55% of GDP.

With a higher totai fiscal deficit expected for 2017, however, Manokaran says that GDP growth would need to come in at 4.6% to the meet this target.

That's 0.2 points higher than the expected growth.

Manokaran acids that Malaysia's trade balance is expected to remain at a surplus.

"Since 2012, Malaysia’s exports-to- imports ratio 1ms been sustained at

around 1:13. which provides a good buffer against slipping into a trade deficit," says Manokaran.

He adds that the Government expects the surplus to be smaller at RM8ft,3bil this year compared with 201fi’s estimate of RM91.4bll.

And even for the average Maiaysian consumer, it is not all doom and gloom.

The Goods and Services Tax (GST) is slated to remain at 6%, allaying fears that the Government may increase it in an attempt to cover the revenue shortfall in the oil and gas industry in 2016 due to the drop in oil prices.

Private consumption growth in the third quarter of 2016 rebounded to 6,1% from a low 4.1% in the same time period in 2015, showing signs of a recovery following the implementa­tion of the GST,

“1 think the impact of GST has more or less stabilised. People have accepted it and it has been embedded into many of the products sold," says Fomca’s Selvaraj.

It is the other factors that will sig­nificantly impact prices, such as the recent slump of the ringgit following Donald Trump's victory in the US presidential election.

“A fall in the ringgit means a major increase in the cost of imports. Since a big part of our food is imported, this means more expensive food,” he says.

Selvaraj also commends the Government’s resolution to increase the amount of affordable housing as stipulated in Budget 2017.

“Definitely, the Government's involvement in directly increasing affordable housing is a very positive , step forward.” he says, though he adds that the Government should also regulate private developers' housing prices.

Most of these private developments are only targeting high-income groups and not those in the middle income segment, he adds.

In terms of what average Malaysians could do to get through the next year more easily, Selvaraj suggests that they educated them­selves on how to properly manage their finances.

"We still have a lot of young work­ers who buy a car despite the fact that they are not able to afford one. Or they misuse their credit cards, which brings a lot of financial stress later.

“So we need to focus on consumer education and financial education to empower consumers to better man­age their finances,” Selvaraj says.

On this end. he says that Malaysians cannot solely rely on 1 Malaysia People’s Aid (BRIM) to help them overcome their financial obstacles.

"As a one-off payment, BRIM may help people at a certain time, blit it is not comprehensive. It is not helpful in the long term,” he says.

Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan is somewhat more upbeat about Malaysia’s eco­nomic prospects, saying that some analysts believe Malaysia is "already at the bottom of the barrel" and there is “no other way but up".

“However, in view of the current difficult economic situation, the job

" mmmu' r i ~i r i ~|

Rate worry; With the ringgit's fall against the US dollar, impart costs will rise and that means more expensive food. — Photos: Filepics

market may still be quite soft.” he says.

“With the rising costs of doing busi­ness arising from the new minimum wages rates, the increased Socso (Social Security Organisation) thresh­old clause, and the volatile currency rate, the ability of employers to cre­ate new jobs - especially mid-level jobs - will be very much restricted," says Shamsuddin.

He explains that employers, mainly small and medium enterprises, are struggling to implement the mini­mum wage.

The recent hike hum the Minimum Wage Order 2016 in July last year has also compounded the issue.

“The minimum wage policy mainly benefits the more than 2.1 million legal foreign workers in the country,” he argues.

These would be mainly foreign workers in low-skill occupations that make up 75% of non-Malaysian work­ers employed here.

Shamsuddin also expects Malaysian firms to continue facing skill shortages in the labour market, saying that the country is short of people with vocational and technical skills.

“At least S0% of future jobs are expected to be skills-based. Without an adequate number of workers who are trained in this area, employers will continue to face difficulties," he says.

"The world is undergoing its fourth industrial revolution and it is expect­ed that at least half of existing jobs today will be obsolete within the next two decades, while new jobs that may not yet exist today will be created,” he says, adding that tire Government needs to be proactive in charting the future of the country's industries,

"If Malaysia doesn't urgently act now, we will be left behind,’’ he says.

Manokaran Mottain: 'For 2017, we are expecting n higher gross domestic product growtl ... compared wi 2016’s estimat

'OUR ECONOMIC PLAN IS WORKIN

Prime Minister Da Ink Seri Nq/ib Kazak taking the M PT after launching Phase One of the MPTSungai Buhh-Kajang Line from Sungai lluloh to Seniantan recently. PIC RV 5 AIRIEN MAF1S

PM says policies, resilience helped nation through turbulent times

FAREZZA HANUM RASHID KUALA LUMPURnFWS@nst.cnm.my________

DESPITE, a period of great uncertainty and change across the world last year, the Malaysian government has remained steadfast in its com­

mitment to build a safer, more pros­perous and more equitable society, said Prime Minister Datuk Seri Najib Rnxak.

In his New Year message yester­day. Najib said the government was successful in keeping the budget delicit, inflation and unemployment low.

“The resilience we have been building in our economy has seen us

< through times of global turbulence. Our economic plan is working.

“Our estimated growth rate of 4.5 per cent to 4.5 per cent for this year is one that developed countries in Eu tripe and North America can only dream of." he said in a statement published on his website, www.nn jibrazak.com.

This growth, said Najib. was re­ported by the International Mone­tary Fund (IMF), which concluded that the Malaysian economy contin­ued to perIbriii well despite head­winds.

Me said IMF had praised (lie gov­ernment for implementing policies of diversification, exchange rale flex­ibility and deepened financial mar­kets. reforms for female labour participation, improvement of edu­

cation quality, productivity enhance meat, infrastructure investment, and promoting research and develop me nr.

Independent assessments such as these, added Najib. were conducted bv the world's top experts and re­flected the true picture ol'Malnysia.

“(They are) contrary to the smear campaigns of those who have been trying to sabotage the country's economy for their selfish political ob­jectives.

“ I urge Malaysians not to Tail for lies. Fake news and the proliferation of false stories have become a world wide phenomenon, and are a grave problem in our country as well," he said.

Although the fMF report and gross domestic product growth figures

m ig h t seem rem o te to m any Malaysians, Najib assured the public that the government was committed to casing die burden of those who struggled to afford a decent life for their families.

“This is why in the 2017 Budget, We focused on the needs of the Bottom 40 and Middle 40 groups, and an­nounced measures t o ensure that no one is left behind, from new afford­able housing, to tax relief, and nu­tritional food packages for hundreds of thousands of school children.

“Our efforts to improve the well- being of Malaysians are underlined by a commitment to good gover­nance. I thank those in our civil ser­vice for the work they have done and continue to do to improve efficiency, and ensure (hat government alloca­

tions are used in the most mean­ingful manner."

Najib, who is also finance minister, added that the government's large- scale infrastructure projects would help the country achieve sustainable growth that could be shared equi­tably iti the long run.

1 lc said the launch of the Mass Rapid Transit and the third phase or the Light Rail Transit, as well as pro­jects. such as Rapid Pengcrang, Ban­dar Malaysia. Tun Rnzak Exchange, the Pan-Bbrneo Highway and the Kuala Lumpur-Singapore 1 ligh Speed Rail, would create job opportunities and stimulate local economies.

“The Pan Borneo Highway, for hi­st ah ce. w ill noL on ly connect Serudong in Sabah to Scmnnlnn in Sarawak, it will also help re energise

towns along the way.“ 1 am determined to see this pro­

ject through as 1 know the number of communities, many of whom i have visited, that will benefit from it."

He said Malaysia last year had con­tinued to speak out against extrem­ism and radicalisation.

The government, said Najib, had successfully requested a gathering of Asean foreign ministers to discuss possible solutions to (lie Rohingya conflict in Myanmar.

l ie said Malaysia remained com rnitted to supporting the quest for peace in the Middle East when it adopted a resolution against illegal settlements i;n Palestinian territories by the United Nations Security Coun­cil.

On the home front, he said, the police and armed services had suc­cessfully prevented attacks by the Islamic Slate (!S) terror group after Malaysia suffered its first iS-tinkcd attack in June.

"I would like to thank oui* police and armed forces lor their efforts in assuring Malaysians that the govern­ment will always be vigilant.

“We will always prioritise the se­curity and welfare of the rakyat."

In his message, Najib expressed his gratitude to the 14th Yang di- Pcrtuan Agong. Tuanku Abdul Hal­im Mu’ndzam Shah, for his service to the country and welcomed Sultan Muhammad V as the 15th Yang cli- Pertuan Agong.

l ie also lauded the spirit of unity shown by Malaysians through the successes of the country's athletes in the. Rio de Janeiro Olympic and Par Olympic Games.

“ i took pride in the way Malaysians came together to support the national team. It was a reflection o fl Malaysia.

“1 ask Malaysians to be united in this spirit, and i wish you a happy, sale and prosperous New Year.”

Economic uncertainty set to dominate 2017 J4N m

Plain speaking YAP LEIUG KUEN

starbiz@thestar.corn.my

AGAINST the prospects for the ringgit, would the country’s econom ic growth hold up this

.year, or potentially slip to below 4%?Views range from positive to cautious, “If

crude palm oil prices still rise, then the gross domestic product (GDP) growth may sur­prise on the upside, m eaning a growth rate of 4,5% is possible," said Pong Teng Siew, head of research, InterPacific Securities.

“With US growth prospects and recovery of US consumption, along with President­elect Donald Trum p’s infrastructure spend­ing, we look forward to seeing growth in our exports.

“Together with continued domestic spend­ing, we hope to achieve an economic growth of 45% ,” said Danny Wong, CEO, Areca Capital.

There are external and domestic head­winds that can derail our growth prospects,

“Externally, Trum pnom ics, higher US interest rates and a stronger US dollar will likely define this year, which, will manifest in financial and exchange rate volatility.

“On the domestic front, households and. businesses will have to endure adjustments induced by the weak ringgit, continued high cost of living and cost of doing business

amidst cautious sentim ent,” said Lee Heng Guie, executive director, Socio Economic Research Center.

Lee puts chances of economic growth slip­ping to 4% at about 30%.

"Amidst cautious sentiment, consumers are expected to spend in a discretionary manner, supported by moderate income growth and higher cash handouts for the targeted household groups.

“The ongoing implementation of public infrastructure and transportation projects should help to support investment.

“However, private investment is expected to grow unevenly due to a cautious invest­ment approach on worries over the volatili­ty of the ringgit and trying economic condi­tions,” said Lee.

The expectation is for real GDP growth by 4.3%, almost the same rate of growth that was estimated for 2016.

“After two years of slowing economic growth, the local economy is in for another challenging year in 2017.

“Faced with uneven export growth, sus­taining the strength of domestic demand, especially private consumption and invest­ment, is vital to deliver the government’s growth target of 45% for 2017,” said Lee.

The International Energy Agency (IEA) has brought forward the dateline for the easing of the crude oil supply glut to the middle of the year.

How does this improve the prospects for oil price and what could derail this potential uptrend?

“If all agreed producers adhere to the deal to cut production, oil price may see support.

“US shale production may return quickly if oil price trends above US$70 per barrel,” said Wong. “Shale oil technology is improv­ing by leaps and bounds.

The latest technology indicates that they can break even at US$27 per barrel,” said Pong.

No doubt there could be a pickup in shale oil production, but shale oil production will likely resum e strongly if its producers believe that oil price increases can sustain long enough to make it worthwhile for them to drill again, noted Nor Zahidi Alias, chief economist, Malaysian Rating Corporation.

“Since it will take time for them to arrive at that conclusion, I believe that there is some room left for further increases in crude oil prices beyond US$55 per barrel,” said Zahidi.

From a historical perspective, Brent crude oil prices have remained too low for too long, noted Zahidi.

"Prices are still currently lower than their two standard deviations below the long his­torical mean.

Although some do not believe that prices will eventually revert to their long term mean, Brent prices may even rebound to somewhere betw een one and two standard deviations below their mean (US$5560 per barrel).

Standard deviation is a measure of the dispersion of a set of data frbm its mean.

“Despite the warning on waning demand

in recent years, crude oil remains an impor­tant global commodity,” said Zahidi.

“With a combined production cut of about 1.8 million barrels per day (bpd), the ELA’s forecast of an elimination of excess supply by the first half of the year may become a reality.

"The fact that Saudi Arabia hinted it may even cut production to more than agreed, to below 10 million barrels per day, suggests its determination to ensure that the deal works this tim e,” noted Zahidi.

The Organisation of Petroleum Exporting Countries (Opec) had agreed to slash output by 1.2 million bpd per day from yesterday, with top exporter Saudi Arabia cutting as much as 486,000 bpd, and indicating that Riyadh may cut even deeper, if necessary.

Producers from outside the 13-country group had also agreed to reduce output by558.000 bpd, short of the initial target of600.000 bpd but still the largest contribution by non-OPEC ever, according to a B ioom berg report. Underpinned by moderate global demand amidst adjustments in supply, oil prices are expected to average between US$5560 per barrel, said Lee, adding that further strengthening of the US dollar on expectations of US interest rate hikes could put pressure on oil prices.

Among other factors, Thomas Yong, CEO of Fortress Capital, sees full compliance on the production cut as unlikely.

Columnist Yap Leng Kuen sees danger in manip­ulating prices.

Pepper market turns hot again nCommodity's price on the rise as global supply tightensBy JACK WONG starbiz@thestar.com, my

KUCHING: A leading pepper exporter, who was bearish about the market due to plunging prices two months ago, has now turned bull­ish because of unexpected positive develop­ments brought about by declining supplies and inclement weather.

Nguong Aik (Kuching) Sdn Bhd director William SC Yii said the latest developments have resulted in a complete change in the market scenario to bullish from bearish mode, resulting in the recovery of global pep­per prices.

He said tire global supply has become limit­ed as Indonesia, the world’s second largest pepper producer, had sold its entire new harvests.

Indonesia is estimated to have harvested between 28,000 tonnes to 30,000 tonnes, which were significantly higher titan the pro­duction in 201.5.

According to International Pepper Community (IPC) weekly reports .Indonesia's black and white pepper prices have increased by some 10% in the past one month or so.

By mid-December.the report said the mar­ket had firmed up further as prices in most producing countries continued, with their uptrend, likely due to stocks in producing countries had limited.Towards the year-end holidays, the market slowed down with limit­ed trading activities.

In Brazil.the IPC said the output of recent harvest was not as good as estimated earlier.

“From India, it was reported that the har­vest is delayed due to unfavourable weather condition and that output of current harvest would be lower than earlier estimation," added IPC.

Yii said Vietnam, the world's No. 1 produc­er and exporter, was hit by severe storms and heavy rains in the past month or so, andtthe adverse weather had slowed down internal logistic in transporting pepper to warehous­es. Also pepper shipments scheduled for December have to be delayed to this month or next.

“Vietnam's new crop which normally comes in February may delay to end-March

Spicy commodity: According to International Pepper Community weekly reports, Indonesia's black and white pepper prices have increased by some 10% in the past one month or so.

due to the Chinese New Year celebrations (end-January to February),” he told StarJJiz.

Vietnam, which contributes more than 30% of global production, was reported to have raised exports by 31,5% to nearly 145,000 tonnes worth US$1.2bil in the first nine months of last year against the January- September 2015 period.

Yii said unexpectedly, there was a bigger demand for the spice from China in December because winter had come earlier.

As all these factors had influenced price trend,he said global prices for both white and black pepper had improved by about US$600 per tonne from recent lows.

For normal FAQ, global white pepper cur­rently fetches around US$10,000 per tonne while it is between US$6,900 and US$7,000 per tonne for black pepper.

Likewise, he said domestic prices had recovered from their November lows - RM28,500 per tonne for Kuching Grade 1

white pepper and RM17.000 per tonne for black pepper. Last Friday, the white and black pepper rebounded to RM30.000 and RM18,500 per tonne respectively based on Malaysian Pepper Board’s (MPB) published rates.

"Exporters,especially those on short cover- ing,are paying much higher than the MPB’s published prices to get supply as this is off harvest season. For the white,they have been paying up to between RM32.000 and RM33,000 per tonne and up to RM22,000 per tonne,” said Yii.

According to trim, local pepper exporters normally sell forward by three to six months.

In 2016,domestic pepper market was vola­tile. The year started with Kuching Grade 1 white and black pepper staying at all-time high of RM50,000 per tonne and RM30,000 per tonne respectively.

The record prices were maintained for nearly six months before correction for the six-year bull run set in .The price drop was especially drastic in November.

Year-on-year, domestic white pepper price slumped by RM20,000 per tonne or 40% in 2016 while the black by RM11,500 per tonne or about 38%.

The run up in prices started in 2009 when domestic white and black pepper were hover­ing around RM11,300 per tonne and RM6,500 per tonne respectively.

“I see bullish market in the first quarter this year (2017).Global white pepper is expected to trade between US$9,600 and US$10,600 per tonne (current about US$10,000 per tonne) and black pepper between US$6,500 and US$7,500 per tonne (US$6,900-US$7,000 per tonne),” said Yii.. He said for the past decade,global pepper demand had exceeded supply.

According to IPC 2016’s projection, global consumption for the year is 463,000 tonnes against production of 414,000 tonnes, result­ing in a supply deficit of 49,000 tonnes.

Nguong Aik,which has been in fire pepper trade business for about 30 years, exported more than 2,000 tonnes of pepper last year to countries in the Middle East, Europe, South Korea, Japan, Singapore and Peninsula Malaysia.

THE EDGE2 JAN 2017

Furniture stocks to return to the sweet spotBY TAN SIEW MUNG

Most furniture stocks have remained in the doldrums in the past year. However, the US economy is now on the path to recovery,which bodes well for Malaysia's furniture makers.

In December 2016, Poh Huat Resources Holdings Bird announced an im­

pressive set of earnings that beat expectations. The Johor-based furniture maker posted a re­cord-high revenue of RM535.22 million for the full year ended Oct 31,2016 (FY2016)—17.9% high­er than theyear before.The growth was thanks to sustained demand for the group’s products from the US and Canada, it says.

Although the stock rebounded to an ll-month high of RM1.76 on Dec 27 following the announcement of the stellar results, it had fallen 16% year to date.

Indeed,among the furniture counters, more than two-thirds fell from their peaks in the beginning of 2016, Latitude Tree Holdings Bhd was the biggest loser, falling 34%. It was fol­lowed by Federal Furniture Holdings (M ) Bhd and SHH Resources Holdings Bhd, which fell 21% and 18% respectively.The few exceptions were Sern Kou Resources Bhd, which gained 70%, Lii Hen Industries Bhd (23% higher) and Jaycorp Bhd (up 18%).

However, the tide is likely to turn. Fund managers and analysts say the US furniture market is expected to improve in 2017. Coupled with the weaker ringgit against the US dollar, these catalysts may bring furniture counters back in favour.

"Although there are catalysts,furniture stocks have not yet recovered — most of them are still laggards,” KAF Investment Funds Bhd chief in­vestment officer Gan Kong Yik tells The Edge.

He opines that a stronger ringgit against the US dollar at the start of 2016 may have caused investors to shun ex port-oriented counters, including furniture players, “There was selling pressure in export players. Investors had an­ticipated the ringgit to continue to strengthen against the US dollar, but it didn’t happen.”

Gan does not foresee the ringgit strengthen­ing much in the near term.

The US dollar rose 16.06% against the ring­git last Thursday — at 4.4B50 to the greenback — from the year’s low of 3.87 in April. Most of the products of furniture players are priced in US dollars.

in addition to the potential foreign exchange gains, these companies may start to see some exciting revenue growth as the US economy gains momentum.

Apart from the upward trend in US housing starts, economic policies that w ill be imple­mented by US President-elect Donald Trump are expected to benefit the country’s economy in the coming years.They include the massive rebuilding of infrastructure, tax cuts and the creation of jobs.

"The industry outlook is positive — local export should benefit from the recovery o f the US economy. I see more upside than downside

The US is seeing an upward trend In housing starts, which could benefit Malaysia's furniture makers

Latitude Tree Holdings1000 W W - ™ ™

■ Dec294.90

for furniture makers now, and they are in a sweet spot,” TA Securities analyst Ooi Beng Hooi tells The Edge,

According to the US Department of Com­merce, housing starts in the country surged 25.5% to a seasonally adjusted annual rate (SAAR) o f 1.32 million units in October 20IS — the highest level since August 2007. However, they unexpectedly fell 18.7% the following month to an SAAR of 1.09 million units.

Nevertheless, this is not a concern for Ooi. Based on the six-mo nth and one-year trends,

new housing starts in the US remain positive, he points out.

Gan concurs, saying furniture makers' rev­enue will be better in 2017 as Americans may spend more on furniture.This is because with more job creation, disposable income w ill in turn increase.

Both Gan and Ooi are unfazed by the new US president's potential protectionist meas­ures. Gan says any protectionist measure, if implemented, w ill only affect low-priced Chi­nese products. To him, Malaysia’s furnitme

Furniture stocks' performanceSTOCK PRICE/

EARNINGS RATIO (TIMES)

DIVIDEND YIELDm

RETURN ON EQUITY (*/.)

NET MARGIN (%) NET GEARINGm

■ SHARE PRICE (DEC 29,2016)

(RM)

YEAR-TO-DATE GROWTH (%)

Latitude Tree Holdings Bhd 7.28 2.45 14,56 8.66 net cash 4.90 -34.1

SYF Resources Bhd 8.09 1.90 15.32 8.06 35.83 0,53 -17.46Poh Huat Resources Holdings Bhd 7.89 4.63 22,24 8.79 net cash 1.71 -15.61I II Hen Industries Bhd 7.89 6,92 32.62 11.95 net cash 3.19 23.21Eurospan Holdings Bhd 24,92 0.00 2.40 2.24 net cash 0.64 -1172Jaycorp Bhd 8.73 7.41 15.62 7.37 net cash 1.34 17.61Sern Kou Resources Bhd NA NA -0 .09 -0 .05 47.23 1.08 70.08SHH Resources Holdings Bhd 8.95 6.13 10.88 8.79 net cash 1.63 -18.48Homeritz Corp Shd 10.01 4.81 26.22 17.79 net cash 0,95 -14.09SWS Capital Bhd 38.88 0.90 5.73 2,77 3.77 1.12 -11,81Federal Furniture Holdings (M) Bhd 10.85 1.42 12,68 4.90 5.46 0,66 -21.43

players may benefit by filling the gap left by these products.

Ooi points out that domestic furniture pro­duction in the US is relatively small compared with industry demand. Therefore, the US gov­ernment still needs to rely on foreign furniture makers, including those from Malaysia.

Furniture makers w ith a strong balance sheet will be more attractive to investors.Thus, Poh Huat remains analysts’ top pick in the in­dustry. Other potential plays include Lii Hen.

“Poh Huat looks good from every angle (rev­enue growth, cash position,valuation,dividend yield and so on). Lii Hen also looks cheap and continues to pay dividend. Its valuation and yield also meet investors’ criteria,” says Gan.

A quick glance at the furniture players re­veals that Lii Hen’s return on equity (ROE) is the highest at 33%. It is followed by Homeritz Corp Bhd and Poh Huat,which have an ROE of 26% and 22% respectively.

Lii Hen's revenue grew 13.26% year on year to RM454.95 million in the nine months ended Sept 30, 2016, w h ile its net profit surged 39.8% y-o-y to RM54.32 m illion . Under­pinned by its record-high revenue, Poh Huat's FY2016 earnings also expanded 20% y-o-y to RM47.06 million.

Most furniture companies are in a net cash position. For instance, Poh Huat’s net cash Stood at RM42.67 million as at Oct 31, 2016, while Lii Hen’s was at RM82.95 million as at Sept 30 the same year.

Both counters are about eight times their res­pective price-earnings ratios (PER) As for dividend yield, Lii Hen offers 6.92% and Poh Huat, 4.63%.

Gan and Ooi opine that investors prefer coun­ters that pay dividend on a quarterly basis,espe­cially when die market is tough.

It is worth noting that Latitude has one of the lowest PERs of about 7.28 times. However, its dividend yield (2.46%) is less attractive than Lii Hen’s and Poh Huat’s.

Homeritz also looks attractive based on its financial data. Although its PER is higher than its peers' (10.1 times), it has the best margin, which is 17.79%. The counter also offers a divi­dend yield of 4.81%.

Poh Huat's strong earnings momentum in the fourth quarter of 2016 w ill likely continue in the first quarter of 2017 as the US econo­my improves, say financial controller Lee Ing Tiong.and Hoh Ming Fatt from the company's strategy and corporate services department.

The management tells The Edge that the company saw its orders increase to US$9 mil­lion between August and December 2016, from ' US$7 million theyear before.More than 80% of its turnover comes from North America.

As the management had spent RM18 million to increase Poh Huat's capacity in its Vietnamese plant last year, it expects capital expenditure inFY2017 to normalise to RMS million, which willbe mainly for production upgrading.

The facility, which was damaged by a fire, saw its production normalise in the last quarter of 2016. The full recovery of the Vietnamese plant will be reflected in FY20i7’s earnings.

The management also expects Poh Huat's overall utilisation rate to increase by about 10% in FY2017, from 75% currently, as the US market recovers.

The group is aiming for a 1% improvement in its profit before tax margin in FY2017, from 10.27% at present.lt expects to achieve this by exploring products that offer better margins.

As for its newA$4,25 million (RM13 million) warehouse in Australia, Poh Huat only expects meaningful contribution in one to two years’ time.

The group recently completed the acquisition of the warehouse and is in the midst of shipping products there. Operation is expected to start in the middle of 2017, and the group will work with local partners to market their products.

To conserve cash, the management says it has no plans to adopt a dividend policy. How­ever, it is still targeting to distribute 40% of Poh Huat’s net profit as dividend in FY2017. B

T H E E D G E

2 JAN 2017Ringgit stabilises but closes year at record lowBY BEN SHANE UM

Bank Negara Malaysia’s efforts over the past few weeks have certainly helped to stabilise the ringgit by reducing volatility.

Exporters have been asked to convert the bulk o f their export

proceeds back to the local currency, w h ile speculative activity in the offshore non-de- liverable forwards (NDF) market has been curbed. On top o f that, Bank Negara is also setting up a fram ework w ith the central banks o f Thailand and Indonesia to facilitate settlement o f bilateral trade in local curren­cies, bypassing the need for US dollars as an intermediary currency.

But there is little that the central bank can do about the persisting strength o f the US dollar.As at Dec 30,2016, the ringgit closed at 4.4862 against the dollar, ending the year at an all-time low.

It may not be the best way to end 2016, but the outlook for the ringgit is relatively optimistic. Economists' consensus estimates show that the ringgit w ill end 2017 at 4.33 against the US dollar.

“ I expect the ringgit to strengthen to 4.2 to 4.3 against the US dollar by the enti of the year. And even at those levels, I believe the ringgit w ill still be undervalued," veteran economist Dr Yeah Kim Leng tells T h e E dge.

Yeah is a member of Bank Negara’s Mone­tary Policy Committee and dean of the school of business at Malaysia University of Science and Technology.

" I f we can maintain our current account surplus, and if commodity prices stay at least at the current levels, there will be strong sup­port for the ringgit to strengthen to those levels. [Shouldj commodity — crude oil and crude palm oil especially — prices strength­en further, the ringgit may do even better,” he adds.

As It stands, Brent crude oil prices have recovered 56.56% to a 1.5-year high of US$57.08 a barrel as at Dec 30. In fact, oil prices are back at end-2014 levels. Meanwhile, crude palm oil futures rose 25.4% in 2016 to close at RM3,117 a tonne, a level not seen since 20U.

However, these fundamentals seem to have less bearing on the ringgit. Hence, Bank Negara's measures are focused on addressing demand for the ringgit in the money market.

The most notable is its ruling that compels resident exporters to convert 75% of proceeds back to the local currency (w ith the option to reconvert to meet foreign currency obliga­tions). In December alone, the central bank reported RM2 billion in net trade inflows.

Bank Negara announced, "December data indicated that about 57% o f the proceeds were reconverted".This means about RM860 million of foreign currency was converted to ringgit last month.

But this figure is relatively small com­pared w ith the da ily average volum e of US$9 billion of foreign-exchange transactions in December,based on Bank Negara data.

Nonetheless, the intraday vo la tility of the ringgit decreased by more than half to average 90 points in December, compared with an average o f 228 points in November, notes Bank Negara.

Interestingly, the spread between the on­shore ringgit rate and the offshore NDF rate has stabilised. As at Dec 30, the three-month NDF rate was 4.5074, only 0.02 higher than the onshore rate.

As part o f its continued efforts to reduce dependence on US dollars, Bank Negara has also signed bilateral agreements w ith the Thai and Indonesian central banks to set up a local currency settlement framework.

It signed the agreement w ith Thailand earlier las t year. In mid-December, however, both countries expanded the framework to include Indonesia.

MOHDlZWAN MO l fd> MaZAMITHC ELXlE

Net foreign fund flows■ Net foreign buying {s<Mng j In M abyslan equities (P M bfl)

At face value, increasing the relevance o f regional currencies in trade is a move in the right direction to reduce reliance on US dollars as an intermediary trade currency.

Thai and Indonesian products make up 10.3% o f Malaysia’s total imports, and are

w orth RM70.2 b illion . Ma- Economlsts laysian products exported toexpect the the two countries make upringgit to end 9.1% of its total exports, worth2017 better KM69.63 billion.

In practice, however, it may not be so easy to wean exporters and import­ers from using US dollars.

“The new measures are not likely to have an impact in the near term. Just look at the adoption of the renminbi in trade w ith China — it is growing, but still very Jslow). And the renminbi is a much larger currency [than the baht and rupiah]," explains an RHB economist.

He adds that China has been trying to en­courage the use of the renminbi in bilateral trade for the past three years.

BURSA MALAYS (A, UN Ml

"prelMhRry estimate

Ringgit vs USD NDF spread has narrowed

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US Dollar Index and ringgit vs USD (normalised)115.......................

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95 ............ ......................... ........■- June 9 . ' ■ Dec 30

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It is estimated that overall, 60% to 70% of global trade is still transacted in US dollars.

“The trouble is, i f an exporter agrees to settle in rupiah, baht or renminbi, his raw materials may be transacted in US dollars. The mismatch creates even more foreign currency risk,” he explains.

The US dollar is simply too engrained in international supply chains for exporters to change overnight. Nonetheless, eco nomists say Bank Negara’s efforts are timely, even i f they may not bear fruit in the short term.

Against this backdrop, it is interesting to note that the exodus of foreign capital also decelerated in December.

Net foreign selling in the equities mar­ket fe ll in December to RM946.3 m illion, compared with RM1.19 billion a year ago. In contrast, net foreign selling in November was a whopping RM3.92 billion.

The December data for foreign holdings in Malaysian government bonds has not been released yet, but anecdotal evidence suggests that net foreign selling has also decelerat­ed. Foreign holders sold RM19.B9 billion in Malaysian bonds issued by both the corpo­rate and government sectors last November.

In fact, the flow o f foreign money might even be reversed in the coming months.

“Excessive US dollar strength is going to work against growth in the US economy and some people have already begun to realise this. Together w ith rising yields in the US,- it could put a dampener on growth after the first quarter (this] year. Even if President Don­ald Trump undertakes expansionary policies to stimulate growth, those w ill take time," explains the economist.

Yeah adds that the US dollar has overshot its fundamentals and should correct in the coming months.

Last week, the US Dollar Index, which is weighted against a basket of other major cur­rencies, eased 0.82% to 102.17 points, down from a high o f 103.01 points.

Against this backdrop, the yield gap cou­pled w ith the undervalued ringgit w ill make Malaysian assets more attractive, says the RHB economist.

RHB’s house v iew is that the ringgit w ill strengthen to 4.2 against the US dollar.This is based on a forecast GDP growth of 4% for 2017 (compared w ith 4.1% last year), and in­flation of 2.5% (compared w ith 2% last year).-

However, that forecast hinges heavily on expectation that the 14th general election w ill be concluded in the first half o f 2017, explains the economist.

Leading up to the elections, uncertainty w ill increase and spur more volatility in the market, as well as the ringgit. But once that is over and the dust has settled, economists expect the ringgit to stay on course to end the year better. B

EMPLOYMENT OPPORTUNITIES

NST3 JAN 2017

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But country lags behind many emerging m arkets in term s of productivity, says World Bank report

Cornier Federation of Malaysian Manufacturers president Tan Sri Saw ChooBoon suggests labour laws be made more flexible.

RUPA DAMODARAN KUALA LUMPURimpabancrji@mediapnma.com.my

MALAYSIA has created more employment op­portunities than many emerging markets, yet it

lags behind most of them in terms of productivity, especially since the global financial crisis.

formal worker training level is also lower than the Asean average, while small firms face problems innovating to adapt skills, according to the latest World Bank report analysing pro­ductivity trends in Malaysia.

At a panel discussion after the re­cent launch o f the Malaysia Econom­ic Monitor's “Quest for Produc tivity Growth" report, panelists said there was a mismatch in the pro-* ductivity levels across various sec tors, and between large firms and small firms.

'fhc large presence of foreign workers in the Malaysian workforce has also distorted the overall pic tore.

According to the report, only 19 per cent of Malaysian firms provide formal worker training, slightly- less

than the Ascan average and far be­low the rates of high-income and the Organisation for Economic Cooper­ation and Development economies and China.

Malaysia's productivity level also varies across the different sectors of the economy.

its Information and communica­tion technology, oil and gas, chem­icals, finance, banking and insurance, and the utility sector were compa­rable fo developed countries, said Datuk Yogeesvaran Kumaraguru, deputy director-general (macro) at the Economic Planning Unit.

The sectors which are wanting in terms of productivity are in the retail and wholesale, which form a big por­tion of the economy.

Accelerating annual Total factor Productivity growth to 2,(1 per cent, a target o f the 11th Malaysia Plan, would boost Malaysia's gross domes­tic product (GDP) per capita, but the country would still reach just 40 per cent of the projected GDP per capita of high-income countries by 2050.

Former federation of Malaysian Manufacturers(FMM)president Ian Sri Saw Choo Boon suggested that labour laws be made more flexible to

resolve conflicts, mediation and ar­bitration process while the quality of labour courts needs to be improved too.

“The labour input has increased over the past years, but it is due to foreign labour. The over-depen­

dence on foreign workers is a key issue which must be addressed in the recommendations.”

He pointed out that the financial sector's high ranking in terms o f training for workers was due to the central bank's ruling that two per

cent of the annual budget be set aside for training.

World Bank lead economist Dr Julio E. Revilla said as Malaysia head­ed towards a developed nation sta­tus, firms should learn to “face the market” if they want to improve ef­ficiency levels.

Exporting firms have been doing well and their productivity levels are well above the level of neighbouring countries.

“What’s bringing it down is the smaller firms which are based in the services sector. Efficiency is the best way to improve the productivity level and that can be done if firms are forced to face the market.”

Malaysia Productivity Corp direc­tor-general Datuk Mohd Razali Hus­sain said in the past, training was seen as important to improve the productivity level.

But now “intervention” is impor­tant via productivity tools which have to be used continuously and improved from time to time.

“Another area of opportunity is re sorting to sharing best practices to address the gap between export and non exporting companies, large ver­sus small firms.”

Ringgit expected to remain volatileRinggit perform ance against select currencies in 2016By IZWAN IDRIS 1 ‘J r . 01**

izwan@tbestar.com.nny ^ J/ifvj 2017

PETALING JAYA: A rating agency estimated that as much as a quarter of foreign funds in the bond market would leave the country, if sentiment on local assets were to worsen, heaping pressure on the ringgit.

This put the potential outflow from the bond market at RMSSbii, based on the total foreign ownership of bonds of RM220M1 as at the end of last November.

The report by Malaysian Rating Corp Bhd (MARC), which focused on the country's eco­nomic prospects for 2017, also highlighted the fickle nature of hot money flows and their impact on the real economy.

Foreign investors had pumped in a record amount of money into the Malaysian bond market in 2016, pushing their holdings of ringgit-denominated bonds to an all-time high of RM240bil in October.

But the surprise US presidential election win by Donald Trump in November had reversed the flow. His campaign of boosting spending on more infrastructure projects, reducing taxes and imposing tariffs on imports are causing global investors to lose their appetite for risks.

“The global bond market is expected to bear the brunt of the anticipated policies of Trump and speedy rate hikes by US Federal Reserve,” said economists at MARC in their outlook for 2017.

The sell-off by foreign investors in November bad caused the ringgit's sharp depreciation against the US dollar in the past two months, reversing its earlier gains.

“There is a risk of the ringgit remaining weak if the sell-offs persist in the short term,” MARC said.

The worries were premised on the still higher-than-average foreign holdings in the local bond market compared with neighour- ing countries.

MARC said its bond outflow estimate is premised on the fact that a bigger chunk of foreign holdings in the bond market now comprised “longer-term investors” such as central banks and pension funds.

“Judging from past experience, we do not rule out the possibility of foreigners offload­

ing about 20%-25% of their current holdings, which is less than 50%-70% reduction of their holdings during the previous cycles/’ it said.

Previous episodes of sell-offs in the last two financial crisis in 1998 and 2008 when the level of foreign holdings of Malaysian Government Securities (MGS) was halved in months.

To counter the outflow threat and to shore up the local currency, Bank Negara had made some policy adjustments including making it compuls ary from last December for compa­nies to convert the bulk of their exports pro­ceeds to the ringgit.

The ringgit exchange rate had weakened significantly against the US dollar over the past four years, failing faster than most regional currencies over the same period.

In early 2013, the exchange rate for one US dollar was RM3.10.

Today, it has weakened to RM4.48 and some forex analysts, including those at Nomura, are predicting that the ringgit could fail to around 4.70 against tire greenback, before recovering.

The ringgit exchange rates against a host of

regional currencies had also depreciated in recent years.

This weak outlook for the ringgit means there is slim chance for the Bank Negara to further reduce its overnight policy rate (OPR) in 2017.

Further reduction in the OPR, if it happens in 2017, would only be limited to 25 basis points, MARC said, as the central bank’s mon­etary stance has to be tailored to minimise the volatility of the ringgit.

Notwithstanding external factors, the coun­try’s domestic outlook continues to be chal­lenging.

Recent statistics revealed that it is the first time since 1999 that total revenue in the first nine months of 2016 has declined (-6.4%) while expenditures increased (+2.1%).

Prior to this, MARC said, the drop in reve­nue had always been accompanied by a decline in expenditure.

“Overall, we think that achieving the budget deficit target of 3% of gross domestic product (GDP) in 2017 remains a challenging task, especially when nominal GDP growth is not expected to improve dramatically/' it said.

Sun

3 JAN 2017

'Living wage a must'> ivl ftJC: Workers shouldbe paid enough, not subsist mi borrowecfincome

BY RAJVINDER SINGHnewsdesk@thesundaily,com

IPiTfAUNCI JAVA: Workers in the country are not being paid the right amount to manage the increasing cost o f living, the country's top trade unionist has claimed

Newly-elected M TU C general­secretary J. Solomon (pix) said a large population o f workers are living on borrowed income, adding that last year Bank Negara announced the nation’s household debt was 89.9% o f the gross domestic product.

“I believe it is much higher. W e are also the highest in Asia. The nation cannot take comfort o f the fact that since workers are employed, it is alright for them to be highly in debt.

“A nation in debt.is like a bubble that

can burst at any time,” he told theSun in a recent interview.

He said workers must be paid a living wage, a wage that is high enough to meet a normal standard o f living.

He said a living wage affords the earner and or his family the most basic cost o f living without need for government support or poverty programmes.

‘W ith a living wage, an individual can take pride in work and enjoy the decency o f a life beyond poverty, beyond an endless cycle o f working and sleeping, beyond the ditch o f poverty wages.

“M TU C appreciates the fact that the government has implemented the minimum wage, however, the amount o f RMi.ooo is not sufficient and has not taken into consideration the Goods and Service Tax and the rising cost o f controlled goods,” he said.

He said the National Wages Consultative Council is supposed to review the minimum wage every two years taking into consideration all factors relating to economy, but workers were denied a revision o f the minimum wages for 18 months as the review o f RMi,ooo was only effective on July 1 last year.

Solomon said the minimum wage for Peninsular Malaysia is RMi.ooo and RM 920 for Sabah,

Sarawak and Labuan, which is still inadequate given the rapidly increasing cost o f living.

He added that the minimum wage should be revised to RM i ,5oo and standardised between Sabah, Sarawak and Peninsular Malaysia.

He also added that when the minimum wage is implemented, the salaries o f other workers should also be elevated proportionately as the increase in prices post the minimum wage will affect these groups o f workers.