Saturday, November 29, 2014

Malaysian must get used to the scrapping RON95 & Diesel subsidies


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Malaysian government decided to scrap the fuel subsidy. Starting next month, December, the prices of RON95 petrol and diesel will be based on a managed float system. Note that this is based on “managed” and not “freely” float system. under the new managed float system for RON95 petrol, pump prices would be determined by a 10-day average of fuel prices in international traded markets plus fixed profit margins for refineries and retailers. So, every month, pump prices will change. Brent crude, an international benchmark, fell 3 percent to $70.15 a barrel on Friday. Therefore, starting from December the fuel price in Malaysia might, possibly adjust according to the global crude oil price. In Malaysia, we have seen many subsidies such as the sugar subsidy, which was abolished in 2013, and the much talked about fuel subsidy, which has been reducing every year, with the recent reduction by RM0.20 last month. 

The government has justified its unpopular move – which is to cut back on the spending to trim its fiscal deficit and ultimately achieve high-income nation status by 2020. On the other hand, Malaysians are not satisfied with the decision and are feeling the squeeze of the increasing cost of living. Subsidy reduction is inevitable and it may not be the most horrible thing to happen to a country. To be globally competitive, Malaysians need to be realistic and be able to adapt to change.Though the initial idea behind subsidies is to help the disadvantaged groups in the country, but more often than not, those who benefit from the subsidies the most are the richer people or companies.

The government is looking to limit the subsidised price of RON95 fuel to “deserving Malaysians” (i.e. the poor), leaving those deemed “undeserving” with no choice but to use the unsubsidised RON97 fuel. Datuk Seri Ahmad Husni Hanadzlah, the Second Finance Minister said that starting next year, only those who are earning RM10,000 and below each month would be eligible for fuel subsidies. This is great news which means that the government is actually looking after the middle income group and not benefiting those who are in the high income levels. In fact, those who earn below RM5,000 will enjoy full subsidies while those earning between RM5,000 and RM10,000 will get partial subsidies. The disparity between the luxury and non-luxury cars is too much which means that before long, supply will run short and price will increase again. At the moment, Malaysians are not too happy about the removal of these subsidies and as usual, it would mean increase of prices of other products as it always happens.

Anyway, it is futile to worry about the impact on prices of goods because the prices of almost everything have been increasing on a regular basis. Expect it to continue in the coming years. With GST around the corner, it will definitely increase the cost of doing business. Any form of tax is bad for businesses, bad for consumers, but good for the government. Expect price increases. There's also talk of water & electricity tariff hikes. So, prices increase. Minimum wage, which has pushed up wages across all levels, have also contributed to the increase of prices.  Unfortunately, the rate of decline of purchasing power is much higher. Since businesses need to pay more for salaries, prices increase. It would be prudent to keep an eye on the economy, both domestic as well as worldwide. Don't get distracted by petty issues and lose your focus on the economy. It's always the economy.

Analyst Kannika Siamwalla from RHB-OSK’s regional division yesterday expected, at worse, another 10 to 15 per cent slide – which would drop prices to US$65 to US$70 per barrel until year end. However, the crude oil price might be elevated after the control of OPEC by maintaining the production level. If the global crude oil price increased and the unsubsidized prices of RON95 petrol and diesel which are under managed float system would probably hike up to the level beyond Malaysians’ affordability. What will be the possible move of government in future? Rationalise the fuel price through subsidy or continue to allow the fluctuation of fuel price by following the global crude oil price?

Thursday, November 27, 2014

Possibility of Malaysia’s Transformation to Net Oil Importer


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Within ASEAN, Malaysia is a major oil-exporting country; however, it is expected to become a net oil-importing country in the near future. This issue brings concerns over Malaysia’s energy security, particularly on the aspect of oil import dependency. The International Energy Agency (IEA) has predicted in a new report that Malaysia would become a net importer of oil and gas in 2017 as a result of rising domestic demand. IEA executive director Maria van der Hoeven said Malaysia, which is the world's third oil and gas exporter at present, would become like neighbouring Indonesia by that year. As an energy exporting country, Malaysia’s energy industry is crucial to its economy, especially the oil and gas industries. 

Although the gas industry is now the largest contributor to the government’s revenue, the oil industry still provides a significant contribution to Malaysia’s economy. The value of oil exports has accounted for approximately 10% of Malaysia’s GDP in the last five years. 
However, Malaysia’s status as a net oil exporter is at the brink as its oil wells are maturing and oil production is waning. On the other hand, the country’s oil consumption remains on an increasing trend driven by the country’s strong economic development.
Economists and market analysts differ on whether the continued decline in oil prices has indeed resulted in Malaysia becoming a net importer of oil. Last year, the country derived about 30% (or RM64.6 bil) of its annual revenue from the oil and gas (O&G) sector. Hence, whether it has become a net importer or exporter of oil is a big concern. The inconsistent implementation of subsidy elimination which obstructs other efforts to decrease oil consumption could be the main reason for Malaysia to transform into a net oil-importing country. At the same time, oil production rates are declining very fast after they peaked in 2004. 

On the contrary, the transformation could be delayed if Malaysia takes the options to rigorously eliminate subsidies and put more investment into enhancing production. The combined effect of these options on the transformation year are significant mainly because of the timely deviation of the oil consumption trajectory. According to RHB Research, Malaysia is now a net oil importer. “Malaysia has turned into a net oil importer in January–August due to a larger import of petroleum products while crude oil exports shrank during the period. It imported a net amount of RM3 bil in the first eight months compared with a net export of RM2.1 bil in 2013,” says RHB Research.

However, others disagree. “If it is just crude oil, no we have not become a net oil importer. But if we add on trade for petroleum products, yes we are a net oil importer now,” says Maslynnawati Ahmad, chief economist of MIDF Amanah Investment Bank to FocusM. AllianceDBS Research chief economist Manokaran Mottain is of the view that Malaysia is still a net exporter of oil. “As Malaysia is still a net exporter of oil, sustained low prices may likely pose adverse impacts on the overall economy. Falling crude oil prices are a double-edged sword to the government's finances,” says Manokaran in a Nov 6 research report. Subjects such as the unexpected effect of efficiency improvements, or the rebound-effect, are particularly motivating. Efficiency improvement in this subject may be translated as lower price per energy unit, thus may reduce the desired effect of subsidy elimination. It has options which may delay the transformation and concurrently improve energy security by slowing down the expected increase of oil import dependence.

While market observers watch and debate on the issue, the continued decline of crude oil prices is having a global impact. The sharp drop dealt a blow to the Malaysian petroleum sector. According to Bloomberg data, the price of Brent crude oil has slide 31.8% since June 19 when it climbed to US$115.06 (RM386.60) per barrel.

Wednesday, November 26, 2014

GST implementation in Malaysia, good or bad?


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The introduction of the Goods and Services Tax (GST) will reduce the Government’s dependence on income tax and oil revenue as well as reduce the size of the country’s shadow economy, says Finance Ministry tax division under secretary Datuk Siti Halimah Ismail. “With the GST, it will disincentivise the entities to continue operating under the shadow economy. It is expected that some of these businesses will eventually come under the GST regime and contribute more revenue,” she says. According to Budget 2015, revenue from GST in 2015 estimated at RM23.2 billion and the government will have a balance revenue of RM5.6 billion after deducting RM3.8 billion for GST exemption. A report by Alliance Research also suggested that the introduction of the goods and services tax (GST) is timely to cushion any fall in the Government’s revenue collection amid falling crude oil prices. 

"The GST which has long been practised in most developed countries, has had a positive impact on economic development, and the people in general. The tax collected by the government through the GST system will generate income for the country's coffer and is for development to benefit the people. As responsible citizens who want to see the country progress, we should therefore not see the GST as a burden, but support its implementation," the president of the Federation of Sabah Manufacturers (FSM) Datuk Wong Khen Thau said. 

However, there are claims that GST could bring negative impact to the economy and the citizens as well. Kluang MP Liew Chin Tong has asked that the impending goods and services tax (GST), scheduled to kick in next year, be postponed as the economy is now fragile. Citing Japan as an example, Liew said the Japanese economy had turned negative after it raised its national sales tax which is its version of the GST. He said "raising the sales tax from 5% to 8% reduced consumer spending and killed any potential for growth in Japan." Like Japan, he said, Malaysia's economy depended on domestic consumption. He also indicated that if consumption is taxed, it will chip away at "disposable incomes of the consumer" and this will put a damper on demand. In the past decade, particularly after the 2008 global financial crisis, the global economy has become acutely concerned about income inequality - the gap between the haves and the have nots. 60% of Malaysians are eligible for the BR1M financial aid, meaning to say 60% of Malaysian families earn less than RM3,000 a month. They are already struggling to make ends meet. They do not pay taxes because they are below  the tax-paying threshold. 

While recognising that Malaysia’s tax system does no favours to the middle income bracket who earn between RM5,000 and RM10,000, the cure is not the introduction of GST. This unfortunate fact of high tax for middle income bracket should be rectified by tax adjustments to reduce the burden of the middle income families, shifting the focus to the super-rich. Malaysia’s GST is not like in the UK, Australia and other developed nations where top income tax rate were 50% and above before the introduction of the GST. For them, tax cuts were the natural course of action after the introduction of GST. There is little room to manoeuvre for a tax cut with the Malaysian income tax rate which is not that high by comparison.

Apart from the government’s expenditure, domestic consumption comprises the money spent by ordinary citizens, mostly via debt. Malaysia’s household debt is the second highest in all of Asia. Should the bubble burst, we will have many casualties. GST by nature is designed to tax those who cannot afford to be taxed in the first place. The 60% of citizens who are eligible for BR1M aid will now be taxed by GST, shrinking the domestic consumer market - i.e. the disposable income that could have been spent buying goods is now taken away by tax. In this scenario, imposing GST at this stage will have negative impact on the affordability of Malaysians. It would not be far fetched to imagine the worst case scenario of GST not as the feared monster of inflation, but the falling demand that precedes a recession.

The GST is effective from April 1, 2015 and the rate has been fixed at six per cent. So whether it will bring prospect for the nation or it will cause negatively to Malaysia, the answer will be knew next year, after the implementation of GST.

Tuesday, November 25, 2014

Oil commodity prices plunge, what is the next step for Malaysian government?

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The negative effects of plummeting oil commodity prices has had a severe impact on Malaysia's growth prospects and government revenues, the Wall Street Journal reported today. The heavy reliance on the export of oil, palm oil and rubber for the nation's revenue means that the decline in global prices for these commodities will hit Malaysia the hardest. Societe Generale de Surveillance (SGS) report showed that Malaysia’s palm oil exports during November 1 to 15 decreased 2.5 per cent to 605,624 tonnes compared with 621,145 tonnes during October 1 to 15. SGS also reported that exports of Malaysian palm oil products during November 1 to 20 fell 4.6 per cent to 843,707 tonnes compared with 884,628 tonnes during the October 1 to 20 period.

Demand from the EU and India fell, while demand from China increased. Spot ringgit weakened on Friday to 3.3525, due to the yen rebounding after the Japanese Finance Minster warned against the currency weakening position. By the end of the year, Malaysian and Indonesian crude palm oil production will likely slow due to the monsoon season. "Malaysia is on track to achieve the 2014 federal budget deficit target of 3.5 percent, down from 3.9 percent in 2013. With fuel subsidy removal locking in the impact of lower oil prices, the mission projects that the deficit could decline below 3 percent of GDP in 2015," the International Monetary Fund said in a statement.

Calling Malaysia Asia’s largest oil-and-gas exporter, the US business daily said the country benefited when the price of crude oil remained over US$100 a barrel for most of last year. Hence, the sharp decline in the oil price to US$80, and the expected further drop in price, has resulted in foreign investors withdrawing around US$2.5 billion from the country last month, WSJ quoted analysts as saying. Malaysia's current account surplus stands at RM7.6 billion in the third quarter of this year compared with RM16 billion for the same period a year ago. The country's oil-related revenue amounted to RM63 billion last year, which is equivalent to almost 30% of the total government revenue.

According to the WSJ, the country's woes are further compounded due to the decline in the price of rubber and palm oil – two other major exports – to new lows. Malaysia remains the world’s second-largest producer of rubber and palm oils, making the 25% and 16% drop in both commodities, respectively, having a severe impact on revenue. Meanwhile, domestic consumer spending by Malaysians has also slowed under an accumulated household debt that is 86% of the economy. The WSJ reports that the pressure from falling commodity prices on the economy will be an obstacle to the vision of turning Malaysia into a high-income country with developed nation status by 2020.

The government will intervene if global crude oil prices rise too high to cushion the impact on RON95 petrol and diesel, said Deputy Finance Minister, Datuk Chua Tee Yong. "However, the intervention mechanism has not been finalised yet, and the evaluation process being undertaken by the Domestic Trade and Consumer Affairs Ministry, is ongoing," he said after delivering his keynote address at the 19th Malaysian Capital Market Summit in Kuala Lumpur today. Chua said the government's move to allow market forces to determine fuel prices, via a managed float system, was to enable consumers to enjoy the current downtrend in global oil prices. The managed float mechanism, to commence on Dec 1 as announced last Friday, superseded the government's initial plan of an income-tiered fuel subsidy. "With the current low oil prices, not announcing the float, means the government has to impose tax on petrol. This is not what we want to achieve.” Making a comparison, Chua said neighbouring Indonesia had priced the lower grade RON88 petrol at RM2.35 a litre, while the premium RON92 and RON95 at about RM2.70 and RM3.20 respectively, which were substantially higher than in Malaysia because of taxes. He said the lower oil prices would also result in some savings of between RM10 billion and RM20 billion annually in terms of subsidies


Monday, November 24, 2014

Household debt in Malaysia – Is it sustainable?


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A recent study by Khazanah Research Insitute (KRI) on the state of households in Malaysia also paints a worrying picture. The report, entitled simply “The State of Households”, shows that consumerism is high in Malaysia, with many households owning discretionary durable goods such as television, washing machines, refrigerators, cars and motorcycles, despite their relatively low-income levels.Most households in the country cannot actually afford to buy all those high valued items with cash; so, they are doing so on credit. “The buyer pays more than a quarter of the purchase price in interest payments. The problem is most acute with consumer durables – rates are almost 50% per year,” the research arm of sovereign wealth fund Khazanah Nasional Bhd says of the impact of “ansuran mudah” (affordable instalment schemes) on households.

While it can be seen as a type of risk, high levels of household debt is a reflection of how easily the average Malaysian can get access to credit and what Malaysians are willing to go into debt for. Spending using borrowed funds can boost economic growth but it can also slow the economy when households are forced to restrain spending in order to service their loans. Thus there are unfavourable policy implications and economic impact when household debt keeps rising. Looking at it from the other side of the coin, the high rate of household debt in the country is not necessarily bad. For an average Malaysian for instance, taking on debt with a reasonably low interest to acquire productive assets, such as a home, is beneficial in the long term. As long as people’s salaries keep rising, growing household debt should be no serious cause for alarm – although of course, minimum wage is yet another topic under continuous debate in the country. 

It’s also a reflection of the demographic changes in the country. The youth are moving to cities like Kuala Lumpur and with their move, they’re looking to acquire their own abode. It’s likely that they’re going to find one in a high-rise such as a condo that have sprouted around the capital. This demand is one factor that helps drive property prices higher. On the risks to the banking sector due to the high levels of household debt, the BNM says that the risks to financial stability from household lending “remain well-contained.” The banking system’s loan delinquencies remain low and are even in a downward trend. Household stress simulations also show the strength of the banking system against losses from household loans.

As at the end of 2013, Malaysia’s household debt is valued at 86.8% of the country’s GDP, which is a substantial increase from 60.4% of GDP in 2008. While economists have long voiced their concern of the potential risks of Malaysia’s high household debt to the country’s growth, Bank Negara has brushed aside such concerns, saying that household debt in Malaysia remains at a manageable level as household financial assets have been expanding in tandem. The International Monetary Fund, World Bank and HSBC are among some of the international organisations that have warned Malaysia over the high level of its household debt.

But obviously, the problem is not unique to Malaysia, as several countries in the Asian region have also seen a dangerous spike in household debts in recent years, thanks to the availability of “cheap money” as central banks all over the world cut interest rates to boost their economies to counter the impact of the 2008/09 global financial crisis. As it stands, Malaysia’s debt-to-GDP-ratio is the highest in Asia. Trailing closely behind is South Korea at 86%, followed by Thailand at 84% and Taiwan at 82%. Debt-fuelled consumption in many Asian economies may have helped boost growth in recent years. But as the current economic environment shifts, with central banks starting the tightening cycle amid a highly uncertain global economy, many countries in the region may well be facing a new danger. Unsurprisingly, therefore, the theme of late is whether a new financial crisis is brewing in Asia because of the region’s high debt levels.

Government efforts to increase the supply of affordable houses should be lauded. This would have an effect on the main component of the household debt-to-GDP ratio and help a lot of people, like Adam and Sarah, acquire their own home. This policy move would be a more precise way to bring down household debt levels. Another option for the government would be for the central bank to come up with new rules on bank loans and this option can address both the housing loan and auto loan component of household debt.

Saturday, November 22, 2014

JAG BHD(0024): Bullish Implication !!! It ready to go test 0.250/0.265/0.280/0.310.


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Weekly Trend
I like to look in to weekly trend in order to determine the direction of the stock either will go north or south,  JAG Bhd weekly trend, I concluded this counter uptrend is on going, which will going to accelerate once it breakout from the 0.250 immediately it will heading to 0.320.

Technical justification on bullish implication

  1. Two consecutive wave 3 development is on going, double wave 3 is consider is bullish signature to Elliot wave trader
  2. Two consecutive wave 3 development is on going, double wave 3 is consider is bullish signature to Elliot wave trader.
  3. MACD Cross over to indicate reversal take over
  4. Stochastic stay above 50 and below 80, it is bullish indication and momentum should continue.
  5. MACD bullish hidden divergent to tell the trend continue.
Daily Trend
We unfold the chart to another level which is daily chart, I am very detail person in trading, Stock/FX Trading is a serious business, it like we going to the WAR with all ours partner, we better do ours homework if I want to commit to the trade. it is very important to know why I buy this stock

Unfold Elliot wave in daily chart.

The smaller chart(at left hand down corner) is the weekly trend ,Black box is the period of the main chart I wanted to share, you can see we had total of three consecutive  wave 3 pointing to the north and its is very bullish implication ( weekly (3),33 )

Daily Chart, Elliot Wave
Wave 1 
This pattern is define trend pattern, which is all 1-3-5 is approximately same length, it is very common pattern
Wave 2
This pattern has been define as a complex correction pattern in which each wave itself is correction wave, the X wave should retrace more than 61.8% to qualify as WXY.
Wave 3 
smaller wave degree wave 3 is confirm, once the price break away from 0.225, the price will accelerate to north 0.250


Down trend trend line broken
  1. Downtrend channel line break and give signal reversal take over
  2. Downtrend trend line broken, most likely the trend will continue to raise up
Inverted Head and Should ; Support Resistance.
  1. Inverted head and should formation, neck line(resistance tested) and most probability it will be break.
  2. Immediate support is 0.215 follow by 0.195
  3. Resistance line 0.225/0.25/0.265/0.280/0.305
Summary of Technical Justification on Bullish Trend.
  1. Three difference time frame consecutive wave 3 is pointing to north.
  2. Weekly MACD Cross over to indicate reversal take over
  3. Weekly Stochastic stay above 50 and below 70, it is bullish indication and momentum should continue.
  4. Weekly MACD bullish hidden divergent to tell the trend continue up
  5. Daily impulse Wave 3 under development and it eve ready to break the resistance and heading to north.
  6. Downtrend  trend line broken, most likely the trend will continue to raise up.
  7. Inverted head and should formation, neck line(resistance tested) and most probability it will be break.
My Trade plan

Stop loss
  1. Early SL 0.215
  2. Late SL 0.195
  3. Trailing SL : 0.230( I will apply right after break out)
Profit Target.
  1. Conservative Target : 0.250
  2. 1st Target : 0:265
  3. 2nd Target 0.280
  4. 3rd Target 0:305(long Term).
As a reminder for myself
I am always remind myself If the trend is go again me and violated my SL limit, I will cut loss base on the risk preference.
Stop Loss is painful process because I making loss, but it is necessary to take it, it is very important because it protect my capital to ensure I am stay in the market.

DISCLAIMER:
Stock analysis and comments presented on klseelwavetrading.blogspot.com are solely for education purpose only. They do not represent the opinions of klseelwavetrading.blogspot.com on whether to buy, sell or hold shares of a particular stock.
Investors should be cautious about any and all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal or corporate ownership, may influence or factor into an expert's stock analysis or opinion.
All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.

Friday, November 21, 2014

Subsidies cut for RON95 and diesel from December 1, will the fuel price goes down?


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RON95 price will follow market price as of Dec 1, said Domestic Trade Cooperative and Consumerism Minister Datuk Hasan Malek today. aThe price of RON95 and diesel would be set according to prevailing global market prices during November, Hasan said. The change is due to global crude oil prices being below that charged at Malaysia fuel pumps, he added.
Hasan, in a statement, said that the price of petroleum products in Malaysia were determined by the Automatic Price Mechanism (APM), implemented since 1983.

“Through this mechanism, the government will fix the retail price at a level where it will not be disrupted by any changes in the cost of the product. However, under this managed float system, the average rate of changes in product costs would determine prices for ensuing months. For example, if world oil prices go up, the prices of RON 95 and diesel here will also increase, and vice-versa.”

The current prices of RON95 and diesel are RM2.30 and RM2.20 per litre, respectively.

“The government will follow the world market prices as well as currency exchange rates to fix the prices of these products. The decision to list RON95 and diesel under the managed float mechanism was made after the successful implementation of fixing RON97 under the scheme.”

Hasan added that the move was done after a thorough study and it proved the government’s commitment to fully enjoy the benefits of the fall in crude oil prices. “For example, the average price of RON95 under the APM between Nov 1 and 19 was RM2.27 per litre, which is lower than the current price of RM2.30 per litre. We will monitor the prices between Nov 20-30 and the average prices in that period will determine the prices of both items in December.” In the current trend persists, it is expected that the pump price of RON95 will be lower next month.

Pressure on the government to have RON95 price to be on a managed float, similar to RON97, rose sharply since the premium fuel price was cut on Wednesday by 20 sen per litre to RM2.55. At RM2.30 per litre currently, RON95 price differential to the premium fuel is just 25 sen and it is understood that internal government policy is to have at least 30 sen difference between the two fuels.

Just at the end of October, the government announced that there will not cut petrol fuel subsidies until June next year when its new targeted subsidy mechanism for RON95 fuel is implemented in June 2015. But today, the government decided to scrap the subsidy. The price of RON97 petrol will go down by 20 sen to RM2.55 per litre from Wednesday. In a statement, the Finance Ministry said it had agreed that the retail price of RON97 petrol be reduced by 20 sen to RM2.55 per litre from Nov 19 (Wednesday). The price of RON95 petrol and diesel, which are subsidised by the Government, remains unchanged. On Oct 2, the prices of RON95 petrol and diesel went up by 20 per litre in an effort by the Government to rationalise subsidies. According to AmResearch, the breakeven of the global crude oil price is at an average of US$84.80 per barrel if RON95 were to remain at RM2.30 per litre without the government subsidy. 

The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 75.81 per barrel (bbl) on 20.11.2014. Based on the table above, the prices of RON 95 and diesel, excluding Government subsidies, are RM2.43 and RM2.32 per litre, respectively. But on the other hand, falling crude oil prices should lead to lower prices soon. As reported by The Rakyat Post, analysts expect RON95 price to be cut to RM2.10 per litre – reverting to the level before early October this year – while RON97 falls to RM2.40 per litre. The government will discuss the possibility of introducing a sales tax for RON95 petrol if global crude oil prices continued on a downward trend at a Fiscal Policy Committee meeting next Wednesday, said Deputy Finance Minister Datuk Ahmad Maslan in a report by Bernama. The change from Dec 1 also raises the possibility that petrol and diesel may be subject to the 6% Goods and Services Tax (GST) come April 1

Thursday, November 20, 2014

Alibaba offers debut bond To Go Along With Sizzling Stock


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Chinese e-commerce giant Alibaba will sell its first-ever bond on Thursday, a jumbo trade expected to be around US$8 billion (RM26.88 billion) in size that comes just two months after the company's record IPO.

The company last week announced plans to launch an offering of senior unsecured notes, and said it intends to use the net proceeds from its debut offering primarily to refinance its existing credit facilities. Alibaba is said to have $11 billion in loans and credit lines. The offering is being run by Morgan Stanley (MS), Citigroup Inc.(C), Deutsche Bank AG (DB) and JPMorgan Chase & Co. (JPM). Though the company has not revealed that size and other terms of the offering, reports peg the offering amount at about $8 billion. The offering of this size is billed to be one of the largest corporate-debt offerings in 2014. Few investors expect to see any commotion tied to the bond sale. New bonds are unlikely to soar because unlike stocks, which can appreciate infinitely, they are predictably repaid at maturity at 100 cents on the dollar.

The offering will also be the largest by a Chinese company in the U.S. in 2014, topping a $6.5 billion offering of additional Tier 1 securities by Bank of China Ltd. in October.It is looking to sell up to seven tranches, including five fixed-rate bonds ranging from three to 20-year maturities and two floating-rate notes with three and five-year maturities, which bankers and investors expect to be the most sought after of the year. Following its historic $25 billion offering in the stock market, Alibaba is now set to test the waters in the bond investors market. The company's stock has surged 60 percent since the IPO and it currently has a market capitalization of $270 billion. Some of the recent successful multi-billion dollar bond offerings by technology companies were from Apple, Inc. (AAPL), Oracle Corp. (ORCL), and Cisco Systems, Inc. (CSCO). Chinese companies such as Hong-Kong listed Tencent Holdings Ltd. and Baidu, Inc. have also been successful in the U.S. bond market.

Alibaba’s dominant position in the Chinese online-retail market and strong financials, with ratings as high as single-A-plus from some credit-rating firms, likely will ensure a positive reception, investors said. Alibaba has been sounding out investors this week in Asia, Europe and the US and is believed to have a huge order book already in place before officially starting the marketing phase in Asia overnight. Two market sources said initial indications of interest were at US$10 billion. Alibaba's high Single A ratings will help as the company pitches itself as a comparable to blue-chip names like Oracle, Amazon and Cisco, rather than its lower-rated Chinese internet peers Tencent Holdings and Baidu. Oracle's 2.25% October 2019 bonds are trading at a G-spread of around 66bp, some 44bp inside the IPTs on Alibaba's five-year tranche. That gap will likely shrink as orders pour in during Asian hours, before Europe weighs in ahead of eventual pricing on Thursday afternoon in the US. 

At the same time, the company is solidly profitable, giving it an edge on many technology and retail firms that have narrow margins and unsteady profitability. Some U.S. rivals have struggled recently, likely boosting investors’ interest in Alibaba’s debt. Ebay Inc. bond prices fell after the online-auction firm said it would spin off its PayPal unit, creating uncertainty for debt investors. Last month, Amazon.com Inc. reported its largest quarterly loss in 14 years. 

Alibaba is “one that looks like it could be a growing business with a stable story,” said Scott Kimball, senior portfolio manager at TCH LLC, which oversees about $10.5 billion and is a unit of BMO Global Asset Management. Revenue for the quarter rose 54% from a year earlier to $2.74 billion. Earnings fell 39% from a year ago to $494 million, largely because of stock awards to employees and executives.

Wednesday, November 19, 2014

Falling Commodity Prices will affect Malaysian Economy


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Plummeting prices for oil and other commodities are dimming Malaysia's growth prospects and government revenues, sending Asia's largest oil-and-gas exporter's currency to over four-year lows.
Unlike other Asian economies, which are commodity importers and are set to benefit from the decline in global commodity prices through lower inflation, Malaysia relies on exports of oil, palm oil and rubber.
As such, Malaysia is highly susceptible to the fluctuation of raw material prices when compared to many of its neighbors in ASEAN. Further diversification into the services sector is needed to not only fix this problem, but to assure the growth of the Malaysian economy well into the future.
Investors pulled $2.5 billion out of Malaysian stocks and bonds in the last month, making it the only emerging Asian country to see outflows. The Malaysian ringgit is one of the worst performing currencies in the region, falling to a four-year low Monday against the U.S. dollar. The sliding oil price has changed the picture somewhat. Poor data Friday confirmed investors' worries about the economy and currency. Malaysia's current account surplus, a measure of trade in goods, investments and services, fell 53% in the third quarter from the previous quarter, driven by weak exports. Economic growth was 5.6% in the period, still solid but down from 6.5% in the previous quarter.
Credit Suisse group explains that low commodity prices can have an impact on the Malaysian economy in two different ways. “First, it reduces the disposable incomes of consumers, especially in the rural areas, and secondly, it lowers exports and the terms of trade, given Malaysia’s high exposure to a broad range of commodities,”
“The Malaysian government derives about 30% of its annual revenue from the oil and gas sector, mainly through national oil company Petroliam Nasional Bhd (Petronas). It had estimated crude oil prices to average at US$105 a barrel this year.” said the bank in a report. Credit Suisse mentioned that even just a 10% fall in oil prices would increase Malaysia’s deficit by 0.1% to 0.3% of GDP.
On a positive note, economists argue that the falling oil prices would not only reduce the subsidy burden for Malaysia, but it would also give further room for the Government to reform the current blanket subsidy scheme for fuel prices. CIMB Economics Research argues that falling oil prices may not be all bad for Malaysia’s economy. The institution points Malaysia can benefit from the recent fall in global oil prices, particularly if global demand is aided by higher discretionary incomes, which then feed into export demand.While CIMB Research acknowledged that Malaysia’s government oil revenue would be affected by weaker global oil prices, it argues that there would not be a real risk to the fiscal deficit target of 3% of GDP next year, given the stable dividends from Petronas. On the upside, the government’s subsidy savings can either be used to bring down the fiscal deficit or be channelled towards productive spending. Given Malaysia's high reliance on petroleum for revenue, Credit Suisse concurs, noting that if oil prices were to stay at around US$80 to US$83 per barrel on a sustained basis, the government’s petrol and diesel subsidy bill should be eliminated completely in 2015, even without further fuel subsidy reform by the Malaysian Government.
The price of RON97 petrol will go down by 20 sen to RM2.55 per litre from Wednesday. In a statement, the Finance Ministry said it had agreed that the retail price of RON97 petrol be reduced by 20 sen to RM2.55 per litre from Nov 19 (Wednesday). The price of RON95 petrol and diesel, which are subsidised by the Government, remains unchanged. On Oct 2, the prices of RON95 petrol and diesel went up by 20 per litre in an effort by the Government to rationalise subsidies. According to AmResearch, the breakeven of the global crude oil price is at an average of US$84.80 per barrel if RON95 were to remain at RM2.30 per litre without the government subsidy. Expecting if the global crude oil price continues to slide, would Malaysian Government possibly adjust the price of RON95 to reduce Malaysians’ burden?

IJACOBS (0162):Time to revisit Inverted Head and shoulder Formation.


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Weekly trend was very clear and we can see this counter is in extension wave 3, what is extension wave 3 ? This pattern has been define as a TREND pattern in which wave 3 is extended, it is most probable trend pattern to occur as of now.
We can see very often wave 1 length in prices and time is equal to wave 5 if 3rd wave was extended( you can see the magenta color wave degree).
The recent downtrend most likely is ended with the abc correction, which is supported 

Technical Justification 
1.) Hidden divergent, which is indicated the wave 4 up and uptrend continuous will happen.
2.) Candle stick forming bullish engulfing reversal signature up signal
3.) Wave 3 volume higher than wave 1, most likely wave 5 is under development right after correction wave ended.


Daily trend : Technical Justification.
Let we zoom down to daily chart, we can see another 3 key points to support this counter will go up .
1.) Bullish divergent was form which is indicate RM 0.38 is bottom.
2.) MACD signal line is about to cross over and Pareto change form negative to positive, which is indicate the bull trend was just started.
3.) Stochatic is cross over and heading to up, which is give a bullish implication.
4.) Head and shoulder formation, right shoulder is under development, which is demonstrated prices is heading to north.
5.)Breakout from downtrend trend line and form a long white candle, it is a bullish implication


My Trade plan
Breakout from downtrend trend line and form a long white candle, it is a bullish implication, most likely the prices will have go up further to 0.505/0.570/0.650. I do expect have some profit taking at 0.475, but it should not stop the prices go beyond it and heading to Min Target 0.505,  after 0.505 clear and will heading to 1st target at 0.570.
My Stop loss is price close below 0.370/0.400





Other related information
Ideal Jacobs (M) Corp Bhd may emerge as one of its O&G partners, while more changes are expected on Ni Hsin’s board after two new faces emerged on Oct 10. Detail read below.

http://www.theedgemarkets.com/my/article/ni-hsin-plans-og-venture


DISCLAIMER:


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Monday, November 17, 2014

Potential changes of fuel price in Malaysia if crude oil price continues to fall

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Brent crude oil was quoted at US$79.41 on Friday when Malaysia announced its recent 20 sen per litre petrol subsidy cut from Oct 2 – a fall of almost 31% since its highs of US$115.06 earlier this year. The decline is largely attributed to a slowdown of global economic growth, especially in China, along with a stronger U.S. dollar that is further driving down the cost of commodities that are denominated in it.
Some experts are beginning to see US$80 levels as “a new normal”. Others, however, wonder if prices would indeed stabilise at current levels and slip lower from here, or move higher again in spite of forecasts of lower global oil consumption ahead. Already, there are reports of the oil-producing OECD countries possibly having an emergency meeting to discuss the weak oil price that will hit their coffers and budgets instead of waiting for their next scheduled meeting on Nov 27.
Jeffery Gundlach, a renowned bond investor and the CEO of US-based fund management company DoubleLine, believes that the price still have more room to fall. “I’m convinced that Saudi Arabia wants the price of oil at US$70,” said Gundlach.
Other experts say the price of oil will remain weak over the medium if the Organization of the Petroleum Exporting Countries(OPEC) does not cut its supply. OPEC is responsible for around 40% of crude oil supply worldwide.

Whether or not Saudi Arabia and other major oil producers will cut production to prop up prices, the broader concern is the state of the global economic recovery and its impact on growth for export-dependent countries like Malaysia.

Whatever happens, one thing seems rather certain: with Malaysia determined to cut its fiscal deficit and rationalise blanket subsidies. RHB Research said Malaysia turned into a net oil importer this year when it imported a net amount of RM3 billion in the first eight months of 2014 compared with a net export of RM2.1 billion in the same period last year. "We estimate that for every US$10 per barrel fall in the average crude oil price, government revenues would be reduced by RM4 billion, but this would be mitigated by a corresponding reduction in expenditure through a lower fuel subsidy bill, with a potential reduction of RM2.5 billion," it said in a statement Tuesday. What’s more worrying than the possibility of pricier petrol at the pumps, though, is the possibility of Malaysians actually paying cheaper prices at the pump without subsidies. This would happen if oil prices fall further, some economists say. 

Malaysia is believed to have assumed an oil price of US$100 per barrel for Budget 2015, down from US$110 per barrel for Budget 2014. RHB Investment Research executive chairman Lim Chee Sing, for one, reckons it may be tougher for Malaysia to achieve its 3% budget deficit targets in 2015 should oil prices remain at US$80 levels, all else being equal. He calculates that every US$1 per barrel drop in crude oil prices would cost the government about RM650 million in revenue, excluding the potential savings from fuel subsidies. In other words, a decline of crude oil price by US$25 (from the US$105 estimated for 2015) to US$80 per barrel will result in a reduction of revenue of RM16.25 billion (6%); at US$70 per barrel, it would mean a loss of RM22.75 billion (8.3%); at US$60 per barrel, a loss of RM29.25 billion (10.6%).

“Increasing government revenue would be a challenge under an environment of falling oil prices, which is projected to account for 28% of government revenue next year,” says Lim to the question of whether it was really that tough for the government to reduce its budget deficit at a faster rate than planned and have a surplus way before year 2020.
Nevertheless, it said Petronas might maintain its dividend payment at RM27 billion temporarily to help the government next year until the full-year implementation of the Goods and Services Tax (GST) in 2016.

Furthermore, it said the lower crude oil price could affect oil and gas investment activities in the country, whereby the impact could be seen perhaps in 2016 if Petronas decided to delay its investment due to a prolonged low crude oil price. "The impact in 2015 would unlikely be significant given that most of the investment had been committed and would unlikely be cancelled or delayed," it said.

RHB Research said although a delay or cancellation of oil and gas investment could impact on the country's economic growth in 2016, it was expected to be manageable given that export growth would likely improve and could turn out to be stronger than expectation due to lower crude oil prices.

The government will discuss the possibility of introducing a sales tax for RON95 petrol if global crude oil prices continued on a downward trend at a Fiscal Policy Committee meeting next Wednesday, said Deputy Finance Minister Datuk Ahmad Maslan in a report by BernamaHe gave an example of charging a sales tax of RM0.58 per litre if the price of RON95 fell to RM1.72 per litre, which would bring the total price for the consumer up to the current price of RM2.30 per litre. RM0.58 is a hefty 33.72% out of the RM1.72 example price given, but we don’t think a fixed 33.72% tax is what the minister meant. 

Although Bernama’s report doesn’t specify any formula in particular, we think the intention is to keep the RM2.30 price fixed, and just collect the difference as a tax. According to the minister, the government paid RM23.5 billion in 2013 and RM21 billion in 2014 so far to petroleum companies for petrol subsidies, it needs to recoup the amount. A fuel tax would allow for this.

So, do you think will fuel price still going up on next year?




SMEs should utilize Government Incentives as business advantage

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The National Chamber of Commerce and Industry Malaysia (NCCIM) has urged Small and Medium Enterprises (SMEs) to take advantage of the various incentives offered in the 2015 Budget.
"Its a pro-business budget when one talks about how the budget helps the sector to grow, and I urge the SMEs, which contribute about 33 per cent to our Gross Domestic Product, to grab the various incentives offered," said NCCIM Secretary-General Datuk Seri Syed Hussien Al-Habshee.
Various schemes and incentives allocated for SMEs testify to the government's concern to empower SMEs, adding the government should set up a system to monitor the SMEs that have been awarded such grants and financial assistance. A monitoring system similar to the Inspectorate Division in SME Corp is needed. Inspectors will visit and audit the SMEs and offer assistance and guide them in soft skills like accounting, book-keeping and cash flow," he said. Meanwhile, e-commerce giant Rakuten Online Shopping also welcomed the RM375 million allocation for the SME Investment Partner programme as well as the RM2.7 billion to build 1,000 new telecommunication towers and lay undersea cables. 
The Government has proposed to further enhance one of the tax incentives for SMEs under the funding model of Investment Account Platform (IAP). The IAP model was introduced to attract participation from both individual and corporate investors to boost development of SMEs as well as entrepreneurs via a funding system which is efficient, simple and transparent. However, this has not taken off as the Government had envisaged.
To further enhance the IAP, the Government has proposed in Budget 2015 that profits earned by individual investors from investments made through IAP be given income tax exemption for three consecutive years commencing from the first year profit is earned, subject to conditions. The proposed operational date of IAP is from Sept 1, 2015 to Aug 31, 2018.
With this, the Government hopes to attract cash-rich individuals to invest funds into SMEs for project financing to help propel SMEs to the next phase of growth and development.
All small and medium enterprises (SMEs) should take advantage of the RM11.4 billion in government incentives earmarked for their development in 2015, says Minister of International Trade and Industry (MITI), Datuk Seri Mustapa Mohamed. The recent Budget 2015 also outlined several measures to further facilitate the SME development and strengthen their long term competitiveness, he added.

"Take advantage of this incentive to expand your businesses. In doing so, you will be able to further contribute to Malaysia's economic growth," he said in his speech, before presenting the Enterprise 50 Awards, here Friday.

The Enterprise 50 is an annual awards programme organised by SME Corporation Malaysia (SME Corp) and Deloitte Malaysia, with other supporting sponsorships, to recognise the achievements of Malaysia's enterprising SMEs. The formation of the Asean Economic Community (AEC) will definitely offer great opportunities for Malaysian SMEs. As a single market with a population of 620 million, Asean's total trade is worth US$2.5 trillion (US$1=RM3.34) with an annual Gross Domestic Product (GDP) growth forecast of more than five per cent," he added. To further enhance the value chain activities, Mustapa said Asean and its neighbours, are negotiating to form a Regional Comprehensive Economic Partnership Agreement (RCEP). When concluded, RCEP will form a trading group with a market size of over three billion and a combined GDP of over US$21 trillion, contributing to almost half the global trade. Malaysian companies must embrace the AEC and East Asian integration. Economic integration will open new business opportunities and create greater value to our businesses.

Realising the importance of SMEs as the country's engine of growth, the government will continue to support SME development through the implementation of the SME Masterplan (2012-2020). The main objective of the Masterplan is to raise productivity, increase the number of high growth and innovative firms, as well as enhance the formalisation of businesses. SMEs played a crucial part in strengthening Malaysia's economic growth in contributing 33 per cent to Malaysia's GDP, and this is targeted to increase to 41 per cent by 2020.