Investments to pour into Malaysia, Boston Scientific plant in Penang to be ready by 2017


 

BATU KAWAN: Malaysia is targeting to attract RM40bil worth of investments from the manufacturing and services sectors this year.

Malaysian Investment Development Authority (Mida) chief executive officer Datuk Azman Mahmud said that of the RM40bil, about RM800mil would be for the medical device segment.

“For the first quarter of the year, we have approved RM651mil investments for the medical sector, compared to RM194.7mil achieved in the same period of 2015.

“The approved medical device investments would create 1,610 job opportunities,” he said.

Azman said this after the ground-breaking ceremony of Boston Scientific new plant at the Batu Kawan Industrial Estate.

The RM40bil investments would come mainly from the United States and Europe, according to Azman.

“We are now negotiating for these investments,” he added.

Deputy Minister of International Trade and Industry (Miti) Datuk Lee Chee Leong represented Minister Datuk Seri Mustapa Mohamed at the event to officiate the groundbreaking ceremony.

Lee also read out Mustapa’s speech.

In the speech, Mustapa said in 2015, the exports of medical devices increased by 15% to RM15.5bil from 2014.

“According to the National Export Council (NEC), revenues from the export of medical devices are projected to grow to RM26bil by 2020.

“In this regard, industry players in Malaysia will be able to enhance their exports by capitalising on the liberalisation of markets such as Asean, facilitating access to the region’s 620 million strong market,” Mustapa said. Also present at the event was Penang Chief Minister Lim Guan Eng.

Boston Scientific’s new medical device manufacturing plant, which will involve investments running more than hundreds of millions of ringgit, is scheduled to be operational in the fourth quarter of 2017.

By David Tan The Star/ANN


Boston Scientific plant in Penang to be ready by 2017 

GEORGE TOWN: Boston Scientific’s new medical device manufacturing plant in Batu Kawan Industrial Park, which will involve investments running more than hundreds of millions of ringgit, will be operational in the fourth quarter of 2017.

Boston Scientific vice-president (operations) Dave Mitchell told StarBiz the group would move production equipment into the facility in the second quarter of 2017.

“The plant will be operational in the fourth quarter of 2017, and we expect to ship our first “Made-in-Malaysia” product before the end of 2017,” Mitchell said in an e-mail.

The construction of the facility will begin in the first half of 2016 and scheduled for completion in the second half of 2017.

Mitchell said the site and facility were designed to accommodate at least 10 years of growth, including new products, additional volume and added capabilities, which might include research and development (R&D) or distribution.

“We anticipate having more than 400 employees at the Penang site within four years of operation, with room to grow significantly beyond that.

“Initially we will focus on building manufacturing capability and capacity in the Penang facility.

“We have the space and ability for additional capabilities at the site, including both R&D and distribution,” he said.

On the outlook of the global medical device market, Mitchell said that according to research firm Euromonitor, in 2016 the medical device industry was expected to record strong growth of almost 6% to reach US$315bil.

“Unlike the traditional markets such as Western Europe and the US, the Asia-Pacific medical device market is projected to to grow and gain a wider market in 2016,” he said.

Boston Scientific was founded in 1979 and is the worldwide developer, manufacturer and marketer of medical devices.

Its products and technologies are used to diagnose or treat a wide range of medical conditions, including heart, digestive, pulmonary, vascular, urological, pelvic health, and chronic pain conditions.

The group has 23,000 employess in 40 countries.

By David Tan The Star/ANN

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Malaysia’s ringgit has done a stunning about-face as China starts buying Malaysian bonds


The market is saying that this recovery in oil prices will be pretty positive for the Malaysian economy,” said Kelvin Tay, chief investment officer for southern Asia Pacific at UBS Wealth Management in Singapore.

SINGAPORE: Malaysia’s ringgit has done a stunning about-face this year, with surging capital inflows turning it into Asia’s best-performing currency from the region’s worst in 2015.

Still, few expect the ringgit to regain all the ground lost last year, as inflows may have peaked as Malaysian risk assets are starting to look pricey to investors and analysts.

The ringgit strengthened 10 percent against the U.S. dollar in January-March, its largest quarterly gain since 1973, Thomson Reuters data shows.

In 2015, the ringgit had its worst year since 1997, shedding 18.5 percent on the back on plunging oil prices, anticipated higher U.S. interest rates and a financial scandal at state-owned 1Malaysia Development Berhad (1MDB).

Driving the currency’s U-turn is the return of foreign investors, who have poured into Malaysian stocks and bonds on better crude oil prices, a surprisingly resilient economy and easier monetary policies from major central banks.

“The market is saying that this recovery in oil prices will be pretty positive for the Malaysian economy,” said Kelvin Tay, chief investment officer for southern Asia Pacific at UBS Wealth Management in Singapore.

In February, exports rose faster than expected. Sales of electrical and electronic products, the biggest item, increased 8.9 percent from a year earlier.

JACKED-UP HOLDINGS

Through the week ended April 1, foreign investors bought a net 5.5 billion ringgit ($1.4 billion) of Kuala Lumpur stocks this year, data from the research arm of Malaysian Industrial Development Finance showed. Last year had total outflows of 19.5 billion ringgit, it said.

Offshore investors have raised their local bond holdings by 11.8 billion ringgit in January-March, central bank data shows, with increased interest in longer-tenor debt. For all of last year, foreigners slashed holdings by 11.1 billion ringgit.

The cautious stance of Federal Reserve Chair Janet Yellen on U.S. rate hikes has caused investors to seek higher yields in Asia, aiding flows into Malaysia.

“This combination of an attractive currency valuation and higher yields in a world of low or negative interest rates is drawing foreign investors back to the local Malaysian market,” said Eric Delomier, Asia fixed income investment specialist for Capital Group of the U.S.

Analysts and investors have concerns, including valuations of Malaysian assets and leadership of the central bank as its internationally-respected governor, Zeti Akhtar Aziz, retires at the end of April, and her successor has not been named.

Malaysian bonds seem “a bit rich,” said Maybank Investment Bank’s fixed income analyst Winson Phoon in Kuala Lumpur. Earlier this month, the 10-year yield fell to 3.77 percent, the lowest since February 2015.

SMALL INFLOWS AHEAD?

“I don’t expect to see a repeat large inflows in months ahead, although the direction should remain slightly positive,” Phoon said.

On share valuations, “Malaysia is actually not particularly cheap or attractive, compared to other markets,” Tay of UBS said. “We don’t think earnings growth has actually improved among Malaysian corporates.”

Local stocks were trading at about 17.3 times the past 12 months’ earnings, according to Thomson Reuters data. That compared with 11.8 times for Indonesian stocks, according to exchange data.

Zeti has led Bank Negara Malaysia (BNM) since 2000, and investors are hoping for a successor with her credibility to help Malaysia’s standing at a time of political crisis for Prime Minister Najib Razak, chairman of 1MDB’s advisory board.

“Given the near-term challenges to a new BNM governor, oil prices and festering political risk from 1MDB, among other things, the ringgit’s upside is limited,” said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore.

His year-end target for the ringgit is 3.70 per dollar, 16 percent appreciation from its 2015 closing. Late Friday, the ringgit was at 3.90.- Reuters

China starts buying Malaysian bonds

Ong: ‘The Chinese government is keen to buy more Malaysian bonds

KUALA LUMPUR: China’s government has started buying more Malaysian government securities (MGS) and this inflow of new foreign money could rise to 50 billion yuan (RM30bil) in total, according to International Trade and Industry Minister II Datuk Seri Ong Ka Chuan.

In an exclusive interview with The Star, Ong said a senior representative of the Bank of China told him about this development recently when he met with the bank on issues pertaining to the use of yuan and ringgit in Malaysia-China direct trade.

“This could be one of the key factors contributing to the strength of the ringgit lately. China’s purchase of our MGS, which I am under the impression could rise to 50 billion yuan, will be very positive for our currency as it shows China’s confidence in our economy,” Ong said.

Other factors that had contributed to the strength of the ringgit in recent weeks included the recovery of crude oil prices, softer US dollar and the successful debt rationalisation of 1MDB, he added.

If China were to buy RM30bil worth of MGS, it would mean supporting 8.5% of Malaysia’s debts in the current MGS market. According to Bank Negara’s website, the value of outstanding MGS stood at RM352.06bil as at April 5, 2016.

Meanwhile, Malaysia’s debt markets saw inflows of RM11.5bil, versus RM1.4bil of outflows in February. The March foreign inflow was the largest monthly inflow since May 2014, according to a Nomura research note on April 7.

The inflows pushed foreign holdings of MGS to a historical high of RM171.5bil, the Japanese research house said. As a result, foreign ownership in outstanding MGS has risen to 48.7%.

Ong noted that Chinese Premier Li Keqiang had pledged to support the Malaysian economy – which was hit by a slowdown, local political problems, heavy outflow of funds and consequent plunge of the ringgit – when he visited Kuala Lumpur last November.

On Nov 23, the Chinese leader announced at a local forum that China would buy more MGS, issue yuan bonds in Kuala Lumpur and grant local institutional funds a quota of 50 billion yuan under the Renminbi Qualified Foreign Institutional Investor programme to invest directly in Chinese equities in the mainland.

The following day, the ringgit reacted positively gaining about 1% and the currency stabilised at around 4.25 to a US dollar in early December. MGS also gained.

“I was told China would use its reserves to buy our bonds. Its international reserves are high, at US$3.21 trillion (RM12.5 trillion) in March. With this development, I don’t think our ringgit will fall to 4.46 again,” said Ong.

Last month, Bank Negara said there were now more foreign governments and central banks holding MGS. A total of 29% was held by these two groups and 13% by pension funds.

The presence of these long-term investors is seen as reducing the risk of Malaysia facing sudden and massive outflows of capital in the event of unfavourable conditions, just like what had occurred last September, which saw the ringgit weakening to a multi-year low of 4.46.

Foreign inflow into the local stock market might be another factor that has boosted the ringgit. According to a Credit Suisse report, Malaysia saw a record net foreign equity inflow of RM6.1bil in March, which contributed to the ringgit’s 10.3% rise against the dollar in January-March 2016. At late trades on Friday, the ringgit stood at 3.9096.

Due to the recent new inflows, Bank Negara’s foreign exchange reserves had risen to RM412.3bil (US$96.1bil) as at March 15 from RM408.5bil (US$95.1bil) as at Jan 15.

This reserves figure is an important buffer against capital flows and has an impact on the ringgit and the sovereign credit rating of the country. Moody’s recently noted this buffer has improved.

Ong also said China would like to see Malaysia conducting roadshows in the mainland so that there is better understanding of Malaysia’s fundamentals and its bonds.

“The representative of Bank of China also told me the Chinese government is keen to buy more MGS, but they also hope our central bank could go there to market our MGS. I have conveyed this to Bank Negara. It is up to them to act,” says Ong.

Ong, who is also MCA secretary-general, noted that China’s huge direct investments had also boosted the ringgit’s sentiment.

The ringgit rose sharply in March partly due to the conclusion of the sale of 1MDB’s energy assets to China’s state-owned China General Nuclear Power Corp for RM9.83bil, as the absorption of all the debts of Edra Global Energy Bhd has reduced the systemic risk to pubic finance, banking system and economy.

Ong is confident that Kuala Lumpur is able to attract more major Chinese investments into the country this year due to Malaysia’s strong bilateral ties with China as well as the many free trade agreements – including the Trans-Pacific Partnership Agreement – Malaysia has signed with various countries and groupings.

By Ho Wah Foon The Star

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MH370 families file biggest lawsuit in Malaysia


 

KUALA LUMPUR: Seventy-six next of kin of the passengers on board  Flight MH370 have launched the biggest suit in the courts here against Malaysian Airline System Bhd and four others over the plane’s disappearance.

With the deadlines to do so up by today, the group  made up of 66 Chinese nationals, eight Indians and two Americans  filed the suit last Thursday, naming MAS, Malaysia Airline Bhd (MAB), Department of Civil Aviation (DCA) director-general, Royal Malaysian Air Force (RMAF) and the Government as defendants.

They are claiming for negligence, breach of contract, breach of statutory duty and breach of Montreal Convention against MAS

Lawyer N.Ganesan representing Indian, Chinese and American families said this is the biggest lawsuit against MAS in Malaysia as it involves a large number of families as plaintiffs.

In the statement of claim filed last Thursday, the families alleged that the plane’s disappearance on 8 March 2014 was caused by MAS’ negligence and the national carrier had breached the Montreal Convention by causing the injuries and death of all 239 passengers and crew..

Besides MAS, the families also named the director-general of the Department of Civil Aviation (DCA), Royal Malaysian Air Force (RMAF), and the government.

They claimed that DCA, RMAF and the government had conspired with MAS in conducting the investigation in a “grossly negligent manner” to delay the search, causing the death of all the passengers and crew.

They also contended the government and MAS had acted fraudulently and in a dishonest manner by hiding information about MH370’s disappearance from the public, and the families of passengers and crew.

The 76 next of kin are seeking damages and losses they suffered after their loved ones went missing.

“The families opted to file the lawsuit here because they have confidence in our court,” said Ganesan when met at the High Court here.

He also pleaded with the government not to move to strike out the lawsuit.

“This lawsuit deserves a day in court, and all the families deserve a fair trial,” he said.

When asked if the families were given consent by the MAS administrator under the MAS Act to initiate the lawsuit, the lawyer said they were denied consent. “They had previously said in the media that they would act in ‘good faith’ to determine fair and equitable compensation.”

“What they said was they were inviting next of kin to initiate lawsuits against them.”

Ganesan disclosed that an American law firm, Hod Hurst Orseck, will be joining the families’ legal team.

“They are the experts in civil aviation. We will be having the firm’s partners, Steven Marks and Roy Altman with me and lawyer Tommy Thomas.”

“When necessary, we will be filing for leave to the court for them to be conducting the trial,” he said.

Last week, 12 families of passengers from Malaysia, Ukraine, Russia and China sued MAS and the government for damages, shortly before the two years deadline for initiating a civil suit under the Montreal Convention.

Sources: The Star news and Free Malaysia Today

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Global growth retreats


US Dollar-euro parity in sight


To raise or not to raise: the uS Federal reserve Building in Washington, DC. the probability of a rate-hike in December now exceeds 80% – delivering the first rise in borrowing costs

THERE we go again. Even before the ink is dry, global growth forecasts are downgraded once more.

Paris-based OECD’s (rich nations’ think tank) November Economic Outlook attributes a slump in the growth of world trade (brought about partly by China’s slowdown) as the major factor behind the sluggishness of the global economy.

It was only in October that IMF estimated world GDP will grow 3.1% in 2015 and 3.6% in 2016, in the face of slowing global trade at 2.8% this year (3.9% in 2016).

Now, OECD thinks global growth will ease to 2.9% (3.3% in 2014) and recover modestly to 3.3% in 2016.

Even these, I think, are optimistic. Bear in mind that growth in world trade had slackened in recent years (falling behind global GDP growth which is unusual and not a good sign) and has stagnated since late 2014. It is expected to grow only 2% this year against 3.4% in 2014 and a much faster rate in the early years of the decade: “World trade has been a bellwether for global output, and that global trade growth observed so far this year have in the past been associated with global recession.”

Meanwhile, further GDP slowdown in emerging market economies (EMEs) is weighing heavily on global economic activity. In addition, sluggish trade and subdued investment and low productivity growth are checking the momentum of recovery in the rich nations.

Indeed, there are already signs that many advanced economies are unlikely to reach anywhere near their potential output, despite continuing easy money. Over the medium term, the risks of recession and deflation have become more probable than indicated by the IMF.

Because of recent headwinds, the probability of recession in eurozone and Latin America has risen beyond 30% and 50% respectively, with Japan now in recession.

Simultaneously, the probability of deflation in eurozone and Latin America now exceeds 30%, while Japan is already experiencing significant deflationary tendencies.

This raises the spectre of secular stagnation (what Harvard’s Larry Summers refers to as the inability of an economy to grow to reach its full potential) at a time when policymakers are running out of firepower – fear that the policy tools available to combat deflating forces are becoming increasingly blunt.

The immediate risks

As I see it, many factors are shifting the global economy into a secular slowdown. Immediate risks include:

> Continuing deficient global demand in the face of excess capacity: The rich nations as a whole are in growth recession, with the US pulling-up the others which are struggling to jump start anaemic output. The eurozone is in extended stagnation; growth if any is low (in Germany) and uneven; indeed, the region is flirting with deflation.

Consumer prices have turned increasingly negative in Q3’15. Abenomics is faltering, moving Japan into recession (-0.7% in Q2’15 and -0.8% in Q3’15). IMF predicts the biggest contributors to global growth in 2015-2020 are the faster growing EMEs. Among the top 10, only two are rich nations (US & UK); heading the list are China (accounting for nearly 30%), India (15%) and US (10%); the remainder being (in descending order) Indonesia, Mexico, South Korea, Brazil, Nigeria, UK and Turkey.

> Falling commodity prices: Energy, food and metals prices have fallen significantly over the past year. As a whole, commodity prices are now down 51% from its peak on April 29, 2011. Oil price has fallen 61% since June 14 and is languishing very near US$40 a barrel last weekend. Gold price lost 9% so far in 2015, dropping to a 5-year low at below US$1,065 per troy ounce on Nov 18.

Already, weary investors have begun to sense an end to the raw materials rout, as prices for most dipped below production costs. But few expect a quick rebound. The historical record: after commodity prices tipped over in 1997, it took 21 months to correct the fall. In 2000-01, it was 13 months.

After collapsing in 2008, commodity prices hit bottom in just eight months. This time, the index has been falling for four years and still counting. Nothing preordains a turnaround. Studies of commodity prices dating back to the 19th century found that cycles have been known to last 30-40 years.

So, don’t raise your hopes. Off-setting these “cuts” are currency weaknesses in many commodity-exporting nations since most commodities are priced in US dollar – thus translating to higher revenues in local currency, at least for now.

> China slowing down; so are EMEs and BRICS: Latest data points to an Asia where growth is stabilising in the region of 5%, reflecting very low growth in the more advanced Asian nations as a whole, where growth was at 1.5% annually (with South Korea and Taiwan expanding about twice as fast).

Asian EMEs are decelerating from close to 8% in 2011 to 6.5% or less in 2015. China is down to 6.8% this year but India is doing well at 7.3%. Similarly, the Asean 5 (Indonesia, Malaysia, Philippines, Thailand and Vietnam) is also slowing down, from 6.2% in 2012 to 4.6% expected this year.

Within the region, performance is mixed: Thailand is doing rather badly at 2.5%; while growth in Vietnam will accelerate to 6.5%, with the Philippines not far behind at 6%.

Both Malaysia and Indonesia will each grow at around 4.5% this year and not much more next year. Expectation is that growth in Asean 5 will likely stabilise in 2016 at between 4.5%-5%.

The BRICS (Brazil, Russia, India, China and South Africa) will continue to slacken considerably, growing at less than 2%, dragged down by severe recession in Russia and Brazil and hardly any growth in South Africa. EMEs now face a host of problems constraining their ability to grow.

Plummeting commodity prices, BRICS’s slowdown and investor flight are exposing deep-rooted weaknesses requiring fundamental economic overhauls, but made difficult by domestic politics and corruption. China’s successful transition towards a slower, but a more sustainable growth path will benefit growth all round, despite disruptions generated by rebalancing reforms, notwithstanding China’s sizable buffers available for it to cope.

> Rising US interest rates: The spectre of Fed uncertainty over the rate uplift that has spooked world markets will soon end, hopefully. The probability of a rate-hike in December now exceeds 80% – delivering the first rise in borrowing costs for nearly a decade. Expectation is for a quarter of 1% rise, with gradual but orderly small bites over the coming year. No big deal really, considering that Federal funds rate is already close to zero (below 0.2%) today and the yield on 5-year US Treasuries is only 1.65% per annum.

> Strengthening US dollar: The consensus is for US dollar to continue to strengthen, reflecting its relatively strong economy and prospects of a near term rate-hike in the face of economic weaknesses world-wide. The US dollar index (against six of its peers) has tipped past 99.6 (up 10.3% so far this year) for the first time since April.

Odds are for euro to be at parity with the US dollar; it has already touched 1.05. Tge euro has depreciated 13% so far this year.

The Chinese yuan is stable since this summer’s policy change. It is now likely that the yuan will be included in the SDR basket of elite currencies before year-end – in practice, bestowing on it reserve currency status.

Against a basket of EME currencies, however, the JP Morgan US dollar index is up 13.7% over the year; the Brazilian real is down 30.1% so far this year (until December 10); Malaysian ringgit, -20.2%; Turkish lira, -18.6%; Mexican peso, -12.1%; and Indonesia rupiah, -9.9.

Most certainly, Malaysia’s strong economic fundamentals don’t deserve a near 30% currency downgrade over the past year – it’s over-depreciated by at least 10%-15% after discounting the “bad” politics.

US President Obama (in Malaysia recently) is right to emphasise the critical importance of accountability and transparency, and the need to root out corruption in government.

> Destabilising politics and conflict: G-20 continues to struggle to come up with workable viable steps to reshape an increasingly dour economic outlook. They also face a host of new troubles, from political problems to security crises, raising doubts about preventing the global economy from falling into a long-term funk. Now, the growing refugee crisis in Europe and renewed fears of widespread terrorism after the Paris, Sinai (Egypt) & Bamako (Mali) attacks are proving difficult to fix. Soon enough, these heinous acts will become a pressing economic and business issue, bringing with it far reaching pressures on recovery efforts on the global economy.

What then, are we to do

So it’s not surprising that global economic prospects are repeatedly marked down in recent years. Add to this calls to join-in the war to fight terrorism with its multi-faceted business implications.

What’s worrisome is the rising risk of a world economy persistently mired in sub-par growth – as though hysteresis (impact of past experience on subsequent performance) has taken hold, with the attendant unacceptably wide income disparities, serious security issues, and persistent unemployment.

There is also the need to address the “large-scale displacement of people” with far reaching humanitarian development dimensions. Given that the global economy is still faced with much economic slack and very low inflation (indeed, even deflation), the complex challenges ahead will require continued monetary accommodation and fiscal support, notwithstanding frequent disruptions arising from China’s and EMEs’ reform transition, in the face of financial market volatility emerging from the pending Fed rate lift-off and the prospective strengthening of the US dollar.

Warren Buffett is known to have said: only when the tide has receded can you see who has been swimming naked. Cheap QE money has spoiled EMEs. Traditionally, debt busts in EMEs are centred on their sovereign US dollar denominated bonds.

Today’s “naked” EMEs reside in the corporate sector, mostly exposed to local currency bonds.

Their total private debt now far exceeds 100% of GDP, even higher than it was among the rich nations on the brink of the 2008 financial crisis. In the face of a debt crunch, they can become unduly vulnerable, especially for EMEs with a difficult and uncertain future.

Clearly, tepid and uneven growth raises the risk that can tip an economy into recession. Easy times have come & gone. Much soul searching lies ahead.

By Lin See-Yan What are we to do? 

Former banker, Harvard educated economist and British Chartered Scientist Tan Sri Lin See-Yan is the author of ‘The Global Economy in Turbulent Times’ (Wiley, 2015). Feedback is most welcomed; email: starbiz@thestar.com.my.







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Has the Commodities Supercycle Run Its Course? bloomberg.com Gordon Johnson, A…


If China killed commodities super cycle, Fed is about to bury it


http://www.bloomberg.com/api/embed/iframe?id=~~b0QXK0QkWLPAVcmUoZqA

Preview of the share image

Has the Commodities Supercycle Run Its Course?

bloomberg.com

Gordon Johnson, Axiom Capital Management analyst, discusses the outlook for commodities and the prospects for SolarCity with Bloomberg’s Carol Massar on “Bloomberg Markets.” (Source: Bloomberg)

For commodities, it’s like the 21st century never happened.

The last time the Bloomberg Commodity Index of investor returns was this low, Apple Inc.’s best-selling product was a desktop computer, and you could pay for it with francs and deutsche marks.

The gauge tracking the performance of 22 natural resources has plunged two-thirds from its peak, to the lowest level since 1999.

That shows it’s back to square one for the so-called commodity super cycle, a hunger for coal, oil and metals from Chinese manufacturers that powered a bull market for about a decade until 2011.

“In China, you had 1.3 billion people industrializing — something on that scale has never been seen before,” said Andrew Lapping, deputy chief investment officer at Allan Gray Ltd., a manager of $33 billion of assets in Cape Town. “But there’s just no way that can continue indefinitely. You can only consume so much.”

If slowing Chinese growth, now headed for its weakest pace in 25 years, put the first nail in the coffin of the super cycle, the Federal Reserve is about to hammer in the last.

The first U.S. interest rate increase since 2006 is expected next month by a majority of investors, helping push the dollar up by about 9 percent against a basket of 10 major currencies this year.

That only adds to the woes of commodities, mostly priced in dollars, by cutting the spending power of global raw-materials buyers and making other assets that generate yields such as bonds and equities more attractive for investors.

The Bloomberg Commodity Index takes into account roll costs and gains in investing in futures markets to reflect actual returns. By comparison, a spot index that tracks raw materials prices fell to a more than six-year low Friday, and a gauge of industry shares to the weakest since 2008 on Sept. 29.

The biggest decliners in the mining index, which is down 31 percent this year, are copper producers First Quantum Minerals Ltd., Glencore Plc and Freeport-McMoran Inc.

With record demand through the 2000s, commodity producers such as Total SA, Rio Tinto Group and Anglo American Plc invested billions in long-term capital projects that have left the world awash with oil, natural gas, iron ore and copper just as Chinese growth wanes.

“Without fail, every single industrial commodity company allocated capital horrendously over the last 10 years,” Lapping said.

Drowning in Oil

Oil is among the most oversupplied. Even as prices sank 60 percent from June 2014, stockpiles have swollen to an all-time high of almost 3 billion barrels, according to the International Energy Agency.

That’s due to record output in the U.S. and a decision by the Organization of Petroleum Exporting Countries to keep pumping above its target of 30 million barrels a day to maintain market share and squeeze out higher-cost producers.

A Fed move on rates and accompanying gains in the dollar will make it harder to mop up excesses in raw-materials supply.

Mining and drilling costs often paid in other currencies will shrink relative to the dollars earned from selling oil and metals in global markets as the U.S. exchange rate appreciates.

Russia’s ruble is down more than 30 percent against the dollar in the past year, helping to maintain the profitability of the country’s steel and nickel producers and allowing them to maintain output levels.

“The problem with lower currencies is operations that were under water a year ago are all of a sudden profitable on a cash basis,” said Charl Malan, who helps manage $31 billion at Van Eck Global in New York. “Why would you shut them?”

While some world-class operators such as Glencore plan to cut copper and zinc output, others like iron-ore producers BHP Billiton Ltd., Vale SA and Rio Tinto are locked in a “rush to the bottom” as they seek to drive out competitors by maintaining supply even as prices slump, according to David Wilson, director of metals research at Citigroup Inc.

“With the momentum on the downside, it’s very difficult to say that we’re reaching a bottom,” Wilson said.

Source: Bloomberg

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Kuala Lumpur property: KSK Land ups the ante with iconic 8 Conlay


 
KSK Group Bhd chairman Tan Sri Kua Sian Kooi with daughter Joanne who is KSK CEO & KSK Land Sdn Bhd MD

Flexibility: 8 Conlay units have the flexibility that allows residents to live their story the way they desire.

Fresh from announcing that its branded residence for Tower A at 8 Conlay project will be sold at a record RM3,200 per sq ft, Kempinski Hotel Kuala Lumpur has now been recognised under the Government’s Economic Transformation Programme.

IF 8 Conlay’s RM3,200 per sq ft (psf)selling price has set tongues wagging for possibly setting a new pricing record in luxury living, here is another development to add to the several “firsts” the project has notched since it was announced some two-and-a-half years ago.

Kempinski Hotel Kuala Lumpur, which is a component of 8 Conlay, has been recognised as an entry point project under the Tourism National Key Economic Area (NKEA) of the ETP – the Government’s initiative to propel the economy into high-income status by 2020.

Kempinski Hotels, Europe’s oldest luxury hotelier, is the hospitality partner of 8 Conlay’s owner and property developer KSK Land Sdn Bhd.

The hotelier will provide services for the project’s branded residence towers as well as manage the hotel tower.

“We got it (the endorsement) recently,” declares a proud Joanne Kua, who is the managing director of KSK Land.

According to the 30-year-old, the recognition is a sign of “quality assurance” that will place 8 Conlay on the global map.

“Even though we are in the ETP because of Kempinski Hotel Kuala Lumpur, Kempinski is also servicing our branded residence.

“This means there is a level of service that we need to adhere to for the entire development. This has always been what we have been reiterating at KSK Land, where every development we undertake has to be of good quality, and the service we provide to customers is always on top of our minds,” Joanne tells StarBizWeek.

“Being the owner of Kempinski Hotel Kuala Lumpur, we are proud to be pushing the boundaries by bringing the Kempinski brand into the Malaysian market because we are one of the few – if not only – fully integrated branded residence developments in the KLCC area.”

Kempinski Hotel Kuala Lumpur is slated to open its doors in 2020, coinciding incidentally with the planned “Visit Malaysia Year” in that same year.

In terms of numbers, Kempinski Hotel Kuala Lumpur is projected to bring in RM19.8mil in gross national income or GNI in the year 2020, which is expected to grow in the following years. Job-wise, the hotel is expected to create some 780 employment opportunities when it opens its doors in January 2020, while committed private investments amount to RM360mil, shares Joanne. This RM360mil is the cost of developing the hotel minus the land cost.

Shedding more light on the ETP recognition, the KSK Group director for corporate strategy and investments Pankaj C Kumar says that these numbers have been audited by the panel of auditors at the Performance Management and Delivery Unit or Pemandu, the driver of the ETP initiative.

“We started engaging with them early last year. Under the ETP’s Tourism NKEA, the Government’s plan is to increase the number of four- and five-star hotels, as well as increase the room rate in Malaysia, which is still relatively lower as compared to the region. They also want to create more vibrancy within the KLCC and Bukit Bintang areas,” says Pankaj.

Kempinski Hotels chief executive officer (CEO) Alejandro Bernabé says the ETP recognition raises the profile of its upcoming hotel in Kuala Lumpur. “For us, this creates even bigger expectations not from the construction point of view, but from the deliverance of (service) expectations. With the opening of the hotel in 2020 coinciding with a planned Visit Malaysia Year, we have to ensure we get it right from day one, as we cannot afford to let the honour of the country down,” he says in the joint interview. Bernabé was in town for the launch of 8 Conlay’s signature sales gallery on Wednesday. During the launch, phase one of 8 Conlay’s branded residence units known as YOO8, serviced by Kempinski, was officially open for sale. A private viewing for a select few of around 200 comprising the who’s who of the corporate circle was held on the same evening of the launch.

With piling works having begun at the four-acre site, it seems to be all systems go despite the expected slowdown seen in the property sector by analysts.

And in what is seen as a “coup of sorts” in positioning and differentiating 8 Conlay, the company has teamed up with the crème de la crème of brand partners like internationally-celebrated design company YOO, local architect Ar Hud Bakar and Bangkok-based landscape design firm TROP other than the world-class hotel management services of Kempinski.

8 Conlay unveiled

8 Conlay owes its name to the auspicious address it sits on in Kuala Lumpur’s Golden Triangle. The development comprises of two YOO-interior designed branded residence towers of 57- and 62-storey blocks that will be connected via two sky bridges on levels 26 and 44. The development is complemented by a 68-storey five-star Kempinski Hotel, serviced suites and a lifestyle retail component.

YOO8 comprises two spectacular towers of 1,062 luxury branded residence, ranging from one to three-bedroom units.

Tower A of YOO8 will feature 564 units covering 700 square feet to 1,308 square feet selling at an average price of a whopping RM3,200 psf.

According to the company, 70% of Tower A has been reserved, with 80% comprising Malaysians.

Meanwhile, Tower B of YOO8 will feature 468 units to be launched some time next year.

Can 8 Conlay usher KSK into the competitive world of property?

8 Conlay’s selling price of RM3.200 psf, which is RM500 psf higher than the indicative RM2,700 psf it was only recently looking at, begs the question of whether it can sell in a soft market. Being the maiden venture for KSK Land, all eyes are on the company and its young and petite head honcho, Joanne. After all, 8 Conlay’s entry into the branded residence space is coming after a hiatus of similar launches in the city.

 

Joanne: ‘Price is reflection of interest.’

Joanne: ‘Price is reflection of interest.’

KSK Land is the property arm of KSK Group Bhd, which has insurance as its other core business. KSK Group was formerly known as Kurnia Asia Bhd that was privatised in 2013.

Joanne, who is also KSK Group’s CEO, is the daughter of the 62-year-old KSK patriarch and executive chairman Tan Sri Kua Sian Kooi.

While Joanne is playing a bigger role as the face of property in the KSK stable, it is no secret that senior Kua remains the driving force of the group.

KSK had sold its Malaysian insurance business in 2013 and diversified into property in the same year. It still operates insurance businesses in Thailand and Indonesia.

A quick check with property consultants indicate that the Banyan Tree branded residence is being transacted at prices between RM2,500 and RM3,000 psf, while St Regis was approaching the RM3,000 psf mark as at July estimates.

As for Four Season’s Place, a property consultant puts the going figure between RM3,000 and RM3,500 psf. “At RM3,200 psf, 8 Conlay is trying to position itself in the likes of Four Seasons. However, Four Seasons sold its units much earlier and it would be interesting to see if 8 Conlay is able to match Four Seasons, given the current market situation,” says the property consultant.

Joanne, however, remains optimistic that 8 Conlay would do well and prove the sceptics wrong.

“The price is a reflection of interest coming from the market. At the same time, if you were to compare what’s around the KLCC area, the pricing will justify the product.

“In terms of value, our location on Jalan Conlay is a strong point as in the branded residence market, buyers buy for location, which itself is capital preservation,” she says, pointing out that branded residences command a 30% higher value than luxury apartments based on a recent Knight Frank report.

Bernab: ‘Kempinski Hotel Kuala Lumpur in the ETP raises the hotel’s profile.’
Bernabé: ‘Kempinski Hotel Kuala Lumpur in the ETP raises the hotel’s profile.’

The disproportion between local and foreign buyers is due to the lack of marketing so far. “With the launch of the sales gallery, we are only now officially going out to market. We are eyeing all major cities like Singapore, Shanghai, Beijing, Taipei, Korea, Hong Kong, Japan and the Middle East.”

The project is eyeing an equal spread of local and foreign buyers.

Locally, she shares that interest has been coming from surprisingly “young professionals who are well-travelled and know of Kempinski”.

“A branded residence is something one buys for capital appreciation for the long term. The buyers are a discerning lot and yearn to have a certain lifestyle.”

In terms of benchmarking, Joanne says that 8 Conlay is being benchmarked with other similar branded residences around the world and that prices in Malaysia are still relatively on the low side.

“If you look at branded residences in London, they are really about infusing three components. One is a five-star luxury service provider which you cannot deviate from. The second is the design element. When you partner a good name for design, buyers feel “safe” knowing that what is to be given is of a certain quality and level.

“The third is the architecture component, which often tends to be overlooked. But people who buy a branded residence are discerning buyers who look for offerings that are limited and unique.”

A unique proposition

Joanne describes it as providing a seamless experience for buyers all the way from the outside to the inside.

“When the thought process began to develop 8 Conlay, we looked at the branded residence space around the world and asked ourselves what was really available here. This is when we decided that we had to differentiate ourselves from the rest and would be able to do it,“ says Joanne.

This in essence sealed the company’s partnership with Kempinski. “What is unique about Kempinski is that in every hotel in the different cities it operates, there is a combination of its heritage and the owner’s identity, which I think is a strength many hoteliers don’t have. That’s one of the reasons why we like Kempinski because of the flexibility that allows for both parties’ personalities to stand out. That makes a very good hotel,” says Joanne.

She shares that the affinity to Kempinski is not altogether a new idea to KSK.

“The (Kua) family has had experience with staying at different Kempinski Hotels as we travelled a lot. So, when we were looking to partner a hotelier, Kempinski naturally popped into our chairman’s mind fairly quickly,” she says.

At the same time, Kempinski was also scouting for opportunities in Kuala Lumpur as part of its expansion into this part of the region.

Water theme: A unit designed around the ‘water’ element. Upon entering, one is treated to the magnificent view of KL City Centre beyond the foldable doors.
Water theme: A unit designed around the ‘water’ element. Upon entering, one is treated to the magnificent view of KL City Centre beyond the foldable doors.

“Kempinski is quite exclusive. We choose our projects very carefully and make sure we work with partners that share the same common values.

“We are looking for exclusivity and authenticity and benchmark ourselves with the top residences in the world because customers who buy these residences have choices being well-travelled,” adds Kempinski’s Bernabé.

He reckons that having other branded hotel residences around 8 Conlay is not competition, but rather a good thing for the person who lives there because “if you live in a branded residence, you would want your neighbourhood to be of the same calibre”.

Drawing strength from brand partners

Joanne says 8 Conlay’s strength is the diversity of the international brand partners it has teamed up with, which would serve as an advantage as it markets overseas.

“Tower A is designed by Steve Leung and YOO. Steve Leung is akin to the “Andy Lau of design” in Hong Kong and China, while Kempinski has a strong presence in the Middle East and China,” says Joanne.

“For interior design, we have YOO which is not new to the branded residence segment. It knows what it means to take on the little details that people don’t see in space optimisation. This is why we market our residence fully furnished because that is the strength we want to show in one of our brand partners.

“And as far as the Kempinski name for service is concerned, you can only experience it if you have stayed in one of the Kempinski Hotels and understand the service standard it brings to the table.”

Incidentally, for Kempinski, YOO, Steve Leung and TROP, this is their first time in Malaysia. “The good thing about this is that it gives us a fresh pair of eyes, where we can innovate and do something different.”

Joanne says the company is also not strategising to compete with other players for its retail component. “In fact, we like it that Pavilion is close to us because it provides options for our buyers.

“We are not building a mall, we’re building a retail lifestyle quarter. We are going with the design first, as it needs to complement the whole development and be an attractive point on its own,” she says.

Taking a leaf out of its insurance book

Joanne believes that 8 Conlay’s unique concept will pan out as planned.

“When we conceptualised the project, our chairman Tan Sri Kua made it clear that he wanted to grow into a conglomerate. It’s not that we woke up one morning and decided that we wanted to go into property. The root of our business is in insurance, which is a long-gestation project. There is no denying that property is also for the long term, so there is no right or wrong time to go into this business.

“In insurance, we come from a base where it is all about customer service. So, when looking at property, we also looked at it from a completely different angle … we put ourselves in the customer’s shoes and decided what we could do differently.

“When we decided which direction we wanted to go into in property, the message was very clear – to make sure we added value to the customer.”

“Creating extraordinary living spaces is what we do. KSK Land is formed on this philosophy and our job here is to create something extraordinary for 8 Conlay.”

On her taking on a mammoth project at a relatively young age, Joanne says she does not see her role from a gender perspective. “Any CEO would face the same challenges as me. The important thing is mutual respect, and in KSK, we are a family. We work together and celebrate together.”

By Gurmeet Kaur The Starbiz

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Sino-UK ties herald golden time with West


  • Buckingham Palace prepares for Xi Jinping visit

    President Xi Jinping’s visit will also receive a warm welcome from the British Monarchy. Queen Elizabeth the second, who has met with some of the most famous leaders in recent history, is expected to greet President Xi at Buckingham Palace.

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Cameron’s meeting with the Dalai Lama in 2012 was a turning point in Sino-UK relations. For 18 months, Beijing gave London the cold shoulder, while at the same time developing cordial relationships with Germany and France. The low ebb in bilateral ties happened when Europe was deeply troubled. Although China had struggled with Germany and France over the same problem in 2007 and 2008, by 2012, China was much stronger and was deemed more influential. Now, China has become more attractive to Europe than ever, and that has served to transform the foundation of China-EU relations.

The UK has shown its adept diplomatic skills while re-calibrating its relationship with China. It was the first European nation to announce that it had applied to join the Asian Infrastructure Development Bank, an international financial institution proposed by China. This decision thawed the previous discord. Since then, the UK has committed itself to turning London into the biggest offshore yuan center other than Hong Kong. Cameron has received Ren Zhengfei, president of Huawei, one of China’s biggest telecommunications companies. He also invited Chinese companies to invest in a new nuclear power station project. Such actions have set examples in Europe.

As an old empire, the UK has declined, but its foundation is solid. With a special relationship with the US, London knows how to communicate with Washington over China issues.

London making a friendly gesture to China shows that Western countries are trying to redress their deep-rooted political prejudices and explore more potential to develop relations with China.

To a large extent, London’s friendliness toward China stems from the pursuit of more benefits, but it shows that the spillover of China’s development in many respects has become an irresistible attraction. Nothing can guarantee that country-to-country relations will develop on a certain course without having to worry about derailment. So far, historical experience has shown us that the bond of interests is one of the most reliable mechanisms that can maintain a reciprocal bilateral relationship.

China and the UK need each other. As the US is becoming weaker in exporting interests to Europe, China is providing more opportunities to the UK, while China also needs a Western country to set an example for a new China-West relationship.

It must be noted that political and ideological misunderstandings will remain a challenge for both sides. How to deal with them is a long-term issue.- Global Times

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