Thursday, October 19, 2017

FW: RHB FIC Rates & FX Market Update - 19/10/17



19 October 2017



Rates & FX Market Update



FFR Futures Remain Highly Supportive of a December Rate Hike




¨   Global Markets: US Treasuries continued to fall, touching an intraday high at 2.35% after comments by FOMC's Dudley and Kaplan supported the view of extra tightening by year end; FFR implied probability for December is steady at c.80%. The broad USD was however lower following the releases of dismal economic data and as the Fed's latest Beige Book reported that a tight labour market is now adding challenges to find "qualified workers" and is not translating into higher wages; remain neutral USD as moreover uncertainties over fiscal agenda and tax reforms linger. The EURUSD pared earlier losses, bouncing in the area of our defined support at 1.1750. Markets still consider that the anticipated ECB's QE extension could provide an upside rate surprise and translates the improving environment in Europe, supporting the Euro. On the political front, Madrid's ultimatum to Catalonia expires at 10am local time (4pm SG/KL time) and the region could lose its autonomy should its President fail to renounce his independence claims. The political jitters could continue in the coming days as taking control over the region by the central government is not automatic and requires Senate approval; however effects on markets are likely to vanish on receding chances of the realisation of independence; remain mildly bullish EUR.

¨   AxJ Markets: Elsewhere in China, movements in USDCNY and USDCNH were broadly subdued as the twice-a-decade congress gets underway. President Xi vowed to deepen supply-side reforms and continue on its deleveraging path, seeking a higher quality of growth going forward. With Xi likely to cement his power post-transition, investors will be looking closely at the next generation of potential leaders for China's willingness to continue on its reform path over the medium to long-term. On a shorter-term horizon, relatively robust growth and easing capital outflow pressures should drive a stable Yuan over the coming months; a neutral CNY stance remains appropriate.

¨   AUDUSD was relatively unchanged overnight, with the pair subsequently edging higher this morning, driven by better-than-consensus employment print (19.8k; consensus: 15k) and an unexpected dip in unemployment rate to 5.5% (consensus: 5.6%). Expect AUD to take cues from key Chinese data due later this morning, with robust Chinese prints likely to support the commodity complex alongside Australia's terms of trade, although we do not see any RBA tightening for the remainder of 2017, which should keep the AUDUSD under the 0.80 level on average; stay neutral AUD.


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FW: CIMB Fixed Income Daily - 19 Oct 2017 - UST yields rose as Fed Beige Book indicated modest to moderate growth



US Treasuries. UST yields climbed post release of Fed Beige book, which indicated that economic growth expanded modest to moderately in Sep through early Oct, although selected districts reported major disruptions from hurricanes, while labor markets remained tight as price pressures crimped business profits. Also, the yield upticks were aided by speculations on nomination of a more hawkish Fed chief by Trump, along with stronger risk appetite as DJIA closed above 23,000 for the first time.

Malaysia. The MYR sovereign bond market was closed on Deepavali holiday. To recap, the govvies continued to see muted flows on Tuesday, led by short and medium dated papers. In addition, sentiment was also not aided by currency movement, as USD/MYR is seen contained within 4.20-4.25 in the near term period.

Indonesia. It was a quiet day in IndoGB market as some neighbouring countries celebrated Deepavali on Wednesday. Despite few activities recorded, there were small buying flows on 7yr bond and caused 7yr yield to go down by 4 bps. The tone was soft on the 10y bucket, but other tenors looked balanced on both bid-offer sides. Today BI will decide on the 7-day reverse repo rate, where market consensus expects rate to remain unchanged at 4.25%. Market volume leaped to IDR17.5 trillion, dominated by bonds maturing in over 5 years (73%).

Best Regards,

CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
Find us on Bloomberg at CIMR <Go>

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FW: RAM Ratings reaffirms Cagamas' ratings


Published on 19 Oct 2017.

RAM Ratings has reaffirmed Cagamas Berhad’s (the Company) global-, ASEAN- and national-scale corporate credit ratings, at a respective gA2/Stable/gP1, seaAAA/Stable/seaP1 and AAA/Stable/P1. We have also reaffirmed the Company’s various issue ratings, as tabulated below. Concurrently, RAM has withdrawn the P1 rating on the Company’s RM5 billion Islamic CP Programme following its maturity on 19 August 2017. The ratings reflect Cagamas’ solid credit metrics, which are expected to remain robust despite its long-term plans to diversify into new areas and products. Given the Company’s strategic position in the domestic capital markets, as a liquidity provider to the financial system and also as one of the largest issuers of corporate bonds and sukuk, we believe that government support will be readily extended in the event of any financial distress. 



Rating Action


 Cagamas Berhad


 Corporate Credit Ratings





 RM40 billion Islamic and Conventional MTN   Programme (2007/2047)



 RM5 billion Islamic MTN Programme (2010/2040)



 RM20 billion Islamic and Conventional CP   Programme (2015/2022)



 Cagamas Global P.L.C.


 USD2.5 billion Multicurrency MTN Programme



 Cagamas Global Sukuk Bhd


 USD2.5 billion Multicurrency Sukuk Programme




As a liquidity provider to the mortgage sector, Cagamas purchases loan/financing assets from financial institutions (FIs), the Government of Malaysia and selected corporations on a purchase-with-recourse (PWR) or purchase-without-recourse (PWOR) basis. During the reviewed period, the Company’s overall asset quality remained robust as 87% of its PWR exposure was to highly rated counterparties rated AA and above. Its PWOR portfolio continued to exhibit a healthy performance, with a gross impaired-loan (GIL) ratio of 0.84% as at end-December 2016, below the Malaysian banking system’s 1.14% for residential property mortgages. The healthy showing is partly attributable to the non-discretionary direct salary deductions for the repayment of these mortgage assets. RAM notes that the diversification of Cagamas’ PWR portfolio into other sectors such as infrastructure and SME is still in the cards, but will likely take some time to materialise. 

Going forward, Cagamas’ business prospects are expected to remain challenging given the matured operating environment, with most FIs highly rated, not to mention the available liquidity in the domestic financial markets. The Company’s recent purchases have been driven by its PWR scheme as the financial industry gears up towards full compliance with the prescribed liquidity ratios. In the absence of any significant purchases of higher-yielding PWOR assets, Cagamas’ margins are expected to remain under pressure. In FY Dec 2016, the Company’s net interest margin eased to 1.2% (FY Dec 2015: 1.4%).  

RAM highlights that Cagamas enjoys ready access to the capital markets given its quasi-government status; it is solely reliant on the wholesale market for funding. Nonetheless, the Company is exposed to minimal liquidity and refinancing risks given its strict asset-liability management. To ensure more competitive pricing of its products, Cagamas ensures that its trade instruments remain liquid and has been increasing the tradability of its debt issues by reopening outstanding ones and including its debt securities in global indices. This has to date enabled Cagamas to improve its time to market, with more attractive pricing of its issuances. 

Meanwhile, the Company’s overall risk-weighted capital adequacy ratio of 24.1% as at end-December 2016 is deemed superior, mainly underscored by high-quality capital that includes common shares and retained earnings. As at the same date, Cagamas’ common-equity tier-1 capital ratio stood at 22.3%. RAM notes that Cagamas’ long-term plans to explore regional opportunities and purchase new asset classes have yet to materialise, and are not expected to materially affect its capitalisation given the Company’s prudent and conservative management practices.

Analytical contact
Lim Chern Yit            
(603) 7628 1035       

Media contact
Padthma Subbiah
(603) 7628 1162






FW: RHB | Economic Research | Tracking Global News




Economic Research

19 October 2017

Global News


Economic Update




Tracking Global News


US Fed’s Beige Book Sees Modest Growth in Economy Amid Tightening Labor Market


US Housing Starts Imply Negative Contribution to 3Q GDP


China’s Xi says It Will Continue to Open Its Economy and Deepen Financial Reforms


Japan's Exports Remain Strong In September



Peck Boon Soon  | +603 9280 2163

Vincent Loo Yeong Hong  | +603 9280 2172

Ng Kee Chou  | +603 9280 2179

Rizki Fajar  | +6221 2970 7065

Aris Nazman Maslan | +603 9280 2184




To access our recent reports please click on the links below:


17 October 2017

16 October 2017

13 October 2017

12 October 2017

11 October 2017


Economics Team





Peck Boon Soon

Chief ASEAN Economist

+603 9280 2163

Vincent Loo Yeong Hong

Malaysia, Vietnam

+603 9280 2172

Ng Kee Chou

Singapore, Thailand

+603 9280 2179

Rizki Fajar

Indonesia, Philippines

+6221 2970 7065

Aris Nazman Maslan

Malaysia, Vietnam

+603 9280 2184



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FW: AmBank Research - Top Glove : Buoyant outlook ahead HOLD, 19 Oct 2017




Top Glove : Buoyant outlook ahead                                                                         HOLD


We raise our FY18-20F forecasts by about 3% each, increase our FV to RM6.36 (from RM6.22) and maintain our HOLD call. This follows the change in FY18F effective tax rate assumption from 18% to 15%. Our FV is based on 20x revised FY18F EPS.


Global glove demand is expected to remain healthy with an annual growth rate of 8%-10%. In FY18F, revenue is poised to grow by 15% on the back of a 13% increase in output volume. We estimate net profit margin to be relatively unchanged at 10% in FY18F. We believe effective tax rates would stay low at ~15% in FY18-20F. Management highlighted that even with the government’s withdrawal of the reinvestment allowance in 2019, the group will be able to sustain the low effective tax rate through the availability of R&D tax incentives, utilization of unutilized allowance and internal tax planning.


Management guided for RM300mil capex in FY18F (vs. FY17: RM447.1mil). The group aims to increase its market share from 25% to 30% by 2020. Besides organic growth, management reiterated its interest in M&As as an expansion means, and guided that there will be more M&As in next few months. We continue to like Top Glove for its carefully crafted expansion plan, focus on quality and continual efforts in enhancing operating efficiency through increased automation. However, we believe the current share price has very much priced in Top Glove’s fundamentals.



Others :

Digi.Com : Stabilising service revenue                                                                     HOLD

Sapura Energy : Minimal impact from full ownership of Sapura3000          HOLD

Automobile : A slow month for all                                                                            NEUTRAL




Tune Protect Group, Green Packet, Versatile Creative,Efficient E-Solutions




Oil & Gas Sector : Petronas warns of stagnation in LNG industry

YSP Southeast Asia : Vietnam ops to break even

Property Sector : Station in Forest City not decided yet — MyHSR





The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.





















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FW: [Maybank IB] Today's Research - Malaysia





Regional | Regional Plantations
Long term trend analysis
Chee Ting Ong



Top Glove | Awaiting material acquisition
Yen Ling Lee | Merely stable
Chi Wei Tan



Malaysia Automotive | Surprises on the downside
Ivan Yap





Company Update

Top Glove (TOPG MK)
by Yen Ling Lee

Share Price:


Target Price:




Awaiting material acquisition

While the operating environment remains sound, Top Glove's sequential 1QFY18E bottomline could be weaker QoQ due to a higher tax rate (4QFY17: 1%). Separately, Top Glove is close to securing a sizable acquisition target but there is risk of earnings dilution as the valuation may not be cheap. Maintain our earnings forecasts, HOLD call and TP of MYR6.20 (20x 2018 PER; +1SD to mean).

FYE Aug (MYR m)















Core net profit





Core EPS (sen)





Core EPS growth (%)





Net DPS (sen)





Core P/E (x)





P/BV (x)





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ROAE (%)





ROAA (%)










Net debt/equity (%)

net cash

net cash

net cash

net cash


TP Revision (DIGI MK)
by Chi Wei Tan

Share Price:


Target Price:




Merely stable

9M17 results were below our expectation, with the prepaid segment merely stabilising instead of growing sequentially. Maintain HOLD with a lower MYR4.80 TP (from MYR4.90 previously) as we lower earnings forecasts slightly to reflect weaker prepaid contribution. Risk-reward remains relatively balanced at present.

FYE Dec (MYR m)















Core net profit





Core EPS (sen)





Core EPS growth (%)





Net DPS (sen)





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P/BV (x)





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RN: Regional Plantations

Long term trend analysis
by Chee Ting Ong

Sector Note

The industry's productivity has stagnated over the past 42 years but this was made up by new area expansion, boosting supply. Cost has been on the rise, but so has selling prices. Meanwhile, operating margins (using IOI Corp as case study) has ranged between 35%-67% over the past 23 years. We forecast the region's production growth rate to slow from 2020 due to the lack of new expansion in recent years, which in turn should be positive for CPO prices in the long run. NEUTRAL.

MY: Malaysia Automotive

Surprises on the downside
by Ivan Yap

Sector Note

Sep 2017 TIV hit a year low of 41.0k units (-21% MoM) and took 9M17 TIV to only 425.7k units (+2% YoY), below our 2017 forecast of 610k units (+5% YoY). We lower our 2017 TIV expectation by 2% to 590k and introduce our 2018 TIV forecast of 610k units, based on our in-house 2018 real GDP growth forecast of +5.1%. Still POSITIVE in anticipation of a gradual earnings recovery from improving sector fundamentals i.e. TIV recovery, rising auto loans approval, stronger MYR. BUY BAuto, MBM & TCM.


MY: Labour Statistics, August 2017

Jobless rate drifting in "now-normal" range
by Suhaimi Ilias

Economics Research

Unemployment rate edged down to 3.4% in Aug 2017 (Jul 2017: 3.5%), but in essence have been drifting in the 3.4%-3.5% range since Dec 2015. Year-to-date average is 3.4%, in line with our forecast of 3.4% full-year average (2016: 3.5%).

MY: Traders' Almanac

BM TRAD/SVC INDEX – A Base is Formed
by Nik Ihsan Raja Abdullah

Technical Research

Last minute selldown in blue chip stocks like KLK, Telekom and Maxis dragged the FBMKLCI 5.38pts lower at 1,748.99 on Tuesday. Market breadth was negative, with losers outpacing advancers by 468 to 395. A total of 2.9b shares worth MYR2.3b changed hands. Despite the negative tone, market may stage a rebound today after falling for two consecutive days, led by gains in overnight US markets.


Outside Malaysia:

U.S: Fed sees economy advancing amid `widespread labor tightness'. The U.S. economy picked up steam with only modest inflation from September through early October, as some companies expected a tight labor market would exacerbate hurricane rebuilding efforts, a Federal Reserve survey showed. The central bank's Beige Book economic report, based on anecdotal information collected by the 12 regional Fed banks through Oct. 6, said economic activity increased even amid "major disruptions" across the South from hurricanes Harvey and Irma. Still, price pressures were described as "modest." "Labor markets were widely described as tight" and worker shortages in certain sectors "were also restraining business growth," the report showed. (Source: Bloomberg)

E.U: ECB bond program survives another challenge at German court. Germany's top court rejected requests to stop the Bundesbank from taking part in the European Central Bank's quantitative-easing program while lawsuits challenging the bond-buying plan are pending. The Federal Constitutional Court said granting the request would give plaintiffs what they want before the case has been fully resolved. While the judges in Karlsruhe, Germany, could eventually rule against the Bundesbank's participation in QE, a final decision is likely months, or even years, off. "Because of the high volume of purchases by the Bundesbank, disrupting bond purchases would endanger or even thwart the program's goal to raise inflation to about 2%," the court said. "Granting the interim bid now would be more than just conserving the status quo, it would be identical with granting the lawsuit." The decision is part of litigation pending over the ECB's policy in Germany, where the EUR2.3tr (USD2.7t) bond-buying program faces widespread opposition. In July, the German court put the program in doubt, asking the Luxembourg- based European Court of Justice for an interim ruling on whether it's legal. The judges argued that QE violates the ECB's mandate under the treaties of the European Union and the ECJ should rule against it. (Source: Bloomberg)

U.K: Inflation climbed to its highest rate in more than five years in September, boosted by the cost of food and transport. Consumer prices rose 3% from a year earlier, the fastest pace since April 2012 and up from 2.9% in August, the Office for National Statistics said. The increase intensifies the squeeze on British households and may embolden Bank of England policy makers to raise interest rates for the first time in over a decade next month. (Source: Bloomberg)

U.K: Jobless rate held at a 42-year low in the three months through August as Britain enjoyed near-record employment, according to figures published. The latest snapshot of the labor market from the Office for National Statistics may help to explain why the Bank of England appears to be edging toward its first interest-rate increase for a decade. Wage growth was little changed at just over 2% well behind the rate of inflation -- but officials are signalling they are no longer prepared to wait for a pickup before tightening policy. The jobless rate stood at 4.3% in the latest period, staying below the BOE's 4.5% "equilibrium" rate below which inflationary pressures start to build. The number of people looking for work fell 52,000 to 1.44 million, the lowest since 2005. (Source: Bloomberg)

Japan: Exports grew by double digits for a third straight month in September, as a trade recovery underway this year showed no signs of letting up. Exports rose 14.1% from a year earlier, while Imports increased 12%. The trade surplus was JPY670.2b (USD5.9b). Recovering global demand has driven growth in Japan's exports, supporting the nation's domestic economy. But Japan's trade surplus with the U.S. continues to irritate the Trump administration. In a report on foreign-exchange policies released on Oct. 17, the U.S. Treasury kept Japan on its monitoring list due in part to its goods surplus with the U.S.,which Treasury said was USD69b over the four quarters through June. (Source: Bloomberg)

Other News:

Seacera: Wins MYR216m contract from Rubber Research Institute of Malaya. The group has won a contract worth MYR216m to build the Rubber Research Institute of Malaya's centre of excellence in Selangor. Seacera said it accepted the letter of award from Koridor Padu S/B pertaining to the sub-contract works for the construction of the centre, which will be located in Sungai Buloh. The project is expected to be completed in 24 months i.e. by October 2019. (Source: The Edge Financial Daily)

YFG: Awarded MYR200m construction job in Taiping. Its wholly owned subsidiary YFG Engineering S/B has bagged a MYR200m contract for the construction of apartments in Taiping, Perak. The project involves the building, infrastructure and landscaping works of the proposed development.It is expected to commence on a date to be notified later and to be completed within 36 months from the commencement date. (Source: The Sun Daily)

Heitech Padu: Bags MYR75.2m contracts for three solar power plants. The group has secured three contracts to establish high voltage interconnection facilities for three solar power plants for a sum of MYR75.16m. The group said its subsidiary Duta Technic S/B received the letters of award from Scatec Solar Solutions Malaysia S/B — a unit of Scatec Solar ASA Norway — for the projects, which are located in Kedah, Melaka, and Terengganu. (Source: The Edge Financial Daily)

T7 Global: To sell Birmingham office block for GBP5.75m.T7 Global , formerly Tanjung Offshore, is selling its entire equity stake in 7 New Market Street Holdings Ltd (7NMSH), which owns a 10-storey office block with 18 car park spaces in Birmingham, UK, for GBP5.75m (MYR32.24m). According to T7, the disposal is expected to net it a gain of GBP1.73m (MYR9.69m).The property, which is currently vacant, is located on 0.19 acres of freehold land at the corner of New Market Street and Great Charles Street Queensway, which is at the edge of the Birmingham Central Business District. (Source: The Edge Financial Daily


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