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Saturday, December 26, 2015

Economic Outlook 2016 [Malaysia]

2015 has been a rather forgettable year for Malaysia. 

The FBM KLCI closed at 1,761.25 points on 31st December 2014 but was last seen at 1,663.51 points on 23rd December 2015 before the market was closed for public holidays on 24th and 25th December....it's a drop of about 5.5%. That is before the Ringgit is being taken into consideration. The RM was one of the worst performing currencies in 2015.

Chart taken from marketwatch.com
 
How 2016 will look like for Malaysia is the BIG QUESTION mark as we head into 2016 within a week's time.

Emerging economies slowdown has been a real concern to global economy including Malaysia, especially with China. The slowdown is exerting downward pressure on commodity prices. While we are expected to see an improvement in the US economy and a moderate recovery in the Eurozone, 2016 is also the year where China is expected to see further decline in their growth. This has hurt the Asian economies as weaker global trade and softer domestic demand takes place. The strengthening US dollar across the board, triggered very much due to the policy divergence between the US and the rest of the world has to a certain extend pulled the commodity prices to a level not seen since the global financial crisis in 2008/2009. This is particularly true with the oil prices. The slump has continued especially after the Organization of Petroleum Exporting Countries (OPEC) recent decision in a meeting not to curb its' production in the near term. This will also be crucial to how the economy in Malaysia will perform in 2016. 

Moving forward, the prospect of the commodity prices depends largely on these factors:

a) Future Supply Conditions
b) Global Demand, particularly China
c) Strength of the US Dollar

FUTURE SUPPLY CONDITIONS

For crude oil in particular, the pace of production by OPEC and non-OPEC members will determine the direction of their prices. With the Saudi-led OPEC's decision not to curb its' production in order to win the market share, it is unlikely that we will see a lack of future supply.

GLOBAL DEMAND

CHINA
China's economy is expected to soften further in 2016 to 6.5% to 7% as exports are not likely to recover sharply in 2016 and investments continue to be dragged down by weaker sentiment. The China's official Purchasing Manager's Index (PMI) fell to the lowest level in more than 3 years in November indicate a weaker manufacturing conditions and the deflationary environment in the country persists even after the People's Bank of China (PBoc) had made six rounds of interest rate cuts since November 2014 is a concern. Even with that, analysts believe moving forward, China will not experience a hard landing and believe there are still room for the PBOC to adjust its policy since the reserve requirement ratio remains relatively high. More fiscal stimulus is also expected to avert an abrupt deceleration in its' headline growth.

United States of America
The United States of America is probably the good news that we will be reading as the US Labour market conditions strengthen (a near level of full employment) and wage gains are also slowly improving. The first rate hike in December 17 has caused a knee-jerk reactions in financial markets and the greenback has strengthened across the board. Moving forward, analysts anticipate a rather similar trend as observed in the rate hike period in 2004 to 2006 which saw the greenback slowly weakening after the first rate hike as bullish expectations were already priced in prior to the hike.

EUROZONE
The Eurozone appears to be finally stabilized. Germany, as had been in the past continue to be the growth engine of the region, with a strong export sector, low unemployment, strong housing and manufacturing sectors and a balanced budget. The euro's depreciation against the USD has revived its' trade performance. The lower oil prices also helped to boost the region's trade surplus, up by 50% in the first nine months of 2015 compared to the corresponding period in 2014. Moving forward, the eurozone is expected to experience a slow and unglamorous pace of recovery but with its' downside risks slowly diminished. However, the moderation of emerging economies especially China might hurt the economy in Eurozone as well. The relatively high unemployment rate in the region is also a concern.

MALAYSIA
The country's economy continues to decelerate and real growth domestic product (GDP) growth will likely to settle around 4.7% in 2015. Generally, this was due to external sectors although the exports have recovered in ringgit terms since June 2015 although it continue to register negative growth in the 13 months to October 2015 in US dollar terms. Moving forward, with the slumping oil prices, the petroleum-related exports will likely to register a further decline. Support on the other hand is expected to be coming from the electronics and electrical (E&E) and palm oil segments which have benefited from the weaker ringgit. Consumer spending domestically will likely to continue to bear the brunt of higher prices resulting from cost push factors. It is likely that the private consumption growth will weaken to 4.2% in 2016. 

Moving into 2016, the impact of the slowdown in the domestic demand will likely to cause the real GDP growth to remain below its' potential but more positives are expected in the second half of 2016 as the impact of the current rout in commodities will slowly diminished by then. This was because while the current bleak outlook is painted on the crude oil futures, it is likely to see a slight recovery in prices by then. This is especially if the growth in demands remain positive and the prospects of stability in China emerges. In addition, the supply growth will likely to taper off if oil prices remain at the current level. Such a scenario will help Malaysia in its external sector going forward. The real GDP growth is expected to average about 4.4% in 2016.



Tuesday, December 22, 2015

Star Wars smashes US Box Office record

It is official....Star Wars: The Force Awakens have smashed the US Box Office record.

The previous record, was set by Jurassic World in June with $208.8m. Disney's Star Wars smashes the record for the biggest box office debut weekend in North America with ticket sales of $238m.

Star Wars: The Force Awakens
 
The new Star Wars film has taken an estimated $517m globally in three days - putting it just behind Jurassic World's $525m tally. While it fail to top Jurassic World's global opening figures, analysts believe the space saga has a huge potential to become the biggest-selling movie of all time, especially since Jurassic World's figure has taken into account of their opening in China which was over the same weekend where it opened everywhere else. Star Wars: The Force Awakens, on the other hand will not debut in the world's second biggest cinema-going territory until 9 January. 

With the trio stars from the original trilogy, Harrison Ford, Carrie Fisher and Mark Hamill to reprise their Han Solo, Princess Leia and Luke Skywalker roles alongside the younger franchise newcomers, the movie that is set to "a galaxy far, far away" some 30 years on from the action of 1983's Return of the Jedi had been receiving plenty of good reviews and feedbacks. Fans are loving it and the movie is also attracting the younger generation. 

The force it strong with Disney on this one it seems....

Saturday, December 19, 2015

The Force is with Disney as Star Wars smashed Records

Disney will most likely to look back at their decision to buy Lucasfilm for $4 billion as a great deal now that the Star Wars franchise belonged to the Mickey Mouse company. Because even when Star Wars: The Force Awakens has just been released on the cinema not long, it's already breaking records. 

The force is with the movie as it takes on the Big Screen with a Bang

The movie is estimated to heads towards an opening day Friday over $100 million, and that's a record, topping Harry Potter and the Deathly Hallows, Part 2 at $91.1 million set on its opening Friday in July 2011. With over $100 million, Star Wars $100 million is the first triple-digit million-day ever. This all comes after studio estimates showed that The Force Awakens exploded out of the box office at Thursday night previews, taking a record $57 million. Once again it beat out Deathly Hallows, Part 2 which made $43.5 million in Thursday night pre-shows in July 2011.

The Force is strong with Disney on this one, and the next thing to look at is whether the Star Wars: The Force Awakens will have the momentum to beat Jurassic World who raked in $208.8 million last June to be the biggest movie opening weekend of all time. It's probably not a question but many are expecting it to do so with such a strong wave of momentum and positive reviews coming out. 

Jeff Bock, box office analyst for Exhibitor Relations said, "I think it definitely stomps on Jurassic World's records. There would have to be an historic drop not to. But how big this will go? That's the question. We know fans brought out pre-sale tickets, leading to the initial records. But we just don't know how many repeat viewers and part-time Star Wars fans are going to show up on Sunday. Those are the only question marks," 

With the movie being a hit with critics as well, many are looking at it as the movie to beat Avatar to be the biggest of all time....question is on is it in $2 billion or will it surpass the $3 billion mark? The movie is currently scoring a 95% positive rating on RottenTomatoes.com.

Star Wars mania is also smashing records overseas, where The Force Awakens began to rollout in 12 markets on Dec. 16. The date marked the biggest box office single day of all time in United Kingdom/Ireland, Germany, Norway and Sweden. 

Suddenly the $4 billion investment on the aged old franchise makes a lot of sense for Disney.

Monday, December 14, 2015

Market Daily Report [14 Dec 2015]

The FBM KLCI index lost 10.18 points or 0.62% on Monday.


FBM KLCI index dropped by 0.62%
The Malaysian market seen a sharp drop as low crude oil prices and anticipation of the US interest rate decision hit the Asian market. Across Asia, Japan's Nikkei 225 was down 1.8%, South Korea's Kospi fell 1.07%, while Hong Kong's Hang Seng index dropped 0.72%. Asian share markets.

US FED RATE ANTICIPATION AND LOW CRUDE OIL PRICES HIT BURSA MALAYSIA

US policy makers will meet tomorrow (Dec 15) and on Wednesday (Dec 16) to decide on the country's monetary policy. A US rate hike does not bode well for emerging Asian markets like Malaysia as investors turn their attention to US dollar-denominated assets.
A US rate hike will be the country's first increase in about seven years from near-zero levels.

Crude oil prices have fallen below US$40 a barrel on oversupply concerns. At the time of writing, Brent oil was trading at US$37.74 a barrel. Sentiment on crude oil also hit the ringgit as the commodity forms a major component of the Malaysian economy and government revenue. The ringgit weakened to 4.3267 against the US dollar at 5pm.

Newly listed Red Sena Bhd led the top active today
Newly-listed Red Sena Bhd's shares and warrants were the most-actively traded counters with XOX just behind it on Bursa Malaysia today.

British American Tobacco was the biggest loser
The top decliners were British American Tobacco and included both Petronas Gas Bhd and Petronas Dagangan Bhd while the top gainers were Ajinomoto (M) Bhd and Kluang Rubber Co (M) Bhd.

AJI and KLUANG were both in the top gainers for the day

Star Wars: Can it beat "Avatar" in the box office?

In 2005, it appeared that the Star Wars saga was officially over. Lucasfilm and Twentieth Century Fox released Star Wars Episode III: Revenge of the Sith, which completed the prequels trilogy and tied the story back to the first film in the series. It was done...finished. Period. But then come Disney.

In October 2012 the studio brokered a $4.05 billion deal to buy Lucasfilm, and with the deal came the announcement that they would be starting production on a whole new trilogy of Star Wars films that would keep the epic story going for years and years to come.

Now that we are less than a week to the release of the movie Star Wars: The Force Awakens, the question remains: How big will this be?

Can Star Wars: The Force Awakens set new record in the box office?


GALAXY-SIZE EXPECTATIONS?

Star Wars: The Force Awakens opening on Friday is already setting records for pre-opening ticket sales....but the expectation is higher....can Star Wars beat "Avatar" in the box office to be the biggest of all time?

The movie is on track to have the biggest December opening ever, topping "The Hobbit: An Unexpected Journey," which took in $85 million in the U.S. and Canada on its opening weekend in December 2012.

Ticket seller Fandango says advance ticket sales for "Star Wars: Episode VII - The Force Awakens" has already topped every other movie and Imax says it has sold double the previous record. Imax receipts account for a third of pre-release sales for this movie.

Whether it bests the biggest grosser of all time — "Avatar," with $2.8 billion worldwide—depends on word of mouth and whether fans love it enough to watch it multiple times through the new year.

The advantage for Star Wars would be a weaker competition for the month...with Marvel's "Deadpool" only coming out in February while Warner Bros.' "Batman vs Superman: Dawn of Justice" coming out somewhere in late March.

THE BUZZ IS BECOMING LOUDER

The buzz is becoming louder on the social media.

"The Force Awakens" had 405 million trailer and teaser views on Facebook and YouTube. That's 87 percent more than this summer's "Jurassic World," which opened domestically with a record $208.8 million in ticket sales and owns the all-time No. 3 spot with $1.7 billion worldwide. No. 2 is "Titanic," at $2.1 billion.

What's more, the 178,000 weekly searches for the movie on Google is more than three times as high as "Jurassic World," which had 51,800 weekly searches a month from release, according to Moviepilot.

"People are searching and craving and demanding content," Moviepilot CEO Tobi Bauckhage said. "That's a very strong signal."

However, history has shown us that advance sales doesn't always equate to record grosses. The first installment of "The Hunger Games" was the leader in advance sales, but topped out at a worldwide gross of $693 million, not even in the all-time Top 10.

What "The Force Awakens" benefits from, however, is interest that now spans multiple generations. The movie also has a much bigger Chinese box office to tap. "Avatar" pulled down a monstrous $204 million in China through 2010, but the theatrical market there is now at least three times as big.

THE BIGGEST QUESTION MARK

Probably the biggest question mark remains is the movie itself...no one has seen it yet and the expectation has been set. With such a strong brand name itself, the excitement for the franchise alone will make this a hit but whether it can beat "Avatar" to be in the all time big, the movie has to deliver...and it has to deliver amid all these expectations and buzz on the movie.


Monday, December 7, 2015

Market Daily Report [07 Dec 2015]

The FBM KLCI index gained 4.13 points or 0.25% on Monday. 

The Finance Index increased 0.42% to 14149.89 points, the Properties Index up 0.27% to 1194.87 points and the Plantation Index rose 0.38% to 7458.45 points. 

The market traded within a range of 7.37 points between an intra-day high of 1675.96 and a low of 1668.59 during the session.

FBM KLCI gained 4.13 points 
The increase was mainly due to higher crude palm oil (CPO) prices. 

Export-oriented counters such as glove counters were performing quite well today. 

Top active for the day
The most actively-traded counter was XOX Bhd while the leading decliner was British American Tobacco (M) Bhd. 

The leading decliner was British American Tobacco (M) Bhd

Bursa Malaysia's top gainer is Top Glove Corp Bhd.

 
Across Asia, Japan's Nikkei 225 rose 0.99%, while South Korea's Kospi closed 0.54% lower. Hong Kong's Hang Seng fell 0.15%.

Reuters reported Asian share markets turned mixed on Monday, as caution grew ahead of Chinese data, though sentiment stayed, supported by hopes the US economy would be able to handle an expected first increase in interest rates in almost a decade.

U.S. crude futures for front-month delivery fell below US$40 per barrel on Monday, after the Organization of Petroleum Exporting Countries (OPEC) failed last week to agree on output targets to reduce a bulging oil glut that has cut prices by over 60% since 2014.