Malaysia Airlines and Singapore Airlines should consider a merger, said an equity analyst.

According to Maybank Kim Eng’s regional aviation analyst Mohshin Aziz, it was his personal opinion this would make both airlines more cost efficient to operate.

“This is my firm view,” he said.

Speaking at an Invest Asia 2019 presentation last week, he said this would first need a change in mentality of people that an airline had to represent their respective countries.

“A merger between them will see a lot of improvements in terms of scheduling. Besides, relocation of assets can also be optimised,” he said.

“If the full service carriers can move away from this mentality, it will be very good for the business,” he said.

Maybank Kim Eng would like to clarify that the view(s) expressed by the analyst quoted in this article do not represent the house view and position of Maybank Kim Eng.

Malaysia and Singapore airlines were once together, then known as Malaysia–Singapore Airlines (MSA), was the flag carrier of Malaysia and Singapore.

According to Wikipedia, MSA came about in 1966 as a result of a joint ownership of the airline by the governments of the two countries.However, MSA ceased operations after six years in 1972 when both governments decided to set up their own national airlines, Malaysian Airline System and Singapore Airlines. – The Star

February surge fails to lift foreign investments

A surge of long-term equity inflows in February failed to reverse a weak start for foreign investments into the Philippines as fewer multinational firms sent funds to their local units coupled with an increase in capital withdrawals, the central bank said on Friday.

In a statement, the Bangko Sentral ng Pilipinas said that total foreign direct investments (FDIs) reached $1.4 billion (Bt44.18 billion) in the January-February period, lower by 15.7 per cent than the $1.6 billion net inflows registered in the comparable period last year.

“The decrease in FDI net inflows during the period was due mainly to the 67.1-percent decline in nonresidents’ net equity capital investments as placements decreased by 31.5 percent, while withdrawals grew by 236.5 percent,” the central bank said.

Equity capital placements during the period came mostly from Japan, China, South Korea, Mauritius and the United States.

By economic activity, equity capital infusions were mainly invested in financial and insurance services, transportation and storage, real estate, administrative and support services, and manufacturing industries.

Meanwhile, net placements in debt instruments increased by 12.9 per cent to $1 billion from $896 million in the first two months of 2018. Reinvestment of earnings grew by 10.1 per cent to $155 million during the period.

Total FDIs for all of 2018 reached $9.8 billion, which represented a 4.4-per cent decline from the $10.3 billion recorded in the previous year. – Philippine Daily Inquirer

OCBC sees slowdown in housing loans

OCBC Bank, like the other two Singapore lenders, is feeling the chill of last year’s property cooling measures with its mortgage book “reduced visibly” for the first quarter of 2019.

“Our housing loans outstanding have reduced visibly on quarter and on year,” chief executive Samuel Tsien said during the bank’s results announcement on Friday. “Housing demand is there but it’s not as strong as before.”

OCBC’s total housing loans stood at S$64.8 billion (Bt1.5 trillion) at March 31, 2019, up from $64.5 billion at end-2018. It was $64.2 billion as at March 31, 2018. Mr Tsien said the Singapore home loans contraction was “less than a billion” (in Singapore dollars) year on year.

In addition, Mr Tsien said OCBC, whose home loan market share remains over 20 per cent, isn’t keen to fight for more of the pie by cutting rates.

“Sometimes, the pricing is not worth our participation in the market,” he said. – The Straits Times

Indonesia posts $2.4 bn surplus in first quarter

Indonesia posted a surplus in its balance of payments for the second successive quarter thanks to the improvement in the current account deficit and surge in capital and financial accounts, Bank Indonesia (BI) has announced.

The balance of payments surplus was recorded at US$2.41 billion (Bt76.05 billion)in the first quarter, lower than the $5.41 billion surplus recorded in the fourth quarter of last year.

BI spokesman Onny Widjanarko said in a statement that the lower surplus was due to payment of the government’s global bonds that reached maturity.

The surplus contributed to the increase in foreign exchange reserves to $124.53 billion, up from $120.65 billion recorded in the previous quarter.

The current account deficit stood at 2.6 percent of GDP, or equal to $7 billion, in the first quarter as the trade balance reversed to a surplus of $1.1 billion after deficits were booked in the previous two quarters.

“The decline in the current account deficit was thanks to the increase in the trade balance surplus, which was in line with the surplus increase in the nonoil and gas trade balance as well as improvements in the oil and gas trade deficit,” said Onny.

Onny added the trade balance surplus in the first quarter was due to the decline in imports compared to exports, in line with the government’s import control policies that were rolled out last year, such as the wider mandate for 20 percent blended biodiesel as well as the higher import tax for 1,147 consumer goods. – The Jakarta Post

Apart from acquiring a new crown jewel to complement its growing infrastructure empire, SMC made history for sealing the biggest merger and acquisition deal in the local cement industry.

“By and large, SMC becomes a proxy of this economy,” said ATR Asset Management head of research Jose Mari Lacson. “From a strategic point of view, it’s good for national interest because it brings capacity to Filipino hands. We need cement to grow the economy so it’s aligned with national interest.”

SMC, advised by Swiss investment house UBS AG, won an auction that pitted it in the final round against Anhui Conch, the largest cement manufacturer in mainland China.

For its part, this transaction completes the exit of LaFargeHolcim from Southeast Asia, which the European cement giant described as a “hyper competitive arena.” It earlier divested its assets in Indonesia, Malaysia and Singapore.

Based on a deal signed Thursday night, SMC agreed to acquire 85.7 percent of Holcim Philippines and make a tender offer for shares held by the remaining investors.

Holcim Philippines will be folded into First Stronghold Cement Industries Inc., a wholly owned new unit of San Miguel Equity Investments Inc., which, in turn, is a wholly owned subsidiary of SMC.

SMC said the acquisition would “increase the foothold of the San Miguel group in the cement business, and will provide the opportunity to implement its plan to expand its cement business nationwide.” Through its indirect subsidiary Northern Cement, SMC is but a marginal player in the local cement space with an annual capacity of 660,000 metric tons.

The next hurdle for SMC is to have this deal cleared by the Philippine Competition Commission (PCC), which is mandated to promote and maintain market competition within the Philippines by regulating anti-competition behavior.

Holcim Philippines operates four integrated cement plants and one grinding plant in the country. It has manufacturing facilities in La Union, Bulacan, Batangas, Misamis Oriental and Davao, as well as aggregates and dry mix business and technical support facilities for building solutions. It has an annual cement production capacity of around 10 million metric tons and a market share of close to 30 percent.

“The decision to put the deal under SMC is smart. It may help win PCC approval and will avoid a huge debt load for Eagle (Cement). The PCC will put this deal under a microscope but we rate the odds of approval good,” Abacus Securities head of research Raymond Neil Franco said.

Eagle Cement – likewise led by the family of SMC president Ramon S. Ang – is currently the fourth largest cement-maker in the country. It will have an annual cement capacity to 8.6 million metric tons by 2020 once its expansion program is complete.

The deal may be “expensive from the point of view of an outsider,” but ATRAM’s Lacson said Ang may have valued this based on the synergies to be unlocked given SMC’s vast infrastructure projects. SMC is building a brand-new airport in Bulacan alongside other big-ticket railway and tollroad projects.

In the last two decades, SMC has diversified from its traditional food and beverage businesses to secure market-leading interests in new areas like power generation and oil refining businesses.

Vietnamese Deputy Minister of Foreign Affairs To Anh Dang and Director for Asia and Pacific in the European External Action Service (EEAS) Gunnar Wiegand co-chaired the event.

Close to 80 delegates from Vietnam’s ministries and sectors as well as 40 representatives from the EEAS, the European Trade Commission, the EU delegation, and embassies of EU member countries in Vietnam participated in the meeting.

The launch of the Joint Committee aims to speed up the implementation of the PCA, which took effect from October 1, 2016. Vietnam and the EU pledged to strengthen the overall cooperation through the bilateral comprehensive partnership and cooperation.

At the meeting, the two sides highly evaluated the development of Vietnam -EU relations over the past three decades, emphasising their wishes to further deepen bilateral cooperative ties in the fields of delegation exchanges, security-defence, trade-investment, law, justice, science-technology, clean energy, and agro-forestry-fishery.

The EU extolled Vietnam’s socio-economic development achievements and position in the region and hoped to enhance coordination with the Southeast Asian country to promote Asean-EU ties.

The EU also voiced its support for the maintenance of security and safety of navigation and aviation and respect for law in the East Sea.

Enhancing bilateral cooperation in global issues will contribute to peace and development in the region and the world, according to the EU side.

The two sides affirmed to promote the signing of the EU- Vietnam Free Trade Agreement (EVFTA) and the Investment Protection Agreement (IPA) in the coming weeks.

The early implementation of the deals will help create a strong boost for business and investment ties as well as a strong wave of high-quality investment from both sides.

Vietnam and the EU also discussed necessary procedures towards the ratification and effective implementation of basic conventions of the International Labour Organsiation (ILO).

The two sides exchanged views on the bilateral development cooperation programme for the 2014-20 period, and agreed to focus on the fields of rural electrification, effective use of energy, renewable energy development, climate change adaptation and sustainable development, judicial cooperation, public financial management and economic matters, human resources training, culture, education, tourism and people-to-people exchanges.

They applauded the enforcement of the Voluntary Partnership Agreement (VPA) on Forest Law Enforcement, Governance, and Trade (FLEGT) between Vietnam and the EU from June 1, 2019.

The EU recognised Vietnam’s efforts in reforming the legal framework to address issues related to illegal, unreported and unregulated (IUU) fishing.

The two sides also agreed to implement a mid-term review mechanism to ensure the effective implementation of the achieved results, actively contributing to the reinforcement of the bilateral comprehensive partnership and cooperation.

They consented to hold the second meeting of the Joint Committee in Brussels, Belgium, in 2020.

Oyster Bay Fund, a global multi-strategy investment fund, is mulling over an investment and has given Hyflux a non-binding letter of intent, the firm said on Friday. The Straits Times understands that the fund is based in Bermuda.

As an indication of its good faith and intent, the fund is prepared to buy preference and ordinary shares in HyfluxShop Holdings from the company for up to S$26 million (Bt 601.96 million), Hyflux said. If a definitive agreement is signed, this sum is expected to be used as working capital.

Hyflux said it envisions an investment of up to S$500 million in the group by the fund, subject to regulatory clearance, due diligence and the execution of a definitive agreement.

HyfluxShop is the consumer water business in which Hyflux owns a 30 per cent stake. HyfluxShop used to be wholly-owned by Hyflux until February last year.

In February last year – months before Hyflux filed for bankruptcy protection in May – Hyflux distributed 70 per cent of the shares of HyfluxShop to Hyflux shareholders via a dividend in specie, resulting in Olivia Lum, Hyflux’s controlling shareholder, owning 23.8 per cent of HyfluxShop. She then made a general offer to buy up the remaining HyfluxShop shares from the rest of the minority shareholders.

At the time, HyfluxShop was valued at S$20 million, based on the price per share she offered to pay. Hyflux also agreed to buy S$20 million HyfluxShop preference shares with a 6 per cent annual dividend.

Hyflux is racing to nail down a $400 million rescue deal with Utico, the largest utilities provider in the United Arab Emirates.

Hyflux said: “The letter of intent (from Oyster Bay Fund) is stated to automatically terminate if a judicial manager or liquidator is appointed over the company.”

The new development comes two weeks after Hyflux received a non-binding letter of intent from Emirati utilities group Utico. Discussions with Utico are based on a possible injection of S$400 million to be used for equity and working capital purposes and possible urgent interim funding.

During a hearing in the Singapore High Court on Tuesday, Hyflux was asked to give more clarity on its planned timeline to complete a restructuring.

Lawyer Smitha Menon, who represents Hyflux, said she could not provide more clarity yet. “The investor (Utico) is doing due diligence, it’s a moving timeline. We are dealing with information requests as well as negotiating a possible structure,” she said.

Hyflux also said that it is continuing to engage with other parties who have expressed an interest to invest in the group.

Priority will be given to parties that are willing and able to provide interim funding and reach a binding agreement with the company within the shortest possible time, it added.

In a statement last week, the Department of Finance (DOF) quoted its strategy, economics and results group (SERG) as saying that the TRAIN law’s net revenues last year amounted 68.4 billion peso (Bt41.35 billion), higher than the 63.3-billion peso goal.

The DOF’s SERG was led by Finance Undersecretary Karl Kendrick Chua, who spearheaded the push for the Duterte administration’s first of seven tax reform packages.

“The largest gains were seen in tobacco excise, auto excise and documentary stamp tax collections. Personal income tax collections were also higher than expected due to better compliance and an increase in the number of registered taxpayers. Taken together, these highest gainers contributed around 51.5 billion peso of the 68.4-billion peso in additional revenue from TRAIN,” the DOF said.

Auto excise taxes surpassed target by 6.2 billion peso, while collections from higher documentary stamp taxes were above target by 4.7 billion peso.

“Accounting for value-added tax from additional spending, estimated at 24.6 billion peso, which was due to additional take-home pay as a result of lower personal income taxes, TRAIN revenue has far exceeded its target, providing additional public resources for infrastructure and human capital development programmes,” the DOF said.

In all, the restructured personal income tax system that raised the tax-exempt cap to 50,000 peso allowed workers to receive an additional 111.7 billion peso last year, according to the DOF.

Citing its previous estimates, the DOF said “the implementation of TRAIN gave a combined 12 billion peso per month in additional income to the country’s individual taxpayers, most of them compensation earners, and in unconditional cash transfers to the poorest households and senior pensioners.”

The central bank released its latest annual economic report recently, providing readers with data that reflects changes in the contributors of foreign exchange.

According to data cited in the bank’s 2018 report, electricity generation will likely become the main provider of foreign exchange in the foreseeable future, thanks to the industry’s rising export value.

In 2014 the sale of electricity to other countries amounted to only $570 million (Bt17.98 bIllIon). This figure surged to about $1 billion in 2016, rising further to $1.2 billion in 2017. Last year, the central bank initially projected the export value of electricity would reach $1.3 billion.

A number of electricity generation projects have begun commercial operation over the past year. More hydropower projects are currently under construction and are expected to export electricity in the near future.

The export of mineral products, gold and copper continues to maintain the top position among foreign exchange earners. However, the income earned from the export of these commodities has remained stable in recent years.

In 2014, mineral exports were valued at $1.2 billion, rising to about 1.4 billion in 2017 and last year. Copper exports were worth about $1 billion in 2014, rising to $1.1 billion in 2017.

The government is aware that the export value of mining products plays a significant role in contributing foreign currency to the economy. But it is recognised that these commodities will in time be depleted when the country’s mineral deposits are exhausted.

The central bank’s 2018 report also indicates that foreign exchange generated by the garment industry and tourism has declined.

The export value of garment products was $391 million in 2014. This figure dropped to $351 million in 2015, to $249 million in 2016, and sank further to $178 million in 2017.

The Bank of the Lao PDR forecasted that last year the export value of Lao garment products would improve slightly to $189 million, but this figure is only a projection.

Over the past decade, the garment industry was considered to be one of the top foreign exchange earners.

With regard to tourism, the central bank data shows that this industry was also a top foreign exchange earner but over the past few years income from this source has also declined.

According to data from the Ministry of Information, Culture and Tourism cited by the bank in its 2018 annual report, the amount of revenue generated by tourism began to decline after 2015. That year, the tourism industry generated about $724 million, dropping to $716 million in 2016 and to $648 million in 2017. The bank made an initial projection that last year tourism would generate $780 million.