Capital markets executive summary | Fri 8 Sep 2023

Capital markets executive summary | Fri 8 Sep 2023

Smart Asia Chemical to list on ACE Market

The industrial paint and coating manufacturer will issue 93.5m shares or 25.28% of its enlarged share base of 369.85m shares. 46.23m shares are for bumiputra investors approved by the Ministry of Investment, Trade and Industry. 16.68m shares are for private placement to selected investors. 18.49m shares are for the Malaysian public. 12.1m shares for directors, employees and contributors. The IPO proceeds will be used for a new plant in Perak and related equipment, working capital, and for listing expenses. The new plant will increase the annual capacity by 27m litres or 310% from 8.71m litres to 35.71m litres. Smart Asia’s profit after tax was RM7.44m in FY2020, RM10.69m in FY2021 and RM8.61m in FY2022. Revenue was RM71.6m in FY2020, RM79.77m in FY2021 and RM79.22m in FY2022. Shareholdings of managing director Goh Chye Hin, his wife Kee Hui Lang and their children will be diluted from 59.55% to 44.5%, 10.05% to 7.51%, and 3.62% to 2.7% respectively. Mercury Securities is the principal adviser, sponsor, underwriter and placement agent.

HSBC’s AAA and P1 ratings affirmed

RAM Ratings affirmed the financial institution ratings of HSBC Bank Malaysia Berhad and HSBC Amanah Malaysia Berhad. It also affirmed the AAA rating of HSBC Amanah’s RM3b multi-currency sukuk programme (2012/2032). The ratings reflect the banks’ domestic franchise, capital buffers and funding capabilities, with some downside risk from macroeconomic headwinds. Ready financial support from parent HSBC Holdings plc is expected. HSBC’s adjusted gross impaired loan (GIL) ratio rose from 2.7% at end-Dec 2021 to 2.8% at end-Mar 2023 caused by loan base contraction in the last 5 years and large corporate loan impairments. The credit cost ratio in 1Q FY Dec 2023 was 62 bps annualised given the stricter assumptions of macroeconomic indicators in the banks’ provisioning model and should improve to pre-covid levels soon. HSBC’s non-interest income was 40% of gross income in FY Dec 2022. Historically, its cost-to-income ratio has been above 50%. The banks’ net interest margin (NIM) grew further from 1.9% in FY Dec 2021 to 2.2% in FY Dec 2022 to 2.6% in 1Q FY Dec 2023 because current and savings accounts were 61% of customer deposits at end-Mar 2023 and gains from repricing of the short-dated securities portfolio. Margins should moderate although profitability will remain steady with reduced impairment charges.
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SC issues fractional share trading guidelines

The Securities Commission issued the revised Guidelines on Market Conduct and Business Practices for Stockbroking Companies and Licensed Representatives, which outline the requirements for stockbroking companies to offer such services for shares listed on Bursa Malaysia. Fractional share is less than one standard board lot and this offers retail investors, particularly the younger generation, affordability to invest in blue-chip stocks. This was one of the capital market initiatives announced by the prime minister in Jun to make Bursa Malaysia more inclusive. Stockbroking companies must implement adequate systems, policies, and procedures to ensure fair treatment of customers’ orders, price transparency and proper supervision of the services.

OPR stays at 3%

Bank Negara Malaysia’s Monetary Policy Committee (MPC) kept the overnight policy rate (OPR) unchanged to support the growth of domestic investment amid the challenging external environment. The MPC has only raised the OPR by 0.25% once this year in May. Continued employment and wage growth, especially in domestic-oriented sectors, support household spending. BNM predicts that tourist arrivals and spending will expand further. Investment activity will be driven by infrastructure projects and catalytic initiatives under the national master plans. It sees that the domestic financial conditions are conducive to sustain credit growth. There are downside risks of weak external demand and declines in commodity output, while upsides are stronger tourism activity, a recovery in electrical and electronics, and acceleration in existing and new projects. Inflation is subject to subsidy policy and price controls, global commodity prices and financial market developments. Headline and core inflation will continue to moderate in 2H2023 given the higher base in 2H2022 and as price increases ease.

Norway’s wealth fund closes Shanghai office

Norges Bank Investment Management, which manages USD1.4t, will have its Singapore office take over as the Asian hub. Deteriorating geopolitics is the undercurrent causing international investors, including Goldman Sachs and Morgan Stanley, to scale back expansion plans in China. Goldman Sachs’ revised 5-year plan led it to cull more than 10% of its workforce after its headcount doubled to above 600. Moody’s and the Ontario Teachers’ Pension Plan have made substantial shutdowns. Also blamed were regulatory crackdowns, inspections on foreign companies and gloomy economic growth prospects. The Singapore office has 45 staff and handles all operational functions for the Asian region including China. The fund owned about 850 companies in its USD42b China portfolio at end 2022.