Capital markets news summary for Tue 7 Mar 2023

Capital markets news summary for Tue 7 Mar 2023

Lower inventory keeps palm oil futures high

The Mar crude palm oil (CPO) futures contract is trading at RM4,260, a 4-month high. In 2Q2023, CPO futures are expected to remain RM4,200-RM4,700. The market anticipates that Indonesian and Malaysian production will fall. There are several factors which will affect the prices including China’s reopening and demand for palm oil, Indonesia’s palm oil export policy, the effect of the Ukraine war on the supply of other vegetable oils and India’s demand for palm oil. Malaysian stocks may decrease below 2 million tonnes in Jun. In 3Q2023, prices will normalise at RM4,300-RM4,500 as inventory levels stabilise. India alone will import 14.32m tonnes of vegetable oils comprising 9.3m tonnes of palm oil, 3.01m tonnes of soybean oil and 2.01m tonnes of sunflower oil. Global palm oil production will grow 4.81% to 78.12m tonnes while demand will reach 79.22m tonnes, up 10% from last year. Soybean oil production will rise by 2.82% to 60.61m tonnes whereas demand will fall by 0.3% to 60.19m tonnes.

Theta Edge is bidding for 70% of Transit Acquirer

The company which is 30%-owned by Lembaga Tabung Haji participated in a request for proposal dated 5 Jan 2022 issued by the Minister of Finance (MOF) Inc for the sale of 70% shareholding in Transit Acquirer Sdn Bhd (TASB). In 2015, MOF Inc formed TASB as a special purpose vehicle to undertake the development of the integrated common payment system of all Klang Valley public transport systems that are operated by Prasarana Malaysia Bhd. The winner will have to pay RM400m for the 70% TASB shares to MOF Inc, and fund RM400m for the payment system capex. Theta Edge closed at 70.5 sen.

Capital A’s Teleport returns to China

As AirAsia resumes flights to China, Teleport – the logistics arm of Capital A – will resume 18 cargo routes between China and Malaysia in Mar. That figure will rise to 40 by 3Q2023 to include Thailand and the Philippines. AirAsia is the largest foreign carrier operating in China by capacity today and helps Teleport service it with one of the largest airplane belly cargo networks. Its reach extends into Australia, New Zealand, India, Japan and Korea. Teleport expects to benefit from cross-border e-commerce movements and harnesses AirAsia to deliver goods faster and more affordably than other air logistics companies. The company was established in 2018 by consolidating the belly capacity of all AirAsia airlines under a single network. Apart from using AirAsia’s planes, the company will have 3 A321s in its own fleet with the 1st delivery in 2023 plus additional capacity from 3rd party airlines. A dedicated freighter will be assigned to the China-KL sector. AirAsia’s flight frequency should normalise to over 350 weekly flights by 4Q2023. Capital A closed at 74 sen.

Jack Ma’s Ant Group gets USD6.5b ESG loan

The fintech company converted an existing syndicated credit facility into the sustainability-linked loan in Nov 2022, the largest of its kind in Asia Pacific and 3rd largest in the world. Its objective was to bolster its environmental social and corporate governance (ESG) goals including achieving net zero by 2030 and hiring underprivileged workers. 20 banks across Asia, the US and Europe participated in the facility. Citigroup, Credit Suisse, JPMorgan and Morgan Stanley were joint coordinators for the amendment exercise. Citigroup was the ESG structuring adviser. The company will use the funds to apply green computing algorithms to improve server efficiency in its leased data centres. The sustainability-linked loan features a tiered 2-way pricing mechanism with interest margin adjustments linked to predetermined sustainability performance targets.

3-month USD Libor punches through 5%

That’s the highest since Dec 2007. The US dollar London interbank offered rate (Libor) is a benchmark rate often used in international finance. Expectations of further tightening – caused by strong economic data – by the US Federal Reserve is driving up Libor. The federal funds rate is currently 4.50%-4.75%. The spread between Libor and overnight index swaps – a barometer of funding pressure – widened from 1.7 basis points to 3.2 basis points. The benchmark rate will be phased out on 30 Jun. A Federal Reserve-backed committee designated the Secured Overnight Financing Rate (SOFR) to succeed Libor.