Capital markets executive summary | Mon 2 Oct 2023

Capital markets executive summary | Mon 2 Oct 2023

SCIB accepts RM34m Islamic banking facilities

Sarawak Consolidated Industries Bhd’s (SCIB) wholly-owned subsidiary, SCIB Concrete Manufacturing Sdn Bhd, accepted RM34m Islamic banking facilities from Small Medium Enterprise Development Bank Malaysia Bhd (SME Bank). The civil engineering company will use the RM12m commodity murabahah term financing-i to redeem property from Affin Islamic Bank Bhd and for working capital. The RM19m revolving credit-i will be used to redeem existing trade facilities from Affin Islamic Bank and for working capital. The RM3m cash line-i is for operating expenditure. The counter closed at 46 sen.

Deutsche Malaysia outlook raised to positive

RAM Ratings revised the outlook on Deutsche Bank (Malaysia) Berhad’s long-term AA1 financial institution rating from stable to positive because of the improvement in the credit profile of parent Deutsche Bank AG. Deutsche Malaysia’s rating takes into account the parent’s ability to provide financial support when required. Initiatives of the parent’s transformation plan (2019-2022) have improved earnings and with more stable businesses, the credit fundamentals should be strengthened. Even risks arising from the ongoing global inflationary pressures should have little effect on the parent. Deutsche Malaysia’s position in Malaysia’s wholesale banking, especially fixed income and currencies, liquidity profile, risk management and capitalisation buffer against earnings volatility. Pre-tax profit almost doubled from RM143.7m in FY2021 to RM270m in FY2022 improving return on risk-weighted assets (RoRWA) from 1.9% to 3.6% resulting from higher interest rates and foreign exchange gains. Pre-tax profit surged from RM29.1m in 1Q2022 to RM73.3m in 1Q2023 for an annualised RoRWA of 3.7%. Trading and market-making make profitability sensitive to market sentiment. Common equity tier-1 capital ratio was 19.4% at end-Mar 2023.
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UEM Sunrise issues RM350m sukuk

The property developer issued 2 tranches. The 1st tranche is RM200m in nominal value with a 5-year tenor and will mature on 29 Sep 2028. The 2nd tranche is RM150m in nominal value with a 7-year tenor and will mature on 27 Sep 2030. The sukuk were issued out of the company’s Islamic medium term notes and Islamic commercial papers programme with a RM4b combined limit. The proceeds will be used for Shariah-compliant general corporate purposes including additions to its landbank, acquisitions of companies, investments, project development and infrastructure cost, capital expenditure, general expenditure, and refinancing of Islamic financing or loan facilities. The counter closed at 84.5 sen.

China’s factory activity suggests economy has stabilised

The purchasing managers’ index (PMI), based on a survey of major manufacturers, increased from 49.7 to 50.2 in Sep, expanding for the 1st time in 6 months. The measure was above a forecast of 50.0, the threshold below which is contraction in activity and above it, expansion. The factory activity adds to other indicators pointing to the bottoming out of the world’s 2nd largest economy. The economy lost momentum after the initial boost early this year when covid policies were loosened. There were preliminary signs of improvement in Aug when factory output and retail sales growth accelerated whereas export and import contraction narrowed and deflation eased. Industrial companies recorded a 17.2% increase in profits in Aug against a 6.7% fall in Jul. China’s non-manufacturing PMI was higher at 51.7 against 51.0 in Aug. The composite PMI, covering both manufacturing and non-manufacturing, gained from 51.3 to 52.0.

World Bank wants to increase lending by USD100b

It published a 24-page report to the joint ministerial committee overseeing the bank and the International Monetary Fund (IMF) ahead of the 9-15 Oct IMF-World Bank annual meetings in Marrakech, Morocco. Shareholders will be asked to approve a hybrid capital measure and a new portfolio guarantee platform to grow lending to developing countries by USD100b more over a decade. These are in addition to measures already approved that will raise lending by USD50b. Biggest shareholder United States is pushing to create a credible alternative to problematic lending by China. The bank needs to expand its sources of financing and maintain concessional financing with low or zero interest. Apart from hybrid capital and portfolio guarantees, the bilateral guarantee limit will be raised from USD15b to USD20b, thereby bumping up the lending capacity of the International Bank for Reconstruction and Development (IBRD). The bank is also finalising a USD1b guarantee from the Asian Infrastructure Investment Bank for IBRD’s lending while considering a clause to temporarily defer principal debt payments following severe natural disasters.