This article first appeared in The Edge Malaysia Weekly on July 30, 2018 - August 5, 2018
Will Corporate Malaysia finally have clarity on the fate and direction of Khazanah Nasional Bhd, which holds strategic stakes in some of the country’s largest listed companies and has appointees on their boards?
It is hoped that the answer will come soon, now that the entire Khazanah board, including managing director Tan Sri Azman Mokhtar, has tendered its resignation — about three weeks after Prime Minister Tun Dr Mahathir Mohamad lamented on July 6 that the fund was doing “all kinds of funny things” and had veered away from its original purpose. At the time, Khazanah had said it would seek “further clarification” from the government on its mandate as Malaysia’s strategic investment fund.
Finance Minister Lim Guan Eng said on July 26 that “it is up to the prime minister to decide on [Khazanah’s] next leadership” and that it was “primarily [the Khazanah board’s] decision to resign” rather than there being pressure from the government to do so. Credited for spearheading the government-linked companies’ transformation programme from 2005 to 2015, Khazanah is among the entities seen by some quarters as the government having an unfair advantage over the private sector in doing business. It is understood that Khazanah has now come under the Prime Minister’s Department and Minister of Finance Inc is being reviewed for dissolution.
The spotlight will also be on Chinese Foreign Minister Wang Yi, who is scheduled to make a courtesy call on Mahathir here on Tuesday.
Mahathir, who will reportedly visit China between Aug 13 and 21, has said discussions would centre on “unfair” contract terms and loans for several infrastructure projects, including the US$20 billion East Coast Rail Line.
Council of Eminent Persons (CEP) chairman Tun Daim Zainuddin, who delivered Mahathir’s letter to Chinese Premier Li
Keqiang in Beijing on July 18, also met Wang that day. Daim will, along with other CEP members, have dinner with Wang here this week. According to a 2015 article in South China Morning Post, Wang, who has shown he can deal with difficult issues in a flexible manner, is described as a diplomat who is firm on China’s core interests but is pragmatic when dealing with tough issues.
It is almost a month since the US-China trade war began on July 6 with tariffs on US$34 billion worth of goods. It remains to be seen if any headway will be made towards an amicable settlement with US President Donald Trump threatening to slap tariffs on all US$500 billion worth of Chinese imports. More tariffs may soon be announced with the US Trade Representative set to complete its public hearings for a second set of tariffs (US$16 billion) on 284 Chinese product lines on Tuesday.
On July 26, the US and the European Union declared a ceasefire in their trade war, agreeing to start talks to reduce tariffs and remove other trade barriers to many industrial goods as well as work on reforming the World Trade Organization. Among other things, Trump reportedly claimed that the EU would “almost immediately” begin buying “a lot of” US soybeans — a crop targeted by China.
Central bank watchers will also be poring over this week’s statement by the US Federal Reserve’s Federal Open Market Committee (FOMC), which is slated to make an interest rate decision on Wednesday. Some experts reckon a rate hike will happen in spite of Trump’s criticism while others expect a pause to assess uncertainties over global trade. The FOMC, which has said there would be two more rate hikes this year, also has meetings in September, November and December.
Key rate decisions are also scheduled from the Bank of Japan (July 30), Reserve Bank of India (Aug 1) and Bank of England (Aug 2).
The key economic releases in Malaysia this week are export and trade balance figures for June. Export growth came in below market expectations in May when it eased to 3.4% year on year, compared with 14% in April. Exports were still up 6.9% year on year in the first five months of this year, but economists expect headwinds in the second half of the year due to mounting trade tensions.
Latest export and trade balance figures are also slated for release in Thailand (July 31), South Korea (Aug 1), Australia (Aug 2) and the US (Aug 3). Other economic releases this week include the US consumer confidence index (July 31), China Caixin Manufacturing Purchasing Managers’ Index (Aug 1), manufacturing PMIs from India, the eurozone (Aug 1) and Singapore (Aug 2), the UK CIPS/Markit Services PMI and the US ISM non-manufacturing index (Aug 3). Also scheduled for release are industrial production data from South Korea (July 30) and Japan (July 31) as well as Consumer Price Index data from Thailand, Indonesia, South Korea (Aug 1) and Switzerland (Aug 3).
Meanwhile, companies having their annual general meetings this week include SC Estate Builder Bhd (July 30); Sapura Industrial Bhd, AMMB Holdings Bhd, Systech Bhd (July 31); and Tatt Giap Group Bhd (Aug 3). Tanco Holdings Bhd is having an extraordinary general meeting on Aug 2 for its proposed issuance of one-for-two free warrants.
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