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Showing posts with label Oil and Gas. Show all posts
Showing posts with label Oil and Gas. Show all posts

Saturday 17 September 2016

Challenging 2017 seen for Singapore's shipping services


It has been a rough week for Singapore’s shipping services industry and the going could get even tougher next year with record debt falling due.

Rickmers Maritime, which operates container ships, said it is asking creditors for leniency on about US$253mil of debt. Marco Polo Marine Ltd, a provider of barges and tugs for coal, steel scrap and iron ores, said Tuesday it’s asking bondholders for approval to delay paying S$50mil (US$36.5mil) of securities due next month.

The city-state’s shipping and other logistics firms face a record US$1.8bil in note repayments in 2017, data compiled by Bloomberg show.

Singapore, a former British colony, relied on its port to help transform itself into one of Asia’s so-called tiger economies. Container throughput shrank 8.7% in 2015 as global trade slowed, while slumping crude prices have hurt firms that service the energy industry.

Swiber Holdings Ltd, which operates construction vessels to support the oil industry, defaulted in August, while Ezra Holdings Ltd said last week it held talks on potential fundraising.

Sembcorp Marine Ltd and Keppel Corp have reported slumping profits.

“It doesn’t look like the worst is over for the maritime industry,” said Joel Ng, an analyst at KGI Fraser Securities in Singapore. “It’s tough for the creditors.

The banks need to continue to provide liquidity given the industry’s cashflows are tight.”

Singapore’s bad loans rose to 2.25% of the total in 2015, the highest since 2009. Oil services firms are also facing mounting difficulties as crude prices have dropped to about half the prices in 2013, forcing energy giants to put investment plans on hold.

“The shipping and oil and gas space has really been a minefield in the bond market,” said Terence Lin, an assistant director of bonds and portfolio management at fund researcher iFast Corp in Singapore.

“One of the positives from this is that there’ll be increased scrutiny on very levered companies, and a push for management to take corrective plans or pre-empt liquidation outcomes.”


Rickmers Maritime won’t be able to repay US$179.7mil of senior debt due in March 2017 and the interest and principal on S$100mil of notes due in May 2017, it said in a filing yesterday.

It’s asking investors to exchange their debt with S$28mil of new perpetual securities to avoid potential liquidation or judicial management that it says would be “likely to result in zero recovery for noteholders.”

Marco Polo Marine told some noteholders of its debt-delay plan at a meeting Tuesday, and those present “appeared generally supportive,” it said in an exchange filing.

It will hold another meeting on Sept 16 on the debt extension proposal, which it didn’t disclose.

“The boards and management teams of the offshore and marine bond issuers still seem to be in denial on the need to do proper balance sheet restructuring,” said Kurt Metzger, a Singapore-based restructuring consultant at GEM Advisory.

“Bondholders are facing significantly higher risk and should be looking for significantly higher returns and improved structures.” – Bloomberg

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Tuesday 2 August 2016

Slippery Oil prices plunging create bad-loan pain for S'pore banks, Swiber to restructure


DBS, OCBC and UOB exposed to downturn in energy sector


The plunge in oil prices is catching up with Singapore’s three largest banks.

Last week, Swiber Holdings Ltd., a small Singapore company that provides construction services for international oil and gas projects, filed a petition to liquidate its operations, after facing payment demands from creditors at a time when its business was under pressure. DBS Group Holdings Ltd., one of Swiber’s largest lenders, said it only expects to recover about half of the S$700 million ($522 million) it loaned to the firm and its units. Swiber subsequently said it’s dropping the liquidation in favor of a restructure plan.

DBS and Singapore’s two other large banks, Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., are exposed to the downturn in the energy sector as a result of their lending to local companies which provide construction, shipping and maintenance services to the oil and gas industry. Many of those companies are suffering as the plunge in crude prices since 2014 curtailed exploration and other activity by oil and gas producers.

The financial health of the energy-services companies is the “key concern” for UOB over the next one or two years, Chief Executive Officer Wee Ee Cheong said at a media briefing Thursday on the bank’s second-quarter results. The bank’s exposure to Swiber is “manageable,” Wee said, though he noted that the wider difficulties in the oil and gas services industry were a factor behind the 17 percent climb in UOB’s nonperforming assets for the second quarter.

Debt Restructuring

Swiber said it will drop its liquidation application in a statement on Friday. Instead, the company plans to operate under a judicial management, which would allow it to continue operating under court supervision while it attempts to turn its business around. Some of its lenders had sought judicial management to recover more of their loans, according to people familiar with the talks who asked not to be identified because the discussions were private.

“I presume it helps them buy time but it’s uncertain how viable these oil-services companies are if oil prices remain low for an extended period of time,” said Alan Richardson, a Hong Kong-based fund manager at Samsung Asset Management, which owns DBS shares. “The indirect victims of these bankruptcies are the banks who are lending money to them.”

Shares of DBS were little changed at S$15.40 as of 11:02 a.m. local time on Monday, paring this year’s loss to 7.7 percent. OCBC gained 0.8 percent and UOB rose 0.6 percent.

Oil has slipped about 19 percent from its recent peak in early June, ending a recovery that saw prices almost double from a 12-year low in February. Prices are falling again as U.S. producers increased drilling amid a glut of crude and fuel supplies that are at the highest seasonal level in at least two decades.

Moody’s Downgrade

The recent recovery in oil prices from their lows has provided only modest relief, OCBC Chief Executive Officer Samuel Tsien indicated Thursday in a media briefing on the bank’s second-quarter results, which included a 61 percent jump in nonperforming assets.

“We cannot say it’s going to be the bottom yet. We may have two more quarters to go,” Tsien said in response to a question on the rise in delinquent energy sector loans.

Oil and gas-related loans made up 5.3 percent of gross lending by Singapore banks as of December, a higher proportion than at banks in Korea, Thailand and the European Union, according to Moody’s Investors Service. The deteriorating quality of the Singapore banks’ loans to energy firms, as well as weaker regional economies, prompted Moody’s to downgrade its outlook for the three largest lenders on June 30.

UOB and OCBC’s exposures to offshore marine services companies amounted to 13 percent to 18 percent of their common equity Tier 1 capital and loan-loss reserves at the end of June, Moody’s said in a statement Monday.

DBS is due to report its second-quarter results on Aug. 8.

In a sign of how fast the bad-loan problems are worsening, OCBC said new nonperforming assets jumped 91 percent to S$924 million in the second quarter, mainly because of companies linked to the oil and gas support services sector. Newly soured assets at UOB more than doubled to S$802 million, from S$372 million a year ago.

“New nonperforming-loan generation was the highest seen in this NPL cycle so far,” Aakash Rawat, a bank analyst at UBS Group AG in Singapore, said in a report last week. “While this was cushioned somewhat by recoveries and upgrades this quarter, it is debatable whether this will continue to be the case in future.”

The SGX Oil & Gas Index, which tracks 25 locally listed firms, fell to a record low last week after news of Swiber’s problems surfaced on Thursday. Among the biggest decliners on the index was Ezra Holdings Ltd., which provides engineering and construction services to the offshore oil and gas sector. Ezra shares plunged 17 percent last week.

Another indicator of the woes among Singapore oil and gas service firms comes from the bond markets. A total of 10 Singapore-listed firms in the sector, including Swiber, have asked bondholders to loosen their covenants so far this year, versus eight in all of 2015, according to data compiled by Bloomberg. That includes efforts to extend the maturity of debt and loosen covenants requiring companies to maintain certain leverage levels.

Oil-related firms have S$1.4 billion of Singapore-dollar securities maturing through 2018, with S$325 million due by the end of this year, according to Bloomberg-compiled data on July 18.

Among the three large Singapore banks, only DBS has disclosed its exposure to Swiber. OCBC isn’t listed among the oil and gas services firm’s main bankers in its 2015 annual report. UOB’s Wee didn’t quantify the bank’s lending to Swiber at the Thursday media briefing. - Bloomberg

Swiber Holdings to restructure its business


Big exposure: People queue up to withdraw money from DBS automated teller machines at a mall in Singapore. DBS Group Holdings Ltd, South-East Asia’s biggest lender, said it has about S700mil (US523mil) in total exposure to Swiber. – Reuters

SINGAPORE: Swiber Holdings Ltd, the Singapore-based offshore oil and gas services group, said it was dropping liquidation plans and intends to restructure its business following talks with the company's major financial creditor.

Swiber plans to operate under so-called judicial management, according to a statement to the Singapore exchange last Friday. The arrangement would allow the company to continue operating under court supervision while attempting to turn around the business.

Some of its lenders had sought judicial management to recover more of their loans, according to people familiar with the talks who asked not to be identified because the discussions were private.

Swiber filed a petition last Wednesday to wind up and liquidate itself after facing US$25.9mil of demands from creditors.

The company had US$1.43bil in liabilities and US$1.99bil in assets at the end of March, according to its financial statements.

News of Swiber's liquidation plans dragged down the SGX Oil & Gas Index to a new low. Local companies that rely on contracts within the offshore oil and gas market are reeling from a collapse in oil prices.

Last year, a measure of the country's bad-loan ratio reached the highest level since 2009, according to the Monetary Authority of Singapore.

The Singapore bourse said last Thursday it will be undertaking a “thorough investigation” into developments at Swiber after the company made key disclosures only after queries from the regulator.

Swiber on July 11 said it failed to get a US$200mil equity injection from AMTC Ltd, which had agreed to subscribe to preference shares.

DBS Group Holdings Ltd, South-East Asia's biggest lender, said last Thursday it has about S$700mil (US$523mil) in total exposure to Swiber. The bank said it expects to recover half of that amount.

Swiber in June redeemed S$130mil of 5.125% notes and in July redeemed S$75mil of 7% securities.

It has four more Singapore dollar bonds worth a total of S$460mil outstanding, according to data compiled by Bloomberg. – Bloomberg

Slippery slope for oil



Prices unlikely to go up too high for the rest of the year

PETALING JAYA: The continued oil supply glut in the market could mean a sustained low oil price environment, especially in the short to medium term.

The oil supply glut does not seem to be abating, with oil majors preferring to pump and store oil at the moment instead of cutting production.

According to unconfirmed reports, India is mulling over the idea of setting up a strategic petroleum reserve to store oil, similar to the ones that have been established in the United States and China.

As it is now, the ample amount of oil that has been extracted from underground is making its way to even more storage above ground. For instance, very large crude carriers (VLCCs) are increasingly being used for the storage of excess oil, with the tankers lying idle offshore in places such as the coasts of the United Kingdom.

According to the Financial Times, the supertankers have become the temporary centre to store excess oil and the ships are found off the coast of Scotland, where sea conditions are rough.

The International Energy Agency (IEA) in its latest Oil Market Report said that non-Organisation of the Petroleum Exporting Countries (Opec) production remains on course to fall by 0.9 million barrels per day (mmbd) this year, before staging a modest recovery in 2017.

However, the IEA said production from Opec countries has seen steady growth in recent years, with notable increases contributed by Iraq in 2015 and Iran in 2016.

“Our chart shows that, in fact, the oil output from the region rose to a record high in June, with production above 31 mmbd for the third month running. As such, the Middle East market share of global oil supplies rose to 35%, the highest since the late 1970s,” the IEA said in its report.

According to analysts, these concerns may return to haunt oil prices and US$40 could be the new normal for the time being.

Oil prices have staged a strong recovery since their January 2016 lows, gaining some 56% to their seven-month high of US$52.31 last month. The commodity, however, has since lost almost half of its gains.

It had gained on expectations by oil companies and Opec producers that the worst was over after hitting its January 2016 lows. However, Bloomberg reported that oil declined again in its biggest monthly drop in a year, as US producers increased drilling for a fifth week.

The increase in drilling by US producers came amid a glut of crude and fuel supplies that are at the highest seasonal level in at least two decades.

Oil prices have lost some 20% from their June 2016 seven-month highs and were last traded at US$41.63 per barrel.

Analysts said that oil could keep trending lower in the immediate term and that if it breaks the US$40 level, could challenge the next key psychological price mark of US$35.

Interpacific Research’s head of research Pong Teng Siew told StarBiz that he was “quite sure” that oil would be lower as short bets have piled up due to fundamentals.

“Many traders have reversed their long positions and have taken up shorts instead which will drive the oil market lower. My thinking is that the oil market today has got a tendency of being lower than what anyone expects, especially if momentum carries it through,” Pong said.

“I think it will drop below US$40 per barrel, and there is a likelihood that it will keep surprising people at this point in time. It also does not seem that the worst is truly over, and my worry is that the number of US rigs, especially in shale oil, appear to be on the upswing and there is no telling how much more is to come,” he added.

Pong noted that the demand side has picked up since January 2016, but that the take-up pace has been slower than before with the growth in supply.

“Demand was (then) tethered to China’s oil purchases for its strategic petroleum reserves, but that is now at full (capacity) and has seen demand tapering off, resulting in lower oil prices,” he said.

The IEA said that while market balance was seen in mid-summer 2016, the existence of very high oil stocks is a threat to the recent stability of oil prices, noting that in the first quarter of this year, refinery runs growth was 60% higher than refined product demand growth.

“Despite the regular upward revisions to demand that we have seen in recent reports, there are signs that momentum is easing, and although stocks are close to topping out, they are at such elevated levels, especially for products for which demand growth is slackening, that they remain a major dampener on oil prices,” the IEA said.

Social Economic Research Centre’s executive director and independent economist Lee Heng Guie said that fundamentals today may cause oil prices to continue to remain weak.

Lee said at this point in time, there may be a slight challenge when the next budget is tabled or planned, but that there is comfort that the oil revenue to the Government’s coffers is now at a low level of about 19%.

“The goods and services tax (GST) will make up for the shortfall, but this also depends largely on the health of the local consumer. If household spending remains cautious, then there will be an impact to the GST collections,” he added. - By daniel Khoo The Star/Asian News Network

Related:

Bears crowd Ezra as Swiber’s woes signal oil risks
Singapore’s Ezra to seek fresh capital to weather slump
Refiners start slowing from summer peak


Alam Maritim on Swiber impact

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Tuesday 2 December 2014

Oil & Gas lead to wealth crunch, Malaysian Ringgit beaten and dropped!


PETALING JAYA: With the oil and gas (O&G) sector being the hardest hit in the current market rout, tycoons who own significant stakes in these companies have seen a huge loss in their net worth.

These tycoons had collectively had their shareholding in these companies valued at some RM15.89bil when O&G stocks were trading at their highest prices. The fall in global crude oil prices and the plunge in the value of O&G stocks on Bursa Malaysia saw the value of their shareholding cut by almost half to some RM7.86bil yesterday.

Accelerating the decline in share prices yesterday and the loss in their net worth was the decision by Petroliam Nasional Bhd (Petronas) to slash its capital expenditure (capex) by between 15% and 20% next year.

Petronas’ capex cut has spooked investors in the local O&G sector as many companies rely on the national oil company for work. Petronas’ huge capex, estimated at RM60bil a year prior to the planned cuts, was also a buffer for the domestic industry from the onslaught of crumbling crude oil prices and its effect elsewhere.

The largest of these companies, SapuraKencana Petroleum Bhd, has seen its share price dip by 48.78% year-to-date. At its peak, SapuraKencana was trading at RM4.81, translating to a wealth of RM4.85bil for Tan Sri Shahril Shamsuddin’s 16.84% stake in the integrated O&G concern.

SapuraKencana was the most actively traded counter yesterday, falling 10.36% to close at RM2.51. At yesterday’s market capitalisation of RM16.76bil, Shahril’s shareholding in the company was valued at RM2.53bil.

Another major shareholder of SapuraKencana is Tan Sri Mokhzani Mahathir, whose 10.25% interest has also seen a decline by almost half its value. At yesterday’s price, Mokhzani’s stake in SapuraKencana was valued at RM1.54bil compared to the RM2.95bil it was worth during its highest level.

Mokhzani had sold a block of 190.3 million shares in SapuraKencana earlier this year when the stock was trading at around RM4.30 per share, giving the entire sale a value of RM818.29mil. The shares were taken up by seven institutions.

Another stock in which Mokhzani has an interest in, Yinson Holdings Bhd, was also not spared from the bearish sentiment surrounding O&G stocks. Yinson’s share price has declined from its peak to close at RM2.45 on Dec 1. Based on yesterday’s price, Mokhzani’s stake in the company was worth RM235mil.

Billionaire Robert Kuok, T Ananda Krishnan, Tan Sri Ngau Boon Keat and Tan Sri Quek Leng Chan are also part of the list of value losers in this O&G stock meltdown.

Kuok owns 80% of PACC Offshore Services Holdings (POSH Semco), an offshore marine services provider that was listed on the Singapore Exchange in mid-2013 at a price of S$1.15 per share. POSH Semco closed yesterday at S$0.51, meaning that Kuok has lost more than half the value of his stake in that company.

Similarly, Ananda’s worth from his 42.3% shareholding in Bumi Armada Bhd has gone down by half the value it was during the peak of its share price. To be noted is that Bumi Armada had undertaken a rights issue in August this year that has seen the dilution of Ananda’s shareholding in the company.

Bumi Armada, Malaysia’s largest offshore support vessel firm, was relisted in 2011 at a price of RM3.03 per share. The stock dived into penny-stock territory yesterday, falling to a low of 98 sen before ending the day at RM1.01 per share. Based on yesterday’s price, Ananda’s stake in Bumi Armada was valued at RM2.06bil.

Dialog Group Bhd’s Ngau, meanwhile, has seen the value of Dialog’s stock fall. His stake was worth RM1.45bil based on yesterday’s closing price of RM1.26. This is about a one-third decline from the RM2.25bil his 23.2% stake was valued at when the stock had hit a high of RM1.96.

Stock investors such as Quek and his lieutenant Paul Poh are also edging into negative territory.

Quek had bought his 9% in TH Heavy Engineering Bhd (THHE) in 2013 at a price of 45 sen per share, enjoying gains for most of this year – the stock had hit a high of RM1.03 on Feb 19 this year. THHE closed yesterday’s trade at 40.5 sen a share, giving Quek a paper worth of RM38mil for his shareholding in the company as opposed to RM80mil as at the end of last year.

In April, Quek and Poh also took a block of 15.5% in Alam Maritim Resources Bhd at RM1.35 a share. They are sitting on a paper loss of some RM80mil today, or a decline of over 40%.

By: GURMEET KAUR The Star/Asia News Network

Ringgit Slides With Stocks as Oil Slump Poses Risk to Revenues



Malaysia’s ringgit posted the biggest two-day decline since the 1997-98 Asian financial crisis and stocks slumped on concern a protracted slide in crude will erode the oil-exporting nation’s revenue.

The currency weakened 1.5 percent to 3.4340 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. The ringgit has dropped 2.5 percent in two days, the steepest decline since June 1998. The benchmark FTSE Bursa Malaysia KLCI Index of shares fell 2.3 percent in the worst one-day performance in 22 months.

Brent slid to a five-year low after OPEC’s decision last week not to cut production to shore up prices, which have slumped 41 percent from a June high. The potential revenue loss may make it harder for Prime Minister Najib Razak to lower the fiscal deficit to 3 percent of gross domestic product next year from 3.5 percent.

“Malaysia is probably most affected by oil prices in the Asian space,” said Andy Ji, a Singapore-based strategist at Commonwealth Bank of Australia. “The ringgit could fall to 3.45 this week.”

A 1997 devaluation of the Thai baht triggered the Asia financial crisis and prompted Malaysia’s government to adopt a pegged exchange rate to the dollar in 1998. The ringgit was fixed at 3.8 until the policy was scrapped in 2005.

The currency dropped to 3.4392 earlier, the lowest level since February 2010, when it last traded at 3.45 and went on to reach 3.4545 on the 5th of that month, data compiled by Bloomberg show.

Stocks Fall

Oil-related industries account for a third of Malaysian state revenue and each 10 percent decline in crude will worsen the nation’s fiscal shortfall by 0.2 percent of GDP, Chua Hak Bin, a Bank of America Merrill Lynch economist in Singapore, wrote in an Oct. 22 report.

The FTSE Bursa Malaysia Index was dragged down by oil, gas and plantation stocks. The gauge has dropped 6 percent from its 2014 high in July.

SapuraKencana Petroleum Bhd., Malaysia’s biggest listed oil and gas services company by market value, fell 10 percent, the most on record. Dialog Group Bhd. (DLG), a contractor in the same industry, dropped 15 percent.

“We are watching the stocks closely,” said Gerald Ambrose, who oversees the equivalent of $3.6 billion as managing director at Aberdeen Asset Management Sdn. in Kuala Lumpur. “There are a lot of oil and gas companies that meet our quality and criteria but there was no upside previously. Now prices are falling.”

Bonds, Exports

Malaysia is already seeing a deterioration in its terms of trade. The current-account surplus narrowed to 7.6 billion ringgit ($2.2 billion) in the third quarter, the smallest gap since June 2013. A Dec. 5 report may show the nation’s exports declined 0.3 percent in October from a year earlier, according to the median estimate in a Bloomberg survey. That would be the worst performance since June 2013.

The nation’s sovereign bonds fell. The yield on the 4.181 percent notes due 2024 rose three basis points, or 0.03 percentage point, to 3.89 percent, data compiled by Bloomberg show. That’s the highest since Nov. 24. The five-year bond yield advanced five basis points to 3.81 percent.

“Hopes for Malaysia have rested on the fiscal consolidation story,” said Tim Condon, head of Asian research at ING Groep NV in Singapore. “Markets need to be re-priced for diminished hopes on that front.”

Source: Bloomberg By Liau Y-Sing and Choong En Han

Beating for KLSE and ringgit



PETALING JAYA: The stock market and the ringgit have taken a beating from falling oil prices, which have sunk below the US$70 per barrel mark.

The benchmark FBM KLCI, which measures the key 30 stocks of Bursa Malaysia, was down 42 points or 2.34% at its close at 5pm, marking its worst performance since mid-October, while the ringgit declined to 3.4340 against the US dollar, a four-and-a-half-year low.

At 5pm, Brent crude oil was down 94 cents to a five-year low of US$69.21 while US light crude oil – better known as West Texas Intermediate (WTI) – fell US$1.09 to US$65.06 as markets continued to be spooked by the plunge in oil prices.

The plunge follows an Opec decision not to cut production despite a huge oversupply in global markets.

The technical indicators are all pointing to even lower oil prices.

Technical analysts said the WTI – the benchmark oil price used by Bank Negara to calculate the economic indicators – should find some support at US$64 per barrel.

If it goes below that level, it could plunge all the way to US$32.40 per barrel – the lowest recorded price in recent years when it hit US$32.40 per barrel on Dec 19, 2008, before rising to US$114.83 on May 2, 2011.

Taking the cue from the plunging oil prices and a chilling warning issued by Petronas on declining revenues, oil and gas stocks on Bursa Malaysia also faced a rout which affected market sentiment as a whole.

Yesterday, some 981 counters declined compared to 82 gainers while 150 were unchanged.

Petronas president and chief executive Tan Sri Shamsul Azhar Abbas had said on Friday that the national oil corporation was cutting its spending for next year by between 15% and 20% and asserted that its contribution to the Government’s coffer in the form of taxes, royalties and dividends could be down by 37% to RM43bil from RM68bil this year.

Analysts said the selling could be over-done and expected a relief rebound when oil prices settle.

Oil prices fell to their lowest in five years yesterday due to the production war between Opec and the American oil boom from shale oil producers.

In recent months, the United States has become a major producer of shale oil and gas – fuel that’s extracted from rock fragments – threatening the position of Saudi Arabia as the dominant oil-producing country.

In response to the threat, Opec, which is influenced by Saudi Arabia, has vowed to continue production of oil in a market where supply has outstripped demand.

This has led to a free fall in global oil prices that have declined by more than 40% since July this year.

Late last night after the opening of the US counters, oil price fell to below US$65 a barrel.

Saudi Arabia hopes to break the back of shale oil and gas producers by making their operations not financially viable.

It had been reported earlier that at prices below RM80 a barrel, shale oil producers would go bust.

However, Bloomberg reported that only about 4% of US shale oil output needs US$80 a barrel or more to be economically viable.

Among the top losers of the Bursa yesterday were SapuraKencana Petroleum Bhd, Bumi Armada, Dialog Group Bhd, UMW Oil and Gas Bhd and Petronas-related counters.

The paper wealth wiped out due to the rout on the oil and gas stocks was close to RM8bil.

The selling pressure also spread to plantation stocks, with crude palm oil for third month delivery down RM63 to RM2,109 per tonne. The fall in crude oil prices would make biodiesel less viable as an alternative at current prices.

However, low-cost carrier AirAsia Bhd bucked the trend as it stands to benefit from weaker oil prices. AirAsia rose 21 sen to RM2.79.

Investors were also worried about the impact Petronas’ reduced payout would have on the Government that counts on the national oil corporation as a key source of funding for its expenditure.

UOB Kay Hian Malaysia’s head of research Vincent Khoo said a much lower crude oil price scena­rio would bring negative implications on the ringgit and the Federal Government’s ability to spend its way to pump prime the economy.

The head of research, products and alternative investments at Etiqa, Chris Eng, said that based on the weakening of the ringgit, foreign funds could be behind the selling.

“However, today’s selling was over­­done and I believe there could be a relief rebound,” he said, based on improving US economic growth and ample liquidity from China and Japan.

Eng said according to reports, Bank of America believed Malaysia’s budget deficit could balloon to 3.8% from a planned 3% while Citi thought the 3% deficit could still be maintained.

“The outlook for investing in 2015 remains challenging but it also depends on what level the local bourse ends the year,” he said.

By JOSEPH CHIN The Star/Asia News Network

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