Shell to sell stake in Malaysian plant to China private refiner

Royal Dutch Shell said on Monday it had agreed to sell its shares in Shell Refining Company in Malaysia to a unit of a private Chinese refiner for US$66.3 million. 

PHOTO: BLOOMBERG

FEB 1, 20169:49 PM

[SINGAPORE] Royal Dutch Shell said on Monday it had agreed to sell its shares in Shell Refining Company in Malaysia to a unit of a private Chinese refiner for US$66.3 million.

It marks the first overseas refinery acquisition by a private Chinese refiner, shortly after Beijing allowed dozens of the country's independent, small oil plants to import crude for the first time.

Shell will sell the 51 per cent stake to Malaysia Hengyuan International Ltd, while the remaining shares are held by institutional and public shareholders, a Shell spokeswoman said.

Malaysia Hengyuan International Ltd is a unit of China's Shandong Hengyuan Petrochemical Company.

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The transaction is expected to be completed in 2016, subject to regulatory approval, Shell said.

"It is (Malaysia Hengyuan's) intention for Shell Refining Company to invest in the upgrades needed to meet the Euro 4M and Euro 5 requirements," the company added, referring to cleaner fuel specifications.

Shell Malaysia Trading will continue to supply its retail and commercial customers in Malaysia and honour its existing commitments which include a long-term offtake deal from Shell Refining Company, it said.

Shell Refining Company is a key petroleum products supplier to Shell's downstream businesses in Malaysia, its website says.

The oil refinery at Port Dickson has a capacity of 156,000 barrels-per-day (bpd) with 90 per cent of its oil products consumed within Malaysia.

Shell has been exploring options for the company including the sale of the Port Dickson refinery or converting it to a storage terminal since at least January, 2015. "The sale is consistent with Shell's strategy to concentrate its global downstream footprint and businesses where it can be most competitive," the company said in a statement.

Shell said earlier this month that it could further cut combined capital investments below the US$33 billion targeted for 2016.

Its asset sales in the past two years have amounted to more than US$20 billion, far outstripping its original plan to make US$15 billion worth of divestments.

REUTERS

    
 

US: Wall St opens lower on China worries, oil

US stocks opened lower on Monday as weak Chinese economic data increased worries about a global slowdown and oil prices continued to slide. 

PHOTO: BLOOMBERG

FEB 1, 201610:45 PM

[NEW YORK] US stocks opened lower on Monday as weak Chinese economic data increased worries about a global slowdown and oil prices continued to slide.

The Dow Jones industrial average was down 77.94 points, or 0.47 per cent, at 16,388.36, the S&P 500 was down 9.67 points, or 0.5 per cent, at 1,930.57 and the Nasdaq composite was down 26.98 points, or 0.58 per cent, at 4,586.97.

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Ex-IMF chief Rato faces trial over Spanish credit card use

Spain's High Court said on Monday it will open a trial against former IMF chief Rodrigo Rato and dozens of other people alleged to have misused credit cards for personal expenses while at Spanish lender Bankia. 

PHOTO: AFP

FEB 1, 201611:13 PM

[MADRID] Spain's High Court said on Monday it will open a trial against former IMF chief Rodrigo Rato and dozens of other people alleged to have misused credit cards for personal expenses while at Spanish lender Bankia.

Rato, a former Spanish finance minister and one-time leadership contender for the centre-right People's Party, has denied wrongdoing in this case and in other investigations related to Bankia.

Prosecutors had been pushing for a four-and-a-half year prison sentence for Rato in the expenses case. He was chairman of the bank shortly before it needed a state bailout in 2012.

The bank's stock market listing, which took place under his watch in mid-2011, is also being investigated by the High Court, although that case has yet to go to trial.

Bankia needed a rescue less than a year later, and many ordinary Spaniards who had bought the shares lost money.

The court said in a statement that Miguel Blesa, Rato's predecessor at Caja Madrid, which merged with other banks to form Bankia in 2011, would also go on trial in the expenses case, along with 64 other people.

The Spanish prosecutor had called for a six year prison sentence and 9.34 million euros in damages for Blesa, who also denies any wrongdoing.

REUTERS

    
 

China to allow banks to directly invest in high-growth tech firms: sources

FEB 1, 20164:35 PM

[BEIJING] China is planning a pilot programme to allow selected commercial banks to set up equity investment arms to take direct stakes in technology firms, people familiar with the matter said, a move aimed at giving lenders a chance to buy into a high-growth industry while stoking competition with private equity players.

Under China's commercial banking law, banks are forbidden from directly investing in equities of non-bank institutions, unless otherwise stated by the government.

The pilot programme, dubbed an "investment and loan linkage mechanism", is set to start sometime this year via special approval by the State Council, China's cabinet, a government official with direct knowledge of the plans said. The official was not authorised to talk to the media and requested anonymity.

Details of which banks will qualify to take part in the pilot scheme, and under what conditions, have yet to be hammered out, the official and three senior bankers said, but China's banking regulator has identified the effort as a major task for 2016.

The bankers declined to be identified because they were not authorised to talk to the media.

The China Banking Regulatory Commission (CBRC) did not respond to a faxed request for comment.

The move is intended to channel more financial support to China's high-flying tech sector, a traditional hunting ground of private equity, venture capital and foreign investment banks. "If these rule changes bring more capital to the market, its going to create more competition and put more pressure on returns for all investors," said Bain & Co partner Vinit Bhatia.

While China's broader growth prospects have cooled, its tech sector remains in demand. Investments in telecommunications, media and technology totalled US$14.1 billion in China in the first half of 2015, surpassing the US$13.3 billion invested during the whole of 2014, according to Bain & Co.

With an eye on the Silicon Valley model, Chinese commercial bankers told Reuters that while sometimes risky, tech start-ups can make for lucrative business if lenders are allowed to not only lend, but also take ownership in those firms.

With more resources to set up offshore vehicles, some of the country's bigger lenders have already made indirect investments in rising tech firms.

Last week, China Merchants Bank Co agreed to invest US$200 million in fast-growing ride-hailing firm Didi Kuaidi, which competes with ambitious US start-up Uber.

In order to make the investment, part of a US$3 billion fund-raising round that brought in money from investors including Singapore state fund Temasek, China Merchants Bank used an offshore investment affiliate, a person familiar with the matter told Reuters.

China Merchants Bank declined to comment.

Elsewhere, Hankou Bank, a small city bank based in central China, has teamed up with Legend Capital and Hony Capital, both owned by Legend Holdings, the biggest investor in PC and smartphone maker Lenovo Group Ltd. The bank provides loans, while its partners buy stakes in tech firms. Legend Holdings has a 15.3 per cent stake in the bank.

But the model isn't ideal, Hankou Bank chairman Chen Xinmin told Reuters in December. Although each of the parties shoulders high risks, equity investors benefit as valuations increase, while the bank makes money only from loan interest. "Traditional banks mainly have debt relations with clients, but to develop tech finance, we need to build shareholding relations with them," Mr Chen said.

Some banks already are testing the boundaries of current law restricting equity investment in tech companies, using debt-to-equity terms in loan agreements and by appointing friendly private equity houses and venture capital firms as proxy shareholders, bankers said.

REUTERS

    
 

Korea bond rally pushes yields to record low as exports falter

South Korea's government bonds rose, pushing yields to record lows, as slumping exports and a weak yen spurred speculation the central bank will cut interest rates to support growth in Asia's fourth-largest economy. 

PHOTO: BLOOMBERG

FEB 1, 20164:15 PM

[SEOUL] South Korea's government bonds rose, pushing yields to record lows, as slumping exports and a weak yen spurred speculation the central bank will cut interest rates to support growth in Asia's fourth-largest economy.

Shipments fell for a 13th month in January, contracting the most since August 2009, official data showed Monday. The yen weakened after the Bank of Japan adopted negative interest rates on Friday, boosting the competitiveness of Japanese goods. The two nations compete globally to sell everything from cars to electronics.

Following the trade figures there's a "substantial risk" the Bank of Korea will cut its policy rate from a unprecedented 1.50 per cent before June, Nomura Holdings Inc said in a report.

The yield on notes maturing December 2018 dropped four basis points to close at 1.53 per cent in Seoul, Korea. Exchange prices show the lowest on record for a benchmark three-year security. The 10-year yield declined six basis points to a historic 1.92 per cent. Global funds bought a net US$335 million in local bonds in January.

"Sluggish exports data after Japan expanded its stimulus spurred the rally in bonds," said Hwangbo Youngok, a Seoul-based director at Korea Investment & Securities Co, one of the nation's 19 primary bond dealers.

"Expectations of another rate cut have heightened considerably," and the three-year yield could fall below the benchmark rate if any BOK board member calls for a reduction at the next meeting on Feb 16, he said.

The Finance Ministry will consider if it's necessary for its officials to attend the central bank's policy meeting and share views on the economic situation with BOK's board, Finance Minister Yoo Il Ho said in a meeting with reporters on Monday. The Kospi index of shares rose 0.7 per cent.

The won weakened 0.1 per cent to 1,200.41 a dollar, data compiled by Bloomberg show. The currency fell as much as 1 per cent, the most since Jan 11, and is Asia's worst performer this year with a 2.3 per cent loss. The won surged 2.7 per cent to 9.90 versus the yen on Friday, its biggest jump since April 2013, as the Japanese currency retreated 1.9 per cent against the greenback.

BLOOMBERG

    
 

Eurozone factory growth slows at start of 2016, PMI shows

Factory growth across the eurozone slowed at the start of 2016 as incoming orders failed to show any meaningful increase, even though companies cut prices at the deepest rate for a year, a survey showed on Monday. 

PHOTO: BLOOMBERG

FEB 1, 20165:26 PM

[LONDON] Factory growth across the eurozone slowed at the start of 2016 as incoming orders failed to show any meaningful increase, even though companies cut prices at the deepest rate for a year, a survey showed on Monday.

Markit's Purchasing Managers' Index will be disappointing reading for the European Central Bank, which left policy unchanged in January but hinted more easing more could be coming within months.

The manufacturing PMI for the euro zone dropped to 52.3 from December's 53.2. That was in line with an earlier flash estimate and still above the 50 mark that separates growth from contraction.

An index measuring output, which feeds into Wednesday's composite PMI, also fell. It registered 53.4 compared with December's 54.5, up from the flash 53.2 estimate.

Global markets have been battered since the start of this year, hitting stock markets, commodities and oil prices, as concern grew that the Chinese economy, the world's second largest, is struggling. "The eurozone's manufacturing economy missed a beat at the start of the year. Growth of order books, exports and output all slowed," said Chris Williamson, chief economist at survey compiler Markit.

"If the slowdown in business activity wasn't enough to worry policymakers, prices charged by producers fell at the fastest rate for a year to spur further concern about deflation becoming ingrained." January's weakening came as companies offered steep discounts on their goods. A sub-index measuring output prices sank to 48.3 from 49.8, its lowest reading since January 2015.

Consumer prices rose just 0.4 per cent last month, official data showed on Friday, nowhere near the ECB's target of close to but just below 2 per cent.

With inflation so low and growth remaining muted, the ECB is almost certain to cut its deposit rate even further into negative territory when it meets next month, a Reuters poll found last week.

There is also an even chance it will increase the 60 billion euros a month currently spent on buying bonds.

REUTERS

    
 

French manufacturing PMI falls to break-even point in January

FEB 1, 20164:55 PM

[PARIS] French manufacturing teetered between growth and contraction in January and export orders shrank, according to a monthly survey of company purchasing managers.

Confirming preliminary data, the final Purchasing Managers Index - where any score below 50 signals a contraction and any score above 50 indicates expansion - fell from 51.4 in December to 50.0 in January.

"A drop in new orders for the first time in four months was the primary culprit, as a generally weak demand climate and client uncertainty continued to weigh on new work inflows," said Jack Kennedy, an economist at the Markit, the consulting firm that compiles the index.

January's reading was the lowest since August, but the slowdown remained modest, Markit said in a statement.

The January score was in line with expectations after a preliminary Markit report with the same outcome.

The PMI data comes on the heels of an official statistics office estimate on Friday that French economic growth slowed in the last quarter of 2015 and that growth for last year as a whole came to a modest 1.1 per cent.

REUTERS

    
 

Malaysian businesses warn of 'economic fire' on labour cost surge

FEB 1, 20164:27 PM

[KUALA LUMPUR] Malaysian manufacturers warned the government of an "insurmountable economic fire" that threatens businesses and jobs after what it said was a sudden decision by authorities to double foreign worker levies.

The government will increase the annual levy it charges employers to hire overseas labour for manufacturing, construction and services sectors to RM2,500 (US$601) from RM1,250 effective Feb 1, Deputy Prime Minister Zahid Hamidi said Sunday. In the plantations and agriculture industries, the rate will be RM1,500, he said. The new measures will increase government revenue by RM2.5 billion, Zahid said.

Prime Minister Najib Razak's administration is seeking new measures to boost its coffers after a plunge in oil meant spending plans had to be reviewed for a second year to keep fiscal deficit targets in check. Manufacturers have demanded structural changes to policies on human resource and foreign workers that will provide clarity and consistency for the sector as the government tries to reduce reliance on overseas labour.

"The government's sudden decision to double levy rate for the manufacturing sector with immediate effect is unacceptable," the Federation of Malaysian Manufacturers said in a statement Monday. "Business sustainability is at stake. Jobs are also at stake, even for local workers when businesses find great difficulty in sustaining their operations."

Malaysia should look at labour market demands more closely when determining foreign worker inflows as its current approval system doesn't sufficiently reflect the needs of industries, the World Bank said in December. It advised the government to improve its existing evidence-based system for identifying labour shortages in the economy and change its levy structure to one that could keep up with varying market conditions.

While businesses are aware of the need to reduce dependency on foreign workers, any changes should be announced in advance and be gradual to allow companies enough time to adjust, the manufacturing group said. 

"Changes, and especially hefty changes with significant impact on business costs, should not be made overnight," it said. The government needs to study business sustainability in totality, and not in isolation of issue by issue, it said. "All issues put together become an insurmountable economic fire which could overwhelm and consume businesses, employees and suppliers throughout out the supply chain."

BLOOMBERG

    
 

US small business borrowing sank in 2015

US small business borrowing fell in December from a year earlier, data released Monday showed, a fresh sign that economic growth may weaken in the coming months. 

PHOTO: BLOOMBERG

FEB 1, 20166:42 PM

[USA] US small business borrowing fell in December from a year earlier, data released Monday showed, a fresh sign that economic growth may weaken in the coming months.

The Thomson Reuters/PayNet small business lending index registered 132.4 in December, up from a downwardly revised November reading of 127.3 but below the December 2014 reading of 134.1. Lending had risen sharply earlier in the year.

"What started as a full gallop in 2015 is barely trotting along now," said Bill Phelan, President of PayNet.

"We are barely replacing worn-out assets here."

Dropping oil prices and slowing world growth are taking a toll on US economic growth, which slowed to a 0.7 per cent annual pace in the last quarter of 2015.

Small business borrowing is a key barometer of growth because it is the little firms that tend to do much of the hiring that fuels economic growth.

Lending slowed sharply to small businesses in mining and agriculture, as well as in wholesale trade, transportation and construction, the figures showed. Texas was particularly hard hit.

The PayNet index typically corresponds to US gross domestic product growth a quarter or two ahead, with Monday's figures spelling further slowing, but probably not recession in the first part of this year, Mr Phelan said.

The delinquency rate on loans more than 30 days past due ticked down in December to match a record low of 1.44 per cent, separate data from PayNet showed.

Small businesses "are settling in for a long time in waiting for what they view as a difficult situation to come to an end," Mr Phelan said.

"I don't think it's time to break the glass and pull the alarm yet, because financial health got better." PayNet collects real-time loan information such as originations and delinquencies from more than 325 leading US lenders.

REUTERS

    
 

China's economic struggles are of particular concern to Europe: Nowotny

The global economy remains on a moderate recovery track but China's slowdown is of particular concern as it raises the risk of crisis returning to developed nations, European Central Bank policymaker Ewald Nowotny said on Monday. 

PHOTO: AFP

FEB 1, 20166:49 PM

[BUDAPEST] The global economy remains on a moderate recovery track but China's slowdown is of particular concern as it raises the risk of crisis returning to developed nations, European Central Bank policymaker Ewald Nowotny said on Monday.

China's growth, though seemingly still rapid, is "meagre"compared to its social and demographic challenges, and its transformation will hurt its trading partners in the short term, said Nowotny, who is also the head of the Austrian central bank.

"The most urgent issue here is the financial volatility and economic weakness in various emerging market economies," Nowotny told a conference in Budapest. "Recent developments in China - since last year, world's largest economy in terms of GDP based on purchasing power parity - are of particular concern." The eurozone has struggled with weak growth and ultra-low inflation for years and its problems have been exacerbated by Chinese growth slowing to its lowest level in 25 years.

The ECB eased policy with a rate cut and an expansion of its asset purchase programme in December and signalled last month it may have to ease policy further in March.

Nowotny said Europe is playing a role in aggravating China's difficulties as the 19-nation euro area is also failing to do its part to foster global growth.

"In other words, the emerging markets now bring the crisis back to us - and at the same time remind us of the interdependence in the global economy," Nowotny added. "We should not be astonished about dampened global demand and deflationary tendencies if the euro area posts a current account surplus way above 3 per cent of GDP." Although household consumption has been showing tentative signs of recovery, corporate borrowing and investment remain low by historic standards.

High debt ratios and a large stock of bad loans spread across eurozone banks will continue to hold back economic growth for years as potential growth is seen below 1 per cent, well below historic norms.

REUTERS