The first month for 2019 is almost going to see its close. While very few of Malaysian companies have reported earnings, US companies are midway through their reporting. From my daily watching and reading, I would say it has been a mix bag. Seldom do I really follow through and be tied down to quarterly earnings. This time though, it has a sizeable threat.
CHINA! and semiconductors.
Several of the companies that are largely dependent on business from China is seeing deterioration. Companies like Nvidia, Intel, Apple, Caterpillar - they have reported earnings or guidance that seems to show that China is slowing down. All of them has indicated that their business has slowed in China. Whether this is wide spread i.e. over the entire China's economy or certain particular economy i.e. semiconductor, construction is unknown. One other factor is also because of the trade conflict between China and US, the Chinese are now being patriotic and they are preferring Chinese brands. This is seen from the market share growth of Huawei's phones as against Apple's IPhones.
However, the other two companies being Intel and Nvidia, despite the trade friction, if the demand is still there, the Chinese companies will still be buying as there are very little alternatives. Intel as we know is largely providing CPUs for PCs, servers and modem chips for Iphones. Nvidia is another chip company whose business supplies to the gamers, data centers, autonomous mobility market.
It is still hard to read how bad the Chinese economy is going to affect the world this year. There are already signals as provided by Alibaba's VP, Micheal Evans a month ago, where he indicated that volume growth has slowed. In China, many economists and businessman are already expecting slowing growth - but to how much? Will there be a recession. Official data from the Chinese government still shows growth of 6% to 7%. Is this true?
What is the impact to Malaysia
Malaysia is a huge trading partner to China especially when it comes to exporting semiconductor components to China, for them to assemble them into full product. Among the companies that exports to China via Malaysia are companies like Intel, Broadcom, Infineon. Malaysian listed companies such as Inari Amertron is a supplier to Broadcom especially for the RF filters. As we have seen, Inari has already been affected somewhat, but not massive.
What about the automation companies like Vitrox, Pentamaster? I presume as we see the trend affecting Intel and Nvidia, there is a possibility that China may see under utilisation of its capacity. With that, there are good chance that these Malaysian companies may see slower growth as well. With the threat of the trade war, many companies are also looking for alternative manufacturing sites. Vietnam, Malaysia, Indonesia, Thailand would definitely be explored. I do not see it to be immediate though as China is working on its under utilisation.
Palm Oil is in danger
The trade war also sees China offering to purchase a vast quantity of soy bean oil to make up for the trade imbalance. As it is, the details are still very vague but considering that if some agreements are to be materialised, soybean will be used as a trading commodity. What's good for soybean farmer in US will not be good for palm oil as they are substitutes. I am very wary of palm as China has not many traded goods to show to the American exporters to make up the imbalance besides cars, Boeing planes, beefs.
A slowing down China towards Malaysia
As it is, at the moment it will be hard to figure out the actual impact. I fear though that the initiatives by Malaysia government to reduce debt will not be able to materialise unless we start to sell national assets especially those held through Khazanah. The government is adamant on reducing debt. Hence, medium term i.e. for the next 3 - 5 years, we will see corporate exercise happening where these assets will be privatised.
Good Articles to Share
What's dangerous for 2019 - felicity
Thursday, January 31, 2019
http://www.intellecpoint.com/2019/01/whats-dangerous-for-2019.html
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1 person likes this. Showing 15 of 15 comments
I wonder how long does felicity need to get all info & details in place before writing this article, well done & thank you.
2019-01-31 16:18
Tell you guys what you should do if you want to avoid Palm oil
1. Don't drink tea tarek.
All the tareh in Malaysia and Spore got milk substitute which is Palm oil. No milk or very negligible if any.
2. Don't eat hawker food or in restaurant. Because all use Palm oil.
3. No more KFC. Kentuky fried chicken use Palm oil
4. No biscuit for you anymore. All 100% biscuit made by hup Seng, kit Kat, munchy, Oreo, Apollo, ofi, London biscuit, all got Palm oil
5. Cannot drink Nestle product as nescafe got oil Palm as well as kit chat
6. All chocolate product also cannot like Cadbury and all others.
Only can eat this one no Palm oil..Tudor gold by pm Corp.
7. Cannot eat cake, muffin or baked stuff as all got Palm oil
8. No more ice cream hor. All ice cream product got Palm oil. Lots of Palm oil.
9. No more fried Koay teow, fried rice or fried Mee hor.
10. Don't go supermarket any more hor.50% of the product got Palm oil.
So how?
Either you migrate to Australia and drink tea tarik with genuine milk for Rm10 a cup or go live with orange asking in jungle
2019-01-31 18:04
Go live with orang asli in jungle. They no money so just boil or roast wild game
2019-01-31 18:08
Some more thing you cannot eat or drink if no Palm oil
1. Cannot drink milo anymore in Malaysia
Malaysia made Milo got Palm oil.
Singapore got 2 type. Malaysia formula with Palm oil or Australian formula with no Palm oil(expensive)
Or best is Buy Milo made in Australia. Zero Palm oil
2. No more tasty Penang hawker food for you. All got Palm oil.
3. No more fast food like McDonald, Burger King, Wendy, Pizza hut, marry brown.
4. Ha! All go drink Starbucks coffee!
5. All eat raw sushi like Japanese
2019-01-31 18:24
If bad then u better go n earn more monies & use expensive sunflower oil loh..!!
If u don want to pay...so this bad...that bad...no use mah...!!
Bcos Palmoil is the most affordable value oil in msia mah....!!
2019-02-01 17:32
Dutaland, CBIP, Kwantas, Harnlen in danger?
Posted by calvintaneng > Jan 31, 2019 03:35 PM | Report Abuse
Palm Oil is in danger
2019-02-01 17:56
https://www.theguardian.com/business/2019/feb/01/trump-hails-china-trade-talks-progress-and-says-he-will-meet-xi-jinping-soon
At the end of two days of high-level talks next door to the White House, Liu told Trump China would make a new, immediate commitment to increase soybean purchases. An administration official later clarified the amount as a total of 5m tonnes, in effect doubling the amount bought by China since resuming limited purchases in December.
2019-02-01 21:32
Maybe massive buying of US soybean could be at the expense of Brazil Russia etc instead of substantially through palm oil substitution ?
2019-02-02 07:04
Commodity is commodity mah....!!
Price is determine by demand & supply mah....!!
If china want to only target buy usa soyabean, it must pay a premium loh....!!
Overall small negative to soyabean price loh...!!
2019-02-02 12:51
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Palm Oil is in danger
The trade war also sees China offering to purchase a vast quantity of soy bean oil to make up for the trade imbalance. As it is, the details are still very vague but considering that if some agreements are to be materialised, soybean will be used as a trading commodity. What's good for soybean farmer in US will not be good for palm oil as they are substitutes. I am very wary of palm as China has not many traded goods to show to the American exporters to make up the imbalance besides cars, Boeing planes, beefs.
I think this one no leh!
China is now suffering from Pig Fever
See
https://www.theguardian.com/environment/2018/dec/07/deadly-pig-virus-african-swine-fever-us-china
That means less purchase of soy as feed meal
Soy oil is the byproduct of Soy meal. So less soy meal means less soy oil
And less soy oil in world market means price of all vege oil will go up
2019-01-31 15:35