KUALA LUMPUR: Volatility in global markets including Bursa Malaysia is expected to continue as the external economic and financial fundamentals dictate investor sentiment.
The FBM KLCI chalked up a combined 30 points last Friday and Monday, giving investors a glimmer of hope, but this saw foreign funds taking the opportunity to reduce their shareholdings in Malaysian equities.
Hence the KLCI retreated on Tuesday on worries about the sustainability of the rally.
MIDF Equity Research said as at Oct 17 year-to-date, foreign funds were net sellers at RM3.8bil, erasing more than the RM3bil in net inflows in 2013.
However, UOB Kay Hian Malaysia Research does not see all is doom and gloom. It advocates investors seize trading opportunities as the market recovers from the last two weeks of fall-off.
We remain positive that ample domestic liquidity will still reward selective mid caps with good absolute returns through 2015, it says in its strategy note.
MIDF Equity Research head Zulkifli Hamzah tells StarBiz investors should buy on dips the stocks that fulfill their requirements, taking into account inherent earnings quality, good earnings growth potential, and/or attractive valuation.
The underlying secular trend of the equity market is expected to remain upward sloping, he says.
The market can never be immune to intermittent cyclical pullbacks. However, do not overreact to its occurrence as it is essentially a manifestation that market expectations may have exceeded the unfolding reality. Thus the prevailing valuation needs to be corrected, he explains.
On the FBM KLCIs performance, MIDF Researchs current year-end target of 1,900 seem lofty under the present circumstances, but he believes this target may only be delayed by about three to six months.
Nevertheless, we expect the KLCI to end the year above the psychological level of 1,800, he said.
He says the recent equity market downswing started on Wall Street, arguably in reaction to a small cut in the International Monetary Fund global growth outlook for 2015.
As for UOB Kay Hian Research, looking beyond the anticipated year-end upward trend, the market will gradually de-rate to mean valuations in 2015 as various challenges crystalise on both the economic and capital market fronts.
Although we advocate being defensive over time, there are trading opportunities as the market recovers from the last two weeks of fall-off. We remain positive that ample domestic liquidity will still reward selective mid caps with good absolute returns through 2015, it says.
However, the research house points out that valuations are going back to the old normal as market dynamics weaken.
Beyond our anticipated domestic liquidity-driven year-end uptrend, we expect the KLCI to trade mostly at its mean price-to-earnings (PE) in 2015 as the following economic challenges impact investor sentiment softer crude oil prices in 2015, domestic inflation in particularly 1H15 and rising interest rate expectations in 2H15 (end of quantitative easing programmes could reduce foreign ownership of Malaysian bonds), it says.
UOB Kay Hian Research points out softer crude oil prices, which moderately worsen government deficit, coupled with domestic inflation (going against a global deflationary environment) suggest the ringgit would remain weak.
While we would avoid concept stocks, still ample market liquidity and the lack of cheap large caps should allow selected mid caps to deliver good capital gains through 2015, although the pool of such companies with decent earnings growth visibility would be smaller.
Meanwhile, our financial screen reveals trading opportunities. While our valuation review shows that most sectors are still not compelling relative to their mean PEs, some investment-worthy mid caps have retraced significantly, it adds.
Meanwhile, another analyst says the current global bearish market sentiment will definitely not spare any markets. The KLCI had been trying very hard to maintain at the 1,800 range after sliding from an all-time high of 1,896 in mid-July.
However, he says it would notbe good to remain in a long term invested position in the equity market, unless the investor has a very strong reason to it, or has a very solid sets of proven trading strategies, coupled with a huge war chest of cash.
For those who had a higher risk appetite and would still want to hunt out in the equity market, I would recommend to seek those companies with upcoming or on-going corporate exercise, while keeping an eye for a good bargain on companies that is debt free, or without significant borrowings, which would also be a good option as well, he adds.
Investing in gold would be good as the current price is quite low and has not been speculated for a period of time after the selldown from a peak of US$1,900 per ounce in September 2011, he says.
With much sell down in equities market, and with the near zero interest rate in US, the option are high for the huge money to be parked into gold or bonds, he adds.
Meanwhile, JF Apex Research is more cautious and advises those to liquidate their position to preserve capital/minimise losses or lock in profit, especially on those small-and-mid cap stocks, and wait for clearer market direction to re-enter the market.
We view the current selldown as temporary and minor correction, hence market shall rebound towards year-end. However, any gains (seasonally being a good quarter driven by window dressing) shall be capped by weak external sentiment, it said.
JF Apex Research also cut its year-end KLCI target to 1,870 and advises investors to stay on the sidelines at this moment.
For long-horizon investors who wish to bottom fish at this moment, they could look a stocks and/or sectors with underlying strong fundamentals such as tech, property and construction while those giving decent yields are on telco, gaming and REIT stocks. They could also park their investments in safe-haven assets such as bonds at this moment, JF Apex Research adds.
NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an AAA rating to the following Hennepin County,
MN (the county) general obligation (GO) bonds:
--$100 million GO bonds, series 2014A;
--$82.675 million GO refunding bonds, series 2014B.
These bonds are expected to sell via competitive sale on or about Oct.
21. Proceeds of the series 2014A bonds will be used to finance various
capital projects, and proceeds of the series 2014B bonds will be used to
refund certain maturities of the countys outstanding series 2006A,
series 2007A and series 2008A bonds.
In addition, Fitch affirms the following ratings:
--$628.39 million general obligation (GO) bonds at AAA;
--$145.3 million first-lien sales tax revenue bonds (ballpark project),
series 2007A at AAA;
--$100.45 million second-lien sales tax revenue bonds (ballpark
project), series 2008B at AA+;
--$29.5 million third-lien variable rate sales tax revenue bonds
(ballpark project), series 2008C at AA;
--$37.675 million Hennepin County Regional Railroad Authority (HCRRA)
limited tax refunding bonds, series 2010A at AAA;
--Up to $200 million GO commercial paper (CP) certificates at F1+.
The Rating Outlook is Stable.
The GO bonds are secured by the countys full faith and credit and
unlimited taxing power.
The sales tax bonds are special limited obligations of the county
payable from certain proceeds of a county wide sales tax of 0.15%
imposed by county ordinance as of Jan. 1, 2007.
The CP certificates are a GO of the county for which its full faith and
credit and unlimited taxing power are pledged; however, the county may
not use for the payments of the certificates any funds which are
appropriated for other purposes by law or resolution or indenture. There
is no standby purchase or other liquidity facility for the certificates.
Instead the county is using self-liquidity to backstop the certificates.
The HCRRA bonds are a limited tax obligation of the HCRRA, payable from
ad valorem taxes on all taxable property in Hennepin County; the levy
cannot exceed 0.04835% of the countys property market value. The HCRRA
covenants to levy taxes to fund debt service at 105% annually.
KEY RATING DRIVERS
HEALTHY FINANCIAL FUNDAMENTALS: Hennepin County has a sophisticated
management team that uses conservative budgeting, investment and debt
practices that have resulted in healthy reserve and liquidity levels.
STRONG ECONOMIC CORE: The county is supported by the Minneapolis-St.
Paul metropolitan area and has a diverse tax base and economy with low
unemployment. After several years of declines, taxable values have
recently grown and further growth is expected.
MANAGEABLE DEBT: The countys moderate debt profile is supported by a
manageable capital plan and above-average amortization.
SHORT-TERM RATING: The F1+ rating on the CP certificates is based on
the countys strong level of unrestricted internal liquidity.
SALES TAX GROWTH: The sales tax ratings reflect adequate debt service
coverage at all three liens from pledged revenues and generally
well-performing sales tax receipts. All liens are effectively closed,
and the rating on the third lien bonds is enhanced by the countys
practice of using excess funds to prepay bonds.
HIGH HCRRA COVERAGE LEVELS: The AAA rating for the HCRRA bonds is
based on the countys economic credit strengths and the bonds dedicated
property tax millage resulting in debt service coverage at the maximum
rate of over 20x.
STABLE GO AND HCRRA RATINGS: The ratings for the GO and HCRRA bonds are
sensitive to shifts in fundamental credit characteristics. The Stable
Outlooks reflects Fitchs expectation that such shifts are highly
WEAKER SALES TAX COVERAGE: A decline in debt service coverage below
current levels could have a negative impact on the sales tax secured
Hennepin County is home to Minneapolis and adjacent to the state capital
of St. Paul. It is the largest and wealthiest county in Minnesota
featuring resident wealth levels at 122% of the state.
HEALTHY ECONOMIC BASE
The local area economy, anchored by the University of Minnesota, several
hospitals and headquarters for 12 Fortune 500 companies, continues to
outperform the state and nation. The unemployment rate of 4.2% as of
July 2014 remains well below the national average. After five
consecutive years of moderate declines in taxable value the county
showed nominal growth in 2013 followed by 8% growth in 2014. Tax base
growth is expected to continue, though at a slower pace, given extensive
construction activity occurring within the area.
CONSISTENTLY ELEVATED RESERVE LEVELS
Conservative budgeting has led to the maintenance of ample overall
financial flexibility reflected in regular budget outperformance and
sizeable reserves. Results for 2013 again beat the budget and produced a
$17 million operating surplus after transfers, bringing unrestricted
fund balance up to $173 million or 31% of spending. This marked the
third straight year of surplus operations.
The 2014 budget was down 0.7% from the 2013 budget, supported by a 1%
increase in the property tax levy and the adoption of a wheelage tax.
Management projects a similar surplus to 2013, resulting from
conservative budgeting of tax collections and close expenditure
The proposed 2015 budget includes a 2.75% increase in the property tax
levy. The county has a 3.8% increase in general fund expenditures and a
$44 million increase in capital spending. The budget conservatively
shows a $25.4 million use of fund balance, in line with recent budgeted
MANAGEABLE DEBT BURDEN
The countys overall debt burden is moderate at $2,738 per capita, or
2.4% of market value. The debt position is expected to remain manageable
given the above-average amortization (61% in 10 years) and a modest
capital improvement program. Fitchs highest short-term rating on the CP
program reflects the countys strong internal liquidity position
providing a range of 3x-8x coverage of the maximum $200 million CP par,
well above Fitchs 1.25x criteria threshold.
ADEQUATE SALES TAX BOND COVERAGE, PREPAYMENT BENEFITS
The Minnesota Legislature approved stadium legislation which provided
the county with the authority to establish a 0.15% sales tax and limited
the countys financial commitment to a baseball stadium project to $350
million. The legislation also created the Minnesota Ballpark Authority
which is responsible for the now completed stadium for the Minnesota
Twins. The county subsequently funded its commitment with the proceeds
from the first-, second- and third-lien sales tax bonds, which are
primarily payable from the county-wide sales tax. The total par amount
of the three liens was almost $342 million.
Sales tax receipts have consistently grown since the issuance of the
bonds other than a decline in bond year (BY) 2009; receipts have
increased from 4.9% to 6.6% annually in BYs 2011-2013. Through the first
10 months of BY 2014, receipts are up 6.6%. Coverage on the first-lien
bonds remains strong at 3.88x in 2014, healthy at the junior-lien level
(1.93x) and adequate on the third lien (1.82x). However, a weaker sales
tax growth scenario could compromise current coverage levels given the
ascending debt service schedule.
Assuming no future growth in sales tax receipts, coverage of first-lien
debt service is expected to be above 2.33x for the life of the bonds,
with coverage for the second-lien bonds always above 1.48x and
third-lien debt at 1.47x or above. The bonds could withstand the
following average annual declines: 3.47% for the first lien (reaching
sum-sufficient coverage in 2037), 2.43% for the second lien (2029), and
2.39% for the third lien (2029). A debt service reserve fund for the
first-lien bonds is cash funded in the amount of $1 million (7% of
maximum annual debt service); there are no reserves for the second- and
The third-lien bonds are variable rate. The budgeted interest rate has
consistently been well above actual rates so the county has been using
excess funds to pre-pay these bonds, boosting coverage. The third-lien
bonds are likely to be paid off in the next few years, well ahead of
their 2037 maturity and freeing up excess funds to call or restructure
the first- and second-lien bonds. Interest rate risk appears limited
given the countys solid financial performance and liquidity position.
Additionally, further leverage is not a material concern, as the county
issued almost the maximum allowed under the authorization.
MODERATE PENSION/OTHER POST-EMPLOYMENT BENEFITS
County employees participate in the states defined benefit Public
Employees Retirement Association, which administers its cost-sharing
multiple-employer retirement plans for public employees as well as
police and fire. The county pays in full the annual required
contribution (ARC) which in 2013 was $36.8 million and is projected to
increase to $38.8 million in 2014.
Funding of the state pension plan is a somewhat weak 63% using Fitchs
7% discount rate assumption. Fitch expects participant contributions
will rise in order to improve the plan funding level but believes the
county has ample financial flexibility to absorb increases.
The unfunded actuarially accrued liability (UAAL) for other
post-employment benefits (OPEB) totals a moderate $217 million or 0.2%
of market value. The county funds 68% of the ARC. To control its
liability, the county discontinued providing post-retirement healthcare
benefits to new hires starting in 2008. Total carrying costs for debt,
pensions and OPEB are a low 13% of governmental spending.
HCRRA CONTINUES HIGH COVERAGE
HCRRA was established in 1980 for the purpose of constructing and
maintaining local rail service and is a component unit of the county.
HCRRA has limited property taxing authority over the broad base of the
county and until 2008 financed both debt service and operating costs for
the rail system. In 2008, the sales-tax-funded Counties Transit
Improvement Board (CTIB) became responsible for 50% of the net operating
costs of the transit system for which it provides capital contributions,
including the prior operating contributions of the HCRRA. HCRRA
continues to provide property tax support for 10% of rail capital costs.
CTIB and HCRRA have an extensive but manageable capital plan to continue
building out the regions transportation infrastructure. At present, the
maximum tax rate provides very strong coverage of over 20x throughout
the life of the HCRRA bonds.
Additional information is available at www.fitchratings.com.
In addition to the sources of information identified in Fitchs
Tax-Supported Rating Criteria, this action was additionally informed by
information from Creditscope, University Financial Associates,
Samp;P/Case-Shiller Home Price Index, IHS Global Insight, Zillow.com,
National Association of Realtors.
Applicable Criteria and Related Research:
--Tax-Supported Rating Criteria (Aug. 14, 2012);
--US Local Government Tax-Supported Rating Criteria (Aug. 14, 2012);
--Rating US Public Finance Short-Term Debt (Dec. 9, 2013).
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
AVAILABLE ON THE AGENCYS PUBLIC WEBSITE WWW.FITCHRATINGS.COM.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCHS CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF
THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE
RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR
RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY
CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
MANILA, PhilippinesThe country's largest bank, Banco de Oro Unibank, has bagged another "best domestic bank" distinction, this time from business and finance magazine Asiamoney.
Asiamoney, a division of global media group Euromoney Institutional Investor PLC, said in a statement: "The bank stands tallest for assets, loans, and deposits, possessing respective market shares of 17 percent, 20 percent and 18 percent in the first quarter of 2014."
The award was given during the Asiamoney Best Bank Awards 2014.
In giving this distinction, the publication highlighted BDO's continued efforts to grow its branch network, expanding its branches by 7 percent in 2013 and adding more in the first quarter of 2014 to reach 822.
"This enlarged presence helped it post P22.6 net income in 2013, 56 percent up year on year," the magazine said.
The same publication earlier recognized BDO as the "best managed company" in the Philippines in its 25th anniversary Special Edition that featured Asia's list of Best of the Best Managed Companies.
BDO joined other organizations that were handpicked based on performance, achievements and financial fundamentals. The barometer used by Asiamoney suggested that the bank had been a consistent performer over the years.
Led by the SM group, BDO is the Philippines' largest bank in terms of total assets, loans, deposits, capital and trust funds under management as of the second quarter of 2014.
In 2013, BDO won the prestigious "Best Asian Bank" award from FinanceAsia, the first time this distinction was earned by a Philippine bank.Doris C. Dumlao