Keeping calm: Malaysia lets ringgit fall below 1998-2005 peg

KUALA LUMPUR: For the past three weeks, Malaysian authorities have allowed the ringgit to trade below levels that in 1998 prompted them to impose a dollar peg and capital controls. Economists expect more downside, with the Federal Reserve set to raise U.S. interest rates.

The ringgit has traded around 3.81 per dollar since July 6, exceeding the 3.80 level of the peg set by the government between 1998 and 2005. Economists warn against intervention to shore up the ringgit, as Malaysia's international reserves have already dropped to near five-year lows of $100.5 billion, data released by the central bank last week shows. While that is sufficient to fund 7.9 months of retained imports, it is just 1.1 times short-term external debt.

The ringgit has fallen against the dollar since the third quarter of last year as weak energy prices threaten Malaysia's oil-and-gas revenues. Political uncertainty arising from the investigations surrounding debt-laden state fund 1Malaysia Development Bhd has further hurt sentiment. Foreign investors were net sellers of shares on the Malaysian bourse for 13 weeks until July 24.

The central bank's governor said in January - when the ringgit was around 3.550 per dollar - that the authority had "moved on" from using controls to manage capital flows. The ringgit has declined 5.1 percent since then. A U.S. interest rate hike this year would spur further capital outflows from emerging markets such as Malaysia, pressuring the currency.

"You can try to stabilise the ringgit, but ultimately I don't think it can stand the correction," said Chua Hak Bin, Singapore-based head of emerging Asia economics at Bank of America Merrill Lynch. "The ringgit will have to adjust to whatever new equilibrium... we are forecasting the ringgit to weaken to 3.86 by end-2015 and 4.05 by end-2016 against the dollar." - Reuters

DRB-Hicom targets RM100m revenue from air freight business.

PORT KLANG: DRB-Hicom Bhd which recently completed the acquisition of air freight operator Gading Sari Aviation Services Sdn Bhd, aims to rake in revenue of RM100 million a year from its new business by increasing its aircraft utilisation.

The integrated logistics services provider, under its wholly-owned subsidiary KL Airport Services Sdn Bhd (KLAS) bought over the local air cargo service company for RM72 million, in a deal which was completed on February 2015.

"Overall now it is already a profitable entity, but if we fly for more hours we will obviously make more money," KLAS group CEO Datuk Mohd Shukrie Mohd Salleh, who is also the CEO of Konsortium Logistik Bhd (KLB) told reporters after launching its first roll-on/roll-off (ro-ro) vehicle carrier vessel, named "MV Zarah Sofia" yesterday.

For the financial year ended Dec 31, 2013, Gading Sari recorded a net profit of RM2.21 million from RM1.71 million in 2012. Revenue for the same period stood at RM72.53 million from RM69.38 million previously.

"We plan to expand the aircraft flying hours to 14 hours a day from less than 10 hours a day currently. In terms of the aircraft utilization, I would say it is still fairly low," Shukrie said, adding that the air freight operator is now called DRB-Hicom Asia Cargo Express (ACE).

He said currently ACE provides air freight services to Pos Malaysia for its Pos Laju service between Peninsular and East Malaysia cites of Kuching, Miri and Kota Kinabalu, with two aircraft.

"Because we have just started, the business for now is solely dedicated for Pos Malaysia. And because we have a long-term commitment with Pos Malaysia, it is our base customer and we can expand from the existing place that we have," he noted.

"Going forward, we are also looking at further acquisition of new aircraft," Shukrie added, without elaborating further.

He also noted that long-term targets include looking at opportunities to enter the regional market.

"The intention is to expand the (air freight operator) business further. (As part of our long term plan, we are not just looking at the Malaysian market, but also the regional market," he said.

DRB-Hicom previously said the acquisition is in line with its plan to develop KLAS into a leading centralized integrated logistics services provider in Malaysia by providing a one stop solution.

Speaking at the launch, Shukrie said the ro-ro vehicle carrier vessel has a capacity of 2,500 vehicles per shipment, and operates two to three shipments per month. It made its maiden voyage on Dec 6, 2014. Yesterday marked its fourteenth shipment.

"She sails from Port Klang to Kota Kinabalu Port, makes her way to Kuching Port and back to Port Klang. A complete return shipment takes about 12 days," he added, explaining that "MV Zarah Sofia" is estimated to sail 28 times a year.

KLAS provides air logistics services which includes ground handling, cargo handling, in-flight catering, aircraft maintenance and engineering services to commercial airlines in the country.

Meanwhile KLB, a fully owned subsidiary of KLAS under the DRB-Hicom group, provides integrated logistics solutions in automotive, haulage, logistics, distribution and warehousing, freight forwarding and project logistics. - the sun daily