RM1.92 billion new investments with 1,207 jobs in first-half 2021 – InvestKL

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According to CEO Muhammad Azmi Zulkifli, InvestKL has attracted RM1.92 billion in new investments with 1,207 jobs for the first half of this year, reinforcing Greater Kuala Lumpur’s appeal as a top location for multinational corporations (MNCs) to set up a regional base. 

In 1H21, it has secured investments from seven MNCs, contributing to its year-end target as well as the larger 10-year strategic plan to attract 100 of the world’s MNCs and fast-growing companies to set up regional services and technology hubs in Malaysia through 2030. Over the last decade the agency, under the International Trade and Industry Ministry, has succeeded in securing investments from 103 MNCs. The achievement is a testament to the country’s continued appeal to foreign investors as a preferred investment destination despite the Covid-19 pandemic disruption, reflecting Malaysia’s fundamentals and investor-friendly policies. The MNCs coming in this year are involved in various sectors, from financial services, food technology, infrastructure, to data and software solutions provider. They represent a balanced mix of countries and regions including the US, Europe, China, and Japan. These companies will offer regional job opportunities to Malaysians while helping to upskill them. The Greater Kuala Lumpur Live Lab and Fit4Work initiatives have contributed to its progress this year. The two initiatives are designed to help revitalise the nation’s innovation capacity and build a pool of globally competitive Malaysian talent to complement the kind of high-value, high-technology and high-growth companies it is aiming to attract. This is aligned with the National Investment Aspiration, which is aimed at achieving a balance between economic development and environmental sustainability. 

Since the agency’s inception in 2011 to end-June 2021, it has realised RM11.56 billion or 65% of the RM17.73 billion investment commitments, translating into 10,850 or 71% of the 15,318 high-skilled regional jobs on the payroll with an average salary of RM10,384. Moving forward, the challenges ahead are inevitable given the shift in business landscape due to a prolonged pandemic environment as companies reassess strategies and deferring investment plants. By showcasing Malaysia’s growth and resilience in the next remaining months, he is positive on a return of investor confidence. InvestKL has embraced a new era in investment promotion where we continue to engage and connect with potential investors through new ways and actively promote Greater Kuala Lumpur as the ideal location for regional operations and future growth. 

Property market confidence returning by 2022 – Knight Frank Malaysia 

According to Knight Frank Malaysia managing director Sarkunan Subramaniam and deputy managing director Keith Ooi, residential properties are expected to remain subdued this year until the health crisis is brought under control. The residential market would continue to self-correct amid challenges brought on by the Covid-19 pandemic. There were fewer completions and launches in the first half of this year as the strict containment measures delayed construction works, project delivery, and completion of real estate transactions.

In the secondary market, no property viewings and on-site surveys have been allowed since June. There appears to be pent-up demand in the housing market which is evident by the short burst of recovery in market activity when movement restrictions were temporarily lifted. The high-end condominium market in Kuala Lumpur would continue to undergo price correction due to weaker demand amid rising inventory for both existing and newly built. Similarly, in the tenant-led market, rentals remain under pressure due to weaker leasing demand. The economy is still in its recessive phase and market confidence is expected to return gradually by early 2022 as buyers and financiers are all on cautiously optimistic mode. The property market is widely expected to start recovering on the back of a more positive outlook, following recent acceleration in vaccine drive, and strong interest from domestic investors shifting from the stock market to safer and less volatile alternative investment products. 

On a positive note, the Home Ownership Campaign has been successful in reducing the property overhang with an estimated 34,354 residential units worth RM25.65bil sold from June 1, 2020, to Feb 28, 2021. The Covid-19 pandemic has fuelled the demand for residential properties, especially new landed housing outside the city – in established and upcoming suburbs with good connectivity where prices are more affordable and competitive. With the potential shift to hybrid work arrangements post-pandemic, buyers are seeking ideal living spaces with a higher emphasis on functionality and comfort. The general buyer focus has now shifted from investment towards creating a haven to live, relax and work in comfort due to the ‘stay at home’ orders amid the various phases of the movement control order. Potential buyers and investors who have the financial capability may be enticed to enter the housing market – to buy a home for their own stay, upgrade or investment – taking advantage of the price discount, attractive deals, stamp duty exemption as well as the current low-interest-rate regime. 

Eye On The Markets 

This week, on Thursday (22July), the Ringgit was 4.2235 against the USD from 4.2125 on Monday (19July). Meanwhile, the Ringgit was 3.1104 to the Sing Dollar on Thursday (22July). On Monday (19July), the FBM KLCI opened at 1522.67. As at Friday (23July) 10:00am, the FBM KLCI is up 4.45 points for the week at 1527.12. Over in US, the overnight Dow Jones Industrial Average closed up 25.35 points (+0.07%) to 34,823.35 whilst the NASDAQ added 52.60 points (+0.36%) to 14,684.60.  

Climate concerns now an inevitable part of business

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According to Climate Governance Malaysia founding member Datin Seri Sunita Rajakumar, addressing climate change is set to be part of doing business as concerns from investors, governments and regulators grow. Businesses need to be responsible and accountable because allocators of capital – bankers, investors and insurers – need this level of transparency as they are deciding where the capital is going. The first step for business to address is by establishing climate disclosure and reporting. In a presentation “Auditors role in understanding climate change” during the Governance in Audit virtual forum organised by the Institute of Internal Auditors Malaysia, she said that absence of such information in the annual report will be taken as a proxy to the quality of management and board. Domestically, Bank Negara Malaysia’s stance on the issue is clear as it outlined climate change is far reaching in breadth and magnitude – foreseeable and irreversible – there is a need to act now. In a taxonomy published on April 30, 2020, it stated that there is a clear link between physical risk drivers and systemic risk on the financial system, and the regulator can map out how exactly this is going to be affected. One of the things recognised is carbon pricing, a classic market failure in which the cost of pollution is borne by society at large globally but the profits accrue to the polluters. Pricing this pollutant is going to be important but the government needs to create an enabling environment. In regard to carbon pricing, the European Union announced on Wednesday that it will introduce a border carbon tax to imports into the customs union as part of its ambitions to be carbon neutral by 2050. The region does not want to be accused of outsourcing its climate ambitions to countries that have zero controls. The carbon pricing approach is not limited to governments alone, as global reinsurer Swiss Re has introduced an internal carbon levy of US$100 per tonne in 2021 which will be increased to US$200 per tonne by 2030. The levy will fund compensation of residual operational emissions through high-quality carbon removal projects. Its group CEO Christian Mumenthaler was quoted as saying that the move is proof of its climate action component of the company’s sustainability strategy and underscores its belief that leading companies can and must propel climate protection beyond mere compliance with current regulations. This move as an indicator to ascertain whether a business is still profitable with the changing climate. This is why shadow pricing is important, as it establishes how resilient you are to the inevitable price of carbon. 

In a report assessing climate change impact of 48 countries by Swiss Re, Malaysia was second last in terms of climate resilience, as it is vulnerable to extreme weather events and has a low adaptive capacity. On a baseline scenario of a 2–2.6°C temperature rise, the report found Malaysia, Thailand and the Philippines would lose 33–36% of GDP by 2048, as a result from the growing adverse impacts such as reductions in labour and agricultural productivity. Another way of looking at this is our sovereign ratings is going to be affected, and the estimation is at least six notches of downgrade, which will affect our cost of funding and weaken the currency. It is important for Malaysia to make headways into addressing climate change as it is a trading nation which exports close to 70% of its GDP to countries such as European Union, China, Japan and South Korea which have declared their ambitions to have net zero carbon emission by 2050 and 2060 in the case of China. Given that these countries are trying to reduce their own carbon footprint, businesses and sectors that are trying to export need to manage their carbon footprint or might not be buyers for their goods. Meanwhile, being at the forefront in climate and sustainability will provide a competitive edge over those lagging behind in the climate issue. 

Bursa Anywhere app now features eRights service 

According to chief executive officer Datuk Muhamad Umar Swift, Bursa Malaysia has introduced a new service on its Bursa Anywhere mobile application (app), enabling investors to subscribe for rights issue electronically (eRights). The exchange said the new eRights service offers a convenient method for depositors to apply and make payment for rights issue electronically on the Bursa Anywhere app. Physical rights subscription forms and a trip to the bank or post office for payments are no longer necessary with eRights. With the new feature in place, the exchange envisaged a significant reduction in the risk of a rights securities application being misplaced or delayed during the course of postal delivery services. Any refund arising from the excess share applications would be credited directly into the investor’s bank account, instead of having to wait for the refund cheques which was sent via post previously. Bursa Anywhere is a mobile app that aims to provide investors ease of accessibility in managing their central depository system (CDS) accounts remotely. Besides the eRights service, the app also facilitates CDS account openings, e-dividend subscriptions and reactivation of dormant and inactive accounts. The Bursa Anywhere app has garnered over 190,000 downloads since its release in June 2019. 

Eye On The Markets 

This week, on Thursday (15July), the Ringgit was 4.1980 against the USD from 4.1870 on Monday (12July). Meanwhile, the Ringgit was 3.1008 to the Sing Dollar on Thursday (15July). On Monday (12July), the FBM KLCI opened at 1522.23. As at Friday (16July) 10:00am, the FBM KLCI is down 9.30 points for the week at 1512.93. Over in US, the overnight Dow Jones Industrial Average closed up 53.79 points (+0.15%) to 34,987.02 whilst the NASDAQ shed 101.80 points (-0.70%) to 14,543.10.  

BNM maintains OPR at 1.75%

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According to Bank Negara Malaysia (BNM), it has kept the overnight policy rate (OPR) unchanged at 1.75%, following the Monetary Policy Committee (MPC) meeting today, as it noted the strengthening in the global economy supported by improvements in manufacturing and services activity. However, the pace of recovery varies across countries, pointing out that economies making better progress in their vaccination programmes have been able to ease containment measures, enabling a swift recovery in domestic activity. Financial conditions remain supportive of growth. Overall, the balance of risks to the growth outlook remains tilted to the downside, due mainly to uncertainty over the path of the pandemic as well as potential risks of heightened financial market volatility. For Malaysia, the better-than-expected economic activity in the first quarter of 2021 continued into April, as reflected by the latest indicators, particularly exports, retail spending and labour market conditions. The re-imposition of nationwide containment measures, however, will dampen growth momentum, with the degree of economic impact highly dependent on the stringency and duration of containment measures. Despite that, continued allowances for essential economic sectors to operate, albeit at a reduced capacity, and higher adaptability to remote work, automation and digitalisation will partly mitigate the impact of restrictions. The various policy support packages will alleviate some of the financial burdens of households and businesses. Favourable external demand conditions will continue to provide a lift to growth. Going forward, the gradual relaxation of containment measures, alongside the rapid progress of the domestic vaccination programme and continued strength in external demand will provide support for the growth recovery into 2022. The growth outlook, however, remains subject to significant downside risks, due mainly to factors that could lead to a delay in the easing of containment measures or imposition of tighter containment measures, and a weaker-than-expected global growth recovery. The materialisation of these risks could undermine the growth recovery. As it had expected, headline inflation had spiked recently due to the low base effect of fuel prices in the second quarter of last year, although the spike is transitory with headline inflation to moderate in the near term as the base effect dissipates. Headline inflation is projected to average closer to the lower bound of the forecast range for 2021, while underlying inflation is expected to remain subdued, averaging between 0.5% and 1.5% for the year, amid continued spare capacity in the economy, although the outlook is subject to global commodity price developments. The MPC considers the stance of monetary policy to be appropriate and accommodative. In addition, fiscal and financial measures will continue to cushion the economic impact on businesses and households and provide support to economic activity. Given the uncertainties surrounding the pandemic, the stance of monetary policy will continue to be determined by new data and information and their implications on the overall outlook for inflation and domestic growth. The bank remains committed to utilise its policy levers as appropriate to foster enabling conditions for a sustainable economic recovery. 

2021 GDP growth at 5-6% for Malaysia – Kenanga Investment Bank 

According to Kenanga Investment Bank head of economic research Wan Suhaimie Wan Mohd Saidie, the bank has settled on a 5-6% gross domestic product (GDP) expansion projection for 2021, taking into account the economy’s recent performance and the Covid-19 situation. The forecast is predicated on an improvement in private consumption from second-half 2021 (H2’21) onwards. The bank anticipated private consumption to grow by 6.7% year-on-year (y-o-y) in the second half compared with 5% y-o-y in the first half of the year. At Kenanga’s Q3 2021 Market Outlook virtual briefing, he said that it is a story of two halves. Initially, they were looking at a higher first half but now they are looking at a higher second half because of the recovery and the intensity of Covid-19’s rise. Previously, they had projected 3.9% growth for 2021 then revised the forecast up to 6.5% before bringing it down to the current 5-6%. The forecast of 5-6% growth is still below the government’s unrevised expectation of 6-7.5%. Should the country reach phase two of the recovery, between August and September, hopefully this will reduce the number of cases and the government will gradually reopen the economy. For now it is still 50-50, giving credit to the government but there is a possibility that they might revise that 5-6% growth. With regard to services, the sector is still underperforming with an anticipated growth of 5% equivalent to a 2.9% contribution to GDP growth of 5-6%, although it will be far higher than the 5.5% decline registered in the previous year. However, this is still below the three-year average of more than 6% experienced pre-Covid. We still underperform but hopefully this will gradually change once the economy reopens with the restart of travel and tourism, which will take another six to 12 months. Meanwhile the manufacturing sector has been a saviour of the Malaysian economy and it is projected to grow by almost 8% this year, contributing 1.8% to GDP growth, primarily due to the high export demand for electric & electronics goods, commodities and rubber products, particularly gloves. As for second quarter GDP, he projected a growth figure of about 11% or in the lower teens. However, this will translate into negative quarter-on-quarter growth, signifying a technical recession. The growth projection of 5-6% translates into a W-shaped recovery, underpinned by broad-based improvements across components and sectors, lifted by various policy measures, stronger external demand and wider vaccine rollout. However, there may be a need to revise downwards, should the government extend the MCO after July 16. 

Eye On The Markets 

This week, on Thursday (8July), the Ringgit was 4.1815 against the USD from 4.1565 on Monday (5July). Meanwhile, the Ringgit was 3.0928 to the Sing Dollar on Thursday (8July). On Monday (5July), the FBM KLCI opened at 1534.04. As at Friday (9July) 10:00am, the FBM KLCI is down 19.83 points for the week at 1514.21. Over in US, the overnight Dow Jones Industrial Average closed down 259.86 points (-0.75%) to 34,421.93 whilst the NASDAQ shed 105.3 points (-0.72%) to 14,559.80.  

SC widens categories of sophisticated investors

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According to the Securities Commission Malaysia (SC), it has widened the categories of sophisticated investors to allow more investors to expand their investment options while issuers can now tap into a larger pool of sophisticated investors. These were among the several amendments to the Capital Markets and Services Act 2007 (CMSA), which came into force on Thursday July 1, 2021. The amendments, effected through changes made to Schedules 6 and 7 of the CMSA, have widened the categories of sophisticated investors. Sophisticated investors will now include among others, individuals with investments of RM1mil in capital market products, either on their own or through joint accounts with their spouse; CEOs and directors of licensed or registered persons under the CMSA; and corporations that manage funds of their companies with assets of more than RM10mil. For the full list of qualifying criteria of sophisticated investors, please click https://www.sc.com.my/api/documentms/download.ashx?id=72b64b5c-313b-44dc-9841-36e0d50906acIn addition, the amendments to Schedules 6 and 7 will enable Bursa Malaysia to undertake the registration of ACE Market prospectuses effective Jan 1, 2022. Upon the transfer of the registration function, which is currently assumed by the SC, Bursa will become the one-stop centre for all approvals in relation to ACE Market listing. Also Schedule 5 of the CMSA, which sets out the type of corporate proposals that do not require the SC’s approval, has been amended to include the following: 

A) Initial exchange offering of digital assets through a recognised market operator; and 

B) An initial public offering (IPO) or cross-listing of the shares of a public company or listed corporation on a stock exchange outside Malaysia. 

For more information on the amendments, click https://www.sc.com.my/regulation/acts/capital-markets-and-services-act-2007 

Hong Leong Bank views renewable energy sector in positive light 

According to Hong Leong Bank Bhd (HLB) business corporate banking managing director Yow Kuan Tuck, the bank has approved up to RM1.3 billion in renewable energy (RE) financing for solar, biomass, biogas and small hydropower projects through its climate-positive financing programme introduced in 2018. The bank has identified RE as a commercially viable industry with significant growth potential and introduced the HLB SME Solar Financing Programme in February this year, a green energy financing facility specially developed for Malaysian SMEs looking to install small-scale solar photovoltaic systems. It aims to encourage more businesses to look at sustainability as an investment which can bring long-term competitive advantages and as a gateway to build business resilience against future disruptions, cushion against future rise in energy costs as well as meeting the rising demand of conscious consumerism for sustainable businesses. On top of providing tailored financing specific to RE projects, the bank has expanded its RE team of specialists to further grow this promising portfolio. The RE specialists work closely with customers and provide value-added services, including advisory in guiding new energy players on warranties and guarantees coverage for equipment as well as helping clients evaluate the feasibility and generation capacity of their projects. Sustainability as a mindset and culture is a necessity in every business and industry, including financial institutions. The links between a financial institution and climate change or low carbon footprint may not be as intuitive at first glance but where and how we invest, loan or channel money impacts the way businesses are run and how well the economy performs in the long run. As a bank, it has a responsibility in steering the sustainability transition and mindset amongst SME and corporate customers. It is done with the provision of working together in finding opportunities and solutions to balance profit, people and the planet, as well as enable households, businesses and the economy to become more resilient to climate change impacts. 

Note From Publisher: In this issue, please turn to Pages 17 to 24 for the BrandFinance special report on Marketing Restrictions. It talks about the regulations placed upon legal products relating to expression of brand identity and promotion to customers and its impact on brands’ valuation. Read the views of marketing experts from global brands. View the full Brand Finance Marketing Restrictions 2021 report here  
 

Eye On The Markets 

This week, on Thursday (1July), the Ringgit was 4.1570 against the USD from 4.1430 on Monday (28Jun). Meanwhile, the Ringgit was 3.0882 to the Sing Dollar on Thursday (1July). On Monday (28Jun), the FBM KLCI opened at 1557.46. As at Friday (2July) 10:00am, the FBM KLCI is down 24.75 points for the week at 1532.71. Over in US, the overnight Dow Jones Industrial Average closed up 131.02 points (+0.38%) to 34,633.53 whilst the NASDAQ added 18.4 points (+0.13%) to 14,522.40.  

Companies with good ESG practices more resilient during Covid-19 pandemic – Bursa CEO

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According to Bursa Malaysia Bhd chief executive officer Datuk Muhamad Umar Swift, companies with good environmental, social and corporate governance (ESG) practices have been more resilient since the start of the Covid-19 pandemic as investors’ growing concerns over damage to the environment have led them to put more value on the effective management of ESG risks. While sustainable finance is still emerging in ASEAN capital markets, governments and regulators are making some meaningful efforts to promote and support the endeavour. The Covid-19 pandemic is widely seen to have given sustainability further impetus. Millennials and Gen Z are showing greater concern with respect to sustainability and changing expectations of businesses’ role in improving society and protecting the environment. At the regional level, key developments include using the ASEAN Green Bond Standards, the ASEAN Social Bond Standards and the ASEAN Sustainability Standards to foster greater transparency and consistency across the region, whereby doing so reduces due diligence costs for investors. Preliminary work has also commenced for an ASEAN taxonomy of sustainable finance. For Bursa, sustainability has always been a significant growth driver, with its approach having considerable influence on the ecosystem — for public listed companies, investors and capital market intermediaries. With several recent listings of companies involved in the renewable energy space, Bursa sees a potential growth area, given increasing priority by consumers and investors on the sustainability front. These are some of the important steps that will help drive sustainability across the region. He is confident that the integration of sustainability best practices will see a successful transition to a genuinely sustainable economy for the ASEAN region.  

SC plans to release guide on sustainable and responsible investment taxonomy by year end 

According to The Securities Commission Malaysia (SC) chairman Datuk Syed Zaid Albar, SC plans to release a public consultation paper on sustainable and responsible investment (SRI) taxonomy by year end to provide more clarity and guidance in identifying sustainable investment assets or activities. SC is currently in discussion with key industry stakeholders on guiding principles for SRI taxonomy. It has identified SRI taxonomy for the capital market as a critical building block to facilitate greater product diversity and accelerate the development of SRI as an asset class. It is also working with market participants to assess the benefits of positive screening that incorporates shariah requirements with environmental, social and governance (ESG) standards. To date, 64% of SRI sukuk issuances are for renewable energy projects. He sees the need to expand this base by targeting transformative technologies and industries with high spill over benefits for the country. In supporting the sustainable agenda in the region, the SC is involved in two key initiatives through the ASEAN Capital Markets Forum, namely the ASEAN Taxonomy for Sustainable Finance and the ASEAN Sustainability-linked Bond Standards. The ASEAN Taxonomy for Sustainable Finance also involves Bank Negara Malaysia (BNM), and it seeks to identify economic activities that are sustainable and helps direct investments and funding towards a more sustainable region. Meanwhile, the ASEAN Sustainability-linked Bond Standards provides an avenue for issuers to raise funds to meet sustainability targets. 

Eye On The Markets 

This week, on Thursday (24Jun), the Ringgit was 4.1630 against the USD from 4.1495 on Monday (21Jun). Meanwhile, the Ringgit was 3.0960 to the Sing Dollar on Thursday (24Jun). On Monday (21Jun), the FBM KLCI opened at 1580.51. As at Friday 25Jun) 10:00am, the FBM KLCI is down 18.14 points for the week at 1562.37. Over in US, the overnight Dow Jones Industrial Average closed up 322.58 points (+0.95%) to 34,196.82 whilst the NASDAQ added 98.0 points (+0.69%) to 14,369.70.  

Bursa Malaysia extends relaxation of rules to help listed companies amid prolonged lockdown

Market Sentiments | INVE$T #62

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Bursa Malaysia Bhd provides two additional relief measures to help listed issuers cope with the extended lockdown amid the Covid-19 pandemic, which continues unabated. The first is an automatic one-month extension for the issuance of quarterly and annual reports for listed issuers on the Main and ACE Markets, as well as semi-annual and annual audited financial statements for those in the LEAP Market, which are due on July 31 and Aug 31, 2021, respectively. Notwithstanding the one-month extension, listed issuers are reminded to promptly announce any material information to ensure informed investment decisions by shareholders and investors at all times. Such listed issuer will not be classified as a PN17/GN3 listed issuer during this period. The second is a 12-month relief period granted for a listed issuer who, within the same July 1 and Dec 31 period, announces that it has an insignificant business or operations. Both the relief measures will allow an affected listed issuer to reassess its financial condition or level of operations at the end of the relief period before making the requisite announcements to the exchange. These measures are in addition to those introduced earlier this year in February and May, after considering the lingering impact of various movement control orders or and the recent nationwide lockdown. 

FTSE4Good Bursa Malaysia review sees 10 changes in constituents 

According to Bursa Malaysia Bhd there will be six new entrants to the FTSE4Good Bursa Malaysia (F4GBM) Index, while four companies have been dropped from the index in the semi-annual review. The index, which measures the performance of listed companies demonstrating strong environmental, social and governance (ESG) practices, welcomed DKSH Holdings (M), Heineken Malaysia, Mah Sing Group, MNRB Holdings, Pos Malaysia and Unisem (M). The review will also see the exclusion of George Kent (M), IOI Properties Group, KLCC PROP & REITS – Stapled Securities and Top Glove Corp from F4GBM. The constituent changes will take effect at the start of business on June 21. With the changes, the number of constituents in the index stands at 76, compared with 75 as at the last index review in December 2020 and 74 as of February 2021 (due to the delisting of Chemical Company of Malaysia Bhd). The F4GBM constituents are drawn from the companies on the FTSE Bursa Malaysia EMAS Index, comprising PLCs from across the small, medium and large market capitalisation segments and the index is reviewed in June and December against international benchmarks. Bursa and its partner, FTSE Russell, have been conducting outreach programmes to encourage and support companies in improving their ESG disclosures and practices. The continuous increase in the number of constituents reflects the benefits of these programmes, in addition to other efforts catalysing public listed companies towards ESG best practices. 

MCMC focusing on national digitalisation for economic recovery 

According to the Malaysian Communications and Multimedia Commission (MCMC), national digitalisation continues to be its main focus to assist the country in providing a solid platform for an economic recovery in line with the National Recovery Plan (PPN). As the regulatory body responsible for the communications sector covering telecommunications and the Internet, post and courier as well as broadcasting, it is committed to continuing to ensure continuity of operations in essential services throughout the movement control order (MCO) period. A phased economic reopening is important for essential services to operate at the required level and adopt the standard operating procedures (SOPs) that have been set in a disciplined manner. The people could utilise Internet connectivity for daily activities, such as e-commerce, working from home (WFH) and home-based teaching and learning (PdPR). This can help the government’s effort to reduce infection clusters in the workplace. To achieve the PPN agenda, among the programmes developed with the industry are the National Digital Network (JENDELA) for connectivity, the National Courier Accelerator Plan (PAKEJ) for delivery of goods, the transformation of the state MCMC offices and the development of community Internet centres (PIK). Elaborating on the PAKEJ initiative, more pickup and drop-off (PUDO) points had been set up nationwide. The broadcasting sector had been given permission to continue operating during the MCO period to enable the people to follow current developments safely and comfortably from home, as well as enable them to plan daily activities through authentic and accurate information. 

Eye On The Markets 

This week, on Thursday (17Jun), the Ringgit was 4.1380 against the USD from 4.1150 on Monday (14Jun). Meanwhile, the Ringgit was 3.0906 to the Sing Dollar on Thursday (17Jun). On Monday (14Jun), the FBM KLCI opened at 1582.46. As at Friday (18Jun) 10:00am, the FBM KLCI is down 16.06 points for the week at 1566.40. Over in US, the overnight Dow Jones Industrial Average closed down 210.22 points (-0.62%) to 33,823.45 whilst the NASDAQ added 121.67 points (+0.87%) to 14,161.35.  

Malaysian bonds stay attractive – foreign holdings at 25%

INVE$T #58 | Market Sentiments – 21 May 2021

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According to Securities Commission (SC) chairman Datuk Syed Zaid Albar, Malaysian bonds continue to attract interest, with foreign holdings amounting to 25% of outstanding government bonds. As at end April 2021, foreign investment in the government bond market stood at RM232bil. In his keynote address at the MARC virtual Malaysian bond and sukuk conference themed “Riding the Wave” he noted the SC has long recognised the role of private debt securities as a source of funding, particularly for large-scale, long-term projects. It also increases private sector participation in economic development. According to the Asian Development Bank, in gross domestic product (GDP) terms, the three largest bond markets in Asia are Japan, followed by South Korea and Malaysia. Given the outlays required for infrastructure development, opportunities abound for the Malaysian bond and sukuk markets to continue to be a major funding source for nation building initiatives. This, however, is not unique to Malaysia. In fact, 79% of the respondents to the 2020 Global Infrastructure Index believe that infrastructure investments will be one of the main drivers that will create new jobs and boost their economies. At end2020, the domestic bond market grew to RM1.6 trillion (government bonds constituting 53% and corporate bonds 47%) despite the challenging environment, up from RM1.49 trillion as at end2019. While this augers well for the country’s recovery and future growth, more needs to be done for growth to be sustainable. There was a need to broaden the credit spectrum to include smaller bond issuers, given the significant contribution of MSMEs (micro, small and medium enterprises) to GDP and employment. The challenge is adapting the bond and sukuk markets to provide cost-effective means for small and lower-rated issuers to raise funds to meet their growth and expansion plans. This is particularly important because the greater or more inventive use of traditional assets alone will not be enough to foster better growth. Securitisation transactions embedded with the necessary safeguards had the potential to be a valuable financing tool, transforming illiquid assets into liquid and tradable assets.

Malaysia’s economic performance doesn’t depend only on Covid-19, MCO impact: MARC research head

According to Malaysian Rating Corp Bhd (MARC) head of economic research Firdaos Rosli, Malaysia’s economic performance depends largely on internal and external factors, and not only on how the Covid-19 pandemic and the movement control order (MCO) play out. There have been narratives by economists and opinion makers that the country’s economy is dependent on the MCO, given its impact on business activities and the economy in general. However, it is not really dependent on the pandemic per se as all economic sectors are open, even with the MCO in place. He was presenting on ‘Economic Report & Capital Market Outlook 2021’ at the MARC Malaysian Bond and Sukuk Conference 2021. We are seeing that economic activities are running as usual, and that will give some rebound compared to what it was in the previous year. Externally, the performance of Malaysia’s economy is linked to its major export markets. Major trade partners such as the US and the UK have ramped up their Covid-19 inoculation drive, which will translate into heightened demand for Malaysian exports, particularly for electrical & electronic and petroleum products. There has not been much communication on the government’s medium to long-term economic action plan as it is busy fighting the pandemic. There is the need for signals on policy since the pandemic differs from the Asian and the global economic crises in the past, which were due to financial and trade factors. This crisis is non-financial and non-export led, which means that as the balloon is squeezed, the economy will still be in contraction mode. The country will see continued positive growth in the future as the government eases the restrictions. On foreign direct investments (FDI) in equities, the foreign investors have left the market, but in the debt market there has been a healthy inflow since the start of the year. However, for manufacturing FDI, it is a completely different perspective altogether. As far as incentives are concerned, what Malaysia has been offering are generic, whether it is pioneer status or tax perks, as there is nothing it can offer that its neighbours cannot. To gain a competitive edge, there has to be something “magical” that the government can offer to attract such investments. The country can examine the trade agreements which it has participated in but has yet to ratify, such as the Comprehensive and Progressive Transpacific Partnership and the Regional Comprehensive Economic Partnership, to obtain such advantage. While this would be one way to look at it, the other is the autonomous liberalisation route, similar to what was done in the 1980s following the commodity crisis, where liberalised foreign equity in manufacturing allowed 100% equity to foreign manufacturers. But such a move will require indepth policy justification. On the possibility of more stimulus measures, his educated guess was that they will be related to the social security net, particularly with regard to employment and the job market. This was in reference to Finance Minister’s statement that the reason behind the government’s decision to keep the economy open was primarily to address the unemployment rate. Noting that in the past, the unemployment rate following a crisis is responsible for projecting the country’s growth trajectory in the post-crisis era. The country would likely see slow growth in private consumption if it is not able to contain the unemployment rate this time around. However, he is not sure that more cash handout is the answer as people are likely to turn it into savings but it is left to be seen what the government has in store.

Eye On The Markets This week

On Thursday (20May), the Ringgit was 4.1443 against the USD from 4.1310 on Monday (17May). Meanwhile, the Ringgit was 3.1085 to the Sing Dollar on Thursday (20May). On Monday (17May), the FBM KLCI opened at 1577.49. As at Friday (21May) 10:00am, the FBM KLCI is down 12.42 points for the week at 1565.07. Over in US, the overnight Dow Jones Industrial Average closed up 188.11 points (+0.55%) to 34,084.15 whilst the NASDAQ added 236.00 points (+1.77%) to 13,535.74.

Malaysia’s economy further improving in Q2 – Statistics Dept

Invest #59 | Market Sentiments – 28 May 2021

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Inve$t #59 | Market Sentiments – 28 May 2021

According to the Department of Statistics Malaysia (DoSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin, Malaysia’s economy is expected to further improve in Q2 2021 especially on the back of a low base as the economy contracted 17.1 per cent in the second quarter of 2020, based on the performance of several key economic indicators. However, the recovery is also highly dependent on the extent to which the infection of Covid-19 could be brought under control and the consequence of movement control order (MCO) 3.0 with tightened standard operating procedures for the economic sectors and social aspects. Further to this, the leading index (LI) for March 2021 achieved strong growth at 17.3 per cent, mainly due to the low base effect of March 2020 following a nationwide lockdown and the better performance of LI components. Taken together, the LI performance and the current state of Covid-19 outbreak, it seems that the near term economic prospect is encouraging but prevailing challenges persist. The utmost commitment in easing the current pandemic situation is vital so as to regain the economic momentum in the upcoming months. Malaysia’s economic situation, gross domestic product (GDP) declined marginally by 0.5 per cent in Q1 21, continuing its recovery from a contraction of 3.4 per cent in the preceding quarter. The improvement was supported by the expansion in the manufacturing sector, the rebound of the agriculture sector and the better performance recorded by all economic sectors compared to the last two quarters. Malaysia’s economy in this quarter gradually recovered as more economic activities were allowed to operate following MCO 2.0, less stringent than the MCO 1.0 imposed in March 2020. Various stimulus packages introduced also steered the economic recovery and cushioned the potential economic losses of this country. Adding to this, the encouraging economic environment during Q1 2021 was largely driven by the better performance of key economic indicators in March 2021. Malaysia’s current account balance continued to record a surplus registering RM12.3 billion in the Q1 2021 compared to RM18.6 billion in the previous quarter, contributed by the positive momentum of the net exports of goods. Whereas foreign direct investment recorded a higher inflow of RM9.1 billion against RM6.8 billion in the preceding quarter owing to higher inflow in equity and reinvestment of earnings and lower inflow in debt instruments. Concurrently, direct investment abroad by Malaysian companies has also increased, gaining from the reopening of the global economy, posting RM7.8 billion in Q1 2021 from RM5.2 billion in the preceding quarter due to the high investment in equity abroad and retained earnings in this quarter. Meanwhile, Malaysia’s trade continued to rise, with total trade recording a double-digit increase of 14.8 per cent year-on-year (y-o-y). In line with this, Malaysia’s trade balance remained surplus at RM58.6 billion. In terms of the labour market, amid targeted measures to manage the Covid- 19 pandemic in the country, uneven recovery momentum in the labour market was observed as the number of employed persons decreased slightly y-o-y by 0.04 per cent to 15.24 million persons while the unemployment rate remained high above four per cent registering 4.8 per cent in the Q1 2021. From the view point of labour demand, the number of jobs in the economic sector decreased marginally as filled jobs declined while vacancies posted a small increase. Overall, the labour market remains in a challenging situation as it has not returned to the way it was during pre-Covid times.

Malaysia to see 6% to 7.5% GDP growth in 2021 if Covid-19 can be stabilised — Mustapa

According to Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed, Malaysia can achieve its 2021 gross domestic product (GDP) growth target of between 6% and 7.5% if the Covid-19 health crisis can be stabilised after the eventual lifting of the Movement Control Order (MCO 3.0). The availability of vaccines and a comprehensive vaccination rollout for Malaysians would have a positive impact on the country’s economy. If assuming that the percentage of Malaysians vaccinated goes according to schedule or can be accelerated, while the Covid-19 situation can be placed under control, then we will be able to see a positive decline in infections. And this will definitely have a positive impact on the position of the Malaysian economy. The Leading Index (IP) surged 17.3% in March 2021, much higher than an increase of 8.2% in January and 8.6% in February. The good performance was in line with the country’s GDP growth of 6% in March 2021. This growth momentum would be affected if the government decided to implement full-scale movement restrictions from May 25 to June 7, 2021. Full-pledged movement restrictions will cause the unemployment rate to rise sharply, the number of poor households will increase, the performance of small and large companies will be affected, and the fiscal position will be in a more challenging condition. During an engagement with industry representatives, micro, small and medium enterprises, and hawker associations on May 22 and 23, 2021, most of them agreed with the government’s decision to implement MCO 3.0.

Eye On The Markets This week

On Thursday (27May), the Ringgit was 4.1390 against the USD from 4.1425 on Monday (24May). Meanwhile, the Ringgit was 3.1257 to the Sing Dollar on Thursday (27May). On Monday (24May), the FBM KLCI opened at 1563.78. As at Friday (28May) 10:00am, the FBM KLCI is up 19.66 points for the week at 1583.44. Over in US, the overnight Dow Jones Industrial Average closed up 141.59 points (+0.41%) to 34,464.64 whilst the NASD

Banks maintain strong capitalisation levels

INVE$T #60 | MARKET SENTIMENTS – 04 June 2021

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According to Bank Negara in its Monthly Highlights – April 2021 report, all banks remained well-capitalised to withstand potential shocks and to continue supporting credit flows to the economy. Banks’ excess capital buffers amounted to RM124.2bil as at April 2021. The banking system’s asset quality also remained sound. Overall gross and net impaired loans ratios were sustained at 1.6% and 1.0%, as impairments moderated slightly during the month. However, banks continued to set aside additional provisions against potential credit losses, which currently stand at 1.7% of total banking system loans. Net financing expanded by 4.9% in April, reflecting the increase in outstanding corporate bond growth which stood at 7.7% versus 5.9% in March, while outstanding loan growth was sustained at 3.9% for both March and April. Outstanding household loan growth increased to 6.2% (March: 5.7%) as loan disbursements grew at a higher pace compared to loan repayments across most purposes. Businesses’ outstanding loan growth moderated to 0.4% (March: 1.1%), mainly reflecting lower growth in loans for working capital purpose. Domestic financial market conditions improved in April amid a confluence of external and domestic factors. Domestic bond yields moderated amid positive investor sentiments driven by Malaysia’s retention in the FTSE Russell World Government Bond Index and the decline in longer-term sovereign bond yields in most advanced economies after the sharp increase earlier in the year. Specifically, the 10-year Malaysian Government Securities yield declined by 12.2 basis points during the month. The ringgit appreciated by 1.3% against the US dollar supported by portfolio inflows to the domestic bond market and broad weakening in the US dollar. The FBM KLCI increased by 1.8%, supported mainly by the healthcare sector amid concerns surrounding the global and domestic resurgence of Covid-19 cases. Malaysia’s headline inflation rose to 4.7% in April versus 1.7% in March due to higher domestic fuel prices. Headline inflation is expected to temporarily spike in the second quarter, and moderate thereafter as the base effect subsides. Underlying inflation, as measured by core inflation, remained stable at 0.7%. Exports expanded further by 31.0% in March versus 17.6% in February, driven primarily by robust manufactured exports.

Banks to continue providing assistance – affected borrowers should contact their lenders

According to the Association of Banks in Malaysia (ABM), member banks will continue to offer financial assistance to borrowers affected by the latest movement control order (MCO) amid the Covid-19 pandemic. Any individual customers who have lost employment are eligible for financial assistance under the Targeted Repayment Assistance (TRA) programme. Customers who have lost their employment are eligible for loan deferment (moratorium) for a period of three months or 50% reduction in the monthly instalment payment for a period of six months. Currently, member banks of ABM offer financial assistance under the TRA programme, which has been in place since Oct 1, 2020. Meanwhile, customers who have experienced a reduction in income including household income are also eligible for a commensurate reduction in monthly instalments. B40 borrowers who are registered under Bantuan Sara Hidup (BSH) or Bantuan Prihatin Rakyat (BPR) are eligible to opt for this specific repayment assistance. Micro-enterprises with loan facilities of not more than RM150,000 can also opt for this repayment assistance. Moreover, micro-enterprises can also request for assistance through Agensi Kaunseling dan Pengurusan Kredit’s (AKPK) dedicated micro business helpdesk at www.akpk.org.my/ microhelpdesk. The virtual helpdesk provides free financial advice and facilitates applications for repayment assistance. Moving forward, the TRA programme has been expanded to include all small and medium enterprise (SME) businesses that are not permitted to operate during the latest MCO. All affected borrowers including individuals, micro-enterprises and SMEs who wish to avail of this latest TRA only need to contact their respective banks to indicate which option they want to choose. The banks will automatically approve all selections by borrowers that fulfil the relevant criteria. Also member banks have made it convenient for borrowers to opt for financial assistance by simplifying the process for the TRA programme. In view of the movement restrictions, affected borrowers can also opt for the financial assistance package at bank branches, online or over the phone. Customers should check their respective banks’ websites for information on any changes in operating hours and over-thecounter services. Meanwhile, according to Bank Negara, borrowers’ central credit reference information system (CCRIS) records would not be affected by the TRA programme received this year. Hence, borrowers need not worry about the impact on their future credit profile. All affected borrowers, including SMEs, are urged to come forward and contact their banks via the banks’ official channels to discuss the best options available. As a reminder, borrowers are to be wary of scammers and apply for financial assistance through official bank channels. It also cautioned borrowers not to deal with any third parties claiming to be agents or representatives of banks with regards to repayment assistance. Member banks do not appoint or engage third parties or agents for purposes of the repayment assistance. Under the TRA programme, banks have received 1.6 million applications, of which 95% have been approved up till March 26, 2021.

Eye On The Markets This week

On Thursday (3Jun), the Ringgit was 4.1225 against the USD from 4.1290 on Monday (31May). Meanwhile, the Ringgit was 3.1127 to the Sing Dollar on Thursday (3Jun). On Monday (31May), the FBM KLCI opened at 1571.04. As at Friday (4Jun) 10:00am, the FBM KLCI is up 7.15 points for the week at 1578.19. Over in US, the overnight Dow Jones Industrial Average closed down 23.34 points (-0.07%) to 34,577.04 whilst the NASDAQ shed 141.82 points (-1.03%) to 13,614.51.

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