Bank Negara likely to raise rates this year – HSBC

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According to HSBC Group Asian economics research co-head Frederic Neumann, Bank Negara (BNM) is likely to raise interest rates this year following in the footsteps of the United States Federal Reserve, which plans to raise rates by three to four times in 2022 to fight inflation. BNM could raise its overnight policy rate (OPR) by 50 basis points (bps) this year on the back of stronger domestic demand and strong export numbers, as the world economy recovers from the impact of the Covid-19 pandemic. Within the Asia region, Malaysia is likely expected to experience one of the strongest domestic demand recoveries. On the investment side, particularly foreign investment, Malaysia will be the key beneficiary under the current trends, and the country’s exports are likely to remain supported. There is a desire by BNM to start to normalise its interest rates again, relatively swiftly. This is where the 50bps hike comes through. He was speaking at the HSBC Asian outlook 2022 media briefing. BNM has kept its OPR at 1.75% since July 2020, when it cut the rate from 2% to support economic growth that was affected by the Covid-19 pandemic and movement control order to curb the infection rate. The OPR at 1.75% is the lowest on record since 2004. As Malaysia’s labour market strengthens, the country’s core inflation may gradually trend higher to 2% by end-2022, thus, allowing Bank Negara to initiate a gradual monetary tightening process in the second half of 2022. HSBC expects a total of 100bps of rate hikes over 2022 and 2023. The Malaysian economy has one of the brighter outlooks in the region. The Malaysian economy is expected to grow 3.6% in 2021 and accelerate to 5.6% this year. Malaysia had one of the highest vaccination rates in Asia, allowing a high degree of resilience. While restrictions may be re-imposed, the government will likely opt for highly targeted measures as opposed to lockdowns. Malaysia is currently attracting the highest share of foreign direct investment (FDI) commitments in Asean, overtaking Vietnam which bodes well for the future of manufacturing. Malaysia’s manufacturing outlook remains impressively strong. Despite the positive outlook on the economy, the interest rate hike could pose the risk of downward pressure on the local stock market. According to HSBC chief Asia equity strategist Herald van der Linde, funds are anticipated to reduce their exposure to Malaysian equities due to potential rising interest rates. In contrast to a few of the other Asean markets, the situation in Malaysia is that domestic interest rates are rising which is not positive for the market. Most funds are already pretty overweight on Malaysia. So, they can’t really buy that much more if they wanted to. Some of the funds would probably reduce their exposure to Malaysian equities and move to other Asean markets such as the Philippines and Indonesia. Growth in all markets is coming down because last year was a large bounce in earnings growth. While there were still a lot of uncertainties, HSBC also believes that the ringgit is undervalued and the local currency could see recovery this year as the Malaysian economy emerges from a “double-dip” recession. The Ringgit is expected to be supported by the higher FDI inflows and the interest rate hike by the central bank should help the Ringgit to maintain a “yield advantage against the US dollar” and keep real rates positive. Greater confidence in the domestic economy and in local assets would help curb residents’ foreign asset accumulation. However, HSBC warned that its positive views on the ringgit were dependent on the Covid-19 developments and that political uncertainty may weigh on sentiment and affect capital flows.

Bursa unveils enhanced requirements

Bursa Malaysia has announced enhanced requirements for Main and ACE Market listings to further strengthen board independence, quality and diversity. The enhanced listing requirements now limits the tenure of an independent director to not more than a cumulative 12 years in a listed issuer and its group of corporations. All long serving independent directors impacted by this enhancement must resign or be redesignated as non-independent directors by June 1, 2023. Another key enhancement is the requirement for listed issuers (PLCs) with a market cap of RM2bil as at Dec 31, 2021 to appoint at least one woman director on their boards by Sept 1, 2022, as announced by the finance minister in Budget 2022. For the remaining PLCs, the requirement must be complied with by June 1, 2023. Additionally, Bursa also introduced a new rule which requires PLCs to have in place a fit and proper policy that addresses board quality and integrity for the appointment and re-election of directors across the PLC group, which must be published on the PLCs’ websites, starting from July 1, 2022. PLCs are also required to disclose the application of the PLCs’ fit and proper policy in the nomination and election of their directors in their annual reports. This seeks to improve the overall quality of directors and promote greater transparency on the criteria for board appointments.

Confidence in small-cap stocks remains – RHB Research

RHB Research notes in their report that despite the unfavourable short-term outlook, there are still pockets of opportunity for investors who are interested in small-cap stocks. Optimism in the market remains with the high vaccination rate and as the economy continues on its recovery path, which would enable investors to benefit from a sector rotational play and a meticulous stock-picking strategy. The research house advocated several key investment themes including exporters, value stocks and election play. Against this backdrop, it recommended consumer discretionary, technology, logistics, oil and gas (O&G), commodity play, and politically-linked thematic play as sectors to look out for in the small-to-mid caps space. The accommodative fiscal and monetary policies should continue to lend support to private consumption, supporting the consumer discretionary sector. Meanwhile, the O&G sector is likely to draw interest, premised on the high crude oil price trend, higher capex allocation and oil demand recovery. The technology space will also remain in favour thanks to its structural growth and strong fundamentals. However, it is paramount that investors remain selective on technology companies with a strong track record and competitive edge to sustain the elevated valuations and weather through a potential valuation de-rating, on the back of persistent high inflation rates and the rising interest rate environment. As for the logistics sector, growth will continue on improving trade and volume following the reopening and resumption of economic activities. Additionally, secular e-commerce play, elevated freight rates, growing demand for third-party logistics, and favourable measures and tax incentives from policy makers bode well for the industry. The imminent general election could also see politically-linked stocks gain prominence, with improved sentiment and the resumption of contract flows. With the FBM 70 Index and FBM Small Cap Index’s current forward price-earnings ratios (P/E) having retraced to below their five-year mean levels, and the indices are now trading at two times to three times P/E discounts to that of the FBM KLCI – based on RHB’s coverage universe – the brokerage cautioned that it is still paramount for investors to exercise extra diligence in their stock-picking, despite a better risk-reward ratio in terms of the relative forward valuation. It also highlighted that valuation for the MSCI Malaysia Small Cap Index continued to be at the north of the MSCI benchmark index. This is mostly owing to the superb performance of many stocks in the small-cap space, especially the high-flying technology stocks that command premium valuations, even in the region. The prolonged pandemic, political instability, earnings disappointment, worsening economic conditions, liquidity issues and higher environmental, social and governance-related risks could curb potential gains in the small-cap space.

Note From Publisher – RinggitPlus has launched a 3-part once a month series on Financial Planning. Please turn to page 9 or 10 for the 1st part.

Eye On The Markets

This week, on Friday (21Jan), the Ringgit opened at 4.1925 against the USD from 4.1865 on Monday (17Jan). Meanwhile, the Ringgit was 3.1110 to the Sing Dollar on Friday (21Jan). On Monday (17Jan), the FBM KLCI opened at 1553.80. As at Friday (21Jan) 10:00am, the FBM KLCI is down 28.17 points for the week at 1525.63. Over in US, the overnight Dow Jones Industrial Average closed down 313.26 points (-0.89%) to 34,715.39 whilst the NASDAQ shed 186.20 points (-1.30%) to 14,154.00

EPF investment income for 9M21 up 7.7% y-o-y to RM48b

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According to Employees Provident Fund (EPF) chief executive officer Datuk Seri Amir Hamzah Azizan, the total gross investment income for the EPF for the nine months ended Sept 30, 2021 (9M21) rose 7.7% year-on-year (y-o-y) to RM48.02 billion from RM44.6 billion the year before. Total gross investment income for the third quarter ended Sept 30, 2021 (3Q21), however, amounted to RM13.97 billion, lower than RM17.33 billion for 3Q20. He said that 3Q21 was volatile for equities in both the domestic and emerging markets, largely caused by concerns surrounding rising inflation and interest rates. On the other hand, continued recovery of equities in the developed economies amid the heightened volatility provided the EPF an opportunity to capitalise additional gains. Equities continued to be its main income contributor, accounting for 54% of total gross investment income at RM7.5 billion. As part of EPF’s internal policy and a prudent measure to ensure a healthy portfolio, RM110 million was written down for listed equities during the quarter, compared with RM130 million in the corresponding period of the previous year. After taking into account the cost write-down, RM13.86 billion of net investment income was recorded for 3Q21. Cumulatively, RM350 million was written down for listed equities, down from RM6.46 billion in the same period in 2020, on the back of continued recovery in the global equity market, resulting in net investment income of RM47.67 billion for 9M21, compared with RM38.14 billion for 9M20. Investments in fixed income instruments contributed RM5 billion, or 36% of 3Q21 gross investment income, which was lower than the RM8.18 billion generated in 3Q20 due to lower trading gains. This was in line with the higher market yield in 3Q21, compared to the same period of the previous year. The real estate and infrastructure, as well as money market instruments, contributed RM1.18 billion and RM290 million respectively. As at September 2021, the EPF’s investment assets stood at RM988.55 billion, of which 36% were invested in overseas investments. The fund’s diversification in different asset classes, markets and currencies continued to provide income stability and add value to its overall returns. In 3Q21, the EPF’s overseas investments generated RM8.1 billion in income, representing 58% of total gross investment income recorded. A total of RM1.4 billion out of the RM13.97 billion gross investment income was generated for Simpanan Shariah, and RM12.57 billion for Simpanan Konvensional. On the outlook for the rest of the year, the post-lockdown recovery would continue, although at a slower pace, despite continuing concerns over the monetary policy and inflation outlook. Risks to Malaysia’s economic growth outlook remain tilted to the downside on external and domestic factors amid lingering Covid-19 concerns. Continued inflationary pressure and aggressive shifts from central banks led yields to increase amid increased expectations of monetary policy tightening. The environment of increasing bond yields has not just impacted bond markets, but created unease in equities as well. Despite the challenging and unprecedented times, the EPF is hopeful of seeing market sentiments improving in the near future. As a long-term fund, it remains committed and guided by the Strategic Asset Allocation that helps to ride out volatility while taking advantage of declines in valuations of fundamentally strong assets. 

Foreign investors net buyers of bonds in December – Kenanga 

According to Kenanga Investment Bank Bhd, foreign investors turned net buyers of Malaysia’s debt securities in December last year, totalling RM6.1bil, after a month of net selling in November for RM3.6bil. Total foreign debt holdings increased to RM256.6bil compared to November’s RM250.4bil, while its share to total outstanding debt rose to 14.8%, a seven-month high. Demand was likely driven by the return of global risk-on sentiment as Omicron fears began to subside, following reports that it was less severe than other Covid-19 variants. Furthermore, domestic bonds retained high yield differentials against many developed market bonds, keeping them attractive despite monetary policy tightening by major central banks. December’s inflow was driven by a sizeable net increase in holdings of Malaysian Government Securities and Government Investment Issues, which outweighed a softer rise in holdings of Malaysian Treasury Bills. For the equity market, it noted that foreign investors turned net sellers for the first time in five months, selling a total of RM1.1bil worth of shares compared to the RM200mil net buy in November. Demand for equities may have been hindered by lingering uncertainty over the Omicron variant and the United States Federal Reserve’s increasingly hawkish tilt, as it quickened the pace of its tapering process. The capital market registered its largest inflow in four months amounting to RM5bil. However the debt market remains at risk of outflows in the near term as the Fed may tighten monetary policy. 

AmInvest Launches Global Small Caps Fund 
AmInvest unveiled its Global Smaller Companies Fund, offering investors to tap into the potential capital growth of small companies listed globally. The fund will feed into the target fund, Janus Henderson Horizon Fund – Global Smaller Companies Fund, which aims to identify good quality and potentially undervalued small-cap stocks. According to the fund management firm’s chief executive Goh Wee Peng, the fund benefits from structural drivers that will continue to support global small-cap growth and has partnered with investment manager Henderson Global Investors Ltd which has a team of regional specialists in the US, Europe, Singapore and Japan. Since its inception in August 2019 and until Nov 30, 2021, the target fund has delivered returns of 63.5% which is 17.1% higher compared to its benchmark. This has translated to returns of 23.6% per year by the target fund. AmInvest pointed out returns from global small-cap stocks have surpassed large-cap stocks over the long term as they have higher growth and more opportunities for future growth and have outperformed large caps by over 220% over the last 24 years. Smaller companies are targets for mergers and acquisitions. To complete a takeover, the acquirer normally has to offer a valuation over and above where the share price has been trading. This premium has averaged between 21% and 40% in recent years. The target fund utilises fundamental and value-biased screening tools by identifying a narrow investable universe of around 100 to 200 quality stocks with growth potential. While the fund’s risks are managed by diversifying exposures by geography and market sector. The Global Smaller Companies Fund’s base currency is US dollars and it is being offered to sophisticated investors in US dollar and RM as well as RM-hedged classes at an initial offer price of US$1 and RM1 per unit respectively during the initial offer period until Jan 30, 2022. 

Eye On The Markets 

This week, on Friday (14Jan), the Ringgit opened at 4.1815 against the USD from 4.1995 on Monday (10Jan). Meanwhile, the Ringgit was 3.1078 to the Sing Dollar on Friday (14Jan). On Monday (10Jan), the FBM KLCI opened at 1543.38. As at Friday (14Jan) 10:00am, the FBM KLCI is up 16.38 points for the week at 1559.76. Over in US, the overnight Dow Jones Industrial Average closed down 176.70 points (-0.49%) to 36,113.62 whilst the NASDAQ shed 381.60 points (-2.51%) to 14,806.80.  

Thumbs up for reinstating shares stamp duty cap – CGS-CIMB Research

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According to CGS-CIMB Research, investors will enjoy lower transaction costs following the Finance Ministry’s decision to reinstate the cap on stamp duties for the trading of shares on Bursa Malaysia. This will make the Malaysian stock exchange more competitive regionally. On Dec 30, 2021, the Finance Ministry announced that a stamp duty of 0.15% would be imposed on share contract notes, up to a maximum of RM1,000. Stamp duty amounts exceeding RM1,000 would be remitted and that this remittance would apply to all contract notes from Jan 1, 2022 until Dec 31, 2026. The government had earlier proposed in Budget 2022 for the stamp duty rate to be raised to 0.15% from 0.1%. It also said the RM200 cap on the duty would be abolished, effective Jan 1, 2022. The brokerage estimated that the government’s latest decision will cut total transaction costs for Malaysia from 0.32% to 0.2% for US$1mil (RM4.2mil) trade value, assuming a brokerage rate of 0.15%. This is because the stamp duty costs will decline to RM1,000, as compared to an estimated RM6,300 if the stamp duty is removed. However, this is still higher than the total transaction costs in 2021 of 0.19%, based on its estimates when the stamp duty cap was RM200. Nevertheless, this is positive for stockbrokers and Bursa Malaysia as the higher cap on stamp duty for the next five years will improve Malaysia’s competitiveness against MIST (Malaysia, Indonesia, Singapore and Thailand) peers. They estimate total transaction costs for shares to be 0.16% to 0.26%. It pointed out that the FBM KLCI had reacted positively to the reinstatement of the stamp duty cap and window-dressing activities, gaining 23.92 points or 1.55% on the last trading day of 2021. However this positive is partly offset by concerns over Omicron, the return of intraday short selling effective Jan 1, 2022 and flooding risks in Malaysia. The market’s excitement seen in the last trading day of 2021, however, did not last long. The FBM KLCI began the new year on a weak footing as the benchmark index dropped by 18.48 points or 1.18% to 1,549.05 points on the first day of trading. Meanwhile, the brokerage was positive on the government’s decision to extend the tax exemption on foreign sourced dividends for corporates till Dec 31, 2026. 

Maybank Asset Management launches China Equity Fund 

According to Maybank Asset Management Group (MAMG) CEO Ahmad Najib Nazlan, MAMG has partnered with global investment firm T Rowe Price to offer its China-focused equity strategy to Malaysian investors via the MAMG China Evolution Equity Fund. The fund feeds into T Rowe Price’s China Evolution Equity Strategy, which looks beyond the Chinese mega-caps to seek to identify the future winners, focusing on opportunities outside China’s 100 largest companies. The fund favours companies it believes are best positioned to capitalise on China’s changes and growth, including those moving up the value chain through innovation, niche players, companies set to benefit from disruptions as well as those involved in energy transition and high performance computing space. It is also benchmarked against the MSCI China All Shares Index Net for performance comparison. The strategy is managed by Hong Kong-based portfolio manager Wenli Zheng who has over 13 years’ experience at the global asset manager and the Chinese market. By extending MAMG’s reach beyond the top 100 stocks into a universe of over 5,500 untapped stocks, this unique pivot provides an unconstrained All-China investment approach to pick the best and most valuable upcoming companies; coupled with its ESG fundamentals to ensure business sustainability. With T Rowe Price’s knowledge and experience of the China market, he is confident the partnership will reap positive benefits for investors.  

Meanwhile according to T Rowe Price’s head of distribution for Asia ex-Japan, Elsie Chan, China is a deep market with over 5,500 onshore and offshore-listed companies, offering a huge opportunity set to investors. It remains a fertile hunting ground for investors seeking sustainable businesses and potential excess return opportunities through bottom-up fundamental research. Chan is pleased to offer the investment strategy for investors in Malaysia to complement their investment portfolios and pursue the attractive but overlooked opportunities amidst China’s economy upgrade. 

5.2% growth in 2022 from private consumption woes – SERC 

According to The Socio-Economic Research Centre (SERC) executive director Lee Heng Guie, SERC has projected a gross domestic product (GDP) growth of 5.2% for 2022, slightly lower than the government’s forecast of 5.5-6.5% growth prediction, attributed to its more modest private consumption estimate. Looking at the private consumption, he expects it to recover but there are also some headwinds, mainly, inflation risk, high cost of living as well as an expectation for households to rebuild their savings and balance sheet. For this year, the private consumption is projected to grow at 5.9% of the GDP, while the official forecast had expected 7.3% of the GDP. Sector wise, some of the forecasts are lower than the official estimates, as the latter was made earlier in September last year during the formulation of Budget 2022. Since then there has been some development, especially with the unexpected pickup in inflation risks, which is something to watch out for as well as the worst ever flood experienced that could temper the activities early this year which would impact the overall GDP. In identifying a number of risks to the country, he noted one of which is a decline in China’s growth, one of Malaysia’s key trading partners. He calculated a 1% decline in China’s GDP could shave Malaysia’s GDP growth by 0.3-0.5% via trade channels. Similarly, the country also has to contend with price pressures similar to one faced across the globe. Domestically, labour shortage has to be addressed, effects of inflation to consumers and producers as well as a winding down of domestic relief measures and policy changes’ impact to local businesses and industries. The one-off prosperity tax this year could reduce dividend payments and corporate earnings, as well as a slew of other measures such as rental discounts, utilities rebates, multi-tier levies and higher minimum wage. Hopefully, the government will make sure some of the policy changes would be staggered out and there will be sufficient industry engagement particularly with the multi-tier levy implementation. On the bright side, the Regional Comprehensive Economic Partnership (RCEP) as a key catalyst to the country’s performance as the 14-member countries account for 58% of Malaysia’s trade. This translates to a wider market for Malaysian exporters and because of the agreement, at least 92% of the tariff line will be reduced over 20 years and some would enjoy an immediate zero tariff, facilitating the exports of goods and services to the international market. For SMEs, because of e-commerce and digitalisation, they can fully leverage this platform to find new markets rather than concentrating on the domestic market. He also cautioned that the free trade agreement could also bring challenge to Malaysian businesses, in terms of competition. It is important to focus on product quality, good delivery and competitive cost so they are able to compete with the international players in the RCEP market whilst at the same time there will be goods coming into Malaysia offering a wide choice at a competitive price. And the SME can source for raw material and inputs they need for their production and participate in the global or regional supply chain. On this matter, the electronic & electric sector is estimated to be the biggest beneficiary as it is an important hub for the sector in the global supply chain. With regard to the overnight policy rate, it is anticipated that Bank Negara Malaysia (BNM) to raise the interest rate in the second half of 2022, though the timing will depend on the growth trajectory and inflation risk. A removal of monetary accommodation is needed to rebuild buffer and hikes in baby steps so as not to hamper the recovery path. A prolonged period of low interest rates can induce financial imbalances by reducing risk aversion of banks and other investors. On the whole, SERC expects BNM to raise the policy rate by 25-50 basis points to 2%-2.25% in the second half of 2022. On a global note, it expects growth to normalise in 2022 amid headwinds, at a moderating pace of 4.5%. It also pointed out that the Omicron variant, ongoing supply disruptions, rising inflation pressures and more hawkish central banks are the headwinds as tighter financial conditions and capital flows volatility could weigh on global growth. The Omicron will dent confidence and sentiment given the still inequitable vaccinations across the countries in different regions. What comes in the near-term is to what extent the impact of Omicron variant on global growth. Three vaccine doses hold the key for protection against the new variant. The International Monetary Fund had estimated that a more transmissible Omicron could cost the global economy a further US$5.3 trillion, in addition to the current projected loss of US$12.5 trillion. 

Eye On The Markets 

This week, on Friday (07Jan), the Ringgit opened at 4.2145 against the USD from 4.1705 on Monday (03Jan). Meanwhile, the Ringgit was 3.0963 to the Sing Dollar on Friday (07Jan). On Monday (03Jan), the FBM KLCI opened at 1553.64. As at Friday (7Jan) 10:00am, the FBM KLCI is down 20.01 points for the week at 1533.63. Over in US, the overnight Dow Jones Industrial Average closed down 170.64 points (-0.47%) to 36,236.47 whilst the NASDAQ shed 19.30 points (-0.13%) to 15,080.90.  

Individuals to be exempted from tax on foreign-sourced income – MOF

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According to the Ministry of Finance (MOF), the government has agreed to exempt all types of foreign incomes of individuals from tax, and has also extended the exemption to dividend incomes earned by limited liability companies and partnerships. This would be subject to the eligibility criteria which will be detailed in the Inland Revenue Board’s guidelines. For individual taxpayers, the government provides exemption to all individuals except those who conduct business partnership in Malaysia, which will be subject to tax on foreign-sourced income (FSI) received. Non-resident categories (individuals, companies, etc) remain eligible for income tax exemption. At the same time, FSI received in the year of assessment 2022 is exempt from tax calculation for the purpose of Cukai Makmur. The exemption would be effective Jan 1, 2022 until Dec 31, 2026. During the tabling of Budget 2022, the government had proposed the withdrawal of the tax exemption on FSI received in Malaysia, which had caused a stir among companies and individuals, especially those with significant investments abroad. The exemption on FSI has been in place since 1998 for companies and since 2004 for individuals, in a bid to encourage remittance of such income. The withdrawal of the exemption is part of its revenue sustainability measures, adding that it is in line with international regulations. 

Policy transition raises risk of volatility in 2022 – Kenanga Research 

According to Kenanga Research in its investment strategy note, Malaysia’s policy transition from monetary accommodation and fiscal expansion to austerity and consolidation raises the risk of volatility in the stock market in 2022. However this is only likely to happen in the second half of the year and after the 15th general election (GE15). Until then, conditions are supportive for positive stock market returns as liquidity remains ample, while value has emerged following 2021’s steep market decline and regional underperformance. And for all the anxieties that the recent floods have caused, the implied Q4’21 earnings results already suggested that Q4’21’s earnings would be the lowest. This is despite commodity prices holding up and a surge in economic reopening activities (briefly disrupted by the floods notwithstanding), plus encouraging data of leading economic indicators released recently. However, catalysts were lacking and there would be the usual pre-election inertia that would drag the market’s advance, and so, returns would not be broad-based. While the severe floods in mid-December would likely impact Q4’21 earnings, the market had already projected very conservative earnings estimates around lockdown-related impacts, which may have been overly aggressive, given anecdotal evidence of a surge in economic reopening activities. Several signs suggested the likelihood of GE15 being called well before the July 2023 deadline, including the resounding win by the Barisan Nasional in the November Melaka state election, followed by the convincing win by its close ally, Gabungan Parti Sarawak, recently. Additionally, economic data released in Q4’21 suggested the current recovery was intact for now, and would likely hit the government’s targeted 3% to 4% growth. The Opposition is more fragmented after the Sheraton Move and it looks highly unlikely for Pakatan Harapan, Bersatu and Parti Pejuang to regroup. And finally, the pandemic looks to be subsiding. These events should likely embolden the ruling coalition to call an election possibly as early as Q2’22. Meanwhile liquidity remained ample and no tightening is expected in Q1’22. The tightening would only likely be a post-GE15 event. When Bank Negara finally tightens by raising the overnight policy rate and statutory reserve requirement, the research house expects heightened market volatility as liquidity reduces. 

Eye On The Markets 

This week, on Friday (31Dec), the Ringgit opened at 4.1740 against the USD from 4.1975 on Monday (27Dec). Meanwhile, the Ringgit was 3.0869 to the Sing Dollar on Friday (31Dec). On Monday (27Dec), the FBM KLCI opened at 1517.37. As at Friday (31Dec) 10:00am, the FBM KLCI is up 15.21 points for the week at 1532.58. Over in US, the overnight Dow Jones Industrial Average closed down 90.55 points (-0.25%) to 36,398.08 whilst the NASDAQ shed 24.70 points (-0.16%) to 15,741.60.  

Bursa extends validity period of 20% general mandate

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According to Bursa Malaysia CEO Datuk Muhamad Umar Swift, the exchange has announced another 12 months extension of the temporary relief measures for the increased general mandate of 20% for new issue of securities by way of private placement (20% general mandate) and the general mandate of 50% based on a pro-rata entitlement for new issue of securities by way of rights issue (pro rata 50% general mandate), each of which would expire on Dec 31, 2021. This extension is in line with Bursa Malaysia’s commitment to assist listed issuers to address their funding needs and working capital requirements by easing compliance and facilitate secondary fundraising. Covid-19 has had an unprecedented lingering impact on the listed issuers. It is imperative for listed issuers to be able to raise funds through the secondary market in an expedient, efficient and cost-effective manner during these challenging times. The 20% general mandate previously announced on April 16, 2020 will be extended for another 12 months for listed issuers that have not raised any funds using the 20% mandate in 2020 or 2021. Such listed issuers will have up to Dec 31, 2022 to issue new securities under the 20% general mandate subject to the same prescribed conditions. For example, procuring shareholders’ approval for the 20% general mandate at a general meeting, complying with all applicable legal requirements including the constitution and disclosing views from the board of directors that the 20% general mandate is in the best interest of such listed issuers and their shareholders as well as the basis for such views. The validity of the pro-rata 50% general mandate announced on Nov 10, 2020 is similarly extended for another 12 months until Dec 31, 2022. An eligible listed issuer may issue rights securities on a pro-rata basis using this mandate, subject to compliance with the same conditions as imposed earlier. Additionally, the pro-rata 50% general mandate can now be utilised to issue a combination of ordinary shares/units and convertible equity securities (instead of just ordinary shares/units previously) as part of the rights issue exercise. 

PNB declares 5 sen income distribution for ASB unitholders 

According to Permodalan Nasional Bhd (PNB) Group chairman Tun Arifin Zakaria, PNB’s wholly owned unit trust management company Amanah Saham Nasional Bhd (ASNB) has declared an income distribution payout of five sen per unit for its flagship unit trust fund Amanah Saham Bumiputra (ASB) for the financial year ending Dec 31, 2021. The payout comprised an income distribution of 4.25 sen per unit, as well as a bonus payment of 0.75 sen totalling RM8.9 billion which will benefit 10.4 million ASB unit holders, bringing the fund’s total cumulative income distribution and bonus to RM168.5 billion since it was first introduced in 1990. ASB’s performance remains competitive compared to other low-risk investment instruments, and continuous efforts in diversifying and strengthening the portfolio have yielded positive results. The stronger performance of its global equity investments has managed to cushion the impact of the challenging domestic market. This exemplifies the importance of a well-diversified portfolio in managing portfolio risks and delivering sustainable returns. The income distribution for ASB this year is competitive, a result of hard work and dedication of our investment team. The total rate of five sen per unit translates into a spread of 315 basis points over the 12-month fixed deposit rate which currently stands at 1.85%. ASB transactions are suspended from Dec 23 until Jan 2, 2022 for dividend distribution and will reopen on Jan 3, 2022. 

Malaysia’s total approved investments up 51.5% y-o-y to RM177.8b in January to September – MIDA 

According to Senior Minister and International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali, Malaysia attracted a total of RM177.8 billion in approved investments in the manufacturing, services and primary sectors, involving 3,037 projects, between January to September 2021. This represented a 51.5% increase compared to the same period last year and is expected to generate 79,899 jobs in the country. The country’s stellar performance is indeed a testament to investors’ strong confidence in Malaysia as a preferred investment hub, particularly its conducive business ecosystem in providing high-skilled talent and having strong readiness for advanced technology. This, in turn, further bolsters its role as a prominent site in global companies’ manufacturing networks, enhancing Malaysia’s position as a pioneering and renowned investment destination in the region. The manufacturing sector accounted for the largest share of total investments in the January-to-September period, amounting to RM103.9 billion (58.4%), followed by the services sector with RM57.8 billion (32.5%) and the primary sector with RM16.1 billion (9.1%). Foreign direct investment (FDI) accounted for nearly 60% of approved investments, valued at RM106.1 billion. Singapore, China, Austria, Japan and the Netherlands were the top five foreign investment sources, contributing nearly 85.3% or RM90.6 billion of total approved FDI. While FDI led approved investments in the manufacturing sector, investments from local companies dominated in the services and primary sectors. Domestic direct investment totalled RM71.7 billion or 40.3% of total approved investments. Five states, namely Kedah, Sarawak, Kuala Lumpur, Selangor and Pahang, contributed RM134.8 billion or 75.8% of total approved investments in various sectors. 

Eye On The Markets 

This week, on Friday (24Dec), the Ringgit opened at 4.1985 against the USD from 4.2285 on Monday (20Dec). Meanwhile, the Ringgit was 3.0916 to the Sing Dollar on Friday (24Dec). On Monday (20Dec), the FBM KLCI opened at 1497.57. As at Friday (24Dec) 10:00am, the FBM KLCI is up 18.35 points for the week at 1515.92. Over in US, the overnight Dow Jones Industrial Average closed up 196.67 points (+0.55%) to 35,950.56 whilst the NASDAQ added 131.50 points (+0.85%) to 15,653.40.  

Bursa Malaysia launches Bursa Digital Research

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Bursa Malaysia Bhd launched Bursa Digital Research (BDR), a multi-faceted research portal that serves to provide investors with an added source of research and data analysis with the objective of improving financial literacy and facilitating informed investment decision making. In addition, the BDR platform offers public listed companies (PLCs) a direct digital touch point with investors to improve PLCs’ overall visibility, enable better understanding of business operations and value propositions, while facilitating price discovery. This platform complements the Bursa Broadcast platform which seeks to enrich investors’ capital market understanding. According to Bursa Malaysia CEO Datuk Muhamad Umar Swift, BDR aims to provide an additional resource to help investors gain market insight and keep abreast of the latest developments in the stock market. Four main content categories are now available on the BDR portal, with more content to be added from time to time. Research data and market information are crucial to making informed investment decisions which will act as a catalyst for greater investor participation on Bursa Malaysia. 

Market Updates: In-house research analysis offering latest insights within the capital market, covering a wide range of topics including but not limited to trading momentum of stocks, global and local market trends, compilation of analyst consensus, indices revisions and highlights of investor product segments. 

Bursa Blitz: A series of FAQs touching on matters related to PLCs’ businesses and industries, covering latest development and future prospects. 

Initial Public Offering (IPO): A factsheet offering quick read about latest IPO launches while the quarterly performance report provides a comprehensive performance review, key statistics and insights on the trading of new listings. 

Exchange Traded Fund (ETF): Monthly performance reports to enrich investors’ understanding about ETFs available on the exchange. 

The BDR is accessible at https://www.bursamalaysia.com/reference/bursa_digital_research/ 

Night trading session to boost Bursa Derivatives’ competitiveness 

According to Bursa Malaysia Derivatives chief executive officer Samuel Ho, Bursa Malaysia Derivatives Bhd’s after-hours (T+1) night trading session, which has gone live, is expected to bode well for the country’s derivatives market and enhance the competitiveness of the exchange’s products. The after-hours trading offered by Bursa Malaysia Derivatives is an extension of the exchange’s current market trading hours in line with global market practices. With its improved price discovery, the after-hours trading can be used as a hedging and risk management tool, allowing investors to manage their risk exposure to price fluctuations in response to any major market movement that occurs during the United States and European market hours. More recently, the exchange’s trading volume for Bursa Malaysia’s crude palm oil futures in the third quarter of this year recorded a positive growth momentum with a total of 11.8 million contracts, an increase from 10.8 million in the same period last year. After-hours trading is important for hedging in the highly volatile crude palm oil market. Market participants will now have an avenue to better manage their risk exposure based on real-time global developments. By strengthening the connection between the Malaysian derivatives market and the global markets, the price discovery and effectiveness of its products as risk management solutions will be improved, hence enticing global investors to trade in our market. Market participants are able to trade between 9pm and 11.30pm from Monday to Thursday, thereby closing the gap between local and foreign market trading hours.  

Eye On The Markets 

This week, on Friday (10Dec), the Ringgit opened at 4.2220 against the USD from 4.2325 on Monday (6Dec). Meanwhile, the Ringgit was 3.0924 to the Sing Dollar on Friday (10Dec). On Monday (6Dec), the FBM KLCI opened at 1503.66. As at Friday (10Dec) 10:00am, the FBM KLCI is down 0.9 points for the week at 1502.76. Over in US, the overnight Dow Jones Industrial Average closed down 0.06 points (0.00%) to 35,754.69 whilst the NASDAQ shed 269.60 points (-1.71%) to 15,517.40.  

Listing momentum seen continuing into 2022 – Investors keen on businesses with tech, digital touch

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Deloitte Malaysia IPO leader Wong Kar Choon foresees a continuous momentum of listings next year as economic recovery gets underway in view of the higher number of initial public offerings (IPOs) on Bursa Malaysia this year. There are some potential IPOs next year as the firm received enquiries on IPOs from its clients. He said that based on what they know in the market and how busy they are with clients, he feels very bullish about IPO listings in the coming year. The number of positive Covid-19 cases are declining and coupled with the additional booster vaccination shots, these provide confidence to the capital market. Malaysia saw a higher number of IPO listings this year, totalling 25 year-to-date from 19 listings last year, bolstered by the drive-in vaccination rates and the reopening of the economy. Despite it being the second year of the pandemic, fund raising has not stopped. Companies have continued to attract investments through mergers and acquisitions as well as IPOs. There is still continuous support of retail investors in the market. Of the 25 listings up until now, Malaysia has had four Main Market IPOs, followed by 11 in the ACE Market and the remainder in the LEAP Market. Proceeds raised from the IPOs were lower at RM789mil from RM1.9bil last year mainly due to MR DIY Group (M) Bhd’s listing that raised RM1.5bil the year before. The proceeds raised made MR DIY Group’s IPO the largest in three years and the only listing to surpass the billion-ringgit threshold last year. In 2021, there was no such big IPO. However, CTOS Digital Bhd (which was listed this year) also did an outright offer of sale of RM990mil plus the RM200mil from the public funds raised, making it an impressive RM1.2bil deal, especially in the pandemic year. There is an increase in the number of real estate sector listings in the country this year compared to a year ago as a result of the economic recovery from the Covid-19 pandemic. Property technology firms would gather an attractive IPO listing in Malaysia, noting that property tech listings in other countries have been appealing to retail and cornerstone investors. The capital market in Malaysia continues to be vibrant, supported by both retail and cornerstone investors. They are interested in particularly certain type of businesses that have technology and digital outreach. They will look out for outfits that disrupt conventional businesses. It is also worth noting that price-to-earnings ratio of tech companies tends to be higher than conventional businesses.  

According to Deloitte Malaysia business tax executive director Choy Mei Won, the government’s proposal to remove the RM200 stamp duty on contract notes for the trading of listed shares and increasing the rate to 0.15% would make it more expensive to buy and sell shares. It would impact intraday traders, given their high frequency of buying and selling transactions. Following the move, potentially a marginal percentage of intraday traders may be attracted to trade in other financial hubs such as Singapore and Hong Kong. 

Lack of impetus could leave market directionless – Inter-Pacific Securities 

Inter-Pacific Securities Sdn Bhd said there is still a lack of market impetus, and this could leave the market directionless over the near term. The research house said that once again, the key index made little headway as fresh buying interest remains thin, despite the prospects of an early General Election following the Melaka state election. As it is, there were still few leads to draw market players and as a result, traded volumes continue to fall and slipping to just 2.45b shares – its lowest in 2021. The broader market was also directionless and became broadly lower to result in losers still overwhelming gainers for the day. Fresh buying interest remains anaemic with the ongoing results reporting not providing the much-needed catalysts to attract more market players back to the market. Therefore, the wait-and-see stance is likely to prolong and keep the FBM KLCI trapped within a tight range for the time being, hovering between the 1,520 and 1,530 levels over the near term. The other support and resistance levels are at 1,515 and 1,540 points respectively. The lower liners and broader market shares are also experiencing low participation, and this is likely to prolong their insipid outlook. With few positive leads, the selling and profit taking activities could also stay and leave most of these stocks lower for the time being. 

Eye On The Markets 

This week, on Friday (26Nov), the Ringgit opened at 4.2345 against the USD from 4.1890 on Monday (22Nov). Meanwhile, the Ringgit was 3.0939 to the Sing Dollar on Friday (26Nov). On Monday (22Nov), the FBM KLCI opened at 1526.76. As at Friday (26Nov) 10:00am, the FBM KLCI is down 13.12 points for the week at 1513.64. Over in US, the overnight Dow Jones Industrial Average closed down 9.42 points (-0.03%) to 35,804.38 whilst the NASDAQ added 70.10 points (+0.44%) to 15,845.20.  

Bursa inks MoU with OCBC, Alliance to introduce sustainable financing for PLCs

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According to Datuk Muhamad Umar Swift, chief executive officer (CEO) of Bursa Malaysia, the exchange operator and regulator has entered into a memorandum of understanding (MoU) with Alliance Bank Malaysia Bhd and OCBC Bank (Malaysia) Bhd to establish #financing4ESG, an initiative to improve Malaysian public listed companies’ (PLCs) environmental, social and governance (ESG) adoption. Bursa Malaysia said it will collaborate with both banks to develop sustainable financing options that recognise PLCs’ ESG credentials in accordance with the FTSE4Good assessment criteria. The initiative enables PLCs the opportunity to accelerate their ESG adoption while also improving their ESG ratings for inclusion into the domestic capital market’s ESG index, FTSE4Good Bursa Malaysia Index. FTSE Bursa Malaysia EMAS Index constituents are eligible for the sustainability financing under the initiative as they form the FTSE4Good ESG assessment universe. The signing of the MoU with Alliance Bank and OCBC Bank underscores Bursa’s commitment towards accelerating ESG adoption among PLCs, in line with the aspiration to elevate PLCs as regional leaders in this space. He is optimistic that this collaboration will spur the growth of sustainable finance while also enhancing PLCs’ appeal to investors. He noted that for PLCs, ESG is no longer nice-to-have but has become need- to-have. Joel Kornreich, group CEO of Alliance Bank, speaking at the event, noted that it is important to help business owners adopt ESG practices and innovation to reduce carbon footprint as the sustainable choices they make can be a force for good for the community and environment. He added that sustainable choices will result in positive climate impact, social outcomes, and business profitability in the long term and that their collaboration with Bursa Malaysia will enable them to help businesses, large and small, innovate and grow sustainably. Also present at the MoU was Tan Ai Chin, managing director, senior banker and head of investment banking of OCBC Bank, who said that the bank will collaborate with Bursa Malaysia by synergising OCBC Bank’s leading experience in pioneering various sustainable finance transactions and capitalising on Bursa Malaysia’s ESG database to provide optimal financing solutions for PLCs. They aim to mainstream the adoption of sustainable finance to further accelerate the PLCs’ sustainability agendas, as a means to support the Malaysian government’s commitment towards achieving carbon neutrality by 2050. Besides the competitive financing from Alliance Bank and OCBC Bank, PLCs will obtain non-monetary benefits from the collaboration’s branding and capacity building exercises. Bursa Malaysia will also provide access to its investor relations engagements and event platforms, along with the opportunity to participate in specialised technical workshops on climate-related disclosures. The #financing4ESG initiative sets the foundation for Bursa Malaysia to collaborate with other ecosystem players to advance the nation’s ESG adoption, which is in line with the Exchange’s vision to be al leading sustainable and globally connected marketplace. PLCs interested in learning more about the initiative or improving their general ESG practices may approach the Exchange’s Index & Sustainable Business unit via email at isb@bursamalaysia.com 

Govt to unveil MSC 2.0 to attract more digital investment — Mustapa 

According to Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed, the government will unveil MSC 2.0 with a new branding and further improvements to address the digital divide, meet current challenges and constraints, and enhance Malaysia’s value proposition to attract more digital investment nationwide. This effort is in line with the 12th Malaysia Plan (12MP), Malaysia Digital Economy Blueprint (MyDIGITAL), and United Nations Sustainable Development Goals. He said the decision was made at the fourth meeting of the National Digital Economy and Fourth National Industrial Revolution (4IR) Council, which was chaired by Prime Minister Datuk Seri Ismail Sabri Yaakob. For 25 years, the Malaysia Digital Economy Corporation (MDEC) through the MSC Malaysia initiative, has succeeded to increase the contribution of the digital economy from 0% to more than 20% to gross domestic product by 2021. As at Dec 31, 2020, MSC Malaysia had helped the country raise investments of more than RM384 billion and revenue of RM588 billion. The country has grown into a global digital economic power, having been ranked among the top three of the Kearney Global Services Location Index since 2004 through this initiative. Hence, efforts to digitise the people’s economy and popularise the digital economy will continue. The government was satisfied with the implementation of the National Digital Network Plan (JENDELA) through the Malaysian Communications and Multimedia Commission (MCMC) with a total of 6.427 million premises covered with fibre optic, average mobile broadband speed increased to 31.34 Mbps, and 4G coverage increased to 94.03% in populated areas until the third quarter of 2021. The 5G network throughout Malaysia will be implemented aggressively to achieve the target of 80% coverage in populated areas by 2024 to ensure the country is back on par with neighbouring countries in the near term. To encourage the adoption of digital technology by micro, small and medium enterprises (MSMEs), the MyDIGITAL Corporation will be organising the National MSME Digitisation Empowerment Programme 2021 from Nov 21 to 23. The programme will be held in collaboration with the Ministry of Communications and Multimedia, Ministry of Entrepreneur Development and Cooperatives, Ministry of International Trade and Industry (MITI), MDEC, MCMC, and other relevant government agencies and private entities. The prime minister will be launching the programme which will be held in Bera, Pahang. The programme aims at sharing information on the stimulus or support packages provided by the federal and state governments, the private sector, as well as to share the experiences of entrepreneurs who have achieved success from the various assistance. It was decided that the Ministry of Science, Technology and Innovation, through early-stage start-up influencer Cradle Fund Sdn Bhd, would coordinate and monitor the implementation of the Malaysia Startup Ecosystem Roadmap (SUPER) 2021-2030 through the MYStartup platform in an effort to place Malaysia in the top 20 of the global start-up ecosystem by 2030. It was also decided that the achievements of the MyDIGITAL initiative be used as a key performance indicator (KPI) for ministers and department heads, in line with the importance of the digital economy. 

Eye On The Markets 

This week, on Friday (19Nov), the Ringgit opened at 4.1800 against the USD from 4.1640 on Monday (15Nov). Meanwhile, the Ringgit was 3.0804 to the Sing Dollar on Friday (19Nov). On Monday (15Nov), the FBM KLCI opened at 1531.38. As at Friday (19Nov) 10:00am, the FBM KLCI is down 7.59 points for the week at 1523.79 Over in US, the overnight Dow Jones Industrial Average closed down 60.10 points (-0.17%) to 35,870.95 whilst the NASDAQ added 72.10 points (+0.45%) to 15,993.70.  

Prosperity Tax a one-off measure – Tengku Zafrul

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According to Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz, the Prosperity Tax is a one-off tax measure amid analysts’ fear of its reintroduction in the future. In reiterating, he added that it would not impact more than 250 companies – only companies with more than RM100 million in chargeable income would be taxed. The Prosperity Tax is one-off in this extraordinary time and it will be implemented in that spirit. It will be used to ensure the public health system is more resilient in the face of any threat in the future. Speaking at the Invest Malaysia 2021 Series 2 virtual event, he said that several large corporations have stated that the Prosperity Tax will not affect their dividend payments, citing Telekom Malaysia, Tenaga Nasional and Axiata that have supported the effort. There are more than 900 listed companies on Bursa Malaysia, of which 145 made over RM100 million in their financial year 2019. But in the financial year 2020, only 125 listed companies earned more than RM100 million. According to Bloomberg data, only 130 companies achieved the same pre-tax earnings level across the last two financial years. It is a very small number of companies on the stock exchange. Different countries have decided to permanently increase their taxes in the future as they recover from the Covid-19. For example, in the UK, corporate tax is increased permanently. Saudi and Indonesia have increased value added tax (VAT). In the medium term, the government is considering options to reduce the reliance on direct taxes and to widen the revenue base including shifting to a consumption tax base. There will be more discussion on this when the Fiscal Responsibility Act is tabled next year which will cover the medium-term revenue strategy and outline the stages of revenue measures. We want to review tax legislation and modernise revenue administration. The Prosperity Tax certainly does not fall in that spirit. More reliable consumption tax will be explored as new taxation revenues such as taxation on the digital economy. As part of the 12th Malaysia Plan, the government is now looking into imposing the carbon tax. The finance ministry is working with the environment and water ministry on the imposition of the carbon tax, adding that the government will continue to assess the entire revenue ecosystem. 

Malaysia’s Q3 2021 e-commerce income increases to RM279b – DOSM 

According to the Department of Statistics Malaysia Chief Statistician Datuk Seri Dr Mohd Uzir Mahidin, Malaysia’s e-commerce income surged to RM279.0 billion, a jump of 17.1% year-on-year, in Q3 of 2021. Commenting on the Malaysia Digital Economy 2021 report, he said that in terms of quarter-on-quarter growth, it maintained a positive trend of 4.3%. From January to September,   e-commerce income recorded RM801.2 billion, an increase of 23.1% y-o-y. E-commerce was driven by industrial centres such as Selangor, Kuala Lumpur, Johor, and Penang. In terms of industry, manufacturing and services remained the key drivers of growth. The improved performance was attributed to the adoption of new normal during the Covid-19 pandemic, in which it boosted digital usage in Malaysia. On e-commerce income by market segment in 2019, the local sector dominated with a contribution of 87.6%, generated from sales in Malaysia, compared with the international sector’s 12.4%. The value of the income generated was RM591.8 billion and RM83.5 billion, respectively. E-commerce income by type of customers via business-to-business registered the highest income of RM449.6 billion with a 66.6% contribution, followed by business-to-consumer at RM194.0 billion, or 28.7%. In the meantime, business-to-government recorded RM31.8 billion (4.7%) adding that digital technology has the potential to propel Malaysia’s economic growth. The Malaysia Digital Economy Blueprint (MyDigital), which was launched by the government in February 2021, is the foundation for the country’s transformation into a “regional digital pulse” which is expected to boost productivity, stimulate innovation, and improve livelihoods by harnessing the internet, Big Data, the Internet of Things, artificial intelligence, and other technologies. 

Malaysian healthcare sector to benefit from progressive reforms – Fitch Solutions 

According to Fitch Solutions Country Risk & Industry Research, the spread of the Delta variant had stretched the healthcare system in Malaysia. It said that Malaysian hospitals were overstretched, while Covid-19 bed utilisation was consistently beyond 100% during its peak in August 2021, leading to the construction of field hospitals. As the virus now progresses from the pandemic to endemic stage, Malaysia aims to invest in regional disease centres, vaccine development and develop better understanding of communicable diseases. And, as the Covid-19 pandemic has shown, infectious diseases threaten a blow to health systems already facing significant pressure on their capacity to care for patients. Malaysia’s public healthcare system is mainly financed through federal government taxation and general revenue. Although government spending on healthcare as a percentage of the country’s gross domestic product had been gradually increasing over the years, the World Health Organization still considers this to be below global as well as regional standards. The pandemic had underscored the need to increase funding for the healthcare system both in terms of facilities and working conditions for staff. Citing Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz, it said Malaysia will undertake a medium-to long-term reform of its healthcare sector while gradually aiming to increase healthcare spending every year. Fitch Solutions added that among other policy directions being considered is increasing public healthcare charges for higher-income earners, and incentivising people to buy health insurance. Social protection schemes will also provide health benefits for informal workers. Moreover, looking beyond the pandemic, it believes that the Malaysian government will remain firmly committed to improving health quality and access across the country. Noting that in recent years, the healthcare sector has seen a rise in government expenditure, with an increase in medical facilities and higher-quality treatments. The implementation of the B40 healthcare scheme is one of the key initiatives that will expand healthcare access to the nation’s lowest earners. In 2020, healthcare expenditure in Malaysia grew 6.9% year-on-year, with an estimated value of RM63.1 billion. In 2021, it’s growth is expected to accelerate to 9.6%, reaching RM69.2 billion. It forecasts health expenditure to experience a five-year compound annual growth rate of 7.6% in local currency terms and 8.9% in US dollar terms, reaching RM91.1 billion by 2025. While reforms are under way to secure the long-term sustainability of the public healthcare system, challenges remain. Fitch Solution remains sceptical about the progress of the reforms and any alteration of the funding structure of the healthcare system will require a revision of its healthcare expenditure forecast. It will not incorporate this into their forecast until the reforms are officially approved and it notes that it is likely that the funding structure will change. Public healthcare expenditure will increase considerably in the short term. Its longer-term forecast reflects that the growth in spending will decelerate as cost-containment measures will inevitably be introduced to maintain sustainable levels of funding. 

Eye On The Markets 

This week, on Friday (12Nov), the Ringgit opened at 4.1675 against the USD from 4.1545 on Monday (08Nov). Meanwhile, the Ringgit was 3.0764 to the Sing Dollar on Friday (12Nov). On Monday (08Nov), the FBM KLCI opened at 1534.21. As at Friday (12Nov) 10:00am, the FBM KLCI is down 6.46 points for the week at 1527.75. Over in US, the overnight Dow Jones Industrial Average closed down 158.71 points (-0.44%) to 35,921.23 whilst the NASDAQ added 81.60 points (+0.52%) to 15,704.30.  

Maybank Kim Eng lauds govt decision on EV incentives in Budget 2022

INVE$T | Market Sentiments | 05 November 2021

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According to head of regional equity research Anand Pathmakanthan, Maybank Kim Eng has applauded the government’s decision to give full exemption of import duty, excise duty, as well as sales tax for electric vehicles (EVs) as it seeks to support the local EV industry. The government initiatives will kick start the infrastructure investment by various parties for the EV space. Malaysia is a bit slow to address the EV issue when the rest of ASEAN countries have got so many policies in place. This initiative would be good to the economy, would be good for stocks in this sector as well. This was in reference to Finance Minister Tengku Datuk Seri Zafrul’s who in his Budget 2022 presentation in Parliament on Friday (Oct 29), said a 100% road tax exemption will also be given to EVs. And that the government sees the potential of EV as it is energy efficient and that it also helps to reduce air pollution. The government is also giving tax income exemption for individuals of up to RM2,500 on the cost of purchase, installation, rental, hire purchase as well as subscription fees for EV charging facilities. The government will extend the 100% sales tax exemption for completely knocked down (CKD) passenger vehicles and a 50% discount for completely built-up (CBU) cars, including multi-purpose vehicles (MPVs) and sports utility vehicles (SUVs) for six months until June 30 next year. In view of this, Maybank Investment has maintained its positive outlook on the automotive sector. The extended sales tax exemption announcement is welcoming but the timing of the announcement is relatively off. This would affect vehicle sales in Nov-Dec 2021, as prospective buyers will not be rushed to place orders before the earlier deadline of Dec 31, 2021.  

Return of GST not only way to tackle revenue issue – Tricor’s Dr Veerinderjeet Singh 

According to Tricor Malaysia chairman Dr Veerinderjeet Singh, bringing back the goods and services tax (GST) is not the only answer to Malaysia’s revenue issue but is only one of many that can be introduced. Speaking at the Malaysian Economic Association’s (MEA) 2022 Post-Budget Dialogue, he said that his suggestion for the way forward is to examine the existing sales and services tax (SST) and expand it a little bit – but this year might not be the right time – to cover a lot more services over time and integrate it to have the attributes of GST. In other words, there is some kind of harmonisation that has to occur but it might take three years. He reminded participants that there was a particular issue with profiteering in the previous implementation of GST. He said the strength of the consumption tax is built into its multistage mechanism, which forces traders to come onboard, enhancing the compliance culture as well as marking an audit trail to the tax invoice. That is the strength on which we can actually build better compliance and therefore the revenue collected can be more secure as prediction will be with a little bit more accuracy. He also cleared the misconception that GST produces more revenue than SST. He said it is the preferred tax regime across the world because it is more robust as the multistage tax can help address issues with tax collection at the retail level, especially relating to compliance. 

MIDF Research foresees normalisation of OPR next year 

According to MIDF Research, it expects Bank Negara Malaysia (BNM) to consider normalising its benchmark interest rate in 2022, despite keeping the overnight policy rate (OPR) unchanged at 1.75 per cent throughout this year. At this point, the policy normalisation will likely be carried out in the latter half of 2022. We believe the current focus of BNM’s monetary policy setting is to ensure a sustainable recovery of Malaysia’s economy, coming out from the full lockdown. With the rate of inflation hovering within BNM’s forecast, there is less pressure for BNM to quickly shift towards policy tightening. However the decision will be subject to the stability of economic growth, the pace of price increases and further improvement in macroeconomic conditions, particularly a continued recovery in the labour market and growing domestic demand. From a medium-term perspective, the policy rate normalisation is needed to avert risks that could destabilise the future economic outlook such as the persistently high inflation and a further rise in household indebtedness. At the Monetary Policy Meeting, the central bank decided to keep the OPR unchanged at 1.75 per cent, in line with MIDF’s and market’s expectations, as the current rate is deemed to be appropriate and supportive of Malaysia’s economic growth. 

Eye On The Markets 

This week, on Friday (05Nov), the Ringgit opened at 4.1590 against the USD from 4.1475 on Monday (01Nov). Meanwhile, the Ringgit was 3.0739 to the Sing Dollar on Friday (05Nov). On Monday (01Nov), the FBM KLCI opened at 1545.99. As at Friday (05Nov) 10:00am, the FBM KLCI is down 18.34 points for the week at 1527.65. Over in US, the overnight Dow Jones Industrial Average closed down 33.35 points (-0.09%) to 36,124.23 whilst the NASDAQ added 128.70 points (+0.81%) to 15,940.30.