Malaysia welcomes RCEP signing, a game changer to investment flow

Malaysians need to seize opportunities in digital economy

According to Prime Minister Tan Sri Muhyiddin Yassin, Malaysia welcomes the signing of the Regional Comprehensive Strategic Partnership (RCEP). The signing of RCEP will reflect Malaysia’s unwavering support for the multilateral trading system and regional integration. Malaysia trusts that RCEP will be a game-changer to increase the flow of investments and to encourage intra-trade within the region. As the global growth rate is expected to slow at roughly 3.5% between 2021 and 2025, Malaysia should double its efforts to ensure the sustainability of economic activities. Focus should be given to promoting trade and investment and maintaining the regional and global supply chains by tapping into the digital economy. As part of efforts to build a stronger economic region post-COVID-19, Malaysia believes that ASEAN and China must fully tap the potential of the digital economy. A lot has been learnt during this pandemic period from the increased use of online transactions in peoples’ daily lives. The vital role of the digital economy in reviving the region’s economies will contribute to more job opportunities and encourage growth and business sustainability, especially for Micro, Small and Medium Enterprises (MSMEs) sector.

Malaysians need to seize opportunities in digital economy

According to Malaysia Digital Economy Corporation (MDEC) chief marketing officer Raymond Siva, Malaysians need to seize the opportunities provided by the digital economy as it will be a key driver to economic growth in the long term. The demand in e-commerce has grown exponentially in the COVID-19 era. E-commerce is an important component of the digital economy and it will keep growing. Malaysians and businesses should take advantage, especially in the context of COVID-19. The pandemic has abruptly increased the need for digitalisation as people are adapting to the new norms of working from home. The segment (digital economy) is forecast to grow by 20 per cent to the economy this year. The forecast was initially reported by the Department of Statistics Malaysia with the e-commerce sector expected to exceed RM110 billion in revenue by 2020, which is equivalent to 40 per cent of the nation’s digital economy. The MTM 2020 aims to fortify Malaysia’s role in expanding the digital economy and its first-mover position in the ASEAN region while drawing attention to the country’s readiness in leveraging opportunities that the Fourth Industrial Revolution (IR4.0) will spur. The campaign enables a platform for a wide-ranging array of events, highlighting multiple collaborations with industry partners. Industry players should share their challenges, successes and innovations that they have developed, especially over the last six months, and inspire the next generation of digital-tech entrepreneurs.

SC wants public feedback on proposed amendments to Unit Trust Fund guidelines

The Securities Commission Malaysia (SC) is seeking feedback from the public on its proposed amendments to the Guidelines on Unit Trust Funds. The two-month consultation process is part of it’s ongoing efforts to enhance market competitiveness and ensure the continuous development of the Malaysian unit trust industry. The commission has outlined 30 proposals as part of the consultation paper, ranging from liberalising the types of investments a fund could consider, to amendments on strengthening risk management processes of fund management companies. It is considering enhancements to operational requirements, including dealing in and valuation of a fund. These proposed new enhancements will facilitate greater competitiveness in the industry and provide investors access to a wider range of products, while maintaining adequate investor protection. Additionally, to ensure consistency in policy with unit trust funds, it is also considering making some of the proposals applicable to exchange-traded funds (ETF) and private retirement schemes (PRS). The consultation paper is available on the SC’s website. Interested parties are invited to submit their feedback via www.sc.com.my/survey-cp01-2020 by Jan 10, 2021. For further information, the public can also email to MISConsultation@seccom.com.my. Unit trust funds are the largest component of the Malaysian collective investment scheme industry. As at Sept 30, there were 39 locally-incorporated management companies approved to offer 693 unit trust funds with a total net asset value (NAV) of RM490.3 billion.

Eye On The Markets

This week, on Thursday (12Nov), the Ringgit weakened to 4.1340 against the USD from 4.1145 on Monday (09Nov). Meanwhile, the Ringgit was 3.0645 to the Sing Dollar on Thursday (12Nov). On Monday (09Nov), the FBM KLCI moved up 4.68 points (0.31%) to 1524.32 from previous Friday’s close of 1519.64. As at Friday (06Nov) 10:00am, the FBM KLCI continued its climb to 1580.00. Over in US, with the outcome of the Presidential elections still in the balance, stocks were broadly down due to new highs of over 100,000 new Covid-19 infections and the need of much higher Govt stimulus. The Dow Jones Industrial Average shed 317.46 points (-1.08%) to 29,080.17 and the NASDAQ Composite index shed 76.84 points (-0.65%) to 11,709.59.

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All eyes and high hopes for Budget Malaysia 2021

BNM keeps OPR at 1.75 per cent to make way for expansionary Budget 2021

Malaysians will be anxiously awaiting the Finance Minister’s tabling of his maiden budget later today at 4pm, in what could very well be the most crucial budget in the country’s history amid a pandemic that has brought major disruptions to lives and livelihoods in Malaysia and elsewhere. Reviving the economy, creating jobs and safeguarding the livelihoods of the people are expected to be key areas of focus for Budget 2021.

BNM keeps OPR at 1.75 per cent to make way for expansionary Budget 2021

According to Maybank Investment Bank Bhd Research (Maybank IB Research), Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 1.75 per cent is to make way for Budget 2021. The budget, which is scheduled to be tabled in Parliament today, is expected to remain expansionary, with a deficit forecast of RM90 billion, or 6.0 per cent, of gross domestic product (GDP) versus the estimated RM95 billion, or 6.7 per cent, of GDP in 2020. BNM kept the OPR at 1.75 per cent for the second consecutive Monetary Policy Committee (MPC) meeting to preserve monetary policy space. BNM’s decision was also consistent with indications that the economic recession is shallowing after the slump of GDP in April or the second quarter of 2020 (-17.1 per cent), which is supportive of the current official real GDP forecast of growth of between +5.5 per cent to +8.0 per cent in 2021, after the -3.5 per cent to -5.5 per cent performance in 2020. Aside from the pause in the OPR, it also noted that the use of other monetary policy instruments to boost liquidity and provide reliefs to the economy have tapered, hence, reducing the need for monetary policy intervention via an OPR cut and/or liquidity measures. That included the slowing BNM’s purchases of the Malaysian Government Securities, shift to targeted loan moratorium extension and flexible loan repayments after the end of the automatic/blanket loan moratorium period from April to September, 2020. For now it expects the OPR to stay at 1.75 per cent until end-2021, but continues to view this is a dovish pause amid the downside risks economic outlook highlighted in the latest Monetary Policy Statement.

A-G’s Report: Federal govt records RM264.415 bln revenue in 2019

According to the Auditor-General’s (AG) 2019 Report on the Federal government’s financial statement, the Federal government recorded a revenue of RM264.415 billion in 2019, a 13.5 per cent (RM31.532 billion) increase compared to 2018. Meanwhile, operating expenditure approved last year amounted to RM260.547 billion while actual expenditure amounted to RM263.343 billion. Expenses due to national debt (interest, dividends, and other charges) amounted to RM32.933 billion or 12.5 per cent of the operating expenses. This expenditure increased by a total of RM2.386 billion or 7.8 percent compared to 2018 which amounted to RM83.050 billion because it was not budgeted for under the management allocation but was paid directly from the Consolidated Loan Account. Additionally, on the ministries’ and federal departments’ development expenditure, RM54.173 billion or 104.6 per cent was spent from the allocation approved in 2019. The Federal government had a RM51.370 billion deficit with a deficit to Gross Domestic Product (GDP) ratio of 3.4 per cent. The deficit was offset by new loans amounting to RM138.559 billion and of the total loans, RM83.05 billion or 59.9 per cent was used to repay matured debts. The Federal debt stood at RM792.998 billion, a seven per cent increase compared to RM741.094 billion in 2018, the debt-GDP ratio is RM52.5 per cent. Of the total debt amount, 96.4 per cent was domestic debt with the balance of 3.6 per cent  being off-shore loans, the total Federal government debt and liabilities in 2019 is RM1.080 trillion. Meanwhile, audit on state government’s financial statements for the year ending Dec 2019 found that all 13 state governments’ financial statements were given opinions without reprimand. The audit analysis showed that all financial statements had presented a true and fair view of the financial position of the state government and the accounting records were complete and updated. The National Audit Department had conducted 28 compliance audits at the state government level involving one ministry in Sarawak, 23 departments and 14 state agencies in 2019/2020. Among the main findings were occurrence of irregular payments, revenues not collected in an orderly manner and weaknesses in government procurement. The A-G’s report on the federal government’s financial statement for 2019 will be uploaded on the National Audit Department’s website after its presentation in the Dewan Rakyat. The public may view this statement at http://www.audit.gov.my.

Malaysia ranks among top economies in cost of doing business

According to KPMG Malaysia managing partner Datuk Johan Idris, a study by KPMG has ranked Malaysia fourth among 17 economies in an assessment comparing the economy’s competitiveness as a manufacturing hub in cost of doing business (CoDB). The study found that Malaysia is placed ahead of countries in the Asian region such as China, Japan, Vietnam and India. The study indicates that Malaysia’s CoDB Index results from high scores on the Primary Cost Index where Malaysia emerged at the top of the chart, tied with China, Mexico, and Vietnam. Malaysia had outperformed on three factors: hourly compensation costs, real estate costs and corporate tax rate. In analysing the results further, by changing the weight of the primary costs and secondary costs from equal to 70 per cent-30 per cent, Malaysia would be ranked the number one most cost-effective location in the CoDB Index. Malaysia continues to be a prime manufacturing hub for investors despite uncertainties in the current landscape. This is especially significant in our new reality, where operational stability and cost containment are central in every company’s long-term business survival. The results in this study only substantiate what Malaysian businesses already know and are proud of. As an immediate effect out of the COVID-19 pandemic, companies around the world have begun relooking at their supply chains. A study by McKinsey estimates that 16 per cent to 26 per cent of global exports, worth US$2.9 trillion  to US$4.6 trillion, could move to new countries over the next five years if companies reshuffle their supplier networks. The study by KPMG proves that Malaysia has the factors for moving up the production value chain.

On The Markets

This week, on Thursday (05Nov), the Ringgit was 4.1525 against the USD from 4.1550 on Monday (02Nov). Meanwhile, the Ringgit was 3.0584 to the Sing Dollar on Thursday (05Nov). On Monday (02Nov), the FBM KLCI barely moved with -0.43 points (-0.03%) to 1466.46 from previous Friday’s close of 1466.89. As at Friday (06Nov) 10:00am, the FBM KLCI has rebounded to 1510.96 from Monday’s low following the upward trend of US markets overnight and in anticipation of a comprehensive Malaysia Budget 2021 scheduled to be tabled in Parliament today. Over in US, despite a clear winner in the Presidential elections, stocks were bullish in anticipation of a fiscal stimulus package to boost the economy and the possibility of COVID-19 vaccine. The Dow Jones Industrial Average gained 542.52 points (+1.95%) to 28,390.18 and the NASDAQ Composite index climbed 300.15 points (+2.59%) to 11,890.93.

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SC revises guidelines on digital assets

Bursa Q3 net profit jumps 158.9pct to RM121.94mil, revenue at RM237.74mil

SC revises guidelines on digital assets

According to the Securities Commission Malaysia (SC), it has revised its guidelines on digital assets to regulate initial exchange offerings (IEO) and digital asset custodians (DAC). The revised guidelines would facilitate its objectives in promoting responsible innovation in the digital asset space, while at the same time, managing emerging risks and safeguarding the interests of issuers and investors. Earlier in January 2020, it had introduced a framework to enable companies to raise funds via the issuance of digital tokens in Malaysia through an IEO platform registered by the SC. Under the new guidelines, IEO platform operators will be required to assess and conduct the necessary due diligence on the issuer and review the issuer’s proposal and the disclosures in the whitepaper. The IEO platform operators are also required to assess the issuer’s ability to comply with the requirements of the new guidelines and the SC’s guidelines on prevention of money laundering and terrorism financing. The revised guidelines also included rules and regulations on DAC to facilitate interested parties who wish to provide custody services for digital assets. Digital asset custodians play an important role within the digital asset ecosystem of the Malaysian capital market to safeguard digital assets of investors.

Bursa’s Q3 net profit jumps 158.9% to RM121.94mil, revenue at RM237.74mil

According to Bursa Malaysia Bhd’s chief executive officer Datuk Muhamad Umar Swift, the Exchange’s net profit jumped 158.9 per cent to RM121.94 million in the third-quarter (Q3) ended September 30, 2020 from RM47.10 million recorded a year ago. This was attributed to higher trade feeding and clearing fees. The Q3 revenue rose 93.8 per cent to RM237.74 million from RM122.67 million, driven by higher trading revenue. For the nine months, its net profit increased 94.5 per cent to RM272.89 million from RM140.30 million, while revenue rose 52.3 per cent to RM568.27 million from RM373.16 million previously. Bursa had delivered an exceptional performance, recording the highest ever nine-month net profit since its listing in 2005, against the backdrop of unprecedented circumstances. The on-going developments with regards to Covid-19, low-interest-rate environment, the government’s stimulus packages and the gradual re-opening of the economy continue to support investor participation across segments led by domestic institutions and retail. The continuous operations of the local markets had been critical in making available the necessary liquidity and risk management tools for investors to respond in a higher volatility environment and invest in new opportunities. While key economic indicators are pointing towards an improving outlook for the Malaysian economy, the on-going developments of the Covid-19 pandemic will continue to influence the volatility and performance of the Securities and Derivatives markets. Bursa been working closely with other regulators to ensure market efficiency and improved market accessibility and liquidity to support participants during this period. It was well-positioned to continue developing the marketplace and make further progress on its strategic plans. There has been promising results after successfully conducting five listing ceremonies and holding flagship events, namely, Invest Malaysia Conference and Palm and Lauric Oils Price Outlook Conference and Exhibition being fully virtual. Each of these initiatives is important towards making Bursa’s offerings and the market to continue to remain relevant to the diverse range of investors. Investor participation continued to increase, with average daily trading value (ADV) having grown 101.8 per cent to RM4.0 billion in the nine months from RM2.0 billion previously. The additional number of trading days and the higher effective clearing fee also contributed to the increase in trading revenue, while trading velocity increased by 34 percentage points to 62 per cent year-on-year. Non-trading revenue increased by 7.0 per cent to RM110.9 million from RM103.6 million on higher market data revenue, underpinned by the rise in the number of new subscribers. Bursa would continue to build on its data-related offerings to improve non-trading revenue and ensure the long-term resilience of earnings in all market conditions.

Malaysia’s Sept trade surplus surges 49.3 per cent YoY to RM21.97 bil

According to the Ministry of International Trade and Industry (MITI), Malaysia’s trade surplus surged by 149.3 per cent year-on-year (y-o-y) to RM21.97 billion in September 2020, the highest trade surplus ever recorded for the month. Total trade, exports and imports grew by 7.5 per cent, 12.4 per cent and 1.6 per cent, respectively, in September compared to August 2020, with trade surplus recorded a significant expansion of 66.3 per cent. Malaysia’s total trade in September 2020 expanded by 5.5 per cent to RM155.88 billion compared to September 2019. Increases in trade were recorded primarily with China, Hong Kong, the United States, the Netherlands, and Taiwan. Exports rebounded by a double-digit growth of 13.6 per cent to RM88.93 billion, the highest export value ever recorded for the month of September 2020, while imports decreased by 3.6 per cent to RM66.96 billion. Furthermore, exports of manufactured and agriculture goods also registered a double-digit growth in September 2020.

On The Markets

This week, on Thursday (29Oct), the Ringgit remained at 4.16 against the USD from Monday (26Oct). Meanwhile, the Ringgit was 3.0631 to the Sing Dollar on Thursday (22Oct). On Monday (26Oct), the FBM KLCI barely moved with -0.03 points (-0.002%) to 1494.61 from previous Friday’s close of 1494.64. As at Friday (30Oct) 10:00am, the FBM KLCI trending down towards four months low at 1485.66. The U.S. stocks were bullish after receiving latest data on GDP that the economy grew at its fastest rate in the third quarter, at an annualized 33.1%. The Dow Jones Industrial Average gained 139.16 points (+0.52%) to 26,659.11 and the NASDAQ Composite index climbed 180.72 points (+1.64%) to 11,185.59.

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