Political changes not expected to derail current economic policies, recovery plans, vaccination progress — UOB Research

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According to a report by UOB Research, the political changes in Malaysia are not expected to derail the current economic policies, recovery plans and vaccination progress. As at Aug 22, 55.6%, or 18.26 million, of Malaysia’s adult population have been fully vaccinated while 78%, or 13.02 million, have received at least one dose of vaccine. Larger parts of the economy and more sectors are gradually reopening. Currently, six states — Penang, Perak, Terengganu, Kelantan, Pahang and Sabah — have transitioned to phase 2 of the National Recovery Plan (NRP) while Perlis, Sarawak and Labuan are under Phase 3 of the NRP. While Kuala Lumpur and Selangor remain in Phase 1 of the NRP, more restrictions were loosened on business operations and social activities recently. Malaysia has one of the highest rates of vaccination roll-outs based on vaccination doses. The vaccination timeline expects to achieve the target of 100% of Malaysian adults fully vaccinated by October. Going by this assumption, the Research House expects most economic and social sectors to reopen by 4Q21 which paves the way for a rebound in gross domestic product (GDP). Positive spill-overs from external demand will also provide further impetus to the recovery pace ahead. Nonetheless, it will continue to watch how the external uncertainties surrounding the Covid-19 resurgence unfolds in major countries, the expected US Federal Reserve quantitative easing tapering in the later part of this year and the pace of China’s economic slowdown. They maintained their full-year GDP outlook of 4% for 2021 and expect the key policy rate to be kept unchanged at 1.75% for the rest of the year 

Malaysia’s CPI up 2.2% in July 2021 

According to Department of Statistics Malaysia (DOSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin, Malaysia’s Consumer Price Index (CPI) grew 2.2% year-on-year (y-o-y) in July 2021 to 122.5, marking its sixth consecutive month in positive territory due to the low-base effect. The inflation measure rose from 119.9 in the same month last year, but the growth was slower compared with the 3.4% y-o-y increase in June 2021. Among the reasons cited for the moderate increase was the monthly electricity bill discount given to domestic consumers for a three-month period starting from July 1 under the National People’s Well-Being and Economic Recovery Package (PEMULIH). Nevertheless, the CPI remained in positive territory as there were increases in petrol and diesel prices in July 2021 compared to a year ago. The growth was mainly driven by a double-digit increase of 11.6% in the transport group due to the setting of the RON95 petrol ceiling price at RM2.05 per litre since March, compared with the average price of RM1.69 in July 2020. This was followed by furnishings, household equipment and routine household maintenance (1.7%), food and non-alcoholic beverages (1.3%), and housing, water, electricity, gas and other fuels (0.7%). For the first seven months of 2021, the CPI increased 2.3% y-oy. The core index, which covers all goods and services except volatile items of fresh foods as well as administered prices rose 0.7% y-o-y in July 2021. Among the major groups which influenced the increase were furnishings, household equipment and routine household maintenance (1.7%), food and non-alcoholic beverages (1.1%), transport (1%), restaurants and hotels (0.7%), housing, water, electricity, gas and other fuels (0.6%), recreation services and culture (0.6%), health (0.4%), education (0.1%) and miscellaneous goods and services (0.1%). The CPI without fuel edged up 0.8% y-o-y in July 2021 to 113.2 versus 112.3 in the same month last year. The CPI without fuel covers all goods and services, except unleaded petrol RON95, unleaded petrol RON97 and diesel. Five states surpassed the national CPI rate of 2.2% in July 2021, namely Terengganu (2.8%), Pahang (2.5%), Selangor and Putrajaya (2.4%), Kelantan (2.4%) and Sarawak (2.3%), compared to the same month last year. All states witnessed an increase in the index of food and non-alcoholic beverages. The highest increase was recorded by Selangor and Putrajaya (2%). Meanwhile, other states showed an increase below the national index of food and non-alcoholic beverage rate of 1.3% in July 2021 compared to July 2020. 

Eye On The Markets 

This week, on Friday (27Aug), the Ringgit opened at 4.2020 against the USD from 4.2345 on Monday (23Aug). Meanwhile, the Ringgit was 3.1015 to the Sing Dollar on Friday (27Aug). On Monday (23Aug), the FBM KLCI opened at 1519.99. As at Friday (27Aug) 10:00am, the FBM KLCI is up 73.25 points for the week at 1593.24. Over in US, the overnight Dow Jones Industrial Average closed down 192.38 points (-0.54%) to 35,213.12 whilst the NASDAQ shed 96.10 points (-0.64%) to 14,945.80.  

Kuala Lumpur among top 10 cities in Asia Pacific seen as leading technology innovation hub — KPMG

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According to Guy Edwards, head of technology, media and telecommunications sector at KPMG in Malaysia, Kuala Lumpur is ranked the ninth top city in the Asia Pacific and outside of Silicon Valley/San Francisco as a leading technology innovation hub over the next four years. In its global Technology Industry Survey 2021 involving more than 800 industry leaders, this was based on several factors both at a local level such as infrastructure and demographics and at a macro level such as the regulatory environment and potential national tax incentives. This is not all that surprising considering several studies have already recognised and identified factors that make Malaysia an attractive investment opportunity. 

There is definitely continued global confidence in the country’s potential as a development hotbed, thanks to the Malaysian government’s dedication to advance the country’s technology infrastructure with the introduction of initiatives such as the National Fourth Industrial Revolution policy. While government impetus could be just the thing to amplify Malaysia’s potential as a tech hub, more is needed beyond simply introducing newer policies. The survey showed that 61% of industry insiders believed the pandemic has changed their opinions of which cities would become leading technology innovation hubs. Only one third feel that Silicon Valley will maintain its innovation leadership position, while an equal number feel it will not. 

Agri-commodities export jumps 65% in second quarter 

According to Minister of Plantation Industries and Commodities (MPIC) Datuk Dr Mohd Khairuddin Aman Razali, agri-commodities and agri-commodities product exports jumped 65% to RM105bil in the second quarter of 2021 from RM64bil in the same period last year. As of June this year, palm oil-based products which were the biggest contributor with 43% of the total agri-commodities export, increased to RM46bil compared to RM33bil in the first six months last year. 

However, palm oil based products export quantity declined 5% to 11.5 million tonnes. Covid-19 pandemic continuously impacted palm oil production and exports not only in Malaysia but also other global palm oil producing countries. The implementation of the movement control order by the government up to the National Recovery Programme on a scheduled basis over the past six months has directly impacted the export of palm oil and agri-commodity-based products. Following the encouraging performance, he is optimistic that the RM75bil palm oil export target this year could be achieved even though the country is still facing a shortage of workers in oil palm plantations. Meanwhile, rubber products that contributed 42% of the total agri-commodities export recorded a surge of 150% to RM44bil from RM17.77bil in the same period last year. 

Due to the Covid-19 pandemic, the value of latex-based products export such as rubber gloves and others rose 200% to RM37bil from RM12bil in the same period in 2020. Rubber gloves that are mainly for medical uses recorded more than threefold growth or 210%. On the other hand, wood-based products contributed 11% to agri-commodities export, increasing 21% to RM12bil from RM10bil in the same period 2020. Cocoa-based products export also posted an increase of 7% to RM3.4bil compared with RM3.1bil previously and pepper-based products export climbed 19.24% to RM62mil from RM52mil in the same period 2020. 

Eye On The Markets 

This week, on Friday (20Aug), the Ringgit opened 4.2375 against the USD from 4.2420 on Monday (16Aug). Meanwhile, the Ringgit was 3.1063 to the Sing Dollar on Friday (20Aug). On Monday (16Aug), the FBM KLCI opened at 1499.92. As at Friday (20Aug) 10:00am, the FBM KLCI is up 19.28 points for the week at 1519.20. Over in US, the overnight Dow Jones Industrial Average closed down 66.57 points (-0.19%) to 34,894.12 whilst the NASDAQ added 15.90 points (+0.11%) to 14,541.80.  

PM launches Perkukuh to reform Malaysia’s GLICs

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Prime Minister Tan Sri Muhyiddin Yassin launched Pelaburan Rakyat (Perkukuh), a ‘GLIC mandate recharge’ to reform the mandate and roles of Malaysia’s government-linked investment companies (GLICs) to be aligned with the national agenda and support the nation’s economic recovery plan. Perkukuh as a reform comprises 20 key initiatives focusing on achieving a clearer mandate for each GLIC, more investments in catalytic and developmental areas, increased private sector participation and streamlining of the government’s role. Malaysia’s GLICs involved in the programme comprise four sovereign wealth funds (SWFs) and four institutional investors. The SWFs comprise Khazanah Nasional Bhd, Kumpulan Wang Persaraan (KWAP), the National Trust Fund (KWAN) and Ministry of Finance Inc (MoF Inc). The institutional investors, meanwhile, comprise the Employees Provident Fund (EPF), Permodalan Nasional Bhd (PNB), Lembaga Tabung Haji (LTH) and Lembaga Tabung Angkatan Tentera (LTAT). Speaking at the virtual launch, PM shared measures to attract private investments, such as by kick-starting the development of new growth ecosystems — including through Khazanah’s newly-established RM6 billion Impact Fund. He also mentioned three examples of measures under Perkukuh “to increase the attractiveness of GLCs while allowing them to operate effectively in a regulated environment”, namely to: 

  1. review the government’s golden shares in investee companies; 
  1. re-define Malaysia’s strategic sectors; and 
  1. determine new areas of national interest. 

Stating that succession planning will have an impact on the outcome of the Perkukuh programme, he hoped that there will be a more structured, yet flexible, approach involving socioeconomic leadership development which should include talent rotation programmes between the GLICs, GLCs and the public sector. Perkukuh will also look at optimising operations of the GLICs “where the management of certain asset classes will be pooled” to achieve economies of scale and improved returns. For the SWFs, there will be a re-balancing of focus between financial returns and socio-economic deliverables. A key priority will be on patient capital investing in a more strategic and targeted way into new growth areas. Meanwhile, institutional investors will retain their mandate of maximising returns of contributors, be it future retirees or those who wish to pursue the haj, while playing a synergistic role in contributing to national development. This will include a more cohesive and scaled-up approach to Corporate Social Responsibility (CSR) and supporting national priorities like ESG and green financing. The programme will be overseen by a “New Growth Coordination Council” chaired by the prime minister. As Perkukuh will push GLICs to optimise capital allocation and focus on new growth areas, the council will ensure these are aligned with key policies comprising the National Fourth Industrial Revolution Policy, MyDIGITAL, the National Investment Aspirations framework, the Twelfth Malaysia Plan, and the Shared Prosperity Vision 2030. In formulating Perkukuh, the Govt drew on the deep expertise of the GLICs’ ecosystem, regulators, ministries as well as industry captains, including those involved in the first GLC Transformation Programme. 

E-commerce income in Q2 jumps 23% on-year to RM276.6 billion – DOSM 

According to the Department of Statistics Malaysia (DOSM) Chief Statistician Datuk Seri Dr Mohd Uzir Mahidin, Malaysia’s e-commerce income for the second quarter of 2021 rose 23.3% year-on-year (y-o-y) to RM276.6 billion, attributed to transaction growth driven by the manufacturing and services sectors, Coming from a low base, the services sector registered a significant 20.5% y-o-y increase to RM404.5 billion. The wholesale & retail trade, food & beverages and accommodation segment increased 21.8% to RM324.6 billion. This was followed by a 14.7% rise to RM59.5 billion in the information & communication and transportation & storage segment. Simultaneously, the health, education and arts, entertainment & recreation segment as well as the professional and real estate agent segment reported a similar uptrend, with a 27.3% hike to RM12.2 billion and an 8% increase to RM8.2 billion, respectively. The number of persons engaged in this sector was 3.6 million persons, a 0.7% or 25,812-person decline compared with the same period last year. The decline was attributed to the information & communication and transportation & storage segment which fell by 2.4% (11,297 persons), followed by a 0.2% (6,127 persons) drop in the wholesale & retail trade, food & beverages and accommodation segment. Similarly, the health, education and arts, entertainment & recreation segment fell 1.7% (4,772 persons) and the professional and real estate agent segment dropped 2% (3,616 persons). Compared with the same quarter of last year, salaries and wages paid increased by 0.4% or RM100.5 million. The growth was contributed by the information & communication and transportation & storage segment, which jumped RM120.8 million or 2.8%. This was followed by the wholesale & retail trade, food & beverages and accommodation segment and the health, education and arts, entertainment & recreation segment, which rose RM9.3 million and RM3.0 million respectively. 

Eye On The Markets 

This week, on Friday (13Aug), the Ringgit opened 4.2375 against the USD from 4.2245 on Monday (9Aug). Meanwhile, the Ringgit was 3.1205 to the Sing Dollar on Friday (13Aug). On Monday (9Aug), the FBM KLCI opened at 1491.76. As at Friday (13Aug) 10:00am, the FBM KLCI is up 9.82 points for the week at 1501.58. Over in US, the overnight Dow Jones Industrial Average closed up 14.88 points (+0.04%) to 35,499.85 whilst the NASDAQ added 51.10 points (+0.35%) to 14,816.30.  

SC introduces Shariah Screening Assessment Toolkit for unlisted MSMEs

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According to executive chairman Datuk Syed Zaid Albar, the Securities Commission Malaysia (SC) has introduced the Shariah Screening Assessment Toolkit (Toolkit) for unlisted micro, small and medium enterprises (MSMEs). The toolkit is a major initiative by the commission to provide guidance in screening the Shariah status of unlisted MSMEs as part of its ongoing efforts to enhance the ecosystem for Shariah-compliant fundraising activities. The toolkit will primarily benefit equity crowdfunding and peer-to-peer financing platform operators, as well as Shariah advisers. It is anticipated that the introduction of the toolkit will encourage more Shariah-compliant offerings on alternative market-based fundraising platforms. It will also result in more diversified Islamic investing across asset classes and economic sectors, and enable end-to-end Shariah compliance among MSMEs in the halal sector. He mentioned this in his keynote address at the virtual SC-Halal Development Corporation (HDC) Forum 2021. The toolkit includes a series of questions based on the Shariah screening methodology for MSMEs, endorsed by the SC’s Shariah Advisory Council (SAC). The MSMEs are the backbone of the Malaysian economy, contributing close to 40% of gross domestic product (GDP). MSMEs were one of the hardest-hit segments in the global response to the pandemic. He said that considering the critical role they play in our economy, we must spare no effort to ensure that our MSMEs are able to pull themselves out of the current quagmire to flourish again. The halal economy could play a critical role in their growth and success. Hence appropriate and effective measures must be put in place to support a comprehensive end-to-end Shariah-compliant ecosystem for emerging businesses in the halal economy. Meanwhile, given that Malaysia’s halal economy is projected to grow to US$113.2 billion (about RM477.82 billion now) in 2030, better funding access will certainly assist halal industry players to capitalise on opportunities for expansion. In the long term, market-based funding obligations will also provide MSMEs the necessary discipline to better manage their cash flow and finances. 

Bank Pembangunan Malaysia offers five financing schemes worth RM5.6b, targeting key strategic sectors 

According to Bank Pembangunan Malaysia Bhd (BPMB) Chairman Datuk Seri Nazir Razak, the bank remains committed to supporting the country’s economic recovery in line with its developmental mandate and is offering five financing schemes totalling RM5.6 billion, targeting key strategic sectors. The financing schemes, in addition to its general corporate banking facilities, are offered at preferential financing rates to targeted sectors, including digitalisation, sustainability, maritime and logistics, tourism and public transportation. It welcomes viable projects and businesses in these eligible sectors to submit their applications. So far these schemes, previously announced by the government, have seen a total of RM2.4 billion being approved for utilisation, leaving RM3.2 billion still available for deployment. The Covid-19 pandemic had hit businesses and industries hard and as a development finance institution, BPMB plays a catalytic role to help businesses and the economy recover. It is in unprecedented times like this that BPMB has to step up with countercyclical lending by looking at business viability over longer horizons and providing viable companies support over this extreme but temporary downturn. Since inception, BPMB had been a strong partner to businesses in support of the development of Malaysia’s economy and improving the lives of the rakyat, guided by its vision and mission statement as Malaysia’s leading developmental partner. The bank is reinforcing its focus, given the crucial needs of the country at the moment. 

Eye On The Markets 

This week, on Friday (6Aug), the Ringgit opened 4.2175 against the USD from 4.2255 on Monday (2Aug). Meanwhile, the Ringgit was 3.1198 to the Sing Dollar on Friday (6Aug). On Monday (2Aug), the FBM KLCI opened at 1497.39. As at Friday (6Aug) 10:00am, the FBM KLCI is down 1.72 points for the week at 1495.67 Over in US, the overnight Dow Jones Industrial Average closed up 271.58 points (+0.78%) to 35,064.25 whilst the NASDAQ added 114.60 points (+0.78%) to 14,895.10.