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.