INVE$T | Market Sentiments
According to UOB Global Economics and Market Research analysts Julia Goh and Loke Siew Ting, Malaysia’s foreign portfolio inflow, comprising the combined value of net foreign purchases in the country’s debt and equity markets, rose to its highest in six months at RM5.9 billion in February from RM3.8 billion the month prior. Both Malaysian debt and equity markets saw net foreign purchases of RM3.1 billion and RM2.8 billion respectively in February from RM3.5 billion and RM0.3 billion in January. Year to date, foreign portfolio inflows amounted to RM9.7 billion in the first two months of 2022, slightly higher than the RM9.2 billion inflows recorded in Jan-Feb 2021. It was driven by resilient demand for the debt securities (at +RM6.6 billion vs +RM10.9 billion in Jan-Feb 2021) and a return of buying interest in equities (at +RM3.1 billion vs -RM1.7 billion in Jan-Feb 2021). February’s foreign debt inflows were driven by all sub-debt instruments, led by government investment issues (GII). Non-resident holdings of Malaysian government bonds (MGS), jumped for the third straight month by RM2.2 billion to a new all-time high of RM240.4 billion as at end-Feb (end-Jan: +RM4.3 billion to RM238.2 billion). It is equivalent to 25.3% of total government bonds outstanding (end-Jan: 25.5%). Foreign holdings of MGS alone also marked a new all-time high of RM194.6 billion even though just RM500 million worth of MGS were snapped up in February. This brought overseas investors’ shareholding of MGS to 39.3% of total MGS outstanding (end-Jan: 39.6%). Similar to GII, foreign investors raised their holdings by RM1.7 billion to a new record high of RM45.8 billion (end-Jan: -RM0.3 billion to RM44.2 billion), which made up 10.5% of total GII outstanding (end-Jan: 10.4%). Risk-off sentiment and sky-rocketing commodity prices sparked by the Russia-Ukraine conflict and sanctions are initiating some asset reallocation into commodity producing countries, including Malaysia. However expectations of narrower interest rate differentials, domestic policy uncertainty, constrained fiscal policy space, and increasing downside risks to domestic growth prospects are wildcards for Malaysia’s foreign portfolio flows and currency outlook, should geopolitical risk escalate further. The US Federal Reserve is anticipated to start its rate hike cycle at next week’s Federal Open Market Committee (FOMC) meeting (March 15-16), while most regional central banks including Bank Negara Malaysia (BNM) are projected to begin their monetary normalisation at a more measured pace and later than the US Federal Reserve. This will likely lead to narrower interest rate differential between regional central banks including Malaysia and the US Federal Reserve. Key events to watch out for in March include the ongoing developments of the Russia-Ukraine conflict, March’s FOMC meeting outcome, Johor state election results, as well as BNM’s publication of its Annual Report 2021, Economic and Monetary Review 2021, and Financial Stability Review for 2HFY21 with its latest economic forecasts for gross domestic product and inflation.
Malaysia attracted record approved investment of RM306.5b in 2021, driven by E&E boom
According to Senior Minister and International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali, Malaysia attracted a record amount of approved investments worth RM306.5 billion in the manufacturing, services and primary sectors in 2021, driven by higher foreign direct investment (FDI) and increased projects in the manufacturing and the electrical and electronics (E&E) sectors. Malaysia’s FDI of RM208.6 billion accounted for 68.1% of total approved investments, with the remaining 31.9% coming from domestic direct investment (DDI) at RM97.9 billion. Year-on-year, Malaysia’s FDI was significantly higher by 224.9% from RM64.2 billion in 2020, however, DDI declined marginally by 5.13% from RM103.2 billion the year before. The Netherlands (RM78 billion), Singapore (RM47.3 billion), the People’s Republic of China (RM31.3 billion), Austria (RM18.9 billion) and Japan (RM9.9 billion) accounted for 88.9% of total FDI approved in the manufacturing, services and primary sectors. Pulau Pinang (RM83.5 billion) recorded the highest investments approved last year, followed by Kedah (RM68.3 billion), Kuala Lumpur (RM37.7 billion), Selangor (RM28.8 billion) and Sarawak (RM25.7 billion). These five states contributed 79.6% of total approved investments in 2021. The record-breaking approved investments for the manufacturing, services and primary sectors were a 83.1% jump from 2020’s figure. Malaysia’s RM97.9 billion DDI in 2021 is a signal that local industry players had grown in terms of capabilities and business capacity to be competitive on the global stage. MIDA has already secured 352 projects in the pipeline with proposed investments of RM39.2 billion for the manufacturing and services sectors. These projects will create more than 19,000 new job opportunities for the rakyat. Meanwhile, the manufacturing sector led total investments approved in 2021 by recording RM195.1 billion, followed by the services sector and the primary sector at RM94.1 billion and RM17.3 billion respectively. The manufacturing sector reported a leap in approved investments by 113.7% from RM91.3 billion in 2020, while the services and primary sectors saw improvements of 34.4% and 183.6% from RM70 billion and RM6.1 billion respectively. Notably, the E&E industry contributed the bulk of the FDI as well as total approved investments within the manufacturing sector by recording RM148 billion for 94 approved projects. Chief among the E&E industry’s RM148 billion in total approved investments included RM42.2 billion from Risen Solar for the design development and manufacturing of solar modules and solar cells, followed by Intel Electronics’ RM30 billion to produce wafer fabrication and stacked dies in Pulau Pinang, AT&S’ RM8.5 billion to establish design development and manufacturing of integrated circuit substrates in the Kulim Hi-Tech Park, and Infineon Technologies’ RM3.25 billion in Melaka. MIDA had secured 75 capital-intensive projects valued at RM100 million and above in 2021, which could spur the growth of new advanced manufacturing technologies and produce a highly skilled workforce. Meanwhile, the services sector’s 34.4% improvement in 2021 was driven by sub-sectors such as real estate (RM28.8 billion), global establishments (RM19.7 billion), financial services (RM12 billion), utilities (RM9.6 billion), and information and communications (RM8.2 billion). The bulk of the primary sector’s approved investments were led by the mining sub-sector’s RM17.1 billion or 98.7% amid higher crude oil and natural gas prices, while the plantation and commodities and agriculture sub-sectors brought in RM211.4 million and RM20.5 million respectively.
Bursa: Malaysia sees increasing number of new women investors
According to Bursa Malaysia Bhd chief executive officer Datuk Muhamad Umar Swift, Malaysia continued to see an increasing number of new women investors in the stock market, representing 36% of new Central Depository System (CDS) accounts opened year-to-date. In 2020, 32% of the CDS accounts were held by women, and the number rose to 34% last year. Female investors made up 30% of total trade value in 2021, and women’s total trade volume surged 194.1% between 2018 and 2021. Speaking at the annual Ring the Bell for #EqualityforEquity Campaign in conjunction with the International Women’s Day 2022 celebration on Tuesday (March 8), he said that women have become more actively involved in investing activities. Various studies conducted showed that portfolios managed by women tend to outperform those overseen by their male counterparts. In 2021, a study by Fidelity Investments showed women investors achieved positive returns and surpassed men by 0.4% on average in terms of annual performance between January and December. However there is still room to grow and much needs to be done to further encourage the participation of women investors. Hence, Bursa Malaysia launched the #MyFirstTrade campaign that runs from March 8 until March 31 exclusively for women investors who have a positive story to share. During the period, Bursa and participating brokers will wave respective portions of the opening fee for the first 4,000 CDS accounts opened by women. Bursa provides a fair and open platform where everyone, men or women, can participate in the capital market and corporate space. Bursa has implemented rules for more women representation on the board of directors and will continue with efforts to reduce the gender equality gap in the workplace.
ICMR launches inaugural book on sustainable finance
The Institute for Capital Market Research Malaysia (ICMR) launched its inaugural edited book, “Financing Sustainability: Critical Issues with East Asian Experiences.” Led by chief editor, Professor Dato’ Dr. Rajah Rasiah, the book is a compilation of thought pieces contributed by ICMR analysts and regional experts. Together, they offer valuable insights to address the financing of sustainable development to meet the UN’s Sustainable Development Goals (SDGs). In dissecting the experience of a high-income economy and that of some middle and low-income economies in East and Southeast Asia, the book breaks new ground by linking evidence with strategies and mechanisms in countries at different levels of development. The experiences of more developed economies are presented as learning opportunities for less developed ones. The book offers a refreshingly novel account of the different funding alternatives that are now pursued by various socio-economic agents to address sustainability issues worldwide. This goes beyond environmental issues alone to cover financial inclusion, sustainable trade, Islamic finance, as well as the role of corporate governance and pension institutions. Drawing on a careful review of the extant literature and the crafting of policy-relevant strategies, the book is therefore intended to contribute significantly to the literature on sustainable development. It will serve as an essential guide for policy makers and market actors in their quest to promote the financing of sustainability across the globe. The book is published by the University of Malaya Press and can be purchased at www.umpress.com.my. At the conclusion of the event, ICMR and Sunway University, represented by the Jeffrey Sachs Center for Sustainable Development, inked a Memorandum of Understanding to promote greater knowledge sharing on sustainable finance with the hope of working closer together on positive developments in this area.
Eye On The Markets
This week, on Friday (11Mar), the Ringgit opened at 4.1890 against the USD from 4.1795 on Monday (7Mar). Meanwhile, the Ringgit was 3.0814 to the Sing Dollar on Friday (11Mar). On Monday (7Mar), the FBM KLCI opened at 1606.27. As at Friday (11Mar) 10:00am, the FBM KLCI is down 44.03 points for the week at 1562.24. Over in US, the overnight Dow Jones Industrial Average closed down 112.18 points (-0.34%) to 33,174.07 whilst the NASDAQ shed 125.58 points (-0.95%) to 13,129.96.