Leading Index (LI) signifies better economic recovery ahead for Malaysia – DOSM

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According to Malaysia’s Department of Statistics Malaysia (DoSM) chief statistician Datuk Seri Mohd Uzir Mahidin, economic recovery is in a better direction, as the performance of the Leading Index (LI) for April 2022 eased to a better negative of 0.5 per cent from a negative 1.4 per cent in March 2022. The LI is a predictive tool used to anticipate economic upturns and downturns in an average of four to six months ahead. The decrease in LI was influenced mainly by the drop in the number of housing units approved caused by the decline in applications from developers during the said month. Based on a month-on-month comparison, LI slipped to a negative 0.5 per cent, dragged by the number of housing units approved (-1.4 per cent), number of new companies registered (-0.5 per cent), and the Bursa Malaysia Industrial Index (-0.3 per cent). Despite the softening in LI for the reference month, the direction portrayed by the smoothed LI remained favourable by consistently above the long-term trend and registered better index points. This implies that the trend of Malaysia’s economic recovery is in a better direction. The issue of inflation and rising commodity prices need to be taken into account, considering the global situation. The Coincident Index (CI), which measures the overall current economic performance, is picking up since February 2022, reflecting an increase in economic activities with the economic and social activities operating at full capacity. The CI continued to climb by 5.3 per cent year-on-year to attain 120.3 points in April 2022. On monthly basis, the growth of CI increased to 2.0 per cent in the reference month compared to 1.4 per cent in the previous month. The growth was driven by a significant increase in volume index of retail trade (1.6 per cent). In relation to the reference period of the Malaysian business cycle, the CI detected a recession-induced by the Covid-19 pandemic beginning in February 2020 and ending in July 2021. 

SC to release SRI Taxonomy framework by the end of the year 

According to the Securities Commission Malaysia (SC) Executive chairman Datuk Dr Awang Adek Hussin, SC will be releasing the Sustainable and Responsible Investment (SRI) Taxonomy framework by the end of the year. The framework would act as the guiding principles to identify and classify economic activities that support environmental, social and sustainability objectives. The SC is finalising the SRI Taxonomy following a public consultation paper issued in December last year and will continue to pursue the SRI agenda for the next phase of the market development. Speaking at the SRI Virtual Conference 2022, titled ‘Preserving the Climate through Sustainable Business and Living’, he said this is clearly articulated in the Capital Market Master Plan 3 (CMP3). The SRI, along with the Islamic capital market (ICM), will play a key role in accelerating the transition to a sustainable and inclusive stakeholder economy. SC intends to expand the range of products and services for Islamic social finance and impact investing, in alignment with SRI principles. It will also be developing a framework for market-based instruments to enable transition finance in Malaysia which will increase funding options for companies at various stages of their sustainability journey. Malaysia’s sustainable investments journey started as early as 2014 when the SC’s SRI Sukuk Framework was introduced, which allowed for funds to be raised to finance a wide range of green, socially beneficial and sustainable projects. To date, a total RM8.3 billion of SRI Sukuk has been issued under this framework. Subsequently, the Guidelines on SRI Funds was rolled-out in 2017 to facilitate the growth of environmental, social and corporate governance (ESG) funds in Malaysia. As of 2021, 34 SRI funds have been launched, offering wholesale and retail investors the opportunity to invest in conventional and Shariah-compliant ESG-focused funds. Businesses today face rising expectations from stakeholders and the communities they serve. More than ever, they are being assessed on their sustainability commitments and handling of social issues, and our corporates are rising to the challenge. Recent research by PricewaterhouseCoopers (PwC) found that 94% of the top 50 Malaysian public-listed companies have ESG strategies in place. Sustainable and inclusive business practices benefit not just shareholders, but all stakeholders. Therefore, boards and management must take the lead and ensure that sustainability is at the heart of business strategy and operations. Crucially, investors must also play their role by shining a spotlight on the credibility of corporate commitments and shape the narrative ahead. Progress has certainly been made but there is still a long way to go. Moving forward, the key to managing the transition to a more sustainable and greener future is the availability of financing and impetus for change. Sustainable change requires investments in new technologies and innovative solutions. Market-based funding and risk management instruments are well-equipped to facilitate public and private efforts in climate mitigation and transition adding that Bloomberg Intelligence has estimated global ESG-related assets under management to grow to US$50 trillion (RM221 trillion) by 2025, primarily driven by fund inflows focused on climate change. 

Towards formalising stewardship policy for investee companies – EPF 

According to the Employees Provident Fund (EPF) chief strategy officer Nurhisham Hussein, the Fund is currently formalising a stewardship policy to address investee companies that fail to comply with the environmental, social and governance (ESG) standards. The stewardship policy addresses the level of engagement and action taken by the Fund in case somebody does not comply with the standards. The policy is expected to be issued sometime in the near future. At least the people will be able to understand the consequences and the channels that they can use to communicate with the EPF and other big investors on specific issues that need to be addressed. He was speaking at the Sustainable and Responsible Investment Virtual Conference 2022, titled “Preserving the Climate through Sustainable Business and Living”. In March this year, EPF had launched the Sustainable Investment Policies, Priority Issues Policies, and Priority Sector Policies to guide the EPF in making informed decisions by integrating ESG standards. These initiatives are aligned with EPF’s commitment to two overarching sustainable investment ambitions that will guide its overall pursuit of sustainability, namely, to achieve a fully ESG-compliant portfolio by 2030 and a climate-neutral portfolio by 2050, in line with the 12th Malaysia Plan’s aspirations for a carbon-neutral country.  

Eye On The Markets 

This week, on Friday (24June), the Ringgit opened at 4.4030 against the USD from 4.4025 on Monday (20June). Meanwhile, the Ringgit was 3.1665 to the Sing Dollar on Friday (24June). On Monday (20June), the FBM KLCI opened at 1454.40. As at Friday (24June) 10:00am, the FBM KLCI is down 20.80 points for the week at 1433.60. Over in US, the overnight Dow Jones Industrial Average closed up 194.23 points (+0.64%) to 30,677.36 whilst the NASDAQ added 179.11 points (+1.62%) to 11,232.19. 

EPF enhances i-Invest portal with new features for making informed decisions

INVE$T | Market Sentiments

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The Employees Provident Fund (EPF) has rolled out new features and tools on the i-Invest web portal to improve user experience. Various web features of i-Invest such as transactional functions, suitability assessment and useful information on approved unit trust funds, and the fund management institutions (FMIs) offering them, are now available on the i-Akaun mobile application, with additional features to be added in the coming months. In an effort to help members make more informed decisions, the EPF has introduced the Historical Investment Performance Dashboard to enable members to analyse investment performance returns across various time horizons. This new feature, which is the first of its kind in the domestic fund management industry, provides a display of investment returns based on three key categories to enable comparisons to be made at the fund level, FMI level and overall portfolio level. The EPF has also introduced an investment simulator as a tool to help members assess investment decisions based on five key parameters. Investment objectives can now be simulated based on a member’s choice of the initial investment amount, monthly investment amount, investment period, rate of return or ending investment value. The enhanced i-Invest portal has also incorporated Lipper-assigned benchmarks for members to compare against the unit trust funds’ performances. The i-Invest portal, which was launched in August 2019, offers a wide range of functions, flexibility and convenience for members to conduct investment decisions, as well as monitor their investments at any time and from anywhere. Through this facility, members can compare between unit trust funds offered by the FMIs and obtain a consolidated view of their investment holdings, information on investment costs, fund performance history, as well as statutory information related to the FMIs. The EPF said it will continue to ensure that the i-Invest portal is improved from time to time for the benefit of its members and invites feedback on the portal via the link at https://cms.kwsp.gov.my/survey/surveyfront/index?sid=54 

Recovery on the horizon for Malaysian economy, but challenges remain – Bursa Chairman 

According to Bursa Malaysia chairman Tan Sri Abdul Wahid Omar, Malaysia must be clear-eyed about the challenges on the horizon despite being fortified by sound economic fundamentals and the economy on its way to a recovery after turning the corner against the pandemic. Speaking at the Malaysian Economic Summit 2022 organised by the KSI Strategic Institute for Asia Pacific, he said there were a number of factors to be optimistic about the country’s growth outlook and most importantly, it was transitioning to the endemic phase with the relaxation of pandemic control measures and reopening of international borders. The endemic phase is likely to contribute to the revival of Malaysia’s tourism industry which supports 3.5 million jobs. The high vaccination rate with close to 80 per cent of the population being vaccinated with two doses is another important factor. This compares favourably against Asean’s rate of 60 per cent. A sound government policy has provided economic relief and support for the people and businesses, including employment incentives, cash transfers and subsidies, which resulted in a significant decline in the unemployment rate from a peak of 5.3 per cent in May 2020 to 4.1 per cent in May 2022. Being also chairman of Economic Club of Kuala Lumpur (ECKL) Advisory Council, he said that Bank Negara Malaysia has forecast that Malaysia’s economic growth to be between 5.3 per cent and 6.3 per cent in 2022 while the World Bank projected the economy to grow by 5.5 per cent. However, it is important to note that these forecasts have been downgraded, underscoring the uncertainties within and beyond the country. If there is upside, there will be downside and we must consider domestic and global challenges that will affect the Malaysian economy. Geopolitical risks threatened Malaysia’s recovery whereby the conflict in Ukraine and the economic sanctions on Russia have created uncertainties and they had exacerbated the supply shocks in commodities such as crude oil, natural gas, wheat and sunflower oil, hence, driven up the prices of food commodities. Malaysia also had to contend with these inflationary pressures where the annual Consumer Price Index went from -1.2 per cent in 2020 to 2.5 per cent in 2021. The inflation rate will continue to rise this year and has been driven by significant increases in transportation and food costs. Food prices have increased between 3.6 per cent and 4.0 per cent in the first quarter of this year. Fortunately, the government’s fuel subsidy has kept a lid on further increases on fuel cost. However, the fuel subsidy is a double-edged sword because while it keeps inflation down, the government’s fiscal space will shrink. Another major domestic issue is the political uncertainties that have afflicted the country since the last general election. The economic boost from the transition to the endemic phase may be neutralised by the adverse global developments such as the conflict in Ukraine, China’s Covid-19 lockdown and the inflationary pressures. Therefore, the short-term goal of economic stabilisation should focus on supporting domestic demand and addressing the impact of imported inflation from weaker exchange rates and higher fuel prices. He was cautiously optimistic that Malaysia will be able to overcome these challenges if Malaysians were to come together, be constructive and do what we can in our respective roles since the country has weathered similar crises in the past. Obviously, there were different factors that will require different sets of solutions which means we cannot rest our laurels and must be persistent and focused. 

Eye On The Markets 

This week, on Friday (17June), the Ringgit opened at 4.3975 against the USD from 4.4110 on Monday (13June). Meanwhile, the Ringgit was 3.1752 to the Sing Dollar on Friday (17June). On Monday (13June), the FBM KLCI opened at 1483.76. As at Friday (17June) 10:00am, the FBM KLCI is down 31.88 points for the week at 1451.88. Over in US, the overnight Dow Jones Industrial Average closed down 741.46 points (-2.42%) to 29,927.07 whilst the NASDAQ shed 453.06 points (-4.08%) to 10,646.10. 

Malaysia has RM3 bil IPO pipeline in 2H22 – Maybank IB

Market Sentiments | June 10, 2022

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According to Maybank Investment Bank (Maybank IB) chief executive officer Datuk Fad’l Mohamed, the Malaysian initial public offering (IPO) pipeline in 2H22 is valued at around RM3 billion. Across the wider equity capital market (ECM), the investment bank is also seeing some traction in the merger and acquisition (M&A) and private equity (PE) space. He was speaking at a press conference in conjunction with Maybank Invest Asean 2022 conference. There are still a lot of deal activities happening in the market. There is a strong ECM pipeline coming through, year to date with around nine IPOs. Going forward in 2H22, he is seeing a total deal value of about RM3 billion on ECM coming through in sectors like consumer, retail, general industrial, TMT (technology, media and telecommunications) and transport and logistics. On the M&A side, there is a lot of restructuring activities particularly among some of the GLCs and GLICs. There is also a lot of traction on the PE space, with buy-sell opportunities coming in, and also in-country consolidation. Meanwhile, the local debt capital market (DCM) has also remained stable with a full-year outlook of RM110 billion. This compares with RM114 billion recorded in 2021, according to Securities Commission Malaysia’s data. On DCM, he sees a potential of RM6.8 billion coming up in 2H22, and potential ESG-linked alone is over RM6 billion. The investment bank has completed 33 issuances totalling RM6.3 billion, of which sustainability issuance alone is RM2.1 billion. On sustainability-linked instruments, the investment bank is seeing opportunities for key projects that fall within the category, coupled with ample liquidity looking for such green assets. The other aspect is for some companies looking at transitioning, sustainability-tied instruments. Attractive proposition for a lot of clients to raise capital with clear targets in terms of the pathway of ESG. And on the demand side, a lot of investors are looking at this asset class, and continue to have a strong appetite to take up ESG-related papers, sustainability-tied instruments. With economic recovery, with refinancing of large maturities coming through this year and next, the environment is definitely conducive for capital raising. 

Malaysia 2H equities outlook hinges on global risk appetite – HSBC 

According to HSBC global private banking and wealth Southeast Asia chief investment officer James Cheo, the Malaysian equities market outlook in 2H22 is likely to depend heavily on global appetite for risk assets, with selective investment opportunities in beneficiaries of economic reopening and commodities sectors. The bank is currently neutral on Malaysia equities, which are really tied in to the general risk sentiment in the global economy, and at this stage the risk appetite in the world economy is still very fragile. Speaking at the HSBC 2H22 Investment Outlook briefing, he said the market may reassess the Malaysian market again when there is a more concrete kind of improvement in the global dynamics, particularly on how the recovery is in the picture of inflation. He acknowledged that Malaysia is on a “fairly solid” growth path given the Southeast Asian nation’s well-diversified export base from crude oil, palm oil as well as playing a prominent role in the global semiconductor supply chain. Malaysia’s economy grew 5% in the first quarter of this year thanks to improvements in labour market, domestic and external demand amid easing pandemic restrictions. This came after a 3.1% gross domestic product (GDP) growth last year. Malaysia’s GDP is expected to grow 5.5% this year thanks to tailwinds from improving manufacturing activities and favourable commodities prices. This has taken into account an expectation for another 50 basis points overnight policy rate hike this year, with Bank Negara Malaysia potentially ending 2022 with a benchmark interest rate of 2.5%. In terms of foreign exchange outlook, while the ringgit has endured high volatility in 1H22, the domestic currency will likely stabilise in 2H22 and trade around 4.2800 against the US dollar by end of this year. With the impact of pandemic restrictions receding and reopening of the economy, private consumption is going to bounce back, investments are likely to also be quite robust. Therefore, there are several selective investment opportunities, particularly in sectors associated with reopening, consumption, banking, commodities and semiconductor. Although the bank’s outlook is neutral on Malaysian equities, there are selective opportunities, because various parts of the economy are actually doing very well. 

Foreign funds purchase RM477.5mil net of local equities – MIDF 

According to MIDF research data, the foreign inflow turned positive on Bursa Malaysia for the week ended June 3, 2022 with net purchases of RM477.5mil. This was in line with the swing to a positive inflow in Asian markets after eight weeks of net outflow. This was owing to the US dollar index (DXY) losing appeal as forecasts of the US non-farm payrolls were trimmed vigorously. Based on the provisional aggregate data for the seven Asian exchanges that MIDF tracks, investors classified as “foreign” bought US$2.3bil last week. On the local bourse, net buying from foreign investors was recorded from Monday to Wednesday. The heaviest net inflow came on Tuesday with RM320.8mil net of local equities bought by foreigners. Meanwhile, local retailers remained net sellers with a net outflow of RM121.4mil. Local institutions were net sellers for a fourth consecutive week to the tune of RM356.1mil. In terms of participation, all investor classes except for local retailers showed an improvement for the week. Foreign investors and local institutions saw an increase in the average daily trade value (ADTV) by 110.3% and +24% respectively. Meanwhile, local retailers posted a decline of 2.5% in ADTV. 

Eye On The Markets 

This week, on Friday (10June), the Ringgit opened at 4.3990 against the USD from 4.3975 on Tuesday (7June). Meanwhile, the Ringgit was 3.1849 to the Sing Dollar on Friday (10June). On Tuesday (7June), the FBM KLCI opened at 1538.74. As at Friday (10June) 10:00am, the FBM KLCI is down 43.71 points for the week at 1495.03. Over in US, the overnight Dow Jones Industrial Average closed down 638.11 points (-1.94%) to 32,272.79 whilst the NASDAQ shed 322.05 points (-2.75%) to 11,754.23. 

No changes to FBM KLCI constituents after semi-annual review

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According to FTSE Russell and Bursa Malaysia Bhd, there are no changes to the constituents of the FTSE Bursa Malaysia KLCI, following the semi-annual review of the FTSE Bursa Malaysia Index Series. The index series is reviewed semi-annually in accordance with the index ground rules. The FTSE Bursa Malaysia KLCI reserve list, comprising the five highest-ranking non-constituents of the index by market capitalisation, will be Westports Holdings Bhd, QL Resources Bhd, AMMB Holdings Bhd, Malaysia Airports Holdings Bhd and Gamuda Bhd. The reserve list will be used if one or more constituents are deleted from the FTSE Bursa Malaysia KLCI in accordance with the index ground rules during the period up to the next semi-annual review. Meanwhile, eight new constituents would be added to the FTSE Bursa Malaysia Mid 70 Index, namely Aeon Co (M) Bhd, Boustead Plantations Bhd, Chin Hin Group Bhd, Farm Fresh Bhd, Hengyuan Refining Company Bhd, Hextar Global Bhd, Hibiscus Petroleum Bhd and Ta Ann Holdings Bhd. As a result, Allianz Malaysia Bhd, ATA IMS Bhd, Cahya Mata Sarawak Bhd, GDEX Bhd, Hong Leong Industries Bhd, Magnum Bhd, Sapura Energy Bhd and YTL Hospitality REIT will be deleted from the FTSE Bursa Malaysia Mid 70 Index. For the FTSE Bursa Malaysia Hijrah Shariah Index, two new constituents will be added – FGV Holdings Bhd and Sunway Bhd – while Inari Amertron Bhd and Press Metal Aluminium Holdings Bhd would be deleted from the index. All constituent changes take effect at the start of business on June 20. The next review will take place in December 2022. 

AmInvest launches New China Sectors Index Fund 

According to AmInvestment Bank chief executive officer Tracy Chen Wee Keng, AmInvest has introduced its New China Sectors Index Fund that will enable investors to ride on the potential growth of the flourishing consumer and consumer-related sectors in China. The fund, launched in view of China’s rising local purchasing power, will feed into the Industrial and Commercial Bank of China (ICBC) and CSOP Asset Management Limited (CSOP) S&P New China Sectors exchange traded fund (ETF) (target fund), which tracks the performance of S&P New China Sectors (A-shares Capped) Index. The fund is timely, as it is positioned to capture the potential new growth sectors of China whose economy has been transitioning from an investment-led to consumption-led growth model. While China’s traditional sectors such as energy, materials and industrials have shown signs of a slowdown in growth, new sectors such as consumer, communications, healthcare and technology are driven by the continued growth of consumer demand. Meanwhile, according to AmFunds Management Bhd chief executive Goh Wee Peng, demographics and consumer trends will continue to shape China’s consumer landscape for the next decade of growth. AmInvest is excited to again partner with CSOP, which is one of the largest and most active ETF issuers in Hong Kong. China’s annual growth rate of disposable income per capita, driven primarily by the rise of the middle class, has exceeded 8%. Singles’ Day, the world’s biggest online shopping event in November last year, garnered an outstanding total spending of 965.1 billion yuan (about RM629.4 billion) despite the slowdown in China. The shifting patterns of consumer spending in China’s ageing society have also supported demand-driven sectors such as insurance, medical care and fitness. The fund’s base currency is the Hong Kong dollar. It is being offered for subscription to sophisticated investors in Hong Kong dollar and ringgit and in ringgit-hedged classes at an initial offer price of HK$1 and RM1 per unit respectively, during the initial offer period which ends on June 20, 2022. 

Eye On The Markets 

This week, on Friday (3June), the Ringgit opened at 4.3815 against the USD from 4.3755 on Monday (30May). Meanwhile, the Ringgit was 3.1982 to the Sing Dollar on Friday (3June). On Monday (30May), the FBM KLCI opened at 1546.35. As at Friday (3June) 10:00am, the FBM KLCI is down 0.05 points for the week at 1546.30. Over in US, the overnight Dow Jones Industrial Average closed up 435.05 points (+1.33%) to 33,248.28 whilst the NASDAQ added 322.44 points (+2.69%) to 12,316.90.