INVE$T | Market Sentiments
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.