Inve$t | Market Sentiments
Seven Malaysian companies have made it to the Forbes Asia’s Best Under A Billion 2022 list. The annual list highlights 200 Asia-Pacific public companies with less than US$1 billion in sales and consistent top- and bottom-line growth. The seven Malaysian companies are CE Technology, D&O Green Technologies Bhd, Greatech Technology Bhd, Kim Loong Resources Bhd, Tashin Holdings Bhd, UG Healthcare and ViTrox Corp Bhd.
In the list released on Tuesday (Aug 9), Forbes said that as Covid-19 restrictions ease across the Asia-Pacific and people adapt to the new normal, this year’s annual Best Under A Billion list highlights the shift to discretionary spending. It said while healthcare and pharmaceutical-related companies were standouts last year, the post-pandemic return to daily life has benefitted apparel makers, mall operators, restaurants, consumer electronics and entertainment companies, among others. Forbes said this year’s list includes 75 returnees from the prior year, reflecting their resiliency in a fast-changing environment.
Methodology – Forbes said the list is meant to identify companies with long-term sustainable performance across a variety of metrics. From a universe of 20,000 publicly traded companies in the Asia-Pacific region with annual sales above US$10 million and below US$1 billion, these 200 companies were selected. The companies on the list, which is unranked, were selected based on a composite score that incorporated their overall track record in measures such as debt, sales and earnings-per-share growth over both the most recent fiscal one- and three-year periods, and the strongest one- and five-year average returns on equity.
Aside from quantitative criteria, qualitative screens were used as well, such as excluding companies with serious governance issues, questionable accounting, environmental concerns, management issues or legal troubles. State-controlled and subsidiaries of larger companies were also excluded. The criteria also ensured a geographic diversity of companies from across the region.
The list uses full-year annual results, based on the latest publicly available figures as of July 11, 2022.
Source: Forbes Asia
Malaysia’s Firming Economic Recovery Allows for Recalibration of Policy Support – AMRO
According to the ASEAN+3 Macroeconomic Research Office (AMRO) in their 2022 Annual Consultation Report on Malaysia, the Malaysian economy is recovering strongly from the COVID-19 disruptions in 2021 and early 2022. The report was based on AMRO’s virtual Annual Consultation Visit to Malaysia in January – February 2022, and data and information available up to April 29, 2022.
Protected by its high vaccination rate, continuing nationwide inoculation program, and adequate healthcare capacity, Malaysia has progressively reopened its economy despite the resurgence of infections by the Omicron variant in early 2022. Economic growth should firm up further with the country’s transition to the endemic phase of COVID-19 from the beginning of April. In this respect, accommodative policy settings can be recalibrated to build more buffers against future shocks and safeguard financial stability.
Economic developments and outlook
The economy is on track to expand by 6.0 percent in 2022 after growth firmed up in Q1 on the back of a strong rebound in private consumption and buoyant exports. Headline inflation is set to increase moderately to 3.0 percent in 2022 from 2.5 percent in 2021, reflecting the partial pass-through of higher global food and energy prices to consumer prices.
Robust trade, strong foreign investment inflows, and an SDR allocation from the IMF, have allowed Bank Negara Malaysia (BNM) to build up its reserves buffer in 2021. The improvement in the reserves position has strengthened BNM’s capacity to withstand volatility shocks in capital flows.
Risks and vulnerabilities
COVID-19 remains a serious threat to the economic recovery. Although a tail-risk, the emergence of more virulent vaccine-resistant COVID-19 variants could once again prompt stringent mobility restrictions if a surge in cases risks overwhelming the healthcare system. At the same time, the economic outlook is shrouded by a new set of headwinds. The war in Ukraine and a more aggressive monetary policy tightening by the United States and the European Union have exposed Malaysia to the risks of higher inflation and a global economic slowdown. Heightened inflationary pressures could persist due to prolonged disruptions in global supply chains. Meanwhile, aggressive monetary policy tightening in the U.S. and E.U. amidst the ongoing war in Ukraine, could trigger a slump in global demand, including for Malaysia’s exports.
Aggressive rate hikes by the U.S. Federal Reserve also present financing challenges to the Malaysian economy as bond yields rise in tandem with the U.S. bond yields. On a positive note, the strong earnings recovery, larger cash buffers and lower leverage particularly for larger corporates provide comfort that corporate sector balance sheets would remain robust against increasing refinancing costs.
Policy recommendations
While supportive fiscal policy remains critical to narrow the disparity across sectors, a faster pace of fiscal consolidation over the medium term is warranted to safeguard fiscal sustainability. AMRO welcomes the increase in expenditure in the 2022 budget, with more targeted support to vulnerable groups and greater allocation to development expenditure, while lowering the fiscal deficitto-GDP ratio. As the recovery becomes more firmly entrenched, tax reforms—especially with regard to indirect taxes—could be implemented, starting in 2023, to boost fiscal revenue and facilitate a faster reduction of the high debt-to-GDP ratio.
BNM has started to normalize monetary policy, a welcome move given the strong rebound in economic activity and elevated global inflationary pressures. The policy rate, which was raised from a record low, has scope to increase further as the output gap continues to narrow and inflation continues to rise. Meanwhile, the gradual phasing out of the loan relief schemes in 2022 comes at an appropriate time as business and labor market conditions continue to improve. Loan impairments could emerge as a result, but the banks should be able to withstand the credit losses given their ample buffers and pre-emptive provisioning.
Lastly, proactive initiatives to facilitate foreign direct investments and to mitigate the impact of climate change are highly commendable and should be sustained to propel the economy to a progressively more sustainable path. It would be critical to ensure the timely realization of investment commitments while strengthening workforce upskilling programs and the domestic financing ecosystem. At the same time, stepping up disaster preparedness and speeding up the implementation of policies that incentivize the shift to low-carbon domestic activities would place Malaysia on a strong footing to deal with the risks surrounding climate change.
Eye On The Markets
This week, on Friday (12Aug), the Ringgit opened at 4.4475 against the USD from 4.4595 on Monday (8Aug). Meanwhile, the Ringgit was 3.2461 to the Sing Dollar on Friday (5Aug). On Monday (8Aug), the FBM KLCI opened at 1501.58. As at Friday (12Aug) 10:00am, the FBM KLCI is up 2.95 points for the week at 1504.53. Over in US, the overnight Dow Jones Industrial Average closed up 27.16 points (+0.08%) to 33,336.67 whilst the NASDAQ shed 74.89 points (-0.58%) to 12,779.91.
