Bursa Malaysia enhances reporting framework

Market Sentiments | 20 Sept 2022

Download Inve$t #126

According to Bursa Malaysia chief executive officer Datuk Muhamad Umar Swift, Bursa Malaysia has enhanced sustainability reporting in the Main Market Listing Requirements (Main LR) and the ACE Market Listing Requirements (ACE LR) in efforts to drive sustainability practices and disclosures of listed issuers. The exchange has enhanced the sustainability reporting requirements in the LR to ensure continued relevance and to propel listed issuers to adopt international best practices on issues like climate change. The enhancements are a clear and unequivocal signal of the bourse’s ambition to be the leading exchange for environmental, social and governance (ESG) in the region.  

The high bar set for all the listed issuers is underpinned by a multi-year, phased implementation approach to ensure a successful rollout. By embracing these enhancements, listed issuers would boost their overall resilience, competitiveness and, in turn, appeal as attractive investments.  

Main Market listed issuers would now be required to include the following disclosures in their sustainability statements: 

(i) a common set of prescribed sustainability matters and indicators that are deemed material for all listed issuers, 

(ii) climate change-related disclosures that are aligned with Task Force on climate-related financial disclosures (TCFD) recommendations, 

(iii) at least three financial years’ data for each reported indicator, corresponding targets (if any) as well as a summary of such data and corresponding performance target(s) in a prescribed format, and 

(iv) a statement on whether the Sustainability Statement has been reviewed internally by internal auditors or independently assured. 

The requirements for ACE Market listed corporations have also been strengthened to align with those of the Main Market. In addition, ACE Market listed corporations are now required to disclose a basic plan to transition towards a low carbon economy, with regards to climate change reporting. This not only facilitates ACE Market listed corporations in considering climate change-related risks and opportunities but also takes into account their maturity in this space. 

The enhanced sustainability reporting requirements for Main Market listed issuers will be implemented in a phased manner, beginning with the disclosure of the common sustainability matters for the financial year ending (FYE) on or after Dec 31, 2023, and culminating with the TCFD-aligned disclosures for FYE on or after Dec 31, 2025. Similarly, ACE Market listed corporations will adopt the enhanced sustainability disclosures on a staggered basis, with disclosures of the prescribed sustainability information taking effect for FYE on or after Dec 31, 2024, and concluding with disclosures of the basic transition plan for FYE on or after Dec 31, 2026. 

Bursa Malaysia had launched a sustainability reporting framework in 2015 where listed issuers are required to disclose a narrative statement of the management of material economic, environmental and social risks and opportunities in their annual reports. 

Foreign investors post largest weekly net sale value of Malaysian stocks YTD – CGS-CIMB 

According to CGS-CIMB analyst Ivy Ng Lee Fang, foreign investors had last week posted their highest weekly net sale value of Bursa Malaysia-listed stocks year-to-date (YTD) at RM565 million, possibly due to the weak ringgit and global recession concerns at a time when world central banks are pursuing aggressive interest rate hikes to fight inflation. Last week (ended Sept 23, 2022), they were net sellers in the healthcare and financial services sectors, with Malayan Banking Bhd (Maybank), Top Glove Corp Bhd and Press Metal Aluminium Holdings Bhd as their top three net sell stocks. 

Foreign investors were the only net sellers of Malaysian equities last week when market sentiment was dented by Top Glove’s Sept 20, 2022 announcement of its first quarterly loss since listing. The best-performing Bursa indices last week were the transport, construction and REIT sectors. The KLCI fell 2.9% w-o-w (week-on-week) due to concerns over more aggressive rate hikes. Local institutional investors recorded their highest weekly net buy YTD of RM336 mil. Local retail investors turned second-largest net buyers last week. They net bought RM218 mil of equities, which represent a 12% w-o-w rise in their net buy. 

Among individual stocks, Maybank was the largest net buy stock for local institutional investors and largest net sell stock for foreign institutional investors. Top Glove was the largest net buy stock for retail and nominee investors but the second-largest net sell stock for foreign institutional investors. CIMB Group Holdings Bhd was the largest net buy stock for foreign institutional investors, but the largest net sell stock for local institutional investors. Top Glove, Hartalega and Maybank were the top three regulated short-selling targets last week. The top three short-sell sectors in terms of value were healthcare, technology, and financial services sectors. 

World Bank lowers 2023 growth target for M’sia but upgrades growth for this year to 6.4% 

According to World Bank lead economist for Malaysia Apurva Sanghi, the World Bank has lowered its 2023 growth target for Malaysia to 4.2% from 4.5% earlier and warned that significant headwinds will continue to persist. As an open economy, Malaysia faces the brunt of global supply disruptions. But upon zooming out, the disruptions are not as bad as compared to, for example, the West. He was speaking at an online briefing session held in conjunction with the release of the World Bank’s East Asia and Pacific Economic update report. 

The Asian region in general has suffered from fewer disruptions and Malaysia’s status as a commodity, semiconductor as well as electrical and electronic products producer and exporter, has held it in good stead. Having said that, there will be significant headwinds and downsides in 2023 and beyond. On the global front, overall stagflation and recessionary pressures as well as the ongoing Russia-Ukraine tensions will have an adverse effect on Malaysia’s demand for exports. On the regional front, the slowdown in China due to its continuing zero-Covid policy, which is hampering its growth, will also impact Malaysia. China is Malaysia’s largest direct trading partner, so anything that happens in China will affect the economy here. 

On the domestic front, there are the issues of rising inflation, particularly food inflation, and a sluggish labour market where there is a shortage of workers. One thing he hasn’t spoken of about the domestic front is the shrinking fiscal space, the persistently declining revenues for almost 10 years – these are issues that need to be tackled on the domestic front. 

The World Bank also announced it had upgraded its forecast for Malaysia’s economic growth for this year to 6.4% from an earlier 5.5%. The higher figure is premised largely on the fact that the local economy had performed above expectations in the first half of this year, driven by a high second-quarter growth. Positive momentum is expected to spill over into the second half of this year with growth for the remaining of the year boosted by a low-base effect. 

On the ringgit, the bulk of Malaysia’s trade is denominated in US dollars. While 83% of Malaysia’s exports and 80% of its imports are invoiced in US dollars, a “measly” 5.4% (exports) and 4.5% (imports) are denominated in ringgit. It does speak of the power of the US dollar, so a depreciating ringgit against the US dollar is a concern. What can be done? Bank Negara is doing what it can but basically the strength of the currency will depend on how well the economy will perform and how well Malaysia can keep its focus on its fundamentals and structural reforms. There’s no quick and easy fix. 

Notably, the ringgit and other regional currencies have been seeing huge falls against the greenback as the US Federal Reserve continues to aggressively raise interest rates, causing investors looking for higher returns to shift their monies from this part of the world to the United States. The ringgit has fallen to its lowest in more than 20 years against the US dollar, trading at around RM4.60 against US$1.  

Consumer stocks likely to remain steady – Kenanga Research 

According to Kenanga Research, the top line of listed consumer stocks is expected to remain resilient for the remainder of 2022, underpinned by the recovery of the labour market, year-end festive sales and a gradual pick-up in tourism. Earnings of consumer-based firms are anticipated to remain steady despite inflationary pressures. The research house is of the opinion that the M40 group will continue to maintain spending on the back of a healthy household balance sheet. The Bottom 40 group, however, will struggle due to depleted pandemic handouts and fund withdrawals. 

It expects retail players to be able to defend their margins on a combination of better product mix and operational efficiency, coupled with the absence of major supply disruptions, especially from China. However, the same cannot be said for food and beverage (F&B) producers, who have not raised product prices sufficiently to offset higher input costs. Some F&B players are reluctant to jack-up prices for fear of demand destruction, which would result in consumers down-trading or switching to cheaper alternatives. This could also lead to a market share loss for the F&B players. 

F&B producers face renewed economic challenges, such as elevated input and logistics costs arising from inflationary pressures. Ongoing geo-political tensions are stoking further inflationary pressures as energy prices surge amid volatile supply. Despite the gradual softening of commodity prices in the last few months, global trends are starting to indicate otherwise. Global indicators show a reversed trend well into 2023, posing risks to earnings and indicating that pre-pandemic level margins are still a long way off, especially for F&B producers. 

On the local front, the research house notes that consumer consumption has been softening. Citing the Malaysian Institute of Economic Research, it said the country’s consumer sentiment index fell 23 points to the 86-mark during the second quarter of 2022. This was below the consumer optimism threshold. Rising prices and subdued expectations for employment and finances, sentiment appears to be softening. Year-to-date growth of total distributive trade sales as of July is hovering around the 20% mark. 

Based on its in-house forecast of 15% for the full year, growth is expected to taper off going forward as interest rate hikes and inflationary pressure squeeze consumption. It is projecting consumption to soften from August onwards due to tighter financial conditions following Bank Negara’s back-to-back rate hikes. On top of that, the rising cost of living and impending global recessionary pressures due to China’s persistent zero-Covid policy and Europe’s worsening energy crisis may also lead to a decline in consumer spending. It expects growth in private consumption as the economy reopens, but overall growth is expected to normalise significantly. It cited Retail Group Malaysia (RGM), which is upbeat about the outlook of the local retail sector. Owing to the firm recovery of the Malaysian retail industry since the beginning of this year, RGM has revised its growth target for the retail industry to 32% year-on-year from 13% previously. 

Note From Publisher: There were no stocks that met our Criteria & Conditions under the Non-Shariah Hot Stocks.  

Eye On The Markets 

This week, on Friday (30Sept), the Ringgit opened at 4.6375 against the USD from 4.5890 on Monday (26Sept). Meanwhile, the Ringgit was 3.2378to the Sing Dollar on Friday (30Sept). On Monday (26Sept), the FBM KLCI opened at 1423.83. As at Friday (30Sept) 10:00am, the FBM KLCI is down 28.02points for the week at 1395.81. Over in US, the overnight Dow Jones Industrial Average closed down 458.13 points (-1.54%) to 29,225.61 whilst the NASDAQ shed 314.13 points (-2.84%) to 10,737.51. 

Robust GDP seen to sustain in 3Q – Growth of between 8% and 9% estimated – SERC

Inve$t | Market Sentiments | 23 Sept 2022

Download Inve$t #125

According to Socio-Economic Research Centre (SERC) executive director Lee Heng Guie, Malaysia is estimated to experience a robust gross domestic product (GDP) growth of between 8% and 9% in the third quarter of this year (3Q22), partly owing to the low base of 3Q21 where GDP contracted by 4.5% year-on-year (y-o-y). This would be similar to the GDP growth recorded in the previous quarter (2Q22). Speaking at a media briefing on Malaysia’s quarterly economy tracker, he said that for 3Q22, buying sentiment is quite positive up till now.  

In 2Q22, Malaysia recorded an extraordinary GDP growth of 8.9% y-o-y, beating market expectations and bringing GDP growth in the first half of the year (1H22) to 6.9% y-o-y. However GDP growth is expected to ease to the range of 4% to 5% y-o-y going into 4Q22 on account of slowing global growth prospects. With that, SERC has revised its full-year GDP growth projection for Malaysia to 6.5% from an initial 5.2%. 

For 2023, the GDP is forecast to grow at a more moderate pace of 4.1% owing to weakening global growth, the normalisation of domestic demand and also the high-base effect. Domestic demand will be impacted by higher inflation and cost of living, as well as interest rates, while private investment remains cautious due to increased costs, shortage of workers, external uncertainties and domestic political uncertainty. 

On the global economic outlook, he foresees an increasing risk of a slowdown next year pointing out that the International Monetary Fund had said a global recession in 2023 cannot be ruled out and the World Bank said global rate hikes could trigger a recession in 2023. In the United States, over two-thirds of economists believe a recession is likely to hit in 2023. 

Commenting on inflation, it is too early to say if price pressures have peaked owing to the mixed inflation data by major advanced economies. While headline inflation in the United States indicated a reversal of the surge, core inflation accelerated. In Europe, inflation surged higher. However he agrees with Bank Negara’s projection of inflation peaking in 3Q22. 

Interest rates are expected to remain at 2.5% this year, following a cumulative 75-basis-point (bps) hike throughout the year so far. But the central bank is expected to raise the interest rate by another 50 bps in 1H23 to 3%. However he believes that Bank Negara will take into consideration the impact of its gradual and measured pace of interest rate hiking trajectory due to growth risks while anchoring inflation under its radar. 

The pressure on the Ringgit would remain in the near term as there was no sign of US interest rates peaking. Once interest rate in the United States stabilises, pressure on emerging markets’ currencies will reduce, including the Ringgit. Commenting on Budget 2023, he hopes it will contain more development and structural reforms rather than be election-centric. As the economy has moved out of contraction, it no longer requires extraordinary massive deficit fiscal spending packages as during the Covid-19 pandemic. SERC estimates a deficit budget of between 4.5% and 5.5% of GDP in 2023 compared to an estimated average deficit of 6.2% in 2020 to 2022. He also recommended the reintroduction of the goods and services tax (GST) starting with a 4% rate. 

Maybank IB issues structured warrants over Hong Kong stocks – First ever structured warrants over NetEase Inc on Bursa Malaysia 

According to Azzahir Azhar, Head of Investment Management at Maybank Investment Bank, Maybank IB has begun issuing structured warrants over companies listed on the Hong Kong Stock Exchange (HKEX). The maiden launch of 16 structured warrants comprises an even combination of call warrants and put warrants over 8 different HKEX-listed stocks. This includes the first ever structured warrants on Bursa Malaysia over NetEase Inc, China’s second largest online game company by revenue. Other global brands in the maiden launch today are from the automotive and e-commerce sectors, such as Alibaba Group Holding Ltd, JD.com Inc, Geely Automobile Holdings Ltd, Tencent Holdings Ltd, Ganfeng Lithium Co Ltd, Meituan and BYD Company Ltd. 

As these warrants are listed on Bursa Malaysia and settled in Ringgit, investors will be able to gain exposure to Hong Kong-listed companies without the need for a foreign trading account or currency conversion. The warrants enable investors to exercise their investment strategies on the underlying stocks with a much lower capital outlay while taking advantage of the leverage effect. 

As a leading equity-linked structured products issuer in Malaysia, Maybank Investment Bank continues to innovate to satisfy market demand for more sophisticated products to aid in portfolio diversification. This launch of warrants over HKEX-listed stocks caters to investors seeking diversified investment instruments and geographical exposure while having the convenience of settling their trades in the local currency. Call warrants enable investors to profit from price appreciation of the underlying shares. Put warrants are the opposite whereby they are used to hedge against negative price performance of the underlying shares. The advantage of this call-put issuance is that investors will be able to express their views in either direction. 

Investors who are new to structured warrants are advised to understand and evaluate the risks involved and seek professional advice in order to make informed investment decisions. In conjunction with this launch, Maybank IB will be conducting a webinar on structured warrants investing on Wednesday, 21 September 2022 at 8:00pm. To learn more, visit www.warrants.maybank2u.com.my and join Maybank IB’s Telegram channel, “Trade With Maybank”. 

Eye On The Markets 

This week, on Friday (23Sept), the Ringgit opened at 4.5690 against the USD from 4.5380 on Monday (19Sept). Meanwhile, the Ringgit was 3.2223 to the Sing Dollar on Friday (23Sept). On Monday (19Sept), the FBM KLCI opened at 1459.51. As at Friday (23Sept) 10:00am, the FBM KLCI is down 29.81 points for the week at 1443.11. Over in US, the overnight Dow Jones Industrial Average closed down 107.10 points (-0.35%) to 30,076.68 whilst the NASDAQ shed 153.39 points (-1.37%) to 11,066.80. 

Healthier outlook seen for construction industry – Kenanga Research

INVE$T | Market Sentiments

09 September 2022

Download Inve$t #123

According to Kenanga Research, the Malaysian construction industry is poised for improved earnings in the second half of 2022, given the gradual return of foreign workers and the recent easing in base metal prices. It is reiterating an “overweight” call on the sector, believing that the worst is over. Since the end of June, certain key building material prices, such as steel and aluminium, have come off substantially due to the intermittent lockdowns in China. So are diesel and bitumen on the back of weaker oil prices. Meanwhile, most new contracts being negotiated would have priced in the current market prices (which are higher) and have an element of price variation built in, to protect the contractor’s margins in the event of huge swing in material prices. Overall margins should gradually improve, as the low-margin old jobs tail off and the new projects adjusted for higher input costs start to contribute.  

Construction counters under the research house’s coverage saw marginal deterioration in the second quarter of this year. Gamuda Bhd was the only company that beat stronger-than-expected property and construction margins. While on the disappointing end is WCT Holdings Bhd, which saw a weak contribution from its property unit as it struggled to cover overhead costs. Kerjaya Prospek Group Bhd was affected by slower billings on labour shortages.  

The margins realised by most contractors in the first half of 2022 were still below the pre-Covid levels, due to the soaring costs of building materials, particularly steel and labour shortages that hampered work progress. Gamuda is the exception, which saw construction margins stronger than pre-Covid levels due to cost savings recognition from its MRT2 project, which is coming to an end. Amid a slow job market, year-to-date, IJM Corp Bhd and WCT have yet to secure any new work packages. Similarly, Kimlun Corp Bhd and Sunway Construction Group Bhd are trailing their replenishment targets. Consequently, orderbook levels of most players are depleting. However, it foresees better job replenishment prospects with the imminent rollout of MRT3 and Pan Borneo Highway (Phase 2). As multinational companies diversify their manufacturing bases geographically (away from China) to de-risk, there are opportunities in the construction of new semiconductor plants and data centres locally. 

Asean PMI data shows business improvement – S&P Global 

According to S&P Global Market Intelligence economist Maryam Baluch, the Purchasing Managers’ Index (PMI) data for August 2022 signalled an eleventh monthly improvement in business conditions across the Asean manufacturing sector. In its Global Asean Manufacturing PMI report, growth was supported by quicker upturns in production levels and new factory orders. The headline PMI posted at 52.3 in August, up from 52.2 in July, marking eleven months of expansion, with the latest reading indicating a solid improvement in the health of the Asean manufacturing sector. 

For Malaysia, while the headline PMI figure was posted above the neutral 50 threshold for the fifth month running at Malaysian manufacturers (50.3), the pace of increase softened from July and signalled only a marginal improvement in operating conditions. In Singapore, six of the seven constituents recorded improvements in operating conditions in August with the country registering the quickest upturn, and for the ninth month running. That said, the rate of increase (56.8) softened from the survey high observed in July to the weakest since March. 

Mild growth was noted at Indonesian manufacturers, thereby extending the current run of increase to 11 months. At 51.7, the rate of increase was the quickest in four months. Similarly, at 51.2, the Philippines also reported an improvement in business conditions. Looking ahead 12 months, manufacturing companies remain hopeful of expansion in output. Sentiment improved for the third month running with the degree of confidence the highest since November 2016. 

The August data signalled yet another modest expansion across the Asean manufacturing sector. Data suggested that higher production volumes and intakes of new orders resulted in firms raising employment and inventories. Supply-side and inflationary pressures eased during the latest survey period. Lead times lengthened at the slowest pace in 23 months, while input price inflation eased to the weakest in six months. Firms will hope these trends continue. Overall, client appetite across Asean nations remained strong. However, interest rate hikes will likely challenge demand in the coming months. 

Eye On The Markets 

This week, on Friday (9Sept), the Ringgit opened at 4.4975 against the USD from 4.4880 on Monday (5Sept). Meanwhile, the Ringgit was 3.2068 to the Sing Dollar on Friday (9Sept). On Monday (5Sept), the FBM KLCI opened at 1492.03. As at Friday (9Sept) 10:00am, the FBM KLCI is up 5.78 points for the week at 1497.81. Over in US, the overnight Dow Jones Industrial Average closed up 193.24 points (+0.61%) to 31,774.52 whilst the NASDAQ up 70.23 (+0.60%) to 11,862.13. 

Foreign capital inflows to bolster market – Rakuten

INVE$T | Market Sentiments

2 September 2022

Download Inve$t #122

According to Kenny Yee, head of research at Rakuten Trade, the benchmark FBM KLCI is expected to be at the 1,600 to 1,650 level by year’s end due to increased foreign capital inflow and improved corporate results. The growth momentum is anticipated to continue into the following year, with the barometer index likely to be more stable than it was this year. The net inflow of foreign funds has already reached RM8bil following the introduction of Rakuten Trade’s currency facility here. It is a plus point since volatility is still low in Malaysia compared to the region. Next year will be even smoother with much better corporate earnings. For this year, even though there was still uncertainty in the market, coupled with the implementation of the prosperity tax (Cukai Makmur), the corporates had managed to record good earnings growth. Saying to watch out for next year as it’s going to be much better as the inflationary pressure is still not as bad as in the developed countries. Over the short term, the Ringgit is still on the weak side. However, it is only weakening against the US dollar, whereas against the region’s currencies it is strengthening. However once the US Federal Reserve has eased its quantitative tightening, then the Ringgit may rebound. 

Tech stocks are currently “sexy” but his personal preference is banking stocks, real estate investment trusts and telco counters. The healthcare sector, especially rubber glove companies, still has a lot of uncertainty adding that fundamentally, things are still not that positive.  

Meanwhile, the brokerage has launched its enhanced foreign market service that includes the benefits of a FX facility. Investors can now convert funds between the ringgit and the US dollar via its iSpeed.my app and web platform. Conversions are made in real-time, at competitive rates and with no additional FX charges imposed on inter-currency trades. With the rollout, investors can now trade in either the ringgit or the US dollar at low brokerage rates of RM7 to RM100 or US$1.88 to US$25, respectively.  

According to Rakuten CEO Kazumasa Mise, almost 25,000 US trading accounts have been activated through Rakuten Trade since the service was first introduced in January and it has also served as a catalyst for new investors to test trading strategies on Bursa Malaysia before diversifying onto the US markets. To date, more than 85% of Rakuten Trade’s clients trade first on Bursa Malaysia before going into US markets. The brokerage continues to record strong and steady trading growth on the New York Stock Exchange and Nasdaq. 

Foreign fund inflows continued for sixth consecutive week – MIDF Research 

According to MIDF Research, Bursa Malaysia continued to see foreign fund inflows for the sixth consecutive week for the week ended Aug 26, although at a much more moderated pace, with an inflow of RM355.1 million compared with the net inflow of RM615.5 million in the previous week. Malaysia was among five Asian exchanges which were in the positive region last week. Strong inflows were seen in South Korea (US$463.7 million), India (US$405.8 million), Thailand (US$259.5 million) and Indonesia (US$119.5 million).  

In its weekly Fund Flow Report, the research house that said foreigners were net buyers on every trading day last week except on Wednesday, where they disposed of RM90.5 million worth of equities, while local institutions remain as net sellers. Foreign investors were net buyers on Monday (RM56.2 million) and Tuesday (RM14.2 million), and on Thursday (RM193 million) and Friday (RM71.7 million), respectively. However, local institutions remained net sellers for the seventh consecutive week at RM286.2 million. They have been net sellers for every trading day since Aug 3 before briefly turning into net buyers on Wednesday (Aug 24) at RM24.3 million. They were net sellers on Monday (RM92.4 million), Tuesday (RM40.4 million), Thursday (RM114.3 million) and Friday (RM63.5 million). Meanwhile, local retailers maintained their net buying spree for the third consecutive week at RM41.7 million. They bought RM128.6 million net from Monday to Wednesday before net selling RM87 million over the next two days.  

To date, international funds have been net buyers in Bursa Malaysia for 23 out of the 34 weeks of 2022, with a total net inflow of RM7.97 billion. Local retailers have been net buyers for 22 out of 34 weeks of 2022 at RM1.8 billion year-to-date. On the other hand, local institutions were net sellers for 27 out of 34 weeks, with a total net outflow of RM9.76 billion. In terms of participation, there has been a decline in average daily trade value (ADTV) across the board, led by local institutions (-8.9 per cent), retailers (-2.97 per cent) and foreign investors (0.9 per cent). 

Eye On The Markets 

This week, on Friday (2Sept), the Ringgit opened at 4.4845 against the USD from 4.4740 on Monday (29Aug). Meanwhile, the Ringgit was 3.2001 to the Sing Dollar on Friday (2Sept). On Monday (29Aug), the FBM KLCI opened at 1486.52. As at Friday (2Sept) 10:00am, the FBM KLCI is up 3.82 points for the week at 1490.34. Over in US, the overnight Dow Jones Industrial Average closed up 145.99 points (+0.46%) to 31,656.42 whilst the NASDAQ shed 31.08 (-0.26%) to 11,785.13.