Bursa Malaysia enhances reporting framework

Market Sentiments | 20 Sept 2022

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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. 

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