Inve$t | Market Sentiments | 24 February 2023
According to Real Estate and Housing Developers’ Association Malaysia (REHDA) president Datuk NK Tong, inflation and a higher cost of doing business are likely to push property prices up by double-digit this year. On average it will be a double-digit increase in property prices but in the past six months the anticipated price increase has not materialised. This is also reflected in the moderation of construction materials’ prices.
Speaking at the Rehda Property Industry Survey 2H2022 and Market Outlook for 2023 media briefing, he said that globally we have been in 40 years of inflationary environment and that it will remain inflationary for a while. That is why there is no choice but to consider price increases. This is also to protect the homeowners whom developers are selling these units to. This is to make sure the developers have enough revenue to complete the project.
According to Rehda’s survey, three out of four developers surveyed reported an average increase of 13% in the overall cost of doing business against an average increase of 17% in 1H2022. Meanwhile, 94% of respondents said they are affected by the current economic scenario, and have taken various cost-cutting measures including freezing recruitment, reducing salary, rescheduling the launch of planned projects and reducing the scale of launches.
“Similar to 1H2022, respondents reported that the three main cost components affecting cash flow were material and labour cost, compliance cost (including but not limited to policies, contributions, planning requirements and so forth) and land cost. However, Bank Negara Malaysia is doing a good job in managing inflationary pressure in the country by keeping the overnight policy rate (OPR) relatively stable.
Malaysian interest hikes have been much more moderate. With the economy opening up and the new government being very focused on doing right by the Rakyat, at some point people will have to make a commitment into certain assets that protect themselves against inflation in the long run, one of which will be real estate. An investment in real estate would remain a good hedge against inflation as properties tend to hold better value should inflation remain sticky.
Although the rising OPR may be seen as a headwind, people will eventually recognise that real estate helps protect the value of their assets and to keep up with inflation.
Malaysian businesses remain optimistic on business condition in 1Q 2023 – DOSM
According to the Department of Statistics Malaysia’s (DoSM) latest business tendency statistics report, Malaysian businesses remain optimistic about the business condition in 1Q 2023 with the confidence indicator improving to 3.6 per cent from 3.2 per cent in the previous quarter (4Q 2022). Among the sectors surveyed, services, wholesale and retail trade and industry sectors stayed optimistic about their future business condition, but the construction sector remained pessimistic with confidence indicator of -18.5 per cent for 1Q 2023 against -29.2 per cent in 4Q 2022.
The confidence indicator for services sector improved to 11.4 per cent in 1Q 2023 from 9.2 per cent in the previous quarter, while for wholesale and retail trade sector, it grew to four per cent from 1.9 per cent in the last quarter. The industry sector also expected favourable business condition in 1Q 2023 with the confidence indicator staying in the positive territory at 1.1 per cent compared with 3.7 per cent in the previous quarter. Moving forward, business perception for the first half of 2023 improved with a net balance of 12.1 per cent against 5.9 per cent for the period of October 2022-March 2023.
Foreign funds back as net buyers on Bursa with RM195.3m last week – MIDF
According to MIDF Research, foreign funds have returned as net buyers of equities on Bursa Malaysia, with an amount of RM195.3 million last week. Prior to that, foreign investors were net sellers for five consecutive weeks with outflows totalling to RM860.9 million. In its weekly fund flow, the research house said that every trading day last week was a net buying day by foreigners except Friday, which saw an outflow of RM25.9 million. Year-to-date, foreign investors have net sold RM593.3 million.
The highest amount of net inflow came on Wednesday to the tune of RM103.2 million while Thursday was the second highest as it amounted to RM74.4 million in terms of net buying. The sectors that saw net foreign inflows last week were healthcare at RM56.5 million, construction at RM41.6 million and financial services at RM40.2 million. Meanwhile, sectors that saw net foreign outflows were plantation at RM18.8 million, utilities at RM12.4 million and property at RM6.4 million.
Local institutions have net sold RM140.2 million worth of Malaysian equities after five consecutive weeks of net buying. Only Tuesday recorded a net inflow of RM16.2 million, while the rest of the week recorded outflows. The heaviest outflow was seen on Wednesday at RM53.2 million. Year-to-date, local institutions have net bought RM819.8 million.
Local retailers were net sellers last week to the tune of RM55.1 million, which is a sharp reversal from the RM263.8 million net bought during the week ended Feb 10. Only Monday and Friday saw net inflows of RM7.0 million and RM40.1 million respectively. Year-to-date, local retailers were net sellers at RM226.6 million. In terms of participation, there was a decrease in average daily trading volume among local retailers (-14.9%), local institutions (-16.0%) and foreign investors (-12.3%).
Eye On The Markets
This week, on Friday (24Feb), the Ringgit opened at 4.4340 against the USD from 4.4250 on Monday (20Feb). Meanwhile, the Ringgit was 3.3039 to the Sing Dollar on Friday (24Feb). On Monday (20Feb), the FBM KLCI opened at 1474.25. As at Friday (24Feb) 10:00am, the FBM KLCI is down 19.25 points for the week at 1455.00. Over in US, the overnight Dow Jones Industrial Average closed up 108.82 points (+0.33%) to 33,153.91 whilst the NASDAQ gained 83.33 points (+0.72%) to 11,950.40.