Malaysia’s foreign portfolio inflow hit six-month high in Feb – UOB

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According to UOB Global Economics and Market Research analysts Julia Goh and Loke Siew Ting, Malaysia’s foreign portfolio inflow, comprising the combined value of net foreign purchases in the country’s debt and equity markets, rose to its highest in six months at RM5.9 billion in February from RM3.8 billion the month prior. Both Malaysian debt and equity markets saw net foreign purchases of RM3.1 billion and RM2.8 billion respectively in February from RM3.5 billion and RM0.3 billion in January. Year to date, foreign portfolio inflows amounted to RM9.7 billion in the first two months of 2022, slightly higher than the RM9.2 billion inflows recorded in Jan-Feb 2021. It was driven by resilient demand for the debt securities (at +RM6.6 billion vs +RM10.9 billion in Jan-Feb 2021) and a return of buying interest in equities (at +RM3.1 billion vs -RM1.7 billion in Jan-Feb 2021). February’s foreign debt inflows were driven by all sub-debt instruments, led by government investment issues (GII). Non-resident holdings of Malaysian government bonds (MGS), jumped for the third straight month by RM2.2 billion to a new all-time high of RM240.4 billion as at end-Feb (end-Jan: +RM4.3 billion to RM238.2 billion). It is equivalent to 25.3% of total government bonds outstanding (end-Jan: 25.5%). Foreign holdings of MGS alone also marked a new all-time high of RM194.6 billion even though just RM500 million worth of MGS were snapped up in February. This brought overseas investors’ shareholding of MGS to 39.3% of total MGS outstanding (end-Jan: 39.6%). Similar to GII, foreign investors raised their holdings by RM1.7 billion to a new record high of RM45.8 billion (end-Jan: -RM0.3 billion to RM44.2 billion), which made up 10.5% of total GII outstanding (end-Jan: 10.4%). Risk-off sentiment and sky-rocketing commodity prices sparked by the Russia-Ukraine conflict and sanctions are initiating some asset reallocation into commodity producing countries, including Malaysia. However expectations of narrower interest rate differentials, domestic policy uncertainty, constrained fiscal policy space, and increasing downside risks to domestic growth prospects are wildcards for Malaysia’s foreign portfolio flows and currency outlook, should geopolitical risk escalate further. The US Federal Reserve is anticipated to start its rate hike cycle at next week’s Federal Open Market Committee (FOMC) meeting (March 15-16), while most regional central banks including Bank Negara Malaysia (BNM) are projected to begin their monetary normalisation at a more measured pace and later than the US Federal Reserve. This will likely lead to narrower interest rate differential between regional central banks including Malaysia and the US Federal Reserve. Key events to watch out for in March include the ongoing developments of the Russia-Ukraine conflict, March’s FOMC meeting outcome, Johor state election results, as well as BNM’s publication of its Annual Report 2021, Economic and Monetary Review 2021, and Financial Stability Review for 2HFY21 with its latest economic forecasts for gross domestic product and inflation. 

Malaysia attracted record approved investment of RM306.5b in 2021, driven by E&E boom 

According to Senior Minister and International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali, Malaysia attracted a record amount of approved investments worth RM306.5 billion in the manufacturing, services and primary sectors in 2021, driven by higher foreign direct investment (FDI) and increased projects in the manufacturing and the electrical and electronics (E&E) sectors. Malaysia’s FDI of RM208.6 billion accounted for 68.1% of total approved investments, with the remaining 31.9% coming from domestic direct investment (DDI) at RM97.9 billion. Year-on-year, Malaysia’s FDI was significantly higher by 224.9% from RM64.2 billion in 2020, however, DDI declined marginally by 5.13% from RM103.2 billion the year before. The Netherlands (RM78 billion), Singapore (RM47.3 billion), the People’s Republic of China (RM31.3 billion), Austria (RM18.9 billion) and Japan (RM9.9 billion) accounted for 88.9% of total FDI approved in the manufacturing, services and primary sectors. Pulau Pinang (RM83.5 billion) recorded the highest investments approved last year, followed by Kedah (RM68.3 billion), Kuala Lumpur (RM37.7 billion), Selangor (RM28.8 billion) and Sarawak (RM25.7 billion). These five states contributed 79.6% of total approved investments in 2021. The record-breaking approved investments for the manufacturing, services and primary sectors were a 83.1% jump from 2020’s figure. Malaysia’s RM97.9 billion DDI in 2021 is a signal that local industry players had grown in terms of capabilities and business capacity to be competitive on the global stage. MIDA has already secured 352 projects in the pipeline with proposed investments of RM39.2 billion for the manufacturing and services sectors. These projects will create more than 19,000 new job opportunities for the rakyat. Meanwhile, the manufacturing sector led total investments approved in 2021 by recording RM195.1 billion, followed by the services sector and the primary sector at RM94.1 billion and RM17.3 billion respectively. The manufacturing sector reported a leap in approved investments by 113.7% from RM91.3 billion in 2020, while the services and primary sectors saw improvements of 34.4% and 183.6% from RM70 billion and RM6.1 billion respectively. Notably, the E&E industry contributed the bulk of the FDI as well as total approved investments within the manufacturing sector by recording RM148 billion for 94 approved projects.  Chief among the E&E industry’s RM148 billion in total approved investments included RM42.2 billion from Risen Solar for the design development and manufacturing of solar modules and solar cells, followed by Intel Electronics’ RM30 billion to produce wafer fabrication and stacked dies in Pulau Pinang, AT&S’ RM8.5 billion to establish design development and manufacturing of integrated circuit substrates in the Kulim Hi-Tech Park, and Infineon Technologies’ RM3.25 billion in Melaka. MIDA had secured 75 capital-intensive projects valued at RM100 million and above in 2021, which could spur the growth of new advanced manufacturing technologies and produce a highly skilled workforce. Meanwhile, the services sector’s 34.4% improvement in 2021 was driven by sub-sectors such as real estate (RM28.8 billion), global establishments (RM19.7 billion), financial services (RM12 billion), utilities (RM9.6 billion), and information and communications (RM8.2 billion). The bulk of the primary sector’s approved investments were led by the mining sub-sector’s RM17.1 billion or 98.7% amid higher crude oil and natural gas prices, while the plantation and commodities and agriculture sub-sectors brought in RM211.4 million and RM20.5 million respectively. 

Bursa: Malaysia sees increasing number of new women investors 

According to Bursa Malaysia Bhd chief executive officer Datuk Muhamad Umar Swift, Malaysia continued to see an increasing number of new women investors in the stock market, representing 36% of new Central Depository System (CDS) accounts opened year-to-date. In 2020, 32% of the CDS accounts were held by women, and the number rose to 34% last year. Female investors made up 30% of total trade value in 2021, and women’s total trade volume surged 194.1% between 2018 and 2021. Speaking at the annual Ring the Bell for #EqualityforEquity Campaign in conjunction with the International Women’s Day 2022 celebration on Tuesday (March 8), he said that women have become more actively involved in investing activities. Various studies conducted showed that portfolios managed by women tend to outperform those overseen by their male counterparts. In 2021, a study by Fidelity Investments showed women investors achieved positive returns and surpassed men by 0.4% on average in terms of annual performance between January and December. However there is still room to grow and much needs to be done to further encourage the participation of women investors. Hence, Bursa Malaysia launched the #MyFirstTrade campaign that runs from March 8 until March 31 exclusively for women investors who have a positive story to share. During the period, Bursa and participating brokers will wave respective portions of the opening fee for the first 4,000 CDS accounts opened by women. Bursa provides a fair and open platform where everyone, men or women, can participate in the capital market and corporate space. Bursa has implemented rules for more women representation on the board of directors and will continue with efforts to reduce the gender equality gap in the workplace. 

ICMR launches inaugural book on sustainable finance 

The Institute for Capital Market Research Malaysia (ICMR) launched its inaugural edited book, “Financing Sustainability: Critical Issues with East Asian Experiences.” Led by chief editor, Professor Dato’ Dr. Rajah Rasiah, the book is a compilation of thought pieces contributed by ICMR analysts and regional experts. Together, they offer valuable insights to address the financing of sustainable development to meet the UN’s Sustainable Development Goals (SDGs). In dissecting the experience of a high-income economy and that of some middle and low-income economies in East and Southeast Asia, the book breaks new ground by linking evidence with strategies and mechanisms in countries at different levels of development. The experiences of more developed economies are presented as learning opportunities for less developed ones. The book offers a refreshingly novel account of the different funding alternatives that are now pursued by various socio-economic agents to address sustainability issues worldwide. This goes beyond environmental issues alone to cover financial inclusion, sustainable trade, Islamic finance, as well as the role of corporate governance and pension institutions. Drawing on a careful review of the extant literature and the crafting of policy-relevant strategies, the book is therefore intended to contribute significantly to the literature on sustainable development. It will serve as an essential guide for policy makers and market actors in their quest to promote the financing of sustainability across the globe. The book is published by the University of Malaya Press and can be purchased at www.umpress.com.my. At the conclusion of the event, ICMR and Sunway University, represented by the Jeffrey Sachs Center for Sustainable Development, inked a Memorandum of Understanding to promote greater knowledge sharing on sustainable finance with the hope of working closer together on positive developments in this area. 

Eye On The Markets 

This week, on Friday (11Mar), the Ringgit opened at 4.1890 against the USD from 4.1795 on Monday (7Mar). Meanwhile, the Ringgit was 3.0814 to the Sing Dollar on Friday (11Mar). On Monday (7Mar), the FBM KLCI opened at 1606.27. As at Friday (11Mar) 10:00am, the FBM KLCI is down 44.03 points for the week at 1562.24. Over in US, the overnight Dow Jones Industrial Average closed down 112.18 points (-0.34%) to 33,174.07 whilst the NASDAQ shed 125.58 points (-0.95%) to 13,129.96.  

EPF allocates RM1bil for investment opportunities in pre-IPO space

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According to The Employees Provident Fund (EPF) CEO, Datuk Seri Amir Hamzah Azizan, the fund aims to venture into the private equity pre-IPO space in 2022. There is not enough stimulus going into Bursa Malaysia as there seems to be an “investment trap” – a funding gap between the time a company moves from the venture capital market and enters the pre-initial public offering (IPO) stage. This gap presents investment opportunities. Towards the later stage of the pre-IPO, EPF can play a role as it can manage the risk element and get fairly good returns for the members and in that process, it can also help generate the engine that feeds into Bursa. He was speaking at the fund’s FY2021 results media briefing. For this endeavour, EPF will be working with specific funds to promote and look into opportunities in that particular stage. The move will also stem the shifting of companies to outside Malaysian waters. Nonetheless EPF needs to deliver its core mandate and in that mandate, it will not take abnormal risks and the investments have to fit its risk investments tolerance levels. For 2021, EPF has declared a 6.10% dividend for conventional savings which translates into a total payout of RM50.45 billion and syariah savings receive a 5.65% dividend, amounting to RM6.27 billion. The latest dividends surpass the 5.2% and 4.9% payouts for conventional and syariah savings reported for 2020, as well as the 5.45% and 5.0% for the pre-pandemic year of 2019, respectively. The strong results were attributed to the continued market recovery in 2021, particularly in the developed markets, which contributed to its listed equity portfolios, providing opportunities for it to realise profits. Equities, particularly foreign-listed equities, which recorded a return on investment (ROI) of 10.44%, continued to be the driver of returns. For 2022, the fund will be increasing its investments in various domestic asset classes. The reopening of economies and businesses, as well as various initiatives under the National Economic Recovery Plan, would provide fertile ground for the EPF to increase its investment efficiencies and leverage on the opportunities that a recovery brings. Due to the complications from the Covid-19 pandemic, the fund received a mandate to allow early withdrawals for its members via i-Lestari, i-Sinar and i-Citra that collectively saw RM100.9 billion withdrawn from EPF between April 2020 and February 2022. EPF had to manage liquidity due to the withdrawals and the best way to manage this was by repatriating its investments in the international market as EPF has a diverse portfolio and won’t rattle the market. If there were no withdrawal schemes, there’s a likelihood the fund could have stayed a bit longer in the international market and had the potential to ride the market as it crested. Now that the schemes have ended the fund will continue to go back and invest both domestically and internationally, continue to design a portfolio that will give risk reward returns that its normal Strategic Asset Allocation will give. On projections for 2022, he said it is too early to tell, but assured contributors that the fund does not have any direct exposure to any interest in Ukraine or Russia, hence there is no material impact from the conflict. When the Ukraine-Russia situation occurred, the market gyrated a little bit and it has since recovered to where it was, save for oil prices. The key is to understand what the long-term ramification of that is and make sure we have the agility in our portfolio to address that. EPF can make money whether the market moves up or down, depending on its volatility play, as it has a long-term investment horizon. For example, when the market goes down, it can take the opportunity to buy good long-term assets at the favourable prevailing price. By asset class, EPF’s fixed income instruments account for 45% of investments, followed by equities at 44%, real estate & infrastructure is at 6% and money market instruments make up the remaining 5%. 

OPR kept unchanged at record low of 1.75% – BNM 

According to Bank Negara Malaysia (BNM), its Monetary Policy Committee (MPC) decided to maintain the overnight policy rate (OPR) at 1.75% as it evaluated various factors including the Russia-Ukraine conflict, which has emerged as a key risk to global economic growth, trade prospects, commodity prices and financial markets. It is also mindful of lingering concerns over the Covid-19 pandemic. For Malaysia, risks to the country’s economic growth outlook remain tilted to the downside due to external and domestic factors while Malaysia’s inflation in 2022 is projected to remain moderate. The MPC considers the current stance of monetary policy to be appropriate and accommodative. Fiscal and financial measures will continue to provide support to economic activity. Amid the prevailing uncertainties, the stance of monetary policy will continue to be determined by new data and their implications on the overall outlook for domestic inflation and growth. The OPR has been maintained at 1.75% since July 7, 2020, when BNM cut the rate from 2%. While the global economy continues to recover and the recent moderation in economic activity due to the Omicron variant-driven Covid-19 resurgence, the overall recovery trajectory remains on track. Inflation in many economies remain elevated, due to both demand and supply factors. Going forward, more countries will transition to endemic management of Covid-19, hence, supporting global growth prospects. The unfolding developments surrounding the military conflict in Ukraine, however, have emerged as a key risk to global growth and trade prospects, commodity prices and financial market conditions. The global growth outlook will also continue to be affected by developments surrounding Covid-19, risks of prolonged global supply disruptions, and heightened financial market volatility amid adjustments in monetary policy in major economies. Despite the challenging environment, the Malaysian economy expanded by 3.1% in 2021 from a year earlier. Looking ahead, Malaysia’s economic growth recovery will strengthen in 2022, driven by the expansion in global demand and higher private sector expenditure, amid improvements in the labour market and continued targeted policy support. The expected reopening of international borders would also provide further support to economic recovery. The economic impact from the recent increase in Covid-19 cases due to the Omicron variant is expected to be considerably less severe than previous waves in the absence of stringent restrictions. Risks to Malaysia’s economic growth outlook remain tilted to the downside due to external and domestic factors. These include a weaker-than-expected global growth, ongoing geopolitical conflicts, worsening supply chain disruptions, and developments surrounding Covid-19. Malaysia’s 2022 headline inflation, as measured by the consumer price index, is projected to remain moderate as the base effect from fuel inflation continues to dissipate. The country’s core inflation is expected to normalise to around its long-term average as economic activity continues to pick up amid the environment of high input costs. Nevertheless, core inflation is expected to be modest, with the upside risk partly contained by the continued slack in the economy and labour market. The inflation outlook continues to be subject to global commodity price developments amid risks from prolonged supply-related disruptions. 

Malaysia’s GDP to grow by 6pc in 2022 – MIDF Research 

According to MIDF Research, Malaysia’s gross domestic product (GDP) is expected to grow stronger at six per cent in 2022 from 3.1 per cent for 2021, mainly driven by further reopening of the economy such as lifting the ban on international travels which will support a better growth outlook this year. The research firm said that with high vaccination rate, there is less need for the government to tighten COVD-19 restrictions given the ability of the healthcare system to withstand the recent resurgence in Covid-19 infections. Therefore the momentum of growth will continue to strengthen this year, backed by growing domestic spending, improving labour market and increased business activities. In its Monthly Economic Review, it said sustained growth in external demand will also support Malaysia’s trade and production activities this year. Near-term growth outlook remains positive as growth momentum seen improving with the leading index (LI) increasing to 2.1 per cent year-on-year (y-o-y) in December 2021 compared to 1.6 per cent in November 2021, buoyed by the increment in the number of housing units approved, indicating increased business activities going forward. Although the Ukraine-Russia conflict will not have a direct significant impact to Malaysia’s trade, prolonged disruption in the global supply chain, rising commodity prices and higher import costs will be among downside risks to growth outlook. Meanwhile, Malaysia’s total trade in January 2022 stood at RM203 billion or 24.8 per cent y-o-y higher than January 2021, driven by sustained growth in both exports and imports. Exports rose at 23.5 per cent y-o-y in January 2022, sustaining double-digit growth for the sixth straight month. The pace of exports growth was, however, more moderate than December 2021 (29.2 per cent y-o-y), reflecting the moderation in manufacturing exports and similar trends observed in regional exports. Imports growth accelerated to 26.4 per cent y-o-y compared to December 2021 at 23.6 per cent y-o-y and maintained two-digit growth since February 2021, mainly due to the low base effect as imports previously weakened in January 2021 because of movement control order 2.0. On Malaysia’s headline inflation rate, January 2022 headline inflation recorded a four-month low, where it eased to 2.3 per cent y-o-y compared to 3.2 per cent y-o-y in December 2021, dragged by lower price growth of non-food. Core inflation remained on upward momentum, rose by 1.6 per cent y-o-y, the fastest pace in two-years. The continuous pick-up in core consumer price index indicates the revival effects of growing domestic demand on general prices amid moderate recovery in labour market and economic reopening. On sequential basis, overall inflation data rose at marginal pace. The softening pace seen in headline inflation is expected following dissipating low-base effects especially from transport inflation. 

Eye On The Markets 

This week, on Friday (4Mar), the Ringgit opened at 4.1900 against the USD from 4.2010 on Monday (28Feb). Meanwhile, the Ringgit was 3.0808 to the Sing Dollar on Friday (4Mar). On Monday (28Feb), the FBM KLCI opened at 1595.74. As at Friday (4Mar) 10:00am, the FBM KLCI is up 8.19 points for the week at 1603.93. Over in US, the overnight Dow Jones Industrial Average closed down 96.69 points (-0.29%) to 33,794.66 whilst the NASDAQ shed 214.07 points (-1.56%) to 13,537.94.  

Bursa Malaysia Derivatives completes first physical delivery of East Malaysia Crude Palm Oil Futures in Sabah

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According to Bursa Malaysia Derivatives chief executive officer Samuel Ho Hock Guan, Bursa Malaysia Derivatives Bhd has completed the first physical delivery of its East Malaysia Crude Palm Oil Futures Contract (Fepo) in Sabah on February 17, 2022. The delivery saw a total of eight contracts, representing 200 tonnes of crude palm oil (CPO) transacted between the seller, Green Edible Oil Sdn Bhd, and the buyer, Kunak Refinery Sdn Bhd at one of the approved Port Tank Installations in East Malaysia, namely in Sandakan, Sabah. The Port Tank Installation is operated by Sawit Bulkers Sdn Bhd, a wholly-owned subsidiary of Sawit Kinabalu Group, which is the premier investment arm of the Sabah state government in the oil palm industry. The successful and orderly completion of the first physical delivery for Fepo contracts demonstrates the demand from Sabah producers to sell their CPO through an alternative platform with greater price transparency. The Fepo contract benefits Sabah refiners and buyers by allowing them to source CPO at competitive pricing. It also enables them to manage price risk and hedge against unfavourable price movement in the physical market, especially during the low-supply season. Meanwhile, Sawit Kinabalu group managing director Datuk Bacho Jansie said the availability of Bursa Malaysia Derivatives’ Fepo contract provides East Malaysia market participants with an additional trading opportunity as well as an improved price discovery mechanism and more physical delivery options in Sabah and Sarawak. He added that as one of the designated delivery ports in Sabah, he hopes to attract more market participants to lease out their available tanks and further increase the visibility of the East Malaysia palm oil market. The Fepo contract, which went live on October 4, 2021, provides East Malaysia CPO market participants with a new avenue to engage in physical deliveries and hedge their positions in the physical CPO market. It also strengthens Bursa Malaysia Derivatives’ Palm Complex offerings and provides price transparency in the East Malaysia CPO market, further cementing Malaysia’s position as the global centre for palm oil price discovery. From its launch date to February 8, 2022, Bursa Malaysia Derivatives recorded a total trading volume of 3,250 contracts which is equivalent to 81,250 tonnes of CPO. Its highest daily trading volume was recorded on January 5, 2022, at 122 contracts representing 3,050 tonnes of CPO. 

Growth momentum expected to be hampered – Moody’s  

According to Moody’s Investors Service in the latest update to its Global Macro Outlook for 2022-23 report, declining fiscal support, tighter monetary policy and waning pent-up demand will weigh on growth momentum in most countries. Although it expects the rapid rise in inflation in recent months to subside, the steep and broad-based increase in prices is eroding household purchasing power and could weaken the recovery. The global economy is transitioning from a tentative recovery toward more stable growth, bolstered by improvement in the Covid-19 health situation. The current economic cycle is remarkable in the swiftness with which activity has been restored in most major economies. The Group of 20 (G20) economies is expected to collectively expand 4.3 per cent in 2022, down from 5.9 per cent in 2021 yet still above long-term trend growth. Global growth will further slow to 3.2 per cent in 2023 as pandemic-fuelled output losses have been largely recouped and labour markets in advanced economies approach a full recovery. The agency also predicted a challenging first half of 2022, with elevated commodity prices, demand-supply imbalances, inflation pressures, volatile financial markets and geopolitical tensions. However, demand-supply distortions is expected to resolve over 2022, with supply bottlenecks easing in the second half of the year. 

AmInvest launches Asia ex Japan Equity Fund 

According to AmBank group CEO Datuk Sulaiman Mohd Tahir, AmInvest has launched its Asia ex Japan Equity Fund, which offers investors potential long-term capital growth by investing in a diversified portfolio of stocks in the Asia region (excluding Japan). The fund will feed into the Baillie Gifford Worldwide Asia ex Japan Fund, which aims to provide above average returns over the long term by investing in the fastest growing stocks in the Asia region excluding Japan. The target fund invests in companies that are financially sustainable in the long run, and takes into consideration factors such as high quality growth businesses that enjoy competitive advantages in their marketplace, environmental, social and governance matters. According to AmInvest chief executive Goh Wee Peng, the fund is a beneficiary of structural drivers that will continue to support strong growth prospects in China and the broader Asia Pacific region. This is the second fund partnership with Baillie Gifford, the target fund’s investment manager, who also manages the target fund for the Sustainable Series – Positive Change Fund. Baillie Gifford have over 30 years of experience managing Asian region equities. Since its inception in February 2020 until to date, the target fund has returned 36.2% and beaten its benchmark by 23.4%. There should be material growth for the fund, as there are more than 3 billion consumers across Asia with a notably large consumer market within the rising Asian middle class. Pre-pandemic data from International Monetary Fund predicts that the per capital spending power of Chinese consumers will nearly double in US dollar terms over a five-year period from 2019 to 2024. Digital penetration and technological change continue to be the key themes for long-term growth opportunities in Asia. Rapid development of technology is creating a fundamental change in market behaviours, with digitalisation driving changes in economic and political systems, businesses, consumer habits and behaviours. The target fund actively seeks companies that may have underappreciated growth and those constantly reinvesting for the long-term, either in research or development of capital projects. The fund’s base currency is US dollar. It is being offered for subscription to sophisticated investors in US dollar, ringgit and in ringgit-hedged classes at the initial offer prices of US$1 and RM1 per unit respectively during the initial offer period until March 23, 2022. AmInvest is the brand name for the fund management business of AmFunds Management Bhd and AmIslamic Funds Management Sdn Bhd. 

Local institutions placed emphasis on importance of ESG-compliant investments — Bursa 

According to Bursa Malaysia, local institutions placed emphasis on the importance of environmental, social and corporate governance (ESG)-compliant investments. Malaysia’s key institutional investment managers and asset owners — such as the Employers Provident Fund (EPF), Khazanah Nasional Bhd and Retirement Fund (Incorporated) (KWAP) — had participated in and signed the United Nations Principles for Responsible Investment in 2019. These institutions have incorporated the ESG mandate into their funds. The EPF is also expected to announce a sector sustainability policy framework as guidance for its future investments that will comply with ESG practices. Citing IHS Markit’s filings up to Feb 7, 2022, the regulator said the local ESG-mandated funds had a total holding value of US$118 billion (about RM494.01 billion) in stocks with good ESG ratings. The filings also showed that the fund houses ranked the highest in terms of the total holding value of stocks with good ESG ratings and accounted for 92% of the total holding value of the stocks. With the change in investment fundamentals within the industry, large-scale investment banks are also pivoting their strategies in tandem with the rise of sustainability consciousness. For instance, in December last year, Maybank Investment Banking Group announced that it would prioritise ESG and help its clients to identify green opportunities. ESG investing is one of the fastest-growing trends in the investment community over the past few years. ESG is slowly becoming a key consideration for investors. Asset owners such as pension funds are increasingly demanding sustainable investing strategies from their asset managers. Bursa, in quoting IHS Markit’s fillings up to Feb 7, said there were 235 ESG-mandated funds globally that had invested in Bursa as an exchange with a total holding value of US$143.5 billion (about RM600.76 billion). 44% of the funds (excluding Malaysia) were from North America, followed by Europe at 27%, Asia at 26% and the Middle East at 3%. 

Eye On The Markets 

This week, on Friday (25Feb), the Ringgit opened at 4.1985 against the USD from 4.1880 on Monday (21Feb). Meanwhile, the Ringgit was 3.1004 to the Sing Dollar on Friday (25Feb). On Monday (21Feb), the FBM KLCI opened at 1601.66 As at Friday (25Feb) 10:00am, the FBM KLCI is down 11.62 points for the week at 1590.04. Over in US, the overnight Dow Jones Industrial Average closed up 92.07 points (+0.28%) to 33,223.83 whilst the NASDAQ added 436.10 points (+3.34%) to 13,473.58.  

Malaysia’s current account surplus to GDP ratio upgraded to 3.5% – MIDF Research 

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According to MIDF Research, the relative size of the current account balance is expected to increase 3.5% of GDP this year (2021: 3.5% of GDP) from their initial expectation of 3.1%. This is in view of the Dept of Statistics Malaysia (DOSM) stating that Malaysia’s current account balance recorded a surplus of RM15.2bil in the final quarter of 2021 despite prolonged nationwide restrictive measures. And a further reopening of economic activities and the continued expansion in export of goods will help drive a wider surplus of Malaysia’s current account balance. This is driven by the exceptionally high net exports of goods with a double-digit growth in prices of commodities. The research house maintains that the sustained surplus will be supported by continued expansion in exports of goods driven by manufactured goods and commodity-related products. As more domestic economic activities reopen, import growth is expected to record higher than export growth this year, at 5.1% versus 4.5%. On the services account, it foresees a smaller deficit in the trade of services for 2022, thanks to the proposed reopening of international borders. Meanwhile, demand for foreign services from the trade-oriented and construction sectors is likely to expand modestly. In the fourth quarter of 2021, the services account recorded a higher deficit of RM15.5bil compared to a deficit of RM15.2bil in the third quarter, dragged down mainly by the travel segment. Traditionally, the travel segment will record higher inflows than outflows. However, the pandemic has flipped the table. With the reopening of domestic economic activities and more leeway given to the fully vaccinated, outflows of travel segment increased to RM4bil in Q4 ‘21, the highest since Q2 ‘20, possibly due to Malaysians travelling to other countries. The travel segment is expected to record a smaller deficit in 2022, particularly with the gradual reopening of international borders. As for other services components, no significant changes is expected throughout the pandemic years. Notably, the National Recovery Council has recommended that the government fully reopen international borders on March 1. However, the borders would not be fully reopened in the first half of the year given that the Health Ministry has forecast daily infection cases to peak at 22,000 by end of March. Additionally, vaccine rollout for children aged five to 11 was only started in February and may take at least 1.5 months for the age group to be fully-vaccinated. Hence, June 1 is expected to be the earliest date for Malaysia to reopen its international borders amid the flattening curve of daily infection rate and higher two-dose vaccination rate as well as booster recipients. For 2022, MIDF Research forecasts services account deficit to GDP ratio to improve from minus 4% in 2021 to minus 3.6%. The travel segment should record a smaller deficit size of minus 0.8% this year (2021: minus 0.9%). 

Inflationary pressures, price hikes temporary – IDEAS 

According to the Institute for Democracy and Economic Affairs (IDEAS), the inflationary pressures and price hikes that Malaysia is facing is temporary and can be effectively controlled through proper monetary and fiscal policies. Even though the inflationary trend is disconcerting, inflation can be controlled efficiently in the short to medium term through the timely deployment of monetary policies. This is in relation to the Statistics Department finding that the country’s inflation rate (as measured by the Consumer Price Index) increased 3.2% year-on-year in December 2021, mainly due to the rise in food and fuel prices and the low base effect. IDEAS noted that the US Federal Reserve has signalled that it would increase its Overnight Policy Rate (OPR) multiple times this year to tame inflation. Malaysia will likely follow suit by increasing its OPR gradually in 2022 and 2023, whereby Bank Negara is expected to increase the OPR by about 50 basis points in the latter half of this year. Meanwhile, according to IDEAS director of economics and business unit and acting director of research Dr Juita Mohamad, the current rise in inflation is a global issue, stemming from stronger demand and higher energy prices, after two years of battling the pandemic through lockdowns. The pandemic and the lockdowns led to both demand and supply shocks at a global scale. As a small and open economy, Malaysia was not immune to the devastating aftermath posed by the pandemic. Inflationary pressure is further compounded by the recent flooding in the country, which puts a strain on the supply of selected essential goods produced locally. 

Malaysia set for a gradual recovery – impressive vaccine rollout, swift measures lauded – IMF 

According to the International Monetary Fund (IMF), Malaysia’s economy is set for a gradual recovery from the Covid-19 downturn, with real gross domestic product (GDP) growth at 3.1% in 2021 and projected to accelerate to 5.75% in 2022. This is in line with the preliminary findings of an IMF team led by its economist Lamin Leigh which says that growth will be supported by the authorities’ impressive vaccine rollout and swift implementation of economic policy support measures. A more severe downturn in 2021 was averted, thanks to the swift, substantial, and multi-pronged pandemic policy response targeted to support affected households and businesses. Growth in 2022 is projected at about 5.75%, driven by pent-up domestic demand and continued strong external demand. The pandemic is set to leave implications that could linger over the medium to long run and the recovery would likely be uneven. The team recommends additional near-term targeted fiscal support to the vulnerable and hard-hit segments of the economy. In the near term, fiscal policy should continue to be nimble and increasingly targeted, with a focus on further buttressing the recovery, minimising economic scarring, protecting the vulnerable segments of the population, and scaling-up productive investments, in line with the authorities’ spending priorities. A credible, specific, growth-friendly, and clearly communicated consolidation strategy should be implemented once the recovery is entrenched to rebuild fiscal buffers, preserve fiscal sustainability, and reduce fiscal risks, supported by robust fiscal governance practices. The findings also recommended accommodative monetary policy stance and the continuation of financial sector support measures. 

Foreign investors jump into M’sian equities – MIDF Research 

According to MIDF Research, foreign inflow into the Malaysian stock market rose to its highest in the year so far at RM749.34mil in the previous week amid optimism over the country’s recent release of its economic data. The research house, which tracks the Indonesia, Thailand, Philippines and Malaysia bourses in South-East Asia, noted that all these markets recorded foreign inflow for the week on positive sentiment over their stability. Foreign interest in Malaysian equities was spurred by positive developments in the country’s economy, including the December industrial production index growth of 5.8%, the December distributive trade sales growth of 3.5% and the fourth-quarter gross domestic product growth of 3.6%. The largest foreign inflow was recorded on Wednesday at RM279.64mil and the smallest inflow was on Monday at only RM21.82mil. International funds had been net buyers on the local stock exchange for four out of the past six weeks. In addition, foreign investors were net buyers for every day of the past week, which last occurred in the week ending January 14. Meanwhile, local institutions were active sellers with a sum of RM649.18mil net of local equities sold over the week. Retailers were net sellers on every day of the week except on Monday. By last Friday’s close, retailers had net sold RM100.17mil in Bursa Malaysia stock. Year-to-date, foreign investors have been net buyers of RM1.052bil in local equities. Net buying by retailers stands at a marginal RM980,000 while local institutions are net sellers of RM1.053bil of Malaysian stock. 

Apac’s investor demand good for sustainable bonds – Moody’s 

According to Moody’s Investors Service assistant vice-president and analyst Nishad Majmudar, Asia-Pacific’s (Apac) large financing needs post-pandemic, and the region’s focus on carbon transition and other environmental, social and governance (ESG) risks will propel issuance of sustainable bonds. There was also rising investor demand for instruments that catered to the sustainable market. Conditions were ripe for a rise in the issuance of sovereign sustainable bonds, which is expected to come initially from established issuers. Although the development of regulatory standards and taxonomies across the region is still at an early stage, it will gradually facilitate markets. Apac governments with track records of conventional issuance or have strong market access, such as Hong Kong (Aa3 stable), Indonesia (Baa2 stable), South Korea (Aa2 stable) and Malaysia (A3 stable), were driving sustainable bonds. The issuer base is likely to expand through multilateral support and as investors’ appetite for sustainable bonds catches up with vanilla bonds. The post-pandemic focus on investment to meet United Nations Sustainable Development Goals will drive issuance, particularly as major governments including China (A1 stable), Japan (A1 stable) and South Korea pursue net-zero emissions by 2050. 

Eye On The Markets 

This week, on Friday (18Feb), the Ringgit opened at 4.1863 against the USD from 4.1915 on Monday (14Feb). Meanwhile, the Ringgit was 3.1165 to the Sing Dollar on Friday (18Feb). On Monday (14Feb), the FBM KLCI opened at 1576.99. As at Friday (18Feb) 10:00am, the FBM KLCI is up 28.59 points for the week at 1605.58 Over in US, the overnight Dow Jones Industrial Average closed down 622.24 points (-1.78%) to 34,312.03 whilst the NASDAQ shed 407.38 points (-2.88%) to 13,716.72.  

Bursa inks MoU with HSBC Amanah to improve PLCs’ ESG adoption practices 

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According to Bursa Malaysia chief executive officer Datuk Muhamad Umar Swift, the exchange and HSBC Amanah Malaysia Bhd has entered into a memorandum of understanding (MoU) to collaborate on an initiative aimed at improving Malaysian PLCs’ environmental, social and governance (ESG) adoption practices. Under this MoU, both parties would collaborate in developing sustainability-linked Islamic financial products as well as ESG solutions aligned to the FTSE4Good ratings model and datasets for eligible PLCs. PLCs in the FTSE Bursa Malaysia EMAS index, which made up the FTSE4Good ESG assessment universe, would have the opportunity to tap into HSBC Amanah’s Shariah-compliant ESG offerings while enabling them to accelerate their ESG adoption. This would help improve their ESG ratings for inclusion into the FTSE4Good Bursa Malaysia Index, the Malaysian capital market’s leading ESG index. Additionally, it would be an opportunity for Shariah-compliant PLCs to be included into the FTSE4Good Bursa Malaysia Shariah Index, which was introduced in July 2021. Having PLCs that are able to successfully manage their ESG risks and opportunities via Shariah-compliant ESG solutions will certainly reinforce Malaysia’s role as a leader in Islamic finance. Meanwhile, according to HSBC Amanah CEO Raja Amir Raja Azwa, HSBC Amanah is pleased to join Bursa Malaysia in developing this important initiative towards enabling PLCs on their sustainability journey through the provision of advisory and Shariah-compliant financial solutions as a practitioner of value-based intermediation. This is very much aligned to the bank’s own journey in transforming HSBC Amanah into a leading sustainable bank in line with the triple-bottom line approach of prosperity for people and planet and in support of the Malaysian Government’s National Determined Contribution to the Paris Agreement. PLCs interested in learning more about the initiative or improving their general ESG practices may contact the exchange’s index and sustainable business unit via email at isb@bursamalaysia.com. 

Retail & Wholesale trade up 1.4% in Q4, 2.1% higher in 2021 – DOSM 

According to Department of Statistics Malaysia (DoSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin, Malaysia’s wholesale & retail trade rebounded 1.4% in the fourth quarter (Q4) of 2021 which translates to a 2.1% increase in the volume index for the full year. The increase for the year was attributed to the motor vehicles sub-sector which rose 3.7%, followed by retail trade with 2%. However, the figures indicated wholesale trade inched down marginally at 0.03% in the same period. For quarter-on-quarter (q-o-q) comparison, the volume index jumped 16.3%, supported by motor vehicles which surged 136.9%. Compared to the fourth quarter of 2019 which was before the Covid-19 pandemic, index volume of this sector expanded to record 2.1%. Looking at the performance across sub-sectors, the volume index of motor vehicles which expanded 3.7% year-on-year (y-o-y) was mainly contributed by sales of motor vehicle and sales, maintenance & repair of motorcycles which posted positive growth of 8.9% and 1.7%, respectively. Maintenance & repair of motor vehicles and sales of motor vehicle parts & accessories decreased -2.3%, and -1.5%, respectively. For the quarterly performance, the volume index of motor vehicles surged 136.9% as compared to the preceding quarter, spearheaded by sales, maintenance & repair of motorcycles with 258.2%. On the other hand, retail trade’s volume 2% gain was attributed to retail sale not in stores, stalls or market with 23.9%. This was followed by retail sale of food, beverages & tobacco 6.5%, retail sale in non-specialised stores 6.2%, retail sale via stalls & market 5.9%, retail sale of automotive fuels 4.6%, retail sale of cultural & recreation goods 0.3%, and retail sale of information & communication equipment 0.1%. Meanwhile, the volume index of retail trade climbed 10.8% compared to the previous quarter. Volume index of wholesale trade sub-sector edged down marginally 0.03% in Q4’21 from Q4’20 and the contraction was attributed to wholesale on a fee or contract basis which eased 7.5%. This was followed by other specialised wholesale which contracted 4%. However other groups in this sub-sector posted positive growth. For q-o-q comparison, volume index of wholesale trade went up 6.%. As for seasonally adjusted volume index, wholesale & retail trade soared 15.3% as against the third quarter of 2021. All sub-sectors recorded positive growth namely motor vehicles 137.1%, retail trade 8.5% and wholesale trade 6%. The volume index of wholesale & retail ended 2021 with 124.1 points, which went up 2.1% supported by wholesale trade and retail trade which grew 3.8% and 3.4%, respectively. As for pre-pandemic comparison, this sector remained below the 2019 figure with -4.2%, pulled down by the motor vehicles sub-sector which slipped -10.2%. 

Consumer spending to continue growing – Unemployment seen hovering below 4% in 2H2022 

According to MIDF Research, consumer spending in Malaysia is set to stay on an upward trajectory this year, underpinned by significantly high vaccination rate, improving labour market, fiscal incentives and stable inflationary pressure. Private consumption and the services sector is expected to contribute positively towards gross domestic product in Q42021. The three-month moving average of distributive trade sales was 5.1% higher year-on-year (Q3 2021: 9.1% drop year-on-year or y-o-y) for the final quarter of 2021. In December 2021, Malaysia’s distributive trade sales growth was 3.5% higher y-o-y, led by motor vehicles (1.5% higher y-o-y), wholesale (4.1% higher y-o-y) and retail (3.5% higher y-o-y). The unemployment rate is expected to hover below 4% in 2H2022 and average at 4% this year. In December 2021, the jobless rate had hit a new pandemic low of 4.2%, as the number of unemployed persons fell below 700,000 for two consecutive months since November 2021. Employment growth in December 2021 reached a seven-month high at 2.8% growth y-o-y, thanks to continuous expansion in both export-oriented and domestic-focused industries. Also, inflationary pressure is predicted to trend lower following receding low-base effects from fuel inflation, especially with retail fuel prices to remain status quo. Cost-induced pressures are set to ease off, given that leading indicators on supply constraints are showing moderating patterns. Steady employment growth and stable inflationary pressure are key fundamentals to benefit and support Malaysia’s consumer spending in the fourth quarter of 2021 as well as for 2022. The country’s retail trade is expected to expand by 5.5% and private consumption to expand by 6% this year with the relaxation of containment measures, economic re-opening and progressive improvements in macroeconomic data, setting the stage for strong consumer spending. With interstate travels allowed, the services sector is projected to benefit and increase by 7.1% this year. Meanwhile, should Malaysia’s international borders be re-opened on March 1, this will be an additional catalyst for the services sector via tourism activity. However, borders are not expected to reopen fully in the first half of this year as the Health Ministry had forecast daily infection cases to peak at 22,000 by the end of next month. Additionally, the vaccine rollout for children aged five to 11 years old had just started in February and they may take at least one-and-a-half months to be fully vaccinated. Meanwhile, retail spending patterns are expected to shift slightly from pre-pandemic years, especially on information and communications technology (ICT) and household items, thanks to remote working and learning arrangements. Spending on non-specialised stores for groceries’ shopping fell in terms of distributive trade sales share to 14.9% in 2021, from a peak point of 15.3% in 2020. As consumers adapted to the new normal, expenditure on ICT products rose to a record high at 4.2% of total distributive trade sales. This year, automotive fuel share is also expected to rebound to its pre-pandemic level at 3.4% (2021: 3.1%) with interstate movements allowed. 

Eye On The Markets 

This week, on Friday (11Feb), the Ringgit opened at 4.1890 against the USD from 4.1850 on Monday (7Feb). Meanwhile, the Ringgit was 3.1123 to the Sing Dollar on Friday (11Feb). On Monday (7Feb), the FBM KLCI opened at 1525.23. As at Friday (11Feb) 10:00am, the FBM KLCI is up 41.70 points for the week at 1566.93. Over in US, the overnight Dow Jones Industrial Average closed down 526.47 points (-1.47%) to 35,241.59 whilst the NASDAQ shed 304.73 points (-2.10%) to 14,185.64.  

Launch of cross-border QR payment linkage between Malaysia and Indonesia 

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Bank Negara Malaysia (BNM) and Bank Indonesia (BI) launched a cross-border QR payment linkage that will enable instant, secure, and efficient cross-border payments between Malaysia and Indonesia. Through this linkage, consumers in both countries will be able to make retail payments by scanning the DuitNow or QRIS (Quick Response Code Indonesian Standard) QR codes displayed by offline and online merchants. This marks the beginning of a pilot phase that will pave the way for a full commercial launch in the third quarter of 2022. This linkage will be expanded in the future to support cross-border remittance where users in both countries can make real-time fund transfers with convenience. According to BNM deputy governor Jessica Chew Cheng Lian, the cross-border QR payment linkage between Malaysia and Indonesia marks a key milestone in the long history of collaboration between both countries. Phase 2 of the QR payment linkage between Malaysia and Thailand has also gone live this week. Such developments will bring us closer towards realising the vision of creating an Asean network of fast and efficient retail payment systems. This in turn, will further accelerate digital transformation and financial integration for the benefit of individuals and businesses. According to Bank Indonesia deputy governor Doni P Joewono, this initiative links cross-border payments through the interconnection of national QR codes of the two countries and also represents another milestone of the Indonesian Payment System Blueprint 2025. Bank Indonesia recognises the significance of cross-border payment system linkages and has continuously pursued such initiatives. This will give more options for users in the cross-border payment space and serve as a key to improve transaction efficiency, support the digitalisation of trade and investment, and maintain macroeconomic stability by promoting a more extensive use of Local Currency Settlement (LCS) Framework. Through the use of direct quotation of local currency exchange rates provided by Appointed Cross Currency Dealer banks under the LCS Framework, it will improve the efficiency of transactions thus lowering the transaction cost. The payment connectivity will further strengthen the close economic ties between Malaysia and Indonesia, and support post-pandemic economic recovery. As international travel resumes, tourism will be a key sector that will greatly benefit from this service. The sizeable traveller flows between the two countries recorded an average of 5.6 million arrivals yearly before the pandemic. Both countries are also key remittance corridors for their nationals working abroad who will benefit from faster, cheaper, and more transparent cross-border remittances. This initiative is also aligned with the G20 Roadmap for Enhancing Cross-border Payments developed by the Financial Stability Board and other international bodies. This project is made possible with the collaboration of various stakeholders from both countries under the joint stewardship of BNM and BI. These include Payments Network Malaysia Sdn Bhd (PayNet), the Indonesian Payment System Association (ASPI) and RAJA (Rintis, Artajasa, Jalin, and Alto) as payment system operators. The settlement banks are CIMB Bank Bhd, Bank Mandiri and Bank Negara Indonesia. Other participants include various banks and non-bank payment service providers from both countries. 

Malaysia’s 2021 PPI records largest annual rise in a decade after Dec’s 10% gain – DOSM 

According to Department of Statistics Malaysia (DOSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin, Malaysia’s Producer Price Index (PPI) for local production increased by 10% year-on-year (y-o-y) in December 2021 as opposed to a decrease of 2.1% recorded in the corresponding month of the preceding year, mainly due to slower pace in primary commodities’ prices but inflationary pressures continued. For 2021, the country’s PPI increased 9.5% from a year earlier, the largest on-year annual rise in a decade. The increase in December 2021 was attributed to the mining index that rose 45.1% from a slump of 40% recorded in December 2020, driven by higher prices for crude oil (46.8%) and natural gas (37%). Agriculture, forestry and fishing also increased at a moderate rate of 10.9% compared to 23.5% in December 2020, largely due to the incline in the indices of fishing (12.4%), animal production (11.6%) and growing of perennial crops (11.2%). The manufacturing index increased 7.6% in December 2021, contributed by the indices for subsectors of manufacture of refined petroleum products (22.3%), manufacture of vegetable and animal oils and fats (18.1%) and manufacture of basic chemicals, fertilisers and nitrogen compounds, plastics and synthetic rubber in primary forms (15.6%). The indices for the subsectors of manufacture of plastics products, manufacture of rubber products and manufacture of basic iron and steel also moved higher, while the utilities index recorded a marginal increase of 0.9% and 0.7% for water supply and electricity and gas supply indices respectively. On a month-on-month comparison, the PPI local production recorded a decline for the first time after a consistent increase for 14 consecutive months — dropped 0.6% in December 2021, with the decline mainly contributed by mining index that registered a negative 4.2%. The index of agriculture, forestry and fishing also recorded a decline of 2.9%, driven mainly by the price of oil palm fresh fruit bunches which fell 4.9% from November 2021. Chicken price also showed a 0.8% decline. Meanwhile, the manufacturing index increased marginally 0.1%, supported by a modest increase of 0.7% for manufacture of refined petroleum products subsector besides rising prices for construction-related products. However, the marginal increase in manufacturing index was also offset by a drop of 0.8% for manufacture of electronic components and boards. Similarly, the indices of water supply and electricity and gas supply rose 0.5% and 0.1% respectively. For 2021, the PPI local production recorded the highest increase in a decade to 9.5%. It was the first time increase after registering a decline for three consecutive years. In 2021, world economies experienced insufficient supply problems which cannot meet rebounding demand after movement restrictions in most countries were being lifted, which had caused disruptions to the supply chain and exerted pressure on the prices of commodity and raw materials. In addition, the unusual prolonged cold weather conditions in certain countries also led to the surge of primary commodities prices, especially natural gas. For 2022, the world is facing the threat of Omicron variant spread, which also made a significant impact on the prices of primary commodities especially crude oil. 

Financial Sector Blueprint 2022-2026 to support Malaysia’s next stage of development — BNM governor  

According to Bank Negara Malaysia (BNM) Governor Tan Sri Nor Shamsiah Mohd Yunus, the central bank envisions that the newly-launched Financial Sector Blueprint 2022-2026 will drive the financial sector to be agile and resilient to support the country’s transition to its next stage of development. BNM had identified five priorities that would anchor its efforts to promote a financial system that would secure long-term growth, planetary health and shared prosperity. The priorities are funding Malaysia’s economic transformation, elevating the financial well-being of households and businesses, advancing digitalisation of the financial sector, positioning the financial system to facilitate and an orderly transition to a greener economy, and advancing value-based finance through thought leadership in Islamic finance. While producing the blueprint has been a lot of hard work, the greater task is to turn its vision into reality. This requires work and outside-the-box thinking as the nation enters a new stage of development. Speaking at the virtual MyFintech Week 2022, she said that it is our desire and belief that the financial sector will continue to serve Malaysia well in the years ahead, doing its part to improve the well-being of the people now and for the generations to come. The financial industry is well positioned to play a stronger role in leading transformation and changes at the industry level, thanks to its strong foundation following two decades of development. BNM is committed to fostering conditions for greater market dynamism to respond to changing needs of the economy and society, which call for more and diverse actors in the financial system, operating within well-defined parameters that encourage healthy competition and innovation, alongside prudent and responsible conduct. BNM’s approach behind the blueprint would be that financial services must help the people and businesses grow their wealth, engage in trade and commerce, and build resilience. It must help customers manage financial risks and adverse events, including climate and environment related risks to secure lasting prosperity. To this end, the blueprint seeks to align the financial sector with the national aspiration to not only become a high-value-added and high-income economy, but also lay a solid foundation for a more dynamic, inclusive and sustainable development path. The blueprint was launched by Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz. 

Eye On The Markets 

This week, on Friday (28Jan), the Ringgit opened at 4.1995 against the USD from 4.1865 on Monday (24Jan). Meanwhile, the Ringgit was 3.1037 to the Sing Dollar on Friday (28Jan). On Monday (24Jan), the FBM KLCI opened at 1521.720. As at Friday (28Jan) 10:00am, the FBM KLCI is down 0.27 points for the week at 1521.45. Over in US, the overnight Dow Jones Industrial Average closed down 7.31 points (-0.02%) to 34,160.78 whilst the NASDAQ shed 189.3 points (-1.40%) to 13,352.8.  

Bank Negara likely to raise rates this year – HSBC

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According to HSBC Group Asian economics research co-head Frederic Neumann, Bank Negara (BNM) is likely to raise interest rates this year following in the footsteps of the United States Federal Reserve, which plans to raise rates by three to four times in 2022 to fight inflation. BNM could raise its overnight policy rate (OPR) by 50 basis points (bps) this year on the back of stronger domestic demand and strong export numbers, as the world economy recovers from the impact of the Covid-19 pandemic. Within the Asia region, Malaysia is likely expected to experience one of the strongest domestic demand recoveries. On the investment side, particularly foreign investment, Malaysia will be the key beneficiary under the current trends, and the country’s exports are likely to remain supported. There is a desire by BNM to start to normalise its interest rates again, relatively swiftly. This is where the 50bps hike comes through. He was speaking at the HSBC Asian outlook 2022 media briefing. BNM has kept its OPR at 1.75% since July 2020, when it cut the rate from 2% to support economic growth that was affected by the Covid-19 pandemic and movement control order to curb the infection rate. The OPR at 1.75% is the lowest on record since 2004. As Malaysia’s labour market strengthens, the country’s core inflation may gradually trend higher to 2% by end-2022, thus, allowing Bank Negara to initiate a gradual monetary tightening process in the second half of 2022. HSBC expects a total of 100bps of rate hikes over 2022 and 2023. The Malaysian economy has one of the brighter outlooks in the region. The Malaysian economy is expected to grow 3.6% in 2021 and accelerate to 5.6% this year. Malaysia had one of the highest vaccination rates in Asia, allowing a high degree of resilience. While restrictions may be re-imposed, the government will likely opt for highly targeted measures as opposed to lockdowns. Malaysia is currently attracting the highest share of foreign direct investment (FDI) commitments in Asean, overtaking Vietnam which bodes well for the future of manufacturing. Malaysia’s manufacturing outlook remains impressively strong. Despite the positive outlook on the economy, the interest rate hike could pose the risk of downward pressure on the local stock market. According to HSBC chief Asia equity strategist Herald van der Linde, funds are anticipated to reduce their exposure to Malaysian equities due to potential rising interest rates. In contrast to a few of the other Asean markets, the situation in Malaysia is that domestic interest rates are rising which is not positive for the market. Most funds are already pretty overweight on Malaysia. So, they can’t really buy that much more if they wanted to. Some of the funds would probably reduce their exposure to Malaysian equities and move to other Asean markets such as the Philippines and Indonesia. Growth in all markets is coming down because last year was a large bounce in earnings growth. While there were still a lot of uncertainties, HSBC also believes that the ringgit is undervalued and the local currency could see recovery this year as the Malaysian economy emerges from a “double-dip” recession. The Ringgit is expected to be supported by the higher FDI inflows and the interest rate hike by the central bank should help the Ringgit to maintain a “yield advantage against the US dollar” and keep real rates positive. Greater confidence in the domestic economy and in local assets would help curb residents’ foreign asset accumulation. However, HSBC warned that its positive views on the ringgit were dependent on the Covid-19 developments and that political uncertainty may weigh on sentiment and affect capital flows.

Bursa unveils enhanced requirements

Bursa Malaysia has announced enhanced requirements for Main and ACE Market listings to further strengthen board independence, quality and diversity. The enhanced listing requirements now limits the tenure of an independent director to not more than a cumulative 12 years in a listed issuer and its group of corporations. All long serving independent directors impacted by this enhancement must resign or be redesignated as non-independent directors by June 1, 2023. Another key enhancement is the requirement for listed issuers (PLCs) with a market cap of RM2bil as at Dec 31, 2021 to appoint at least one woman director on their boards by Sept 1, 2022, as announced by the finance minister in Budget 2022. For the remaining PLCs, the requirement must be complied with by June 1, 2023. Additionally, Bursa also introduced a new rule which requires PLCs to have in place a fit and proper policy that addresses board quality and integrity for the appointment and re-election of directors across the PLC group, which must be published on the PLCs’ websites, starting from July 1, 2022. PLCs are also required to disclose the application of the PLCs’ fit and proper policy in the nomination and election of their directors in their annual reports. This seeks to improve the overall quality of directors and promote greater transparency on the criteria for board appointments.

Confidence in small-cap stocks remains – RHB Research

RHB Research notes in their report that despite the unfavourable short-term outlook, there are still pockets of opportunity for investors who are interested in small-cap stocks. Optimism in the market remains with the high vaccination rate and as the economy continues on its recovery path, which would enable investors to benefit from a sector rotational play and a meticulous stock-picking strategy. The research house advocated several key investment themes including exporters, value stocks and election play. Against this backdrop, it recommended consumer discretionary, technology, logistics, oil and gas (O&G), commodity play, and politically-linked thematic play as sectors to look out for in the small-to-mid caps space. The accommodative fiscal and monetary policies should continue to lend support to private consumption, supporting the consumer discretionary sector. Meanwhile, the O&G sector is likely to draw interest, premised on the high crude oil price trend, higher capex allocation and oil demand recovery. The technology space will also remain in favour thanks to its structural growth and strong fundamentals. However, it is paramount that investors remain selective on technology companies with a strong track record and competitive edge to sustain the elevated valuations and weather through a potential valuation de-rating, on the back of persistent high inflation rates and the rising interest rate environment. As for the logistics sector, growth will continue on improving trade and volume following the reopening and resumption of economic activities. Additionally, secular e-commerce play, elevated freight rates, growing demand for third-party logistics, and favourable measures and tax incentives from policy makers bode well for the industry. The imminent general election could also see politically-linked stocks gain prominence, with improved sentiment and the resumption of contract flows. With the FBM 70 Index and FBM Small Cap Index’s current forward price-earnings ratios (P/E) having retraced to below their five-year mean levels, and the indices are now trading at two times to three times P/E discounts to that of the FBM KLCI – based on RHB’s coverage universe – the brokerage cautioned that it is still paramount for investors to exercise extra diligence in their stock-picking, despite a better risk-reward ratio in terms of the relative forward valuation. It also highlighted that valuation for the MSCI Malaysia Small Cap Index continued to be at the north of the MSCI benchmark index. This is mostly owing to the superb performance of many stocks in the small-cap space, especially the high-flying technology stocks that command premium valuations, even in the region. The prolonged pandemic, political instability, earnings disappointment, worsening economic conditions, liquidity issues and higher environmental, social and governance-related risks could curb potential gains in the small-cap space.

Note From Publisher – RinggitPlus has launched a 3-part once a month series on Financial Planning. Please turn to page 9 or 10 for the 1st part.

Eye On The Markets

This week, on Friday (21Jan), the Ringgit opened at 4.1925 against the USD from 4.1865 on Monday (17Jan). Meanwhile, the Ringgit was 3.1110 to the Sing Dollar on Friday (21Jan). On Monday (17Jan), the FBM KLCI opened at 1553.80. As at Friday (21Jan) 10:00am, the FBM KLCI is down 28.17 points for the week at 1525.63. Over in US, the overnight Dow Jones Industrial Average closed down 313.26 points (-0.89%) to 34,715.39 whilst the NASDAQ shed 186.20 points (-1.30%) to 14,154.00

EPF investment income for 9M21 up 7.7% y-o-y to RM48b

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According to Employees Provident Fund (EPF) chief executive officer Datuk Seri Amir Hamzah Azizan, the total gross investment income for the EPF for the nine months ended Sept 30, 2021 (9M21) rose 7.7% year-on-year (y-o-y) to RM48.02 billion from RM44.6 billion the year before. Total gross investment income for the third quarter ended Sept 30, 2021 (3Q21), however, amounted to RM13.97 billion, lower than RM17.33 billion for 3Q20. He said that 3Q21 was volatile for equities in both the domestic and emerging markets, largely caused by concerns surrounding rising inflation and interest rates. On the other hand, continued recovery of equities in the developed economies amid the heightened volatility provided the EPF an opportunity to capitalise additional gains. Equities continued to be its main income contributor, accounting for 54% of total gross investment income at RM7.5 billion. As part of EPF’s internal policy and a prudent measure to ensure a healthy portfolio, RM110 million was written down for listed equities during the quarter, compared with RM130 million in the corresponding period of the previous year. After taking into account the cost write-down, RM13.86 billion of net investment income was recorded for 3Q21. Cumulatively, RM350 million was written down for listed equities, down from RM6.46 billion in the same period in 2020, on the back of continued recovery in the global equity market, resulting in net investment income of RM47.67 billion for 9M21, compared with RM38.14 billion for 9M20. Investments in fixed income instruments contributed RM5 billion, or 36% of 3Q21 gross investment income, which was lower than the RM8.18 billion generated in 3Q20 due to lower trading gains. This was in line with the higher market yield in 3Q21, compared to the same period of the previous year. The real estate and infrastructure, as well as money market instruments, contributed RM1.18 billion and RM290 million respectively. As at September 2021, the EPF’s investment assets stood at RM988.55 billion, of which 36% were invested in overseas investments. The fund’s diversification in different asset classes, markets and currencies continued to provide income stability and add value to its overall returns. In 3Q21, the EPF’s overseas investments generated RM8.1 billion in income, representing 58% of total gross investment income recorded. A total of RM1.4 billion out of the RM13.97 billion gross investment income was generated for Simpanan Shariah, and RM12.57 billion for Simpanan Konvensional. On the outlook for the rest of the year, the post-lockdown recovery would continue, although at a slower pace, despite continuing concerns over the monetary policy and inflation outlook. Risks to Malaysia’s economic growth outlook remain tilted to the downside on external and domestic factors amid lingering Covid-19 concerns. Continued inflationary pressure and aggressive shifts from central banks led yields to increase amid increased expectations of monetary policy tightening. The environment of increasing bond yields has not just impacted bond markets, but created unease in equities as well. Despite the challenging and unprecedented times, the EPF is hopeful of seeing market sentiments improving in the near future. As a long-term fund, it remains committed and guided by the Strategic Asset Allocation that helps to ride out volatility while taking advantage of declines in valuations of fundamentally strong assets. 

Foreign investors net buyers of bonds in December – Kenanga 

According to Kenanga Investment Bank Bhd, foreign investors turned net buyers of Malaysia’s debt securities in December last year, totalling RM6.1bil, after a month of net selling in November for RM3.6bil. Total foreign debt holdings increased to RM256.6bil compared to November’s RM250.4bil, while its share to total outstanding debt rose to 14.8%, a seven-month high. Demand was likely driven by the return of global risk-on sentiment as Omicron fears began to subside, following reports that it was less severe than other Covid-19 variants. Furthermore, domestic bonds retained high yield differentials against many developed market bonds, keeping them attractive despite monetary policy tightening by major central banks. December’s inflow was driven by a sizeable net increase in holdings of Malaysian Government Securities and Government Investment Issues, which outweighed a softer rise in holdings of Malaysian Treasury Bills. For the equity market, it noted that foreign investors turned net sellers for the first time in five months, selling a total of RM1.1bil worth of shares compared to the RM200mil net buy in November. Demand for equities may have been hindered by lingering uncertainty over the Omicron variant and the United States Federal Reserve’s increasingly hawkish tilt, as it quickened the pace of its tapering process. The capital market registered its largest inflow in four months amounting to RM5bil. However the debt market remains at risk of outflows in the near term as the Fed may tighten monetary policy. 

AmInvest Launches Global Small Caps Fund 
AmInvest unveiled its Global Smaller Companies Fund, offering investors to tap into the potential capital growth of small companies listed globally. The fund will feed into the target fund, Janus Henderson Horizon Fund – Global Smaller Companies Fund, which aims to identify good quality and potentially undervalued small-cap stocks. According to the fund management firm’s chief executive Goh Wee Peng, the fund benefits from structural drivers that will continue to support global small-cap growth and has partnered with investment manager Henderson Global Investors Ltd which has a team of regional specialists in the US, Europe, Singapore and Japan. Since its inception in August 2019 and until Nov 30, 2021, the target fund has delivered returns of 63.5% which is 17.1% higher compared to its benchmark. This has translated to returns of 23.6% per year by the target fund. AmInvest pointed out returns from global small-cap stocks have surpassed large-cap stocks over the long term as they have higher growth and more opportunities for future growth and have outperformed large caps by over 220% over the last 24 years. Smaller companies are targets for mergers and acquisitions. To complete a takeover, the acquirer normally has to offer a valuation over and above where the share price has been trading. This premium has averaged between 21% and 40% in recent years. The target fund utilises fundamental and value-biased screening tools by identifying a narrow investable universe of around 100 to 200 quality stocks with growth potential. While the fund’s risks are managed by diversifying exposures by geography and market sector. The Global Smaller Companies Fund’s base currency is US dollars and it is being offered to sophisticated investors in US dollar and RM as well as RM-hedged classes at an initial offer price of US$1 and RM1 per unit respectively during the initial offer period until Jan 30, 2022. 

Eye On The Markets 

This week, on Friday (14Jan), the Ringgit opened at 4.1815 against the USD from 4.1995 on Monday (10Jan). Meanwhile, the Ringgit was 3.1078 to the Sing Dollar on Friday (14Jan). On Monday (10Jan), the FBM KLCI opened at 1543.38. As at Friday (14Jan) 10:00am, the FBM KLCI is up 16.38 points for the week at 1559.76. Over in US, the overnight Dow Jones Industrial Average closed down 176.70 points (-0.49%) to 36,113.62 whilst the NASDAQ shed 381.60 points (-2.51%) to 14,806.80.  

Thumbs up for reinstating shares stamp duty cap – CGS-CIMB Research

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According to CGS-CIMB Research, investors will enjoy lower transaction costs following the Finance Ministry’s decision to reinstate the cap on stamp duties for the trading of shares on Bursa Malaysia. This will make the Malaysian stock exchange more competitive regionally. On Dec 30, 2021, the Finance Ministry announced that a stamp duty of 0.15% would be imposed on share contract notes, up to a maximum of RM1,000. Stamp duty amounts exceeding RM1,000 would be remitted and that this remittance would apply to all contract notes from Jan 1, 2022 until Dec 31, 2026. The government had earlier proposed in Budget 2022 for the stamp duty rate to be raised to 0.15% from 0.1%. It also said the RM200 cap on the duty would be abolished, effective Jan 1, 2022. The brokerage estimated that the government’s latest decision will cut total transaction costs for Malaysia from 0.32% to 0.2% for US$1mil (RM4.2mil) trade value, assuming a brokerage rate of 0.15%. This is because the stamp duty costs will decline to RM1,000, as compared to an estimated RM6,300 if the stamp duty is removed. However, this is still higher than the total transaction costs in 2021 of 0.19%, based on its estimates when the stamp duty cap was RM200. Nevertheless, this is positive for stockbrokers and Bursa Malaysia as the higher cap on stamp duty for the next five years will improve Malaysia’s competitiveness against MIST (Malaysia, Indonesia, Singapore and Thailand) peers. They estimate total transaction costs for shares to be 0.16% to 0.26%. It pointed out that the FBM KLCI had reacted positively to the reinstatement of the stamp duty cap and window-dressing activities, gaining 23.92 points or 1.55% on the last trading day of 2021. However this positive is partly offset by concerns over Omicron, the return of intraday short selling effective Jan 1, 2022 and flooding risks in Malaysia. The market’s excitement seen in the last trading day of 2021, however, did not last long. The FBM KLCI began the new year on a weak footing as the benchmark index dropped by 18.48 points or 1.18% to 1,549.05 points on the first day of trading. Meanwhile, the brokerage was positive on the government’s decision to extend the tax exemption on foreign sourced dividends for corporates till Dec 31, 2026. 

Maybank Asset Management launches China Equity Fund 

According to Maybank Asset Management Group (MAMG) CEO Ahmad Najib Nazlan, MAMG has partnered with global investment firm T Rowe Price to offer its China-focused equity strategy to Malaysian investors via the MAMG China Evolution Equity Fund. The fund feeds into T Rowe Price’s China Evolution Equity Strategy, which looks beyond the Chinese mega-caps to seek to identify the future winners, focusing on opportunities outside China’s 100 largest companies. The fund favours companies it believes are best positioned to capitalise on China’s changes and growth, including those moving up the value chain through innovation, niche players, companies set to benefit from disruptions as well as those involved in energy transition and high performance computing space. It is also benchmarked against the MSCI China All Shares Index Net for performance comparison. The strategy is managed by Hong Kong-based portfolio manager Wenli Zheng who has over 13 years’ experience at the global asset manager and the Chinese market. By extending MAMG’s reach beyond the top 100 stocks into a universe of over 5,500 untapped stocks, this unique pivot provides an unconstrained All-China investment approach to pick the best and most valuable upcoming companies; coupled with its ESG fundamentals to ensure business sustainability. With T Rowe Price’s knowledge and experience of the China market, he is confident the partnership will reap positive benefits for investors.  

Meanwhile according to T Rowe Price’s head of distribution for Asia ex-Japan, Elsie Chan, China is a deep market with over 5,500 onshore and offshore-listed companies, offering a huge opportunity set to investors. It remains a fertile hunting ground for investors seeking sustainable businesses and potential excess return opportunities through bottom-up fundamental research. Chan is pleased to offer the investment strategy for investors in Malaysia to complement their investment portfolios and pursue the attractive but overlooked opportunities amidst China’s economy upgrade. 

5.2% growth in 2022 from private consumption woes – SERC 

According to The Socio-Economic Research Centre (SERC) executive director Lee Heng Guie, SERC has projected a gross domestic product (GDP) growth of 5.2% for 2022, slightly lower than the government’s forecast of 5.5-6.5% growth prediction, attributed to its more modest private consumption estimate. Looking at the private consumption, he expects it to recover but there are also some headwinds, mainly, inflation risk, high cost of living as well as an expectation for households to rebuild their savings and balance sheet. For this year, the private consumption is projected to grow at 5.9% of the GDP, while the official forecast had expected 7.3% of the GDP. Sector wise, some of the forecasts are lower than the official estimates, as the latter was made earlier in September last year during the formulation of Budget 2022. Since then there has been some development, especially with the unexpected pickup in inflation risks, which is something to watch out for as well as the worst ever flood experienced that could temper the activities early this year which would impact the overall GDP. In identifying a number of risks to the country, he noted one of which is a decline in China’s growth, one of Malaysia’s key trading partners. He calculated a 1% decline in China’s GDP could shave Malaysia’s GDP growth by 0.3-0.5% via trade channels. Similarly, the country also has to contend with price pressures similar to one faced across the globe. Domestically, labour shortage has to be addressed, effects of inflation to consumers and producers as well as a winding down of domestic relief measures and policy changes’ impact to local businesses and industries. The one-off prosperity tax this year could reduce dividend payments and corporate earnings, as well as a slew of other measures such as rental discounts, utilities rebates, multi-tier levies and higher minimum wage. Hopefully, the government will make sure some of the policy changes would be staggered out and there will be sufficient industry engagement particularly with the multi-tier levy implementation. On the bright side, the Regional Comprehensive Economic Partnership (RCEP) as a key catalyst to the country’s performance as the 14-member countries account for 58% of Malaysia’s trade. This translates to a wider market for Malaysian exporters and because of the agreement, at least 92% of the tariff line will be reduced over 20 years and some would enjoy an immediate zero tariff, facilitating the exports of goods and services to the international market. For SMEs, because of e-commerce and digitalisation, they can fully leverage this platform to find new markets rather than concentrating on the domestic market. He also cautioned that the free trade agreement could also bring challenge to Malaysian businesses, in terms of competition. It is important to focus on product quality, good delivery and competitive cost so they are able to compete with the international players in the RCEP market whilst at the same time there will be goods coming into Malaysia offering a wide choice at a competitive price. And the SME can source for raw material and inputs they need for their production and participate in the global or regional supply chain. On this matter, the electronic & electric sector is estimated to be the biggest beneficiary as it is an important hub for the sector in the global supply chain. With regard to the overnight policy rate, it is anticipated that Bank Negara Malaysia (BNM) to raise the interest rate in the second half of 2022, though the timing will depend on the growth trajectory and inflation risk. A removal of monetary accommodation is needed to rebuild buffer and hikes in baby steps so as not to hamper the recovery path. A prolonged period of low interest rates can induce financial imbalances by reducing risk aversion of banks and other investors. On the whole, SERC expects BNM to raise the policy rate by 25-50 basis points to 2%-2.25% in the second half of 2022. On a global note, it expects growth to normalise in 2022 amid headwinds, at a moderating pace of 4.5%. It also pointed out that the Omicron variant, ongoing supply disruptions, rising inflation pressures and more hawkish central banks are the headwinds as tighter financial conditions and capital flows volatility could weigh on global growth. The Omicron will dent confidence and sentiment given the still inequitable vaccinations across the countries in different regions. What comes in the near-term is to what extent the impact of Omicron variant on global growth. Three vaccine doses hold the key for protection against the new variant. The International Monetary Fund had estimated that a more transmissible Omicron could cost the global economy a further US$5.3 trillion, in addition to the current projected loss of US$12.5 trillion. 

Eye On The Markets 

This week, on Friday (07Jan), the Ringgit opened at 4.2145 against the USD from 4.1705 on Monday (03Jan). Meanwhile, the Ringgit was 3.0963 to the Sing Dollar on Friday (07Jan). On Monday (03Jan), the FBM KLCI opened at 1553.64. As at Friday (7Jan) 10:00am, the FBM KLCI is down 20.01 points for the week at 1533.63. Over in US, the overnight Dow Jones Industrial Average closed down 170.64 points (-0.47%) to 36,236.47 whilst the NASDAQ shed 19.30 points (-0.13%) to 15,080.90.  

Individuals to be exempted from tax on foreign-sourced income – MOF

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According to the Ministry of Finance (MOF), the government has agreed to exempt all types of foreign incomes of individuals from tax, and has also extended the exemption to dividend incomes earned by limited liability companies and partnerships. This would be subject to the eligibility criteria which will be detailed in the Inland Revenue Board’s guidelines. For individual taxpayers, the government provides exemption to all individuals except those who conduct business partnership in Malaysia, which will be subject to tax on foreign-sourced income (FSI) received. Non-resident categories (individuals, companies, etc) remain eligible for income tax exemption. At the same time, FSI received in the year of assessment 2022 is exempt from tax calculation for the purpose of Cukai Makmur. The exemption would be effective Jan 1, 2022 until Dec 31, 2026. During the tabling of Budget 2022, the government had proposed the withdrawal of the tax exemption on FSI received in Malaysia, which had caused a stir among companies and individuals, especially those with significant investments abroad. The exemption on FSI has been in place since 1998 for companies and since 2004 for individuals, in a bid to encourage remittance of such income. The withdrawal of the exemption is part of its revenue sustainability measures, adding that it is in line with international regulations. 

Policy transition raises risk of volatility in 2022 – Kenanga Research 

According to Kenanga Research in its investment strategy note, Malaysia’s policy transition from monetary accommodation and fiscal expansion to austerity and consolidation raises the risk of volatility in the stock market in 2022. However this is only likely to happen in the second half of the year and after the 15th general election (GE15). Until then, conditions are supportive for positive stock market returns as liquidity remains ample, while value has emerged following 2021’s steep market decline and regional underperformance. And for all the anxieties that the recent floods have caused, the implied Q4’21 earnings results already suggested that Q4’21’s earnings would be the lowest. This is despite commodity prices holding up and a surge in economic reopening activities (briefly disrupted by the floods notwithstanding), plus encouraging data of leading economic indicators released recently. However, catalysts were lacking and there would be the usual pre-election inertia that would drag the market’s advance, and so, returns would not be broad-based. While the severe floods in mid-December would likely impact Q4’21 earnings, the market had already projected very conservative earnings estimates around lockdown-related impacts, which may have been overly aggressive, given anecdotal evidence of a surge in economic reopening activities. Several signs suggested the likelihood of GE15 being called well before the July 2023 deadline, including the resounding win by the Barisan Nasional in the November Melaka state election, followed by the convincing win by its close ally, Gabungan Parti Sarawak, recently. Additionally, economic data released in Q4’21 suggested the current recovery was intact for now, and would likely hit the government’s targeted 3% to 4% growth. The Opposition is more fragmented after the Sheraton Move and it looks highly unlikely for Pakatan Harapan, Bersatu and Parti Pejuang to regroup. And finally, the pandemic looks to be subsiding. These events should likely embolden the ruling coalition to call an election possibly as early as Q2’22. Meanwhile liquidity remained ample and no tightening is expected in Q1’22. The tightening would only likely be a post-GE15 event. When Bank Negara finally tightens by raising the overnight policy rate and statutory reserve requirement, the research house expects heightened market volatility as liquidity reduces. 

Eye On The Markets 

This week, on Friday (31Dec), the Ringgit opened at 4.1740 against the USD from 4.1975 on Monday (27Dec). Meanwhile, the Ringgit was 3.0869 to the Sing Dollar on Friday (31Dec). On Monday (27Dec), the FBM KLCI opened at 1517.37. As at Friday (31Dec) 10:00am, the FBM KLCI is up 15.21 points for the week at 1532.58. Over in US, the overnight Dow Jones Industrial Average closed down 90.55 points (-0.25%) to 36,398.08 whilst the NASDAQ shed 24.70 points (-0.16%) to 15,741.60.