Malaysian bonds stay attractive – foreign holdings at 25%

INVE$T #58 | Market Sentiments – 21 May 2021

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According to Securities Commission (SC) chairman Datuk Syed Zaid Albar, Malaysian bonds continue to attract interest, with foreign holdings amounting to 25% of outstanding government bonds. As at end April 2021, foreign investment in the government bond market stood at RM232bil. In his keynote address at the MARC virtual Malaysian bond and sukuk conference themed “Riding the Wave” he noted the SC has long recognised the role of private debt securities as a source of funding, particularly for large-scale, long-term projects. It also increases private sector participation in economic development. According to the Asian Development Bank, in gross domestic product (GDP) terms, the three largest bond markets in Asia are Japan, followed by South Korea and Malaysia. Given the outlays required for infrastructure development, opportunities abound for the Malaysian bond and sukuk markets to continue to be a major funding source for nation building initiatives. This, however, is not unique to Malaysia. In fact, 79% of the respondents to the 2020 Global Infrastructure Index believe that infrastructure investments will be one of the main drivers that will create new jobs and boost their economies. At end2020, the domestic bond market grew to RM1.6 trillion (government bonds constituting 53% and corporate bonds 47%) despite the challenging environment, up from RM1.49 trillion as at end2019. While this augers well for the country’s recovery and future growth, more needs to be done for growth to be sustainable. There was a need to broaden the credit spectrum to include smaller bond issuers, given the significant contribution of MSMEs (micro, small and medium enterprises) to GDP and employment. The challenge is adapting the bond and sukuk markets to provide cost-effective means for small and lower-rated issuers to raise funds to meet their growth and expansion plans. This is particularly important because the greater or more inventive use of traditional assets alone will not be enough to foster better growth. Securitisation transactions embedded with the necessary safeguards had the potential to be a valuable financing tool, transforming illiquid assets into liquid and tradable assets.

Malaysia’s economic performance doesn’t depend only on Covid-19, MCO impact: MARC research head

According to Malaysian Rating Corp Bhd (MARC) head of economic research Firdaos Rosli, Malaysia’s economic performance depends largely on internal and external factors, and not only on how the Covid-19 pandemic and the movement control order (MCO) play out. There have been narratives by economists and opinion makers that the country’s economy is dependent on the MCO, given its impact on business activities and the economy in general. However, it is not really dependent on the pandemic per se as all economic sectors are open, even with the MCO in place. He was presenting on ‘Economic Report & Capital Market Outlook 2021’ at the MARC Malaysian Bond and Sukuk Conference 2021. We are seeing that economic activities are running as usual, and that will give some rebound compared to what it was in the previous year. Externally, the performance of Malaysia’s economy is linked to its major export markets. Major trade partners such as the US and the UK have ramped up their Covid-19 inoculation drive, which will translate into heightened demand for Malaysian exports, particularly for electrical & electronic and petroleum products. There has not been much communication on the government’s medium to long-term economic action plan as it is busy fighting the pandemic. There is the need for signals on policy since the pandemic differs from the Asian and the global economic crises in the past, which were due to financial and trade factors. This crisis is non-financial and non-export led, which means that as the balloon is squeezed, the economy will still be in contraction mode. The country will see continued positive growth in the future as the government eases the restrictions. On foreign direct investments (FDI) in equities, the foreign investors have left the market, but in the debt market there has been a healthy inflow since the start of the year. However, for manufacturing FDI, it is a completely different perspective altogether. As far as incentives are concerned, what Malaysia has been offering are generic, whether it is pioneer status or tax perks, as there is nothing it can offer that its neighbours cannot. To gain a competitive edge, there has to be something “magical” that the government can offer to attract such investments. The country can examine the trade agreements which it has participated in but has yet to ratify, such as the Comprehensive and Progressive Transpacific Partnership and the Regional Comprehensive Economic Partnership, to obtain such advantage. While this would be one way to look at it, the other is the autonomous liberalisation route, similar to what was done in the 1980s following the commodity crisis, where liberalised foreign equity in manufacturing allowed 100% equity to foreign manufacturers. But such a move will require indepth policy justification. On the possibility of more stimulus measures, his educated guess was that they will be related to the social security net, particularly with regard to employment and the job market. This was in reference to Finance Minister’s statement that the reason behind the government’s decision to keep the economy open was primarily to address the unemployment rate. Noting that in the past, the unemployment rate following a crisis is responsible for projecting the country’s growth trajectory in the post-crisis era. The country would likely see slow growth in private consumption if it is not able to contain the unemployment rate this time around. However, he is not sure that more cash handout is the answer as people are likely to turn it into savings but it is left to be seen what the government has in store.

Eye On The Markets This week

On Thursday (20May), the Ringgit was 4.1443 against the USD from 4.1310 on Monday (17May). Meanwhile, the Ringgit was 3.1085 to the Sing Dollar on Thursday (20May). On Monday (17May), the FBM KLCI opened at 1577.49. As at Friday (21May) 10:00am, the FBM KLCI is down 12.42 points for the week at 1565.07. Over in US, the overnight Dow Jones Industrial Average closed up 188.11 points (+0.55%) to 34,084.15 whilst the NASDAQ added 236.00 points (+1.77%) to 13,535.74.

Malaysia’s economy further improving in Q2 – Statistics Dept

Invest #59 | Market Sentiments – 28 May 2021

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Inve$t #59 | Market Sentiments – 28 May 2021

According to the Department of Statistics Malaysia (DoSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin, Malaysia’s economy is expected to further improve in Q2 2021 especially on the back of a low base as the economy contracted 17.1 per cent in the second quarter of 2020, based on the performance of several key economic indicators. However, the recovery is also highly dependent on the extent to which the infection of Covid-19 could be brought under control and the consequence of movement control order (MCO) 3.0 with tightened standard operating procedures for the economic sectors and social aspects. Further to this, the leading index (LI) for March 2021 achieved strong growth at 17.3 per cent, mainly due to the low base effect of March 2020 following a nationwide lockdown and the better performance of LI components. Taken together, the LI performance and the current state of Covid-19 outbreak, it seems that the near term economic prospect is encouraging but prevailing challenges persist. The utmost commitment in easing the current pandemic situation is vital so as to regain the economic momentum in the upcoming months. Malaysia’s economic situation, gross domestic product (GDP) declined marginally by 0.5 per cent in Q1 21, continuing its recovery from a contraction of 3.4 per cent in the preceding quarter. The improvement was supported by the expansion in the manufacturing sector, the rebound of the agriculture sector and the better performance recorded by all economic sectors compared to the last two quarters. Malaysia’s economy in this quarter gradually recovered as more economic activities were allowed to operate following MCO 2.0, less stringent than the MCO 1.0 imposed in March 2020. Various stimulus packages introduced also steered the economic recovery and cushioned the potential economic losses of this country. Adding to this, the encouraging economic environment during Q1 2021 was largely driven by the better performance of key economic indicators in March 2021. Malaysia’s current account balance continued to record a surplus registering RM12.3 billion in the Q1 2021 compared to RM18.6 billion in the previous quarter, contributed by the positive momentum of the net exports of goods. Whereas foreign direct investment recorded a higher inflow of RM9.1 billion against RM6.8 billion in the preceding quarter owing to higher inflow in equity and reinvestment of earnings and lower inflow in debt instruments. Concurrently, direct investment abroad by Malaysian companies has also increased, gaining from the reopening of the global economy, posting RM7.8 billion in Q1 2021 from RM5.2 billion in the preceding quarter due to the high investment in equity abroad and retained earnings in this quarter. Meanwhile, Malaysia’s trade continued to rise, with total trade recording a double-digit increase of 14.8 per cent year-on-year (y-o-y). In line with this, Malaysia’s trade balance remained surplus at RM58.6 billion. In terms of the labour market, amid targeted measures to manage the Covid- 19 pandemic in the country, uneven recovery momentum in the labour market was observed as the number of employed persons decreased slightly y-o-y by 0.04 per cent to 15.24 million persons while the unemployment rate remained high above four per cent registering 4.8 per cent in the Q1 2021. From the view point of labour demand, the number of jobs in the economic sector decreased marginally as filled jobs declined while vacancies posted a small increase. Overall, the labour market remains in a challenging situation as it has not returned to the way it was during pre-Covid times.

Malaysia to see 6% to 7.5% GDP growth in 2021 if Covid-19 can be stabilised — Mustapa

According to Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed, Malaysia can achieve its 2021 gross domestic product (GDP) growth target of between 6% and 7.5% if the Covid-19 health crisis can be stabilised after the eventual lifting of the Movement Control Order (MCO 3.0). The availability of vaccines and a comprehensive vaccination rollout for Malaysians would have a positive impact on the country’s economy. If assuming that the percentage of Malaysians vaccinated goes according to schedule or can be accelerated, while the Covid-19 situation can be placed under control, then we will be able to see a positive decline in infections. And this will definitely have a positive impact on the position of the Malaysian economy. The Leading Index (IP) surged 17.3% in March 2021, much higher than an increase of 8.2% in January and 8.6% in February. The good performance was in line with the country’s GDP growth of 6% in March 2021. This growth momentum would be affected if the government decided to implement full-scale movement restrictions from May 25 to June 7, 2021. Full-pledged movement restrictions will cause the unemployment rate to rise sharply, the number of poor households will increase, the performance of small and large companies will be affected, and the fiscal position will be in a more challenging condition. During an engagement with industry representatives, micro, small and medium enterprises, and hawker associations on May 22 and 23, 2021, most of them agreed with the government’s decision to implement MCO 3.0.

Eye On The Markets This week

On Thursday (27May), the Ringgit was 4.1390 against the USD from 4.1425 on Monday (24May). Meanwhile, the Ringgit was 3.1257 to the Sing Dollar on Thursday (27May). On Monday (24May), the FBM KLCI opened at 1563.78. As at Friday (28May) 10:00am, the FBM KLCI is up 19.66 points for the week at 1583.44. Over in US, the overnight Dow Jones Industrial Average closed up 141.59 points (+0.41%) to 34,464.64 whilst the NASD

Banks maintain strong capitalisation levels

INVE$T #60 | MARKET SENTIMENTS – 04 June 2021

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According to Bank Negara in its Monthly Highlights – April 2021 report, all banks remained well-capitalised to withstand potential shocks and to continue supporting credit flows to the economy. Banks’ excess capital buffers amounted to RM124.2bil as at April 2021. The banking system’s asset quality also remained sound. Overall gross and net impaired loans ratios were sustained at 1.6% and 1.0%, as impairments moderated slightly during the month. However, banks continued to set aside additional provisions against potential credit losses, which currently stand at 1.7% of total banking system loans. Net financing expanded by 4.9% in April, reflecting the increase in outstanding corporate bond growth which stood at 7.7% versus 5.9% in March, while outstanding loan growth was sustained at 3.9% for both March and April. Outstanding household loan growth increased to 6.2% (March: 5.7%) as loan disbursements grew at a higher pace compared to loan repayments across most purposes. Businesses’ outstanding loan growth moderated to 0.4% (March: 1.1%), mainly reflecting lower growth in loans for working capital purpose. Domestic financial market conditions improved in April amid a confluence of external and domestic factors. Domestic bond yields moderated amid positive investor sentiments driven by Malaysia’s retention in the FTSE Russell World Government Bond Index and the decline in longer-term sovereign bond yields in most advanced economies after the sharp increase earlier in the year. Specifically, the 10-year Malaysian Government Securities yield declined by 12.2 basis points during the month. The ringgit appreciated by 1.3% against the US dollar supported by portfolio inflows to the domestic bond market and broad weakening in the US dollar. The FBM KLCI increased by 1.8%, supported mainly by the healthcare sector amid concerns surrounding the global and domestic resurgence of Covid-19 cases. Malaysia’s headline inflation rose to 4.7% in April versus 1.7% in March due to higher domestic fuel prices. Headline inflation is expected to temporarily spike in the second quarter, and moderate thereafter as the base effect subsides. Underlying inflation, as measured by core inflation, remained stable at 0.7%. Exports expanded further by 31.0% in March versus 17.6% in February, driven primarily by robust manufactured exports.

Banks to continue providing assistance – affected borrowers should contact their lenders

According to the Association of Banks in Malaysia (ABM), member banks will continue to offer financial assistance to borrowers affected by the latest movement control order (MCO) amid the Covid-19 pandemic. Any individual customers who have lost employment are eligible for financial assistance under the Targeted Repayment Assistance (TRA) programme. Customers who have lost their employment are eligible for loan deferment (moratorium) for a period of three months or 50% reduction in the monthly instalment payment for a period of six months. Currently, member banks of ABM offer financial assistance under the TRA programme, which has been in place since Oct 1, 2020. Meanwhile, customers who have experienced a reduction in income including household income are also eligible for a commensurate reduction in monthly instalments. B40 borrowers who are registered under Bantuan Sara Hidup (BSH) or Bantuan Prihatin Rakyat (BPR) are eligible to opt for this specific repayment assistance. Micro-enterprises with loan facilities of not more than RM150,000 can also opt for this repayment assistance. Moreover, micro-enterprises can also request for assistance through Agensi Kaunseling dan Pengurusan Kredit’s (AKPK) dedicated micro business helpdesk at www.akpk.org.my/ microhelpdesk. The virtual helpdesk provides free financial advice and facilitates applications for repayment assistance. Moving forward, the TRA programme has been expanded to include all small and medium enterprise (SME) businesses that are not permitted to operate during the latest MCO. All affected borrowers including individuals, micro-enterprises and SMEs who wish to avail of this latest TRA only need to contact their respective banks to indicate which option they want to choose. The banks will automatically approve all selections by borrowers that fulfil the relevant criteria. Also member banks have made it convenient for borrowers to opt for financial assistance by simplifying the process for the TRA programme. In view of the movement restrictions, affected borrowers can also opt for the financial assistance package at bank branches, online or over the phone. Customers should check their respective banks’ websites for information on any changes in operating hours and over-thecounter services. Meanwhile, according to Bank Negara, borrowers’ central credit reference information system (CCRIS) records would not be affected by the TRA programme received this year. Hence, borrowers need not worry about the impact on their future credit profile. All affected borrowers, including SMEs, are urged to come forward and contact their banks via the banks’ official channels to discuss the best options available. As a reminder, borrowers are to be wary of scammers and apply for financial assistance through official bank channels. It also cautioned borrowers not to deal with any third parties claiming to be agents or representatives of banks with regards to repayment assistance. Member banks do not appoint or engage third parties or agents for purposes of the repayment assistance. Under the TRA programme, banks have received 1.6 million applications, of which 95% have been approved up till March 26, 2021.

Eye On The Markets This week

On Thursday (3Jun), the Ringgit was 4.1225 against the USD from 4.1290 on Monday (31May). Meanwhile, the Ringgit was 3.1127 to the Sing Dollar on Thursday (3Jun). On Monday (31May), the FBM KLCI opened at 1571.04. As at Friday (4Jun) 10:00am, the FBM KLCI is up 7.15 points for the week at 1578.19. Over in US, the overnight Dow Jones Industrial Average closed down 23.34 points (-0.07%) to 34,577.04 whilst the NASDAQ shed 141.82 points (-1.03%) to 13,614.51.

Upcoming Mid Year Market Outlook

Market Outlook 2H 2021 – PROFITING FROM RECOVERY

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Market Outlook 2H 2021

PROFITING FROM RECOVERY

Date: 3 July 2021 [Saturday]
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The global economy is expected to recover now that mass vaccinations are being rolled out. This Show-Me-The-Money Market Outlook webinar will focus on the opportunities in 2H 2021 for investors. Join us for this free event by registering below:

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  • Market Overview and Behind The Action – Sectors to Look Out For – Pankaj C. Kumar
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  • Technical Market Outlook with the TAD System – Fred Tam and Afnan Firdaus – F1 Academy

Followed by a Fireside Chat session moderated by Mr. Pankaj with Q&A session.

Registration: https://rebrand.ly/showmethemoneysi

Govt channelling RM5.08b to micro SMEs under GKP, payment of RM1.5b starts on June 10

Market Sentiments | INVE$T #61

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According to Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz, a total of RM5.08 billion has been allocated and will be channelled to nearly one million micro small and medium enterprises (micro SMEs) under the Geran Khas Prihatin (GKP) to tide over their difficulties since Covid-19 hit the country. The government hopes the direct assistance channelled to the micro SMEs will ease their burden, especially those affected by the implementation of the Movement Control Order (MCO) 3.0. Under PEMERKASA, announced on March 17, 2021, the government decided to provide GKP 3.0 of RM1,000 to more than one million micro traders to ensure the continuity of their business, especially in managing their cash flow. The government gave a similar commitment under PEMERKASA Plus, which was unveiled on May 31, 2021, where an additional amount of RM500 would be disbursed, increasing the total payment to RM1,500 for each micro SME to help them navigate through MCO 3.0. This means the total payment of GKP 3.0 is RM1.5 billion. He was pleased to inform that nearly one million micro SMEs involving existing recipients of MCO 1.0 and MCO 2.0, as well as micro SMEs that have been approved under MCO 3.0, will receive a payment of RM1,000 from June 10 (Thursday) in stages involving financial implications of almost RM1.0 billion. The payment will be credited directly to the bank account registered in the GKP system and the approval status can be checked from June 8, 2021 at the following link https://gkp.hasil. gov.my. An additional payment of RM500, involving an allocation of almost RM500 million, will be paid in July 2021 bringing the total amount under GKP 3.0 to RM1.5 billion.

Bursa Malaysia warns of investment scams impersonating legitimate institutions

According to Bursa Malaysia Bhd, investors are advised to be on high alert to protect themselves and others from becoming victims of investment fraud. It has recently observed an increase in the number of scams involving the misuse of the Bursa Malaysia name and corporate logo. In times of uncertainty, such as the current COVID-19 pandemic, scammers try to lure victims into participating in dubious investment schemes and activities. They often use unlicensed or unregistered companies, websites and promotional material that mimic legitimate financial institutions to deceive the investing public. Investment scams typically carry the Bursa Malaysia name and logo on marketing-related materials and social media postings, offering high investment returns with a guarantee of little or no risk. Investors are directed to ‘spoof’ websites and phone numbers set up by scammers, these fake websites look nearly identical to the actual sites of legitimate financial institutions. Calls to the phone numbers provided reach the scammer who pretends to be an employee who will then direct investors to transfer funds to an account with a different name. Hence, it reminded the public to invest only with licensed parties. An updated investor alert list of unauthorised websites, investment products, companies and individuals, is available at Bursa Academy at https://www. bursaacademy.bursamarketplace.com/ en/sc- investor-alert. Additionally, investors should verify the information and not rely on unsolicited marketing materials. Investors should also compare and confirm websites or social media pages. Fake websites or social media pages will often have odd-looking (or low resolution) logos that do not match the legitimate company’s logo. Investors should also avoid unusual payment methods and seek independent, professional advice. Be suspicious of unsolicited investment offers made online, on social media or over the phone. Bursa Malaysia said it does not engage third-party agents to represent it. If you receive unsolicited and or suspicious communications relating to or claiming to be agents of Bursa Malaysia, we recommend contacting us directly at 03-2732 0067 or via e-mail at bursa2u@ bursamalaysia.com to authenticate the content of any such communication.

Eye On The Markets This week

On Thursday (10Jun), the Ringgit was 4.1185 against the USD from 4.1200 on Tuesday (8Jun). Meanwhile, the Ringgit was 3.1082 to the Sing Dollar on Thursday (10Jun). On Tuesday (8Jun), the FBM KLCI opened at 1581.44. As at Friday (11Jun) 10:00am, the FBM KLCI is down 4.43 points for the week at 1577.01. Over in US, the overnight Dow Jones Industrial Average closed up 19.10 points (+0.06%) to 34,466.24 whilst the NASDAQ added 108.58 points (+0.78%) to 14,020.33.

It’s All Transitory

Behind The Action: Pankaj C Kumar – Friday, 11 June 2021

Markets

According to the US Treasury Secretary and former Fed Chair, Jenet Yellen, while inflationary pressure is likely to persist and continue on a y-o-y basis, it is not permanent. She also commented that the US should push for the US$4 trillion spending plan, a move that will see not only higher inflation into next year but also higher interest rates. At the same G7 summit, finance ministers entered into a landmark decision that will pave the way for the imposition of a minimum global corporate tax of at least 15%. Locally, EPF announced a stellar 1Q 2021 performance with gross investment income rising by 59% y-o-y to RM19.29bil, with 74% of the income derived from its equity exposure. Interestingly, EPF also revealed that it had to-date approved RM57.97bil in i-Sinar withdrawals for 6.49mil members, while under the i-Lestari facility, RM20.8bil has been paid out to 5.27mil members.

Economy

The May 2021 Institute for Supply Management (ISM) for the Non-Manufacturing sector rose to 64.0 from 62.7 in the preceding month. Investors’ focus this week was obviously on inflation readings, both from the US and China. US Consumer Price Index (CPI) for May came in at its fastest pace in 13 years with a jump of 5% y-o-y, ahead of market expectations of a 4.7% rise, while the core inflation rate jumped 3.8% y-o-y against a forecast of 3.5% increase. Meanwhile, China’s May 2021 CPI increased by 1.3% y-o-y but the Producer Price Index (PPI) surged 9% y-o-y, a fresh 13-year high. On external trade, Chinese exports for May 2021 came in 27.9% higher y-o-y but imports surged 51.1%, which was the highest in more than 10 years. China’s trade balance with the US remains in its favour as the May trade surplus came in at US$31.8bil, up 13.1% from April’s surplus of US$28.1bil. Locally, Bank Negara revealed that Malaysia’s total international reserves as at 31-May stood at US$110.9bil, US$0.3bil higher compared with US$110.6bil as at May 12. Malaysia also reported approved investments data this week which showed foreign direct investments (FDIs) for the 1Q of 2021 leapfrogging to RM54.9bil from RM11.4bil a year ago, a jump of 383% y-o-y. In related news, Austria’s AT&S, a printed circuit board and integrated circuit substrates manufacturer, unveiled its plan to have its Southeast Asia production hub in Malaysia and with a proposed investment of €1.7bil or RM8.5bil. In other news, Malaysia’s unemployment rate for April 2021 improved by 0.1 percentage points to 4.6% while Malaysia’s May palm oil stock level rose 1.5% to reach 1.57mil tonnes as crude palm oil production increased 2.8% but exports fell by 6%.

Corporate

The FBM KLCI 30-stock index will see one change that will take effect from Monday, June 21, 2021, with Mr. D.I.Y. Group (M) replacing Supermax. Meanwhile, Jardine Cycle & Carriage Limited only managed to secure 88.04% of Cycle & Carriage Bintang at the close of the offer period to take the latter private at RM2.40 per share. In other M&A activities, Kuala Lumpur Kepong (KLK) announced a deal to buy a 56.2% stake in IJM Plantations (IJMP) from its parent company, IJM Corporation at RM3.10 per share, valuing the deal at RM1.534bil. KLK will also extend a mandatory general offer to acquire all the remaining IJMP shares not already held by KLK and persons It’s All Transitory Pankaj C Kumar BEHIND THE ACTION acting in concert upon the execution of the Sale and Purchase Agreement, and the same becoming unconditional, at a cash offer price of RM3.10 per IJMP share. Top Glove meanwhile reported its 3Q FY2021 report card that missed market expectations with both revenue and net earnings falling by 22.4% and 29% to RM4.16bil and RM2.03bil respectively as the effect of lower average selling prices kicks in. Equity Global equity markets closed mixed to firmer the past week with markets that trended higher experiencing gains of between 0.1% and 1.2% while markets that fell eased between 0.1% and 0.8%. The KLCI closed the four-day trading period 0.7% lower at 1,579.90 pts. For the week, net foreign outflow amounted to RM295mil as retailers and local institutions maintained their respective net buying interest at RM271.1mil and RM23.9mil.

Eye On Week Ahead

A slew of economic data points out of the US are due next week. On Tuesday, the monthly retail sales will be out with consensus looking at a flat m-o-m growth of zero percent. On the same day, the IPI and PPI too are expected to be released while housing starts and building permits are due on Wednesday, as the market is looking at 1.57mil and 1.73mil annualized rate respectively. The most anticipated event next week is the 2-day Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday. The market anticipates no change to the US Fed Fund Rate but the Fed’s assessment of the factors that determine its rate moves and its tapering plans, if any, will be closely monitored.

Malaysia welcomes RCEP signing, a game changer to investment flow

Malaysians need to seize opportunities in digital economy

According to Prime Minister Tan Sri Muhyiddin Yassin, Malaysia welcomes the signing of the Regional Comprehensive Strategic Partnership (RCEP). The signing of RCEP will reflect Malaysia’s unwavering support for the multilateral trading system and regional integration. Malaysia trusts that RCEP will be a game-changer to increase the flow of investments and to encourage intra-trade within the region. As the global growth rate is expected to slow at roughly 3.5% between 2021 and 2025, Malaysia should double its efforts to ensure the sustainability of economic activities. Focus should be given to promoting trade and investment and maintaining the regional and global supply chains by tapping into the digital economy. As part of efforts to build a stronger economic region post-COVID-19, Malaysia believes that ASEAN and China must fully tap the potential of the digital economy. A lot has been learnt during this pandemic period from the increased use of online transactions in peoples’ daily lives. The vital role of the digital economy in reviving the region’s economies will contribute to more job opportunities and encourage growth and business sustainability, especially for Micro, Small and Medium Enterprises (MSMEs) sector.

Malaysians need to seize opportunities in digital economy

According to Malaysia Digital Economy Corporation (MDEC) chief marketing officer Raymond Siva, Malaysians need to seize the opportunities provided by the digital economy as it will be a key driver to economic growth in the long term. The demand in e-commerce has grown exponentially in the COVID-19 era. E-commerce is an important component of the digital economy and it will keep growing. Malaysians and businesses should take advantage, especially in the context of COVID-19. The pandemic has abruptly increased the need for digitalisation as people are adapting to the new norms of working from home. The segment (digital economy) is forecast to grow by 20 per cent to the economy this year. The forecast was initially reported by the Department of Statistics Malaysia with the e-commerce sector expected to exceed RM110 billion in revenue by 2020, which is equivalent to 40 per cent of the nation’s digital economy. The MTM 2020 aims to fortify Malaysia’s role in expanding the digital economy and its first-mover position in the ASEAN region while drawing attention to the country’s readiness in leveraging opportunities that the Fourth Industrial Revolution (IR4.0) will spur. The campaign enables a platform for a wide-ranging array of events, highlighting multiple collaborations with industry partners. Industry players should share their challenges, successes and innovations that they have developed, especially over the last six months, and inspire the next generation of digital-tech entrepreneurs.

SC wants public feedback on proposed amendments to Unit Trust Fund guidelines

The Securities Commission Malaysia (SC) is seeking feedback from the public on its proposed amendments to the Guidelines on Unit Trust Funds. The two-month consultation process is part of it’s ongoing efforts to enhance market competitiveness and ensure the continuous development of the Malaysian unit trust industry. The commission has outlined 30 proposals as part of the consultation paper, ranging from liberalising the types of investments a fund could consider, to amendments on strengthening risk management processes of fund management companies. It is considering enhancements to operational requirements, including dealing in and valuation of a fund. These proposed new enhancements will facilitate greater competitiveness in the industry and provide investors access to a wider range of products, while maintaining adequate investor protection. Additionally, to ensure consistency in policy with unit trust funds, it is also considering making some of the proposals applicable to exchange-traded funds (ETF) and private retirement schemes (PRS). The consultation paper is available on the SC’s website. Interested parties are invited to submit their feedback via www.sc.com.my/survey-cp01-2020 by Jan 10, 2021. For further information, the public can also email to MISConsultation@seccom.com.my. Unit trust funds are the largest component of the Malaysian collective investment scheme industry. As at Sept 30, there were 39 locally-incorporated management companies approved to offer 693 unit trust funds with a total net asset value (NAV) of RM490.3 billion.

Eye On The Markets

This week, on Thursday (12Nov), the Ringgit weakened to 4.1340 against the USD from 4.1145 on Monday (09Nov). Meanwhile, the Ringgit was 3.0645 to the Sing Dollar on Thursday (12Nov). On Monday (09Nov), the FBM KLCI moved up 4.68 points (0.31%) to 1524.32 from previous Friday’s close of 1519.64. As at Friday (06Nov) 10:00am, the FBM KLCI continued its climb to 1580.00. Over in US, with the outcome of the Presidential elections still in the balance, stocks were broadly down due to new highs of over 100,000 new Covid-19 infections and the need of much higher Govt stimulus. The Dow Jones Industrial Average shed 317.46 points (-1.08%) to 29,080.17 and the NASDAQ Composite index shed 76.84 points (-0.65%) to 11,709.59.

KLCI 3 Years Chart

All eyes and high hopes for Budget Malaysia 2021

BNM keeps OPR at 1.75 per cent to make way for expansionary Budget 2021

Malaysians will be anxiously awaiting the Finance Minister’s tabling of his maiden budget later today at 4pm, in what could very well be the most crucial budget in the country’s history amid a pandemic that has brought major disruptions to lives and livelihoods in Malaysia and elsewhere. Reviving the economy, creating jobs and safeguarding the livelihoods of the people are expected to be key areas of focus for Budget 2021.

BNM keeps OPR at 1.75 per cent to make way for expansionary Budget 2021

According to Maybank Investment Bank Bhd Research (Maybank IB Research), Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 1.75 per cent is to make way for Budget 2021. The budget, which is scheduled to be tabled in Parliament today, is expected to remain expansionary, with a deficit forecast of RM90 billion, or 6.0 per cent, of gross domestic product (GDP) versus the estimated RM95 billion, or 6.7 per cent, of GDP in 2020. BNM kept the OPR at 1.75 per cent for the second consecutive Monetary Policy Committee (MPC) meeting to preserve monetary policy space. BNM’s decision was also consistent with indications that the economic recession is shallowing after the slump of GDP in April or the second quarter of 2020 (-17.1 per cent), which is supportive of the current official real GDP forecast of growth of between +5.5 per cent to +8.0 per cent in 2021, after the -3.5 per cent to -5.5 per cent performance in 2020. Aside from the pause in the OPR, it also noted that the use of other monetary policy instruments to boost liquidity and provide reliefs to the economy have tapered, hence, reducing the need for monetary policy intervention via an OPR cut and/or liquidity measures. That included the slowing BNM’s purchases of the Malaysian Government Securities, shift to targeted loan moratorium extension and flexible loan repayments after the end of the automatic/blanket loan moratorium period from April to September, 2020. For now it expects the OPR to stay at 1.75 per cent until end-2021, but continues to view this is a dovish pause amid the downside risks economic outlook highlighted in the latest Monetary Policy Statement.

A-G’s Report: Federal govt records RM264.415 bln revenue in 2019

According to the Auditor-General’s (AG) 2019 Report on the Federal government’s financial statement, the Federal government recorded a revenue of RM264.415 billion in 2019, a 13.5 per cent (RM31.532 billion) increase compared to 2018. Meanwhile, operating expenditure approved last year amounted to RM260.547 billion while actual expenditure amounted to RM263.343 billion. Expenses due to national debt (interest, dividends, and other charges) amounted to RM32.933 billion or 12.5 per cent of the operating expenses. This expenditure increased by a total of RM2.386 billion or 7.8 percent compared to 2018 which amounted to RM83.050 billion because it was not budgeted for under the management allocation but was paid directly from the Consolidated Loan Account. Additionally, on the ministries’ and federal departments’ development expenditure, RM54.173 billion or 104.6 per cent was spent from the allocation approved in 2019. The Federal government had a RM51.370 billion deficit with a deficit to Gross Domestic Product (GDP) ratio of 3.4 per cent. The deficit was offset by new loans amounting to RM138.559 billion and of the total loans, RM83.05 billion or 59.9 per cent was used to repay matured debts. The Federal debt stood at RM792.998 billion, a seven per cent increase compared to RM741.094 billion in 2018, the debt-GDP ratio is RM52.5 per cent. Of the total debt amount, 96.4 per cent was domestic debt with the balance of 3.6 per cent  being off-shore loans, the total Federal government debt and liabilities in 2019 is RM1.080 trillion. Meanwhile, audit on state government’s financial statements for the year ending Dec 2019 found that all 13 state governments’ financial statements were given opinions without reprimand. The audit analysis showed that all financial statements had presented a true and fair view of the financial position of the state government and the accounting records were complete and updated. The National Audit Department had conducted 28 compliance audits at the state government level involving one ministry in Sarawak, 23 departments and 14 state agencies in 2019/2020. Among the main findings were occurrence of irregular payments, revenues not collected in an orderly manner and weaknesses in government procurement. The A-G’s report on the federal government’s financial statement for 2019 will be uploaded on the National Audit Department’s website after its presentation in the Dewan Rakyat. The public may view this statement at http://www.audit.gov.my.

Malaysia ranks among top economies in cost of doing business

According to KPMG Malaysia managing partner Datuk Johan Idris, a study by KPMG has ranked Malaysia fourth among 17 economies in an assessment comparing the economy’s competitiveness as a manufacturing hub in cost of doing business (CoDB). The study found that Malaysia is placed ahead of countries in the Asian region such as China, Japan, Vietnam and India. The study indicates that Malaysia’s CoDB Index results from high scores on the Primary Cost Index where Malaysia emerged at the top of the chart, tied with China, Mexico, and Vietnam. Malaysia had outperformed on three factors: hourly compensation costs, real estate costs and corporate tax rate. In analysing the results further, by changing the weight of the primary costs and secondary costs from equal to 70 per cent-30 per cent, Malaysia would be ranked the number one most cost-effective location in the CoDB Index. Malaysia continues to be a prime manufacturing hub for investors despite uncertainties in the current landscape. This is especially significant in our new reality, where operational stability and cost containment are central in every company’s long-term business survival. The results in this study only substantiate what Malaysian businesses already know and are proud of. As an immediate effect out of the COVID-19 pandemic, companies around the world have begun relooking at their supply chains. A study by McKinsey estimates that 16 per cent to 26 per cent of global exports, worth US$2.9 trillion  to US$4.6 trillion, could move to new countries over the next five years if companies reshuffle their supplier networks. The study by KPMG proves that Malaysia has the factors for moving up the production value chain.

On The Markets

This week, on Thursday (05Nov), the Ringgit was 4.1525 against the USD from 4.1550 on Monday (02Nov). Meanwhile, the Ringgit was 3.0584 to the Sing Dollar on Thursday (05Nov). On Monday (02Nov), the FBM KLCI barely moved with -0.43 points (-0.03%) to 1466.46 from previous Friday’s close of 1466.89. As at Friday (06Nov) 10:00am, the FBM KLCI has rebounded to 1510.96 from Monday’s low following the upward trend of US markets overnight and in anticipation of a comprehensive Malaysia Budget 2021 scheduled to be tabled in Parliament today. Over in US, despite a clear winner in the Presidential elections, stocks were bullish in anticipation of a fiscal stimulus package to boost the economy and the possibility of COVID-19 vaccine. The Dow Jones Industrial Average gained 542.52 points (+1.95%) to 28,390.18 and the NASDAQ Composite index climbed 300.15 points (+2.59%) to 11,890.93.

KLCI 3 Years Chart

SC revises guidelines on digital assets

Bursa Q3 net profit jumps 158.9pct to RM121.94mil, revenue at RM237.74mil

SC revises guidelines on digital assets

According to the Securities Commission Malaysia (SC), it has revised its guidelines on digital assets to regulate initial exchange offerings (IEO) and digital asset custodians (DAC). The revised guidelines would facilitate its objectives in promoting responsible innovation in the digital asset space, while at the same time, managing emerging risks and safeguarding the interests of issuers and investors. Earlier in January 2020, it had introduced a framework to enable companies to raise funds via the issuance of digital tokens in Malaysia through an IEO platform registered by the SC. Under the new guidelines, IEO platform operators will be required to assess and conduct the necessary due diligence on the issuer and review the issuer’s proposal and the disclosures in the whitepaper. The IEO platform operators are also required to assess the issuer’s ability to comply with the requirements of the new guidelines and the SC’s guidelines on prevention of money laundering and terrorism financing. The revised guidelines also included rules and regulations on DAC to facilitate interested parties who wish to provide custody services for digital assets. Digital asset custodians play an important role within the digital asset ecosystem of the Malaysian capital market to safeguard digital assets of investors.

Bursa’s Q3 net profit jumps 158.9% to RM121.94mil, revenue at RM237.74mil

According to Bursa Malaysia Bhd’s chief executive officer Datuk Muhamad Umar Swift, the Exchange’s net profit jumped 158.9 per cent to RM121.94 million in the third-quarter (Q3) ended September 30, 2020 from RM47.10 million recorded a year ago. This was attributed to higher trade feeding and clearing fees. The Q3 revenue rose 93.8 per cent to RM237.74 million from RM122.67 million, driven by higher trading revenue. For the nine months, its net profit increased 94.5 per cent to RM272.89 million from RM140.30 million, while revenue rose 52.3 per cent to RM568.27 million from RM373.16 million previously. Bursa had delivered an exceptional performance, recording the highest ever nine-month net profit since its listing in 2005, against the backdrop of unprecedented circumstances. The on-going developments with regards to Covid-19, low-interest-rate environment, the government’s stimulus packages and the gradual re-opening of the economy continue to support investor participation across segments led by domestic institutions and retail. The continuous operations of the local markets had been critical in making available the necessary liquidity and risk management tools for investors to respond in a higher volatility environment and invest in new opportunities. While key economic indicators are pointing towards an improving outlook for the Malaysian economy, the on-going developments of the Covid-19 pandemic will continue to influence the volatility and performance of the Securities and Derivatives markets. Bursa been working closely with other regulators to ensure market efficiency and improved market accessibility and liquidity to support participants during this period. It was well-positioned to continue developing the marketplace and make further progress on its strategic plans. There has been promising results after successfully conducting five listing ceremonies and holding flagship events, namely, Invest Malaysia Conference and Palm and Lauric Oils Price Outlook Conference and Exhibition being fully virtual. Each of these initiatives is important towards making Bursa’s offerings and the market to continue to remain relevant to the diverse range of investors. Investor participation continued to increase, with average daily trading value (ADV) having grown 101.8 per cent to RM4.0 billion in the nine months from RM2.0 billion previously. The additional number of trading days and the higher effective clearing fee also contributed to the increase in trading revenue, while trading velocity increased by 34 percentage points to 62 per cent year-on-year. Non-trading revenue increased by 7.0 per cent to RM110.9 million from RM103.6 million on higher market data revenue, underpinned by the rise in the number of new subscribers. Bursa would continue to build on its data-related offerings to improve non-trading revenue and ensure the long-term resilience of earnings in all market conditions.

Malaysia’s Sept trade surplus surges 49.3 per cent YoY to RM21.97 bil

According to the Ministry of International Trade and Industry (MITI), Malaysia’s trade surplus surged by 149.3 per cent year-on-year (y-o-y) to RM21.97 billion in September 2020, the highest trade surplus ever recorded for the month. Total trade, exports and imports grew by 7.5 per cent, 12.4 per cent and 1.6 per cent, respectively, in September compared to August 2020, with trade surplus recorded a significant expansion of 66.3 per cent. Malaysia’s total trade in September 2020 expanded by 5.5 per cent to RM155.88 billion compared to September 2019. Increases in trade were recorded primarily with China, Hong Kong, the United States, the Netherlands, and Taiwan. Exports rebounded by a double-digit growth of 13.6 per cent to RM88.93 billion, the highest export value ever recorded for the month of September 2020, while imports decreased by 3.6 per cent to RM66.96 billion. Furthermore, exports of manufactured and agriculture goods also registered a double-digit growth in September 2020.

On The Markets

This week, on Thursday (29Oct), the Ringgit remained at 4.16 against the USD from Monday (26Oct). Meanwhile, the Ringgit was 3.0631 to the Sing Dollar on Thursday (22Oct). On Monday (26Oct), the FBM KLCI barely moved with -0.03 points (-0.002%) to 1494.61 from previous Friday’s close of 1494.64. As at Friday (30Oct) 10:00am, the FBM KLCI trending down towards four months low at 1485.66. The U.S. stocks were bullish after receiving latest data on GDP that the economy grew at its fastest rate in the third quarter, at an annualized 33.1%. The Dow Jones Industrial Average gained 139.16 points (+0.52%) to 26,659.11 and the NASDAQ Composite index climbed 180.72 points (+1.64%) to 11,185.59.

KLCI 3 Years Chart

Brand Finance reveals Top 100 Malaysian Brands 2020 Ranking

Joint session between ministries to be held in preparing Budget 2021

According to Samir Dixit, managing director of Brand Finance Asia Pacific, the Malaysia 100 Brands  2020 ranking remains very top heavy this year and hopes to see a more diverse mix at the top and more significant brand value increases at the bottom. To do so, brands must start to focus on building both brand value and strength, rather than being sales and offers driven. These tactics will help in the short term but might destroy the long-term value and strength of brands. It is the brand strength for most Malaysian brands that remains a concern – these have remained stagnant this year. Brand has to be a strategic agenda for senior management and boards and must be treated like any other business asset and not just a legal trademark. See the complete ranking from pages 13 to 19.

Joint session between ministries to be held in preparing Budget 2021

According to Finance Minister Tengku Datuk Seri Zafrul Aziz, a joint session will be held between ministries to discuss proposals as well as the operational and development needs in relation to Budget 2021. The Finance Ministry is in the process of drafting Budget 2021, which will be tabled on Nov 6. Economic continuity would be given priority to ensure the momentum of economic recovery was maintained. The government calls on the people to work together in combating the COVID-19 pandemic by always practicing the new norms and physical distancing, maintaining hygiene and health, as well as be disciplined in complying with the standard operating procedures issued by the government. The government was constantly monitoring developments on the COVID-19 situation and was always ready to increase allocations, as and when needed. The government has allocated RM1.7 billion to combat the spread of COVID-19, channelled via 14 ministries and state governments. The government, through the Health Ministry, has also channelled an additional allocation of RM44 million to strengthen Sabah’s healthcare front-liners. Apart from that, the government, through the National Security Council, recently approved an additional allocation of RM50 million to the National Disaster Management Agency (NADMA). These additional provisions are in line with the commitment to ensure preparedness in the face of increasing COVID-19 infections nationwide. Meanwhile, 11.36 million people had successfully received RM50 in their eWallets, amounting to RM567.9 million, under the RM50 eWallet credit programme that ended on Sept 30. The eWallet providers such as Boost, GrabPay and TouchnGo eWallet had also contributed benefits in the form of credit matching and various other incentives, amounting to RM433.8 million, in an effort to boost the Malaysian economy.

China remains Malaysia’s largest foreign investor in manufacturing sector

According to Deputy International Trade and Industry Minister Datuk Lim Ban Hong, China remains Malaysia’s largest foreign investor in the manufacturing sector for four consecutive years since 2016, with 32 foreign direct investments (FDIs) amounting US$452.43million approved in the first six months of 2020. Malaysia approved 79 FDIs worth US$3.74 billion from China in 2019. In terms of total trade, the bilateral trade between Malaysia and China stood at US$80.06 billion from January to August 2020, while in 2019, the two-way trade hit US$123.96 billion. Despite the current Covid-19 pandemic, Malaysia and China continued to show sincere friendship to support each other and overcome difficulties together in these trying times. It is hoped that the corporate elites from both countries would continue to collaborate in sectors such as digital economy big data, innovative economy, as well as industrial innovation and modern agriculture.

DOSM expects Malaysian economic recovery to continue

According to the Department of Statistics Malaysia (DOSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin, the country’s economy is expected to continue its recovery trend based on the smoothed growth rate of leading index (LI), a predictive tool to anticipate upturns and downturns in the economy. The LI registered 108.5 points in August 2020 from 100.8 points in August 2019, maintaining an annual growth of 7.6 per cent. However the LI slipped to negative 0.5 per cent, dragged by the number of new companies registered (negative 0.6 per cent), real imports of semi- conductors (negative 0.4 per cent), and the number of housing units approved (negative 0.1 per cent). Despite the softening LI for the reference month, the growth rate of smoothed LI is consistently above trend and moving upwards. This implied that the Malaysian economy is expected to continue its recovery trend in the months ahead. Nevertheless the downside risk to growth remained amid the recent spike in COVID-19 cases. Meanwhile Coincident Index (CI), which measures the current economic performance, anticipated a better year-on-year growth to register negative 2.3 per cent in August 2020 from negative 2.4 per cent in July 2020. On a monthly basis, the CI rose to 0.5 per cent supported by the increase in volume index of retail trade (0.5 per cent) and real salaries and wages in manufacturing sector (0.1 per cent). The current situation was supported by the performance of volume index of wholesale and retail trade which depicted a sign of recovery to register 130 points with a growth of negative 2.4 per cent year-on-year. This was the smallest negative growth since March 2020. Besides that, in terms of labour force statistics, the number of employed persons improved 0.5 per cent to 15.2 million persons, contributed mainly in the services sectors.

On The Markets

This week, on Thursday (22Oct), the Ringgit eased to 4.1495 against the USD from 4.1470 on Monday (19Oct). Meanwhile, the Ringgit was 3.0593 to the Sing Dollar on Thursday (22Oct). On Monday (19Oct), the FBM KLCI was up 14.27 points (0.95%) to 1518.11 from previous Friday’s close of 1503.84. As at Friday (23Oct) 10:00am, the FBM KLCI continued sideways over the past month at 1500.06. US stocks were higher after the close on Thursday, even as lawmakers worked to strike a stimulus deal but buoyed by a surprise upside on the economic data front, reduced jobless claims and higher home sales. The DJIA rose 0.54% to 28,363.66 while the NASDAQ added 0.19% to 11,506.01.

FBM KLCI 3 Years Chart