It’s All Transitory

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


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.


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%.


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 by Jan 10, 2021. For further information, the public can also email to 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

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

Top 100 Malaysian Brands 2020 Ranking exclusively in Inve$t next week Oct 23 issue

Bursa first virtual listing – Samaiden Group

In an exclusive deal with Brand Finance, Inve$t will be featuring the Top 100 Malaysian Brands 2020 Ranking. Look out for it in our October 23 issue. For a better insight into the power of brands, join the IAA/Brand Finance free webinar. Refer to their advertisement on Page 5 and use the interactive links to register.   

Bursa’s first virtual listing – Samaiden Group

According chief executive officer Datuk Muhamad Umar Swift, Bursa Malaysia welcomed Samaiden Group Berhad as its newest “member” on the ACE Market via a virtual listing ceremony. This first virtual listing is a new offering by the exchange arising from the reinstatement of the conditional movement control order (CMCO) in Selangor, Kuala Lumpur and Putrajaya. In line with the CMCO requirements, the exchange introduced this virtual listing service, enabling flexibility for new issuers during CMCO. Samaiden Group is one of Malaysia’s leading consultants of renewable energy and environmental service provider. Historically, listing ceremonies on the local bourse marked a significant milestone in a company’s life cycle. The event would usually attract many invited guests of the company who come together to celebrate the event with the company’s owners and promoters. Notwithstanding the CMCO, the exchange is happy to maintain this long standing tradition. It will continue to leverage on technology to adapt traditions to the continuously changing environment while always prioritising the health and safety of our stakeholders.

BNM sees spike in property market risks as MCO takes toll

According to Bank Negara Malaysia (BNM), the risks in the real estate sector have risen due to both prevailing oversupply and a re-evaluation of business property needs due to the various movement control orders. In its Financial Stability Review for 1H 2020 Report that was prepared prior to the latest CMCO that has been imposed on the entire Klang Valley, the most apparent loser of the movement curbs was the retail space sector with consumers either shying away due to restrictions or perceived risks amid the Covid-19 pandemic. Overall, property transactions fell by over 25 per cent by volume in the first half and by nearly 27 per cent in terms of value. Amid pre-existing oversupply conditions and changes to consumption behaviour since the pandemic, rental rates in the retail commercial property market are likely to remain depressed in the period ahead. The estimated timeline for a recovery could be as long as 12 months, according to industry experts cited in the report. Another loser was the office space sector citing the shift towards telecommuting and home-working arrangements that were forced by the initial MCO and which were kept up by some firms even after restrictions were relaxed. The report suggested that some firms may make such arrangements permanent or at least incorporate more of these into their operations in the immediate term. Such a trend would further depress both office occupancy and rental rates. Both the retail and office space sectors already had significant overhang prior to the MCO first imposed in March. More worryingly from the report was the conclusion that the property market risk could also extend to the residential market. The pandemic may increase risks of a broader decline in house prices due to a deterioration in income and weaker demand conditions. This in turn would increase risks to financial stability given that loans for the purchase of residential properties account for the bulk of banks’ total property-related exposures. For the residential sector, however, it cited previous findings that four in five mortgages were for owner-occupied homes, which reduced the risk of default. It also said mortgages were also typically held by “higher-income” borrowers with monthly incomes of above RM5,000 who were financially more resilient. Repeated cuts to the overnight policy rate should also support demand for residential property.

Total value of loan repayments reached 70% of pre-moratorium levels

According to Bank Negara Malaysia (BNM) deputy governor Jessica Chew, data showed that the total value of loan repayments had reached 70% of what it was prior to the blanket loan moratorium period. Many borrowers are starting to repay their loans. The data revealed that two million borrowers had been engaged by banks by the end of September, out of which 514,000 were R&R (rescheduling and restructuring) applications received with a 98% approval rate. For businesses, banks approved 6.3 times applications compared to total outstanding R&R loans at the end of 2019. Just this month, Malaysia transitioned into a targeted moratorium after the blanket automatic loan moratorium period ended on Sept 30, 2020. According to BNM’s latest Financial Stability Review Report for 1H 2020, at the start of the blanket moratorium period, more than 95% of individuals and small and medium enterprise (SME) borrowers took up automatic repayment deferment. Up to Sept 25, 2020, a total of 840,000 individuals and SME borrowers had opted out or already started to resume repayments in line with improved economic conditions. This number is expected to increase further following the end of automatic repayment deferment. With the automatic moratorium in place, aggregate impairment and delinquency ratios remained low at 1% and 0.9% of total outstanding household debt respectively (2019: 1.2% and 1.1%). Household asset quality is expected to see some deterioration in 2H2020 and throughout 2021 with the automatic moratorium ended, but banks are well positioned to absorb higher credit losses. At its peak, close to 90% of household borrowers with about 87% of outstanding household loans in the banking system were under the moratorium as most borrowers elected to defer their loan repayments to secure greater flexibility in managing their cash flows during a highly uncertain period. Many of these borrowers would have been able to continue servicing their debt if chosen to. Based on the enhanced financial margin framework, it estimated that household borrowers who may experience difficulties (such as those with negative financial margins) in servicing their debt as a result of income and unemployment shocks are unlikely to account for more than 15% of total borrowers. Among these borrowers, about 1% of total borrowers with 3% of outstanding household debt are expected to default after accounting for financial buffers held and targeted repayment assistance extended to borrowers in need. It also noted that about 40% of potential defaults arise from housing debt with an average loan-to-value (LTV) ratio of 70%, thus limiting financial exposure of affected borrowers and losses for the banking system. It noted that household loan impairments are projected to double — albeit from historically low levels. Higher household impairments are expected to emerge in 2H21 given the extended repayment assistance programmes that will remain in place through the first quarter of 2021 (1Q21) for individuals who have experienced a loss in income.

This week, on Thursday (15Oct), the Ringgit eased to 4.1480 against the USD from 4.1385 on Monday (12Oct). Meanwhile, the Ringgit was 3.0553to the Sing Dollar on Thursday (15Oct). On Monday (12Oct), the FBM KLCI was down 11.92 points (0.78%) to 1518.43 from previous Friday’s close of 1530.35. As at Friday (16Oct) 10:00am, the FBM KLCI was sideways for the week at 1518.33. US stocks were lower after the close on Thursday as fears of a resurgence in Covid-19 cases and a lack of additional fiscal stimulus led investors to safer havens like the USD. At the close in NYSE, the Dow shed 19.80 points (-0.07%) to 28,494.20 while the NASDAQ declined 54.86 points(- 0.47%) to 11,713.87.

FBM KLCI 3 Years Chart

Bursa aims to educate investors on fraud & scams

2020 GDP projection kept at -5.5% to -3.5% despite Covid-19 resurgence

According to Bursa Malaysia Bhd’s chief executive officer Datuk Muhamad Umar Swift, its education programmes are aimed to increase investor awareness of financial frauds and scams, which are on the rise, as financial products become more complex. An educated investor is less likely to fall prey to financial frauds. He sounded the exchange’s ceremonial gong in front of the session’s virtual audience to mark the ‘Ring the Bell for Financial Literacy’ ceremony held on Wednesday in conjunction with World Investor Week 2020. It is a global initiative by the World Federation of Exchanges to promote financial literacy and boost financial inclusion. This year, nearly 40 exchanges have come together in support of this cause. He added that Bursa Malaysia has a strong commitment towards advocating financial literacy in its marketplace and the wider community. It is an important agenda, not just for encouraging retail participation but also to enhance investor protection through education. Bursa Malaysia, over the last 12 months, had accelerated the use of digital technology to effectively reach large segments of the population and promote financial inclusion. In June, the exchange had launched Bursa Academy, a comprehensive one-stop e-learning platform targeted at retail investors across the securities, derivatives and Islamic capital markets. Since its launch, Bursa Academy has continued to grow in traction, registering close to 93,000 users with more than 217,000 pageviews as at end-September 2020. Through its digital learning webinars conducted at the onset of the pandemic, the exchange has reached out to 51,943 investors.

2020 GDP projection kept at -5.5% to -3.5% despite Covid-19 resurgence

According to Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz, there is no further deceleration of the nation’s gross domestic product (GDP) projection despite the sudden rise in Covid-19 infections and the 2020 growth projection remains between -5.5% and -3.5%. The second wave is very much concentrated and more than 60% is confined. We did not implement a movement control order (MCO) so all business activities are allowed to go on. However for this year, Malaysia, along with 150 other countries, is undergoing a recession. But come 2021 the economy would pick up and Malaysia’s GDP growth is expected to be around 5.5% to 8%, a projection that is in line with the stronger GDP forecast by the World Bank and International Monetary Fund (IMF). The government had announced various stimulus packages which would end this year but will continue to look at various avenues to save the people’s livelihood and focus on the recovery momentum in the upcoming Budget 2021.

More small- and mid-cap companies aim to have 30% of board comprising women directors

According to the Securities Commission of Malaysia (SC), gender diversity on boards of listed companies showed slight improvement at 24.82% of the top 100 listed companies as at Aug 31, 2020, up from 23.68% in 2018. Across all listed companies, the ratio stood at 16.96% as at Aug 31 compared with 15.69% in 2018. There are five companies with all-male boards on the top 100 listed companies, namely Comfort Glove Bhd, Focus Dynamics Group Bhd, Frontken Corp Bhd, Guan Chong Bhd and Pentamaster Corp Bhd. Overall, the number of companies with all-male boards stood at 248. The data shows that there’s progress in relation to gender diversity on the boards. However, it appears unlikely to achieve the 30% target [for the top 100 PLCs] by Dec 31, 2020. While the SC, together with other relevant stakeholders will continue to drive greater gender diversity on boards, other measures and interventions are also being considered to accelerate progress. It is worth noting that the number of large companies that had adopted the target of having 30% or more women directors in 2019 remained at 42, the same as in 2018. Among mid-cap companies, however, the number of adopters increased to 28 in 2019 (25 in 2018) and among small-cap companies, the number of adopters rose to 342 in 2019 (302 in 2018) according to data in the CG Monitor 2020. Overall, a total of 412 companies adopted the target in 2019, up from 369 in 2018. There are 682 public-listed companies with at least one woman director on the board, up from 634 in 2018. A total of 165 listed companies here have complied with the target of having 30% women directors, up from 145 in 2018. In 2019, women accounted for 21% of new board appointments. The trend of appointing younger women directors continued, with 41% of women directors below 50 years old and 11% below 40 years old. More listed companies adopted best practices as outlined in the Malaysian Code on Corporate Governance (MCCG) in 2019, compared to the year before. Areas which show an increase in adoption include the two-tier voting process and board practices to determine the remuneration of directors and senior management. The CG Monitor 2020, which is available on the SC’s website, also presents observations on three thematic reviews on the adoption of two-tier resolutions, board remuneration of listed companies on the FTSE Bursa Malaysia Top 100 Index and the conduct of fully virtual general meetings by listed companies since the Movement Control Order.

OPEC, in major shift, says oil demand to plateau in late 2030s

According to the Organization of the Petroleum Exporting Countries (OPEC), the world oil demand will plateau in the late 2030s and could by then have begun to decline in a major shift for the producer group that reflects the lasting impact of the coronavirus crisis on the economy and consumer habits. The prediction, made in its 2020 World Oil Outlook, comes amid a growing number of other forecasts that the pandemic may prove the tipping point for peak oil demand. Oil use will rise to 107.2 million barrels per day (bpd) in 2030 from 90.7 million bpd in 2020, a 1.1 million bpd below its 2030 forecast last year and over 10 million bpd below its 2007 prediction of 2030 demand. Global oil demand will grow at relatively healthy rates during the first part of the forecast period before demand plateaus during the second half. Future demand will likely remain persistently below past projections due to the lingering effects of the COVID-19-related shutdowns and their impact on the global economy and consumer behaviour. While oil use to fuel cars, trucks and industry will rebound as economies recover, it voiced concern that future growth may be partly offset by factors like a post-pandemic shift to homeworking and teleconferencing over commuting, as well as efficiency improvements and a shift to electric cars. Even before the pandemic, rising climate activism in the West and widening use of alternative fuels were putting the strength of long-term oil demand under more scrutiny. This year will also see potential for demand to begin to decline after 2030 given developments like faster adoption of electric cars, more fuel efficiency and a larger reduction in business and leisure travel after the pandemic. This year OPEC, with Russia and other allies, a grouping known as OPEC+, agreed record output cuts of 9.7 million bpd, the equivalent of 10% of global supply.

This week, on Thursday (08Oct), the Ringgit gained to 4.1555 against the USD from 4.1595 on Monday (05Oct). Meanwhile, the Ringgit was 3.0573 to the Sing Dollar on Thursday (08Oct). On Monday (05Oct), the FBM KLCI was up 12.13 points (0.81%) to 1512.43 from previous Friday’s close of 1500.30. As at Friday (09Oct) 10:00am, the FBM KLCI continued marginally upwards for the week gaining only 4.2 points to 1516.63 dragged by a surge in Covid-19 infections, continued political uncertainty and lacklustre regional markets. Meanwhile US stocks were higher after the close on Thursday despite uncertainty over proposed stimulus aid as investors’ focus on value stocks saw gains in the Financial Services, Industrials and Energy sectors. At the close, the Dow added 122.05 points (+0.43%) to 28,425.51 and the NASDAQ climbed 56.38 points (+0.50%) to 11,420.98.

FBM KLCI 3 Years Chart

Malaysian manufacturing returns to growth in June

Malaysia trade surplus above RM10b mark in May

According to IHS Markit PMI’s survey, Malaysia’s manufacturing sector returned to growth in June, rising sharply to 51.0, its highest since September 2018. This was up from 45.6 in May, indicating an improvement in the health of Malaysia’s goods producing sector and stronger economic growth more generally. Output grew at the joint fastest rate in the survey’s history as an increasing number of businesses restarted their operations post MCO. Its chief economist Chris Williamson said such a rapid turnaround in production since the severe collapse in April bodes well for a V-shaped recovery. However, a sustained recovery is by no means assured, and growth could easily lose momentum after the initial rebound. While business expectations continued to improve in June, confidence remains well below levels seen at the start of the year, in part reflecting worries about the impact of ongoing Covid-19 restrictions on demand, both at home and abroad. The survey noted there were encouraging signs that demand conditions were beginning to stabilise during June, with the New Orders Index rising to a six-month high. That said, overseas demand remained particularly fragile, weighing down total order book volumes.

Malaysia’s trade surplus above RM10b mark in May

According to International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali, Malaysia recorded a trade surplus above RM10 billion in May – the fourth time this year – registering a double-digit growth of 14.7 per cent year-on-year (y-o-y) to RM10.41 billion. Major exports in May are E&E products (RM23.5 billion), petroleum products (RM3.94 billion), chemicals and chemical products (RM3.68 billion), palm oil and palm oil-based agriculture products (RM3.6 billion) and rubber products (RM2.71 billion). The country’s total trade in May amounted to RM114.96 billion, down 27.8 per cent from May 2019. Exports totalled RM62.69 billion, contracted by 25.5 per cent while imports decreased by 30.4 per cent to RM52.27 billion. Malaysia’s trade during the first five months of 2020 declined 8.7 per cent to RM688.57 billion compared to the corresponding period of 2019. Exports of rubber products especially rubber gloves registered double-digit growth for two consecutive months, increasing 20.5 per cent or RM461 million in May 2020. The contraction of manufactured goods, which constituted 86.5 per cent of total exports, was due to lower exports of electrical and electronic (E&E) products, petroleum products, manufactures of metal, chemicals and chemical products as well as machinery, equipment and parts.

Malaysia’s current account to rebound in 2021

According to S&P Global Ratings, Malaysia’s current account surplus which has backed the economy against its long-running fiscal deficit, should recover to up to three per cent next year. But for 2020 the surplus is expected to shrink to between 1.0 per cent and 2.0 per cent of the country’s gross domestic product (GDP). This would be due to lower prices of oil and gas and palm oil. The country’s current account balance reportedly came in at 2.9 per cent of GDP for the year until the first quarter. The figure was broadly steady from the average current account surplus of 2.7 per cent of GDP in the preceding five years. Malaysia had for a long time been running on a fiscal deficit but its economy was supported by an external account surplus. However, the surplus has gradually come down over the years, and there was a bit of correction due to the tumble of commodity prices in 2014 and 2015. Over the past five years, Malaysia’s account surplus was averaging 2.0 per cent to 4.0 per cent of GDP. The rating agency expects oil prices to recover over the new few years, and this will most likely lead to a gradual recovery in Malaysia’s trade volume.

Malaysia’s AAA/stable foreign currency rating affirmed

Malaysian Rating Corp Bhd has affirmed its foreign currency sovereign rating of AAA/stable for Malaysia under its national rating scale. It said the AAA rating reflects the country’s several credit strengths, including a competitive and well-diversified economy. Malaysia was, for example, positioned relatively high at number 27 in the 2019 edition of the World Economic Forum’s Global Competitiveness Index 4.0 rankings. It pointed out that Malaysia’s competitiveness has been evident in among other things, a persistent current account surplus, and consequently, a healthy external position. Due in part to this, as well as proactive and practical economic and monetary management, spill-overs from episodic financial market volatility into the real economy have been minimal. The rating agency said the key credit challenges included the disruptive Covid-19 pandemic and the recent crude oil price collapse. Not surprisingly, it said the pandemic was the most worrisome factor with still no vaccine to fight the coronavirus.

Short Selling suspension extended until year end

The Securities Commission Malaysia (SC) and Bursa Malaysia have extended the temporary suspension of short-selling till Dec 31 2020. In a joint statement, the market regulators said the scope of the suspension remains unchanged in that it applies to Intraday Short Selling (IDSS) and Regulated Short Selling (RSS) as well as intraday short selling by Proprietary Day Traders. Permitted Short Selling (PSS) is not affected by the temporary suspension of short selling as PSS is necessary for market makers to market make the relevant securities such as exchange-traded funds efficiently. The temporary suspension which began on March 24 was extended to June 30 and now to year-end is part of a slew of proactive measures to mitigate potential risks arising from heightened volatility and global uncertainties as a result of the Covid-19 pandemic.

Electricity bill discount period extended till December

The Energy and Natural Resources Minister, Datuk Shamsul Anuar Nasarah, announced that domestic electricity users across Malaysia will continue to enjoy discounts of up to 50 percent on their bill till Dec 31, 2020. It is an extension to the previously announced April 1 – September 30 discount period unveiled by Prime Minister on March 27 as part of the Prihatin Economic Stimulus Package. The extension also applies to the 601-900kWh (per month) energy usage and 10 percent discount under the Bantuan Prihatin Elektrik (BPE) which was announced on June 20. The extension will benefit 7.66 million users in peninsular Malaysia, while the 2 percent discount for users in East Malaysia will benefit around 520,000 users in Sabah and 580,000 in Sarawak. He added that in peninsular Malaysia, the extra three months of discounts amounting to about RM392 million will be funded by Kumpulan Wang Industri Elektrik (KWIE), while the Ministry of Finance has allocated about RM6 million for the discounts to be enjoyed by domestic users in East Malaysia.

This week, on Thursday (2July), the Ringgit was 4.2860 against USD from 4.2850 on Monday (2July). Meanwhile, the Ringgit was 3.0755 to the Sing Dollar on Thursday (2July).

On Monday (29Jun), the FBM KLCI gained 6.29 points higher or 0.42% to 1494.43 from previous Friday’s close of 1488.14. But as at Friday (3July) 10:00am, the FBM KLCI, following regional markets, was higher at 1541.62 from Monday, buoyed by Wall Street’s strong gains and NASDAQ’s all time high due to the massive 4.8million jobs rise in the US for June. But as at Friday (3July) 10:00am, the FBM KLCI was rose to 1541.62 from Monday, following regional markets optimism on business reopening globally and the yesterday US reported better than expected employment data report.

FBM KLCI 3 Years Chart

Retail net investment on Bursa soars to RM5.83b YTD

Malaysia’s stimulus packages have softened COVID-19 impact on the economy

The YTD net retail investments on Bursa have increased to RM5.83 billion compared to RM2.45 billion for the whole of 2019. Net investments from local institutions stood at RM8.21 billion. In terms of participation rate, the local institutional participation rate stands at 48.4% with retail investors at 38.3% and foreign investors making up the remainder 13.3%. Trading value hit a record high of RM9.3 billion on May 29 following the surge of retail investors’ participation. It is left to be seen if the momentum will continue now that Recovery MCO is in place and almost all business have reopened and the workforce is no longer stuck at home.

According to Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed, the Government’s initiatives PRIHATIN Rakyat and PENJANA have softened the impact of the COVID-19 pandemic and paved the path towards economic recovery. Malaysia is fortunate to have a very diversified economy that does not depend on just one or two sectors. Food was provided for the people and no Malaysian family is unable to have access to food. Health was prioritized to ensure effective prevention of the pandemic. He said “Going forward from the fiscal point of view, the strategy for the next five to 10 years – we introduced the Shared Prosperity Vision in October 2019 with three main objectives, we want Malaysians to enjoy a decent standard of living. Secondly, we want to close the gaps – development for all – and finally, we want to achieve a united, prosperous nation.” 

Malaysia’s growth slated to average 3.4% in the next decade

According to Fitch Solutions, Malaysia’s growth is expected to moderate to a 3.4% average rate over the next decade compared to an average of 6.4% over the past 10 years, dragged by the likely contraction in 2020 due to the Covid-19 pandemic. It also noted that Malaysia’s active population growth is projected to slow to an average 1% in the next decade compared to 2.3% previously, while slower than before, this will still provide a tailwind to the economy. An added complication could be the boom in household debt fuelled by low interest rate in recent years, which will act as a drag on growth and would pose risks to financial stability if interest rates need to be raised sharply. Household debt as a share of GDP stands close to 85%, which is one of the highest in Asia. While debt service ratios are still manageable, a rise in interest rates could tip service ratios to unsustainable levels, leading to a rise in defaults. It also noted that the Malaysian economy is undergoing a process of external economic rebalancing, which will act as a drag on overall headline real GDP growth. At the same time, it will see private consumption growth outperform, creating investment opportunities in catering for the domestic middle class rather than overseas demand. Additionally, a more domestic focused demand picture will allow the economy to be more resilient to global demand shocks, reducing recession risks.

Malaysia’s debt might hit 55% of GDP

According to Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz, Malaysia’s debt level could hit the statutory limit of 55% of gross domestic product at the end of the year from 52% currently following the implementation of measures to save lives, protect livelihoods and stimulate the economy. The government had announced the RM260bil Prihatin Rakyat economic stimulus plan followed by the RM35bil short-term Penjana economic recovery plan aimed at stimulating the country’s economy that has been hit by the Covid-19 pandemic bringing the government’s direct fiscal injection to RM45bil. He added that the government is very committed to ensuring fiscal discipline is maintained. He said “Moving forward, what is most important is what we can do to improve the situation. The government is committed to fiscal discipline and to reduce the fiscal deficit to below 4% within the next three to four years.”

Malaysia’s Leading Index (LI) slumped to negative 5.5% in April, pointing to weaker growth

According to chief statistician Datuk Seri Dr Mohd Uzir Mahidin from the Department of Statistics Malaysia (DOSM), Malaysia’s Leading Index (LI) which provides an early signal of the future economic direction slumped to negative 5.5% in April 2020 from negative 3.6% in March 2020. The main components driving the 5.6-point downward shift were the number of housing units approved and the number of new companies registered. Considering the weaker performance of the annual LI and the LI growth cycle deviation from the long-term trend, it is anticipated that the economy will remain on the contraction trajectory in the coming months. The year-on-year (y-o-y) CI slipped to negative 19.3% in April 2020 from negative 3.6% in March 2020. This showed that businesses shut down and demand plunged in April 2020. The roll-out of Penjana the short-term economic recovery plan with the thrust of empowering people, propelling businesses and stimulating the economy will help to relieve economic pressures despite the challenging economic outlook. Thus, short-term and long-term economic measures are seen to foster robust economic revival.

This week, on Thursday (25Jun), the Ringgit was 4.2790 against USD from 4.2740 on Monday (15Jun). Meanwhile, the Ringgit was 3.0734 to the Sing Dollar on Thursday (25Jun).

On Monday (22Jun), the FBM KLCI gained 3.98 points higher or 0.26% to 1511.24 from previous Friday’s close of 1507.26. But as at Friday (26Jun) 10:00am, the FBM KLCI was trading sideways at 1491.95 from Monday, indicating the market is looking for clearer direction ahead.

FBM KLCI 3 Years Chart

Company Spotlight on Pintaras Jaya Berhad (9598)

By Evelyn Yong


Pintaras Jaya Berhad (PTARAS) was incorporated as a limited company on 23rd November 1989 by their founder Dr Chiu Hong Keong, a civil and geotechnical engineer and successfully listed on Bursa Second Board in 1994. Then in 1998 it transferred to Main Market. Since then PTARAS has gained a solid reputation and grown as a foundations and pilings specialist leader in the Malaysian construction industry. In 2018, they acquired a Singapore-based piling contractor  Pintary International Pte Ltd in Singapore and its piling subsidiaries, Pintary Foundations Pte Ltd and Pintary Geotechnics Pte Ltd to expand its footprint outside of Malaysia.

Business Model

PTARAS’s core business is in the Malaysia and Singapore construction industry with specialization in foundation and piling systems. Its range of expertise includes earth retaining systems, abasement and substructure works, ground improvement, earth works and civil engineering works with their own large fleet of top-range equipment such as drilling rigs, crawler cranes, vibro-hammers etc. Over the years, it has completed some well-known projects such as MRT (from One Utama station to The Curve station), Pavilion Hilltop, Plaza Mont’ Kiara, I-City – Central Plaza to name a few.

PTARAS also manufactures metal containers via its subsidiary Prima Packaging Sdn Bhd operating in Selangor. The company produces industrial pails and cans and has served the paint industry for 40 years with long-term clients such as Nippon Paint, Colourland and Jotun Malaysia.

Financial Review

PTARAS has a stable dividend payout over the years and maintained a dividend yield at above 7% over past 4 financial years. For FY2019 a total of 20sen per share dividend amounting to RM33,172,960 has been declared with a dividend payout ratio of 127%. Although the dividend payment amount is more than the net profit, the company’s financials is still considered healthy since it has a cash ratio of 0.737.

PTARAS managed the lowest quality of earnings at 1.16 times in FY2019 compared to 2.03 times in FY2018 and 1.33 times in FY2017 and this was due to the interest charged on borrowings and unexpected higher operating expenses. Despite the lowest quality of earning over past 3 financial years, the Quality of Earnings at more than 1 indicates that the company is still having a healthy operating cash flow.

The Current Ratio for FY2019 shows the lowest over past 3 years at 1.98 compare to 5.859 in FY2018 and 4.763 in FY2017. The decline was due to a bad debt being written off amounting to about RM1.5 million. The increasing value of bank borrowings for leasing finance on building, site equipment and investment properties as well as motor equipment were also contributing factors. However, the investment is considered important for the company’s growth and the ratio at 1.98 indicates the company is still financially sound.

PTARAS obtained the highest gross profit margin in FY2019 among past 3 years at 20.89% compared to 14.4% in FY2018 and 20.6% in FY2017. The Singapore division has contributed around 78% of the revenue with full utilization of plant and equipment while the average utilization of the Malaysia division was only about 20% for the construction part and which contributed around 11% to the revenue. The low revenue from the Malaysian construction side was a result of suspension of works involving 2 projects due to non-payments and a deferment of the commencement of a major secured contract.

The Return on Equity of PTARAS is 8.2% in FY2019 while 4.8% in FY2018 and 10.6% in FY2017. Although the unexpected expenses have trimmed the FY2019 net profit for PTARAS, the company still managed to generate a 3.4% increase compared to the previous year and generated an increase in returns for investors.

The Debt to Equity ratio of PTARAS in FY2019 shows 0.086 times and was zero previously. Generally, the benchmark ratio is at 1 and the lower the better to imply a more financially stable position. PTARAS had no bank borrowings before FY2019. In some views, a manageable borrowing is essential to help boost the company’s growth and in this case PTARAS has decided to invest in its construction assets.

Cash Flow Statement

The net cash from operating activities has provided a positive cash flow of RM27.37 million in FY2019 as compared to RM28.58 million in FY2018. The decrease in net cash from operating activities was mainly due to the increase in working capital with a RM53million in negative receivables. Even though the cash flow indicates lesser than last year, the company has enough cash to use to cover their operations.

The net cash from investing activities in FY2019 (-RM46.49 million) was mainly due to the purchases of machinery and assets as well as acquisition of a subsidiary company. The negative cash flow has shown that it is investing in the business for growth.

The net cash generated from financing activities in FY2019 (RM45.04 million) was mainly due to the proceeds from bank borrowings (RM9.5 million) and repayment of finance leases as well as borrowings (RM21.41 million).

Prospect and Challenges

PTARAS revenue in FY2019 has indicated its reliance on its Singapore operations which provided a strong contribution to the overall result. The construction sector has just started to turnaround with good job prospects after several difficult years. However, the operating environment remains tough and competitive. Overheads and labour costs are higher than previous years. In addition, the outbreak of the Covid19 pandemic has halted the progression of the construction works. For FY2019, steel prices were stable but concrete prices were up about 12%. The capital expenditure has been increasing to RM38 million as PTARAS has to rapidly expand its office, storage space and plant and equipment to meet the higher business expansion. These challenges are foreseeable to continue into FY2020.

For the manufacturing division, the revenue of RM36million improved by about 12% from FY2018 due to higher selling prices. But margins remained squeezed by higher tin plate prices averaging RM3,900 per tonne, up by about 5% from FY2018.

Rating System

Return on Equity (ROE) = Poor

Revenue [3 Years CAGR] = Excellent

Net Earnings [3 Years CAGR] = Good

Dividend Yield = Excellent

Interest Coverage = Excellent

Quality of Earning = Good

Pintaras Jaya Berhad Share Price Over 3 Years

My Insight

Based on the calculation on Discounted Earnings Model, PTARAS has an intrinsic value of RM2.40. The current share price of PTARAS is RM2.62 which makes it a fair-valued stock (as at 25 Jun 2020). It has a beta of 0.868 (500 days) indicating that the share price is less volatile than the current market. However, the value is close to 1 indicating it is just slightly behind the market. Based on the computation of Capital Asset Pricing Model (CAPM) on 10 years period, PTARAS has an expected market return of 1.412%.

On the dividend prospect, although PTARAS has maintained a dividend yield of above 7% over the years, in latest 2Q of FY2020, the company has announced a dividend of 4sen per share which is lower than previous years. As with most other companies, PTARAS too has been pressured by the lockdown due to the pandemic crisis. The stoppage in construction works in Malaysia and Singapore is expected to affect the revenue of FY2020. Hence the company will need to depend on sound financials and a strong management to help endure this FY. However for the long-term view, PTARAS still has a good outlook as it has secured in its order book a few big projects in both Malaysia and Singapore. As such the earnings outlook over the next 2-3 years remains positive on the back of its high-quality work and operational efficiency.


The research, information and financial opinions expressed in this article are purely for information and educational purpose only. We do not make any recommendation for the intention of trading purposes nor is it an advice to trade. Although best efforts are made to ensure that all information is accurate and up to date, occasionally errors and misprints may occur which are unintentional. It would help if you did not rely upon the material and information in this article. We will not be liable for any false, inaccurate, incomplete information and losses or damages suffered from your action. It would be best if you did your own research to make your personal investment decisions wisely or consult your investment advisor.