Investments to pour into Malaysia, Boston Scientific plant in Penang to be ready by 2017


 

BATU KAWAN: Malaysia is targeting to attract RM40bil worth of investments from the manufacturing and services sectors this year.

Malaysian Investment Development Authority (Mida) chief executive officer Datuk Azman Mahmud said that of the RM40bil, about RM800mil would be for the medical device segment.

“For the first quarter of the year, we have approved RM651mil investments for the medical sector, compared to RM194.7mil achieved in the same period of 2015.

“The approved medical device investments would create 1,610 job opportunities,” he said.

Azman said this after the ground-breaking ceremony of Boston Scientific new plant at the Batu Kawan Industrial Estate.

The RM40bil investments would come mainly from the United States and Europe, according to Azman.

“We are now negotiating for these investments,” he added.

Deputy Minister of International Trade and Industry (Miti) Datuk Lee Chee Leong represented Minister Datuk Seri Mustapa Mohamed at the event to officiate the groundbreaking ceremony.

Lee also read out Mustapa’s speech.

In the speech, Mustapa said in 2015, the exports of medical devices increased by 15% to RM15.5bil from 2014.

“According to the National Export Council (NEC), revenues from the export of medical devices are projected to grow to RM26bil by 2020.

“In this regard, industry players in Malaysia will be able to enhance their exports by capitalising on the liberalisation of markets such as Asean, facilitating access to the region’s 620 million strong market,” Mustapa said. Also present at the event was Penang Chief Minister Lim Guan Eng.

Boston Scientific’s new medical device manufacturing plant, which will involve investments running more than hundreds of millions of ringgit, is scheduled to be operational in the fourth quarter of 2017.

By David Tan The Star/ANN


Boston Scientific plant in Penang to be ready by 2017 

GEORGE TOWN: Boston Scientific’s new medical device manufacturing plant in Batu Kawan Industrial Park, which will involve investments running more than hundreds of millions of ringgit, will be operational in the fourth quarter of 2017.

Boston Scientific vice-president (operations) Dave Mitchell told StarBiz the group would move production equipment into the facility in the second quarter of 2017.

“The plant will be operational in the fourth quarter of 2017, and we expect to ship our first “Made-in-Malaysia” product before the end of 2017,” Mitchell said in an e-mail.

The construction of the facility will begin in the first half of 2016 and scheduled for completion in the second half of 2017.

Mitchell said the site and facility were designed to accommodate at least 10 years of growth, including new products, additional volume and added capabilities, which might include research and development (R&D) or distribution.

“We anticipate having more than 400 employees at the Penang site within four years of operation, with room to grow significantly beyond that.

“Initially we will focus on building manufacturing capability and capacity in the Penang facility.

“We have the space and ability for additional capabilities at the site, including both R&D and distribution,” he said.

On the outlook of the global medical device market, Mitchell said that according to research firm Euromonitor, in 2016 the medical device industry was expected to record strong growth of almost 6% to reach US$315bil.

“Unlike the traditional markets such as Western Europe and the US, the Asia-Pacific medical device market is projected to to grow and gain a wider market in 2016,” he said.

Boston Scientific was founded in 1979 and is the worldwide developer, manufacturer and marketer of medical devices.

Its products and technologies are used to diagnose or treat a wide range of medical conditions, including heart, digestive, pulmonary, vascular, urological, pelvic health, and chronic pain conditions.

The group has 23,000 employess in 40 countries.

By David Tan The Star/ANN

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Malaysia’s ringgit has done a stunning about-face as China starts buying Malaysian bonds


The market is saying that this recovery in oil prices will be pretty positive for the Malaysian economy,” said Kelvin Tay, chief investment officer for southern Asia Pacific at UBS Wealth Management in Singapore.

SINGAPORE: Malaysia’s ringgit has done a stunning about-face this year, with surging capital inflows turning it into Asia’s best-performing currency from the region’s worst in 2015.

Still, few expect the ringgit to regain all the ground lost last year, as inflows may have peaked as Malaysian risk assets are starting to look pricey to investors and analysts.

The ringgit strengthened 10 percent against the U.S. dollar in January-March, its largest quarterly gain since 1973, Thomson Reuters data shows.

In 2015, the ringgit had its worst year since 1997, shedding 18.5 percent on the back on plunging oil prices, anticipated higher U.S. interest rates and a financial scandal at state-owned 1Malaysia Development Berhad (1MDB).

Driving the currency’s U-turn is the return of foreign investors, who have poured into Malaysian stocks and bonds on better crude oil prices, a surprisingly resilient economy and easier monetary policies from major central banks.

“The market is saying that this recovery in oil prices will be pretty positive for the Malaysian economy,” said Kelvin Tay, chief investment officer for southern Asia Pacific at UBS Wealth Management in Singapore.

In February, exports rose faster than expected. Sales of electrical and electronic products, the biggest item, increased 8.9 percent from a year earlier.

JACKED-UP HOLDINGS

Through the week ended April 1, foreign investors bought a net 5.5 billion ringgit ($1.4 billion) of Kuala Lumpur stocks this year, data from the research arm of Malaysian Industrial Development Finance showed. Last year had total outflows of 19.5 billion ringgit, it said.

Offshore investors have raised their local bond holdings by 11.8 billion ringgit in January-March, central bank data shows, with increased interest in longer-tenor debt. For all of last year, foreigners slashed holdings by 11.1 billion ringgit.

The cautious stance of Federal Reserve Chair Janet Yellen on U.S. rate hikes has caused investors to seek higher yields in Asia, aiding flows into Malaysia.

“This combination of an attractive currency valuation and higher yields in a world of low or negative interest rates is drawing foreign investors back to the local Malaysian market,” said Eric Delomier, Asia fixed income investment specialist for Capital Group of the U.S.

Analysts and investors have concerns, including valuations of Malaysian assets and leadership of the central bank as its internationally-respected governor, Zeti Akhtar Aziz, retires at the end of April, and her successor has not been named.

Malaysian bonds seem “a bit rich,” said Maybank Investment Bank’s fixed income analyst Winson Phoon in Kuala Lumpur. Earlier this month, the 10-year yield fell to 3.77 percent, the lowest since February 2015.

SMALL INFLOWS AHEAD?

“I don’t expect to see a repeat large inflows in months ahead, although the direction should remain slightly positive,” Phoon said.

On share valuations, “Malaysia is actually not particularly cheap or attractive, compared to other markets,” Tay of UBS said. “We don’t think earnings growth has actually improved among Malaysian corporates.”

Local stocks were trading at about 17.3 times the past 12 months’ earnings, according to Thomson Reuters data. That compared with 11.8 times for Indonesian stocks, according to exchange data.

Zeti has led Bank Negara Malaysia (BNM) since 2000, and investors are hoping for a successor with her credibility to help Malaysia’s standing at a time of political crisis for Prime Minister Najib Razak, chairman of 1MDB’s advisory board.

“Given the near-term challenges to a new BNM governor, oil prices and festering political risk from 1MDB, among other things, the ringgit’s upside is limited,” said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore.

His year-end target for the ringgit is 3.70 per dollar, 16 percent appreciation from its 2015 closing. Late Friday, the ringgit was at 3.90.- Reuters

China starts buying Malaysian bonds

Ong: ‘The Chinese government is keen to buy more Malaysian bonds

KUALA LUMPUR: China’s government has started buying more Malaysian government securities (MGS) and this inflow of new foreign money could rise to 50 billion yuan (RM30bil) in total, according to International Trade and Industry Minister II Datuk Seri Ong Ka Chuan.

In an exclusive interview with The Star, Ong said a senior representative of the Bank of China told him about this development recently when he met with the bank on issues pertaining to the use of yuan and ringgit in Malaysia-China direct trade.

“This could be one of the key factors contributing to the strength of the ringgit lately. China’s purchase of our MGS, which I am under the impression could rise to 50 billion yuan, will be very positive for our currency as it shows China’s confidence in our economy,” Ong said.

Other factors that had contributed to the strength of the ringgit in recent weeks included the recovery of crude oil prices, softer US dollar and the successful debt rationalisation of 1MDB, he added.

If China were to buy RM30bil worth of MGS, it would mean supporting 8.5% of Malaysia’s debts in the current MGS market. According to Bank Negara’s website, the value of outstanding MGS stood at RM352.06bil as at April 5, 2016.

Meanwhile, Malaysia’s debt markets saw inflows of RM11.5bil, versus RM1.4bil of outflows in February. The March foreign inflow was the largest monthly inflow since May 2014, according to a Nomura research note on April 7.

The inflows pushed foreign holdings of MGS to a historical high of RM171.5bil, the Japanese research house said. As a result, foreign ownership in outstanding MGS has risen to 48.7%.

Ong noted that Chinese Premier Li Keqiang had pledged to support the Malaysian economy – which was hit by a slowdown, local political problems, heavy outflow of funds and consequent plunge of the ringgit – when he visited Kuala Lumpur last November.

On Nov 23, the Chinese leader announced at a local forum that China would buy more MGS, issue yuan bonds in Kuala Lumpur and grant local institutional funds a quota of 50 billion yuan under the Renminbi Qualified Foreign Institutional Investor programme to invest directly in Chinese equities in the mainland.

The following day, the ringgit reacted positively gaining about 1% and the currency stabilised at around 4.25 to a US dollar in early December. MGS also gained.

“I was told China would use its reserves to buy our bonds. Its international reserves are high, at US$3.21 trillion (RM12.5 trillion) in March. With this development, I don’t think our ringgit will fall to 4.46 again,” said Ong.

Last month, Bank Negara said there were now more foreign governments and central banks holding MGS. A total of 29% was held by these two groups and 13% by pension funds.

The presence of these long-term investors is seen as reducing the risk of Malaysia facing sudden and massive outflows of capital in the event of unfavourable conditions, just like what had occurred last September, which saw the ringgit weakening to a multi-year low of 4.46.

Foreign inflow into the local stock market might be another factor that has boosted the ringgit. According to a Credit Suisse report, Malaysia saw a record net foreign equity inflow of RM6.1bil in March, which contributed to the ringgit’s 10.3% rise against the dollar in January-March 2016. At late trades on Friday, the ringgit stood at 3.9096.

Due to the recent new inflows, Bank Negara’s foreign exchange reserves had risen to RM412.3bil (US$96.1bil) as at March 15 from RM408.5bil (US$95.1bil) as at Jan 15.

This reserves figure is an important buffer against capital flows and has an impact on the ringgit and the sovereign credit rating of the country. Moody’s recently noted this buffer has improved.

Ong also said China would like to see Malaysia conducting roadshows in the mainland so that there is better understanding of Malaysia’s fundamentals and its bonds.

“The representative of Bank of China also told me the Chinese government is keen to buy more MGS, but they also hope our central bank could go there to market our MGS. I have conveyed this to Bank Negara. It is up to them to act,” says Ong.

Ong, who is also MCA secretary-general, noted that China’s huge direct investments had also boosted the ringgit’s sentiment.

The ringgit rose sharply in March partly due to the conclusion of the sale of 1MDB’s energy assets to China’s state-owned China General Nuclear Power Corp for RM9.83bil, as the absorption of all the debts of Edra Global Energy Bhd has reduced the systemic risk to pubic finance, banking system and economy.

Ong is confident that Kuala Lumpur is able to attract more major Chinese investments into the country this year due to Malaysia’s strong bilateral ties with China as well as the many free trade agreements – including the Trans-Pacific Partnership Agreement – Malaysia has signed with various countries and groupings.

By Ho Wah Foon The Star

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Malaysian home prices may go up 5~8%; heart-warming CNY family ties with EcoWorld 全家福


From Left :- Director of Valuation Services Chee Kok Thim , Rahim & Co Executive Chairman Senator Tan Sri Dato’ Abdul Rahim Abdul Rahman, DIrector Real Estate Agency Robert Ang and Director of Research & Strategic Planning Sulaiman Saheh after Press conference and Q&A session – Review on Malaysian Property Market and the prospects of 2016 – on Thursday Feb 4 2016.

KUALA LUMPUR: The property market is expected to remain challenging, with the hike in house prices slowing to between 5% and 8% this year, compared with 7% to 10% last year.

Rahim & Co Chartered Surveyors Sdn Bhd director Sulaiman Akhmady Mohd Saheh expects prices to rise but sees only marginal price gains for the residential sector.

“Depending on location and type of property, some may see price consolidation as the gap between sellers’ asking prices is closing towards the buyers’ expected prices,” he said during the firm’s property market review.

He said that there were concerns that the number of transactions may drop this year, as new property launches could face more challenges and slower take-up.

He said that based on average annual household incomes to the price of average terraced homes, housing affordability could have slightly improved last year compared with 2014 although house prices in general continued to increase.

“Nevertheless, housing affordability is still a big concern especially in urban centres and major towns throughout the country.

“The ratio improved from 3.6 in 2014 to 3.4 last year, which indicates that an average terraced house would cost an average household or family in Malaysia 3.4 times its annual gross income,” said executive chairman Tan Sri Abdul Rahim Abdul Rahman.

Note that the least affordable terraced house in Malaysia last year was in Sabah, with a 5.7 times ratio, Penang, 5.3 times, Kuala Lumpur, 5.2 times and Sarawak, at 4.5 times.

He said that home ownership continued to be beyond the reach of many Malaysians, especially the younger generation.

“The ratio indicate that generally our houses are still moderately unaffordable. For Sabah, Penang and Kuala Lumpur, average prices of terraced houses are even categorised as severely unaffordable,” he said.

He added that the pace of construction and completion for affordable housing needed to be improved in order to address the issue of affordability.

“It is progressing but there should be more effort, for example in PR1MA. Among these, PR1MA is to provide 175,000 units where 74,399 units are currently in various stages of construction. “At present, only 10,000 units is due to be completed by the end of the year.

“That 74,399 units under construction should be intensified instead of completing 10,000 units by the end of the year,” he noted.

For the commercial sector, particularly the office sector, it will still remain challenging as absorption of new supply coming into the market is expected to slow down.

More office buildings are expected to undergo refurbishment to prevent tenants from relocating to newer office buildings.

However, there are concerns on whether the retail property sector might be heading into a glut in supply as a number of malls are being launched within Klang Valley.

Last year, retail sales were affected by the goods and services tax, which was implemented from April as well as a weakening ringgit, driving up costs and lowering consumer spending.

By Nadya Ngui The Star/Asia News Network

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Heartwarning CNY video on family ties goes viral

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Building strong ties: A video grab from EcoWorld’s ‘Family Portraits’ on its official YouTube page captures the essence of maintaining family values.

PETALING JAYA: A heart-warming Chinese New Year video showing a man’s life as seen through his family photographs has been released by EcoWorld Development Group Bhd.

The three-minute video titled Family Portraits, which can be seen on YouTube, has been viewed more than 78,000 times so far yesterday. It is meant to educate the viewer on maintaining strong family values. The video shows glimpses of the man’s life-long journey from early childhood until adulthood.

All throughout, viewers will notice that family plays a huge role in the main character’s life as he encounters the pivotal moments in life that are familiar to many of us. The loving embrace of his family is never too far away even as he grows up and leaves his parents to pursue a career and start a family of his own.

Family Portraits successfully conveys its message through very little dialogue, relying mostly on visual images that reflect the mood and spirit of the central theme of the video.

The touching video, while light hearted and filled with funny moments, sends a strong message that clearly emphasises the importance of family ties and the togetherness that is an integral part of the Chinese New Year festival.

“The love of a family is life’s greatest blessing. This Chinese New Year, capture the warmth and happiness with a family portrait and start a collection of beautiful memories to look back on for generations to come,” posted the company on its YouTube page.

Those who wish to view the video may do so at EcoWorld’s official YouTube page.

Earlier this week, the company announced that it was offering a special Chinese New Year treat for buyers of the few remaining units of EcoWorld’s Eco Meadow Phase 1 homes by giving rebates of RM22,888 on top of an additional 5% early bird rebate from now until Feb 22.

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Public Bank Q4 profit up 19%; RM5bil earnings for 2015


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Public Bank Head Office in Kuala Lumpur – Founder and chairman Tan Sri Teh Hong Piow said expectations were for intense competition for market share

Public Bank Q4 profit up 19% but warns of challenges ahead


Public Bank Bhd, the country’s third largest bank, reported an increase of 19% in its fourth quarter net profit which stood at RM1.49bil compared to the net profit of RM1.25bil for the same period a year earlier but warns of challenges ahead.

Founder and chairman Tan Sri Teh Hong Piow said expectations were for intense competition for market share.

“And the more stringent capital and liquidity requirement will continue to put pressure on net interest margin and return on equity,” Teh said in a statement.

The bank’s increase in its fourth quarter ended Dec 31, 2015 net profit was boosted largely by a net writeback of loan impairment allowances and higher net interest income, it said in the statement yesterday.

It also announced a second interim divided of 32 sen per share for shareholders, bringing total dividends for the year to 56 sen per share or a total payout of 42.7% of the bank’s net profit last year.

For the entire FY15, Public Bank’s net profit stood at RM5.06bil which translates to a net return on equity of 17.8%, against a net profit of RM4.52bil in FY14 while revenue stood at a higher RM19.18bil compared with RM16.86bil earlier.

Public Bank continued to be the most efficient banking group in the country with its low cost-to-income ratio of 30.5% compared to the banking industry’s average cost-to-income ratio of 45.5%. It also continued to maintain a healthy level of capital with its common equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio standing at 10.9%, 12.0% and 15.5% respectively as at the end of 2015, after deducting the second interim dividend, it said.

In FY15, the bank grew its loans by 11.6%, aided by its retail banking segment and extension of credits to small and medium enterprises while total customer deposits saw a growth of 8.9%.

Its domestic customer deposit grew by 7.5%, higher than industry’s growth of 1.8%.

As at the end of 2015, the group’s impaired loan ratio was at 0.5%, significantly lower than the industry ratio of 1.6% while its loan loss coverage ratio of 120.8% as at the end of last year was also higher compared to the local banking industry’s ratio of 96.2%.

Teh said growing fee-based revenue remained a key strategic focus of the Public Bank group.

“Arising from the group’s initiative to drive growth of its non-interest income in order to sustain better return for its shareholders, the group’s non-interest income increased by 22.4% in 2015 as compared to 2014, mainly contributed by higher income from its unit trust business, foreign exchange related transactions and fee income from banking operations,” he said.

Shares of Public Bank finished yesterday higher at RM18.38, up 4 sen.

 

Public Bank’s 2015 earnings cross RM5bil mark 

 

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Public Bank’s Founder and chairman Tan Sri Teh Hong Piow

KUALA LUMPUR: Public Bank Bhd recorded a stellar set of results, with net profit surpassing RM5bil for the financial year ended Dec 31, 2015. It rewarded shareholders by declaring a second interim dividend of 32 sen per share, bringing the full-year dividend to 56 sen.

The total dividend paid and payable for 2015 amounted to RM2.16bil and represents a total payout of 42.7% of the group’s net profit for 2015.

Public Bank posted a net profit of RM5.06bil, up 12% from RM4.52bil it recorded a year ago, translating to a net return on equity of 17.8% for 2015. Revenue was 13.8% higher at RM19.18bil compared with RM16.86bil in 2014.

In its filing with Bursa Malaysia on Wednesday, the bank said it owed its improved earnings to higher net interest income, higher non-interest income and lower loan impairment allowances.

However, these were partially offset by higher operating expenses due to higher personnel costs.

Gross loans grew 11.6% to RM273.4bil driven by growth in property financing, financing of passenger vehicles and lending to SMEs.

Deposits from customers were 8.9% higher to RM301.2bil, which partly contributed to the higher net interest income during the year.

“The results reflected the consistent execution of the group’s organic growth strategy which continues to deliver favourable results to our customers and our shareholders,” said founder and chairman Tan Sri Teh Hong Piow in a statement.

He added that the bank’s robust funding position was mainly supported by its strong retail franchise and large domestic depositor base of over five million customers who continue to place their trust and confidence in the group in safeguarding their funds.

Public Bank’s impaired loan ratio improved to 0.5% as at end-December 2015.

For the fourth quarter, the bank posted a 19% year-on-year gain in net profit to RM1.49bil while revenue was 8.8% higher at RM4.93bil.

Moving forward, the group said it will leverage on its internal strength and capitalise on its customer service and service delivery to maintain its leading market share in the domestic retail segment, supported by steady demand for home mortgages, vehicle financing and SME lending.

By Wong Wei-Shen The Star/Asia News Network

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Malaysia revised budget 2016 to GDP growth 4.0%~4.5% from original 4.0%~5.0%


Video:

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PUTRAJAYA: The Government’s recalibrated Budget 2016 reinforces its pledge to look after the people in times of economic challenges.

The adjustments – reflected in 11 measures to be undertaken – largely serve to cushion the impact of the increase in the cost of living.

In presenting the adjustments yesterday, the Prime Minister said the recalibration and restructuring of Budget 2016 centred on the need to ensure the economy remained on a strong growth trajectory and to protect and safeguard the welfare and wellbeing of the people.

“These measures are proactive, transparent and realistic, in tandem with the current global economic challenges,” Datuk Seri Najib Tun Razak said in his 46-minute address to a packed audience comprising ministers, senior civil servants, economic stakeholders, foreign missions and representatives of non-governmental organisations.

Also present were Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah, Chief Secretary to the Government Tan Sri Dr Ali Hamsa, Treasury secretary-general Tan Sri Dr Irwan Serigar Abdullah and Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz.

Najib said the recalibration was within the range of initiatives and allocation of the Budget approved by Parliament last year, and emphasised that Malaysia was neither in economic nor technical recession.

He noted that other countries were also affected by the slowdown, with world trade anticipated to be moderate from 4.1% to 3.4% and economies such as the United States, Brazil and China expected to grow at a slower pace.

“This trend proves that we are not alone in facing the global economic challenges. Other countries too, are affected by the uncertainties,” he said, adding the drastic decline in world crude oil prices had a significant effect on the nation’s revenue.

The strengthening of the US dollar also affected the economy and the ringgit, which depreciated by 11.3% from RM3.77 in June last year to RM4.25 as of Wednesday, said Najib.

Other currencies also affected are Brazil’s Real which depreciated by 23.2%, China’s yuan (-5.7%), Cana­dian dollar (-11.3%), Russian ruble (-29.3%) and Singapore dollar (-5.6%) against the US greenback.

“In fact, the ringgit is underva­lued and does not reflect the true economic fundamentals. However, the ringgit is expected to better reflect the strength of the economy when the global financial market stabilises and oil prices recover to more reasonable levels,” said the Prime Minister.

Sources: The Star  mazwin nik anis, foong pek yee, ho wah foon, joseph kaos jr, adrian chan, tho xin yi, tashny sukumaran, victoria brown, nurbaiti hamdan, akil yunus, hanis zainal, joash de silva, andrebecca grace rajaendram

Malaysia can withstand oil shocks

Meeting the media: (from left) Irwan, Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar and Bank Negara governor Tan Sri Zeti Akhtar Aziz at the 2016 Budget recalibration forum

PUTRAJAYA: Malaysia can withstand sustained oil price decline to US$25 (RM105) per barrel.

According to secretary-general of Treasury Tan Sri Mohd Irwan Serigar Abdullah, the various scenario analyses conducted by the Government showed that Malaysia would still be able to sustain its economic growth and its recalibrated Budget 2016 would remain on track as long as crude oil prices remain above US$25 per barrel.

He, however, acknowledges that if oil prices were to go any lower than that, there will be great challenges, not only for Malaysia, but also for the global economy.

“In our estimation (for Budget 2016 revision), we even went to US$25 per barrel and we find that the budget will still be intact … that is not a problem because we have a lot of measures in place,” Irwan said.

“But if it goes further down to US$20 or US$15 per barrel, it will be a world recession! Every oil-producing country will face a problem,” he told reporters at a forum after the Budget 2016 recalibration announcement here yesterday.

The Government had been forced to revise its Budget 2016 three months after tabling it in Parliament due to the continuous decline in global crude oil prices.

The recalibrated Budget 2016 saw the Government lowering its average-price assumption for Brent, which is the international oil benchmark, to US$30-US$35 per barrel, compared with US$48 per barrel under the original Budget 2016 when it was unveiled in October last year.

Under the recalibrated Budget 2016, the Government’s revenue is expected to decline by 3.5%-4.2% to RM216.3bil-RM217.9bil, compared with the originally estimated RM225.7bil, while its total spending (operating and development expenditure) will be cut by 3.0%-3.6% to RM255.7bil-RM257.2bil from the initially proposed RM265.2bil.

“Most of the forecasts by analysts and research institutes expect oil prices to average at US$30-US$40 per barrel this year. But we have taken a more conservative estimate of US$30-US$35 per barrel.

“If it goes below US$30 per barrel, we can still sustain economic growth; it won’t affect the budget that much, given the various mechanisms we have at hand,” Irwan said.

Brent crude was traded at around US$33.50 per barrel yesterday. Last week, prices of the commodity fell to a 13-year low of around US$28 per barrel.

Irwan said the Government was expecting additional income from various sources to act as “buffer” if oil prices declined further.

He pointed out that the Government had yet to add this additional income into its revenue projection for the revised Budget 2016.

Among the new measures expected to generate extra income for the Government were the sale of telecommunications spectrums and greater reinforcement to reduce leakages in duty-free islands such as Labuan.

As for managing its expenses, Irwan said the Government would continue to optimise and slash unnecessary spending to manage its operating expenditure; and prioritise high-impact projects and programmes for the country’s growth and people’s well-being, while postponing non-critical projects to manage its development expenditure.

“In terms of reprioritising our development expenditure, what we are going to do is to go further into project-implementation planning.

“There are some projects that will be shifted to beyond 2016 but some important projects that will have an impact on people such as rural roads, schools and hospitals will continue to be implemented,” Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar said.

Wahid, together with Irwan and Bank Negara governor Tan Sri Zeti Akhtar Aziz, were the three panellists at the forum yesterday.

Essentially, Wahid said, the Government would continue to pursue its overall fiscal consolidation targets.

On that note, the fiscal-deficit to gross-domestic-product (GDP) target for 2016 remained unchanged at 3.1% under the revised budget.

Malaysia’s GDP growth, however, had been revised to a narrower range of 4.0%-4.5% for this year, compared with 4.0%-5.0% under the original Budget 2016.

“We have detected moderation in domestic demand,” Zeti said. “The key to support domestic demand is to boost private consumption by putting money into the pockets of consumers through income transfers,” she added.

She pointed out that the newly introduced measure to allow employees’ EPF contribution to be reduced by 3% between March 2016 and December 2017 was one of the ways to boost consumer spending.

However, she stressed: “These measures are only temporary because retirement savings are important.”

By Cecilia Kok The Star

Main points of Budget 2016 revision

KUALA LUMPUR: Datuk Seri Najib Tun Razak had on Thursday announced the revised Budget 2016 in the face of the fall in crude oil prices which has affected the government’s revenue.

The Prime Minister said the government revenue would be based on Brent crude oil at US$30 to US$35 per barrel when compared with the US$48 when it prepared the Budget 2016 last year.

He also said the economy was expected to grow at a slower pace of between 4% and 4.5% when compared with the earlier forecast of 4% to 5%.

Later, Ministry of Finance Secretary-General Tan Sri Dr. Mohd Irwan Serigar Abdullah said the recalibrated Budget 2016 remains on track even if Brent crude oil prices were to deteriorate further to US$25 per barrel

Main points of Budget 2016 revision:

  • Revised Budget 2016 will enable the government to save RM9bil
  • Govt will maintain the Goods and Services Tax
  • Fiscal deficit target at 3.1% of GDP
  • Govt revenue to be based on Brent crude oil at US$30 to US$35 per barrel from US$48
  • Trimmed GDP growth outlook for 2016 to 4%-4.5% from 4%-5%
  • Govt debt to be reduced to 55% of GDP
  • Govt will not peg the ringgit
  • Govt to reduce EPF contributions for employees by 3% from March 2016 to December 2017, contributors from employers unchanged
    Govt to give special tax relief of RM2,000 to individual tax payers earning RM8,000 a month for year of assessment 2015
  • Malaysia to restructure foreign labour system
  • Govt to give special tax exemption for some selected income groups
  • Govt to allocated RM5bil for the Higher Education Fund (PTPTN)
  • Govt will liberalise the control on import quotas or approved permits for eight agricultural produce for temporary period. It includes raw coffee beans, buffalo meat, beef and mutton
  • To enhance the efficiency and amount of tax collection, govt will double compliance and auditing efforts on tax evaders
  • Govt to give special consideration on relaxation for penalty on taxpayers to encourage them to come forward and declare their past years’ income. The tax arrears must be settled before 31 December 2016.
  • For duty-free islands, to reduce leakages which resulted in revenue loss of nearly RM1bil, the government will restructure the selling channel of cigarettes and liquors limited to duty-free outlets licensed by the Royal Malaysian Customs Department (RMCD)
  • The free duty treatment on imported vehicles in duty-free islands will be tightened.
  • However, the restructuring of sales on cigarettes, liquors and vehicles will not affect the tourists and locals who are residing in these duty-free islands
  • Govt will optimise the revenue from the telecommunication spectrum through a redistribution and bidding process which will be implemented soon

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Developers shift focus to higher-priced residential properties in Penang; Busy in construction sector 2016



Projects worth RM41bil in Penang next year

 
Chan: ‘We still foresee the volume and value transactions of properties to contract in 2016. However, the contraction this time won’t be so sharp.” (Default Alternate Text: “Chan: ‘We still foresee the volume and value transactions of properties to contract in 2016. However, the contraction this time won’t be so sharp.

GEORGE TOWN: Five developers will undertake RM4.33bil in property projects in Penang next year despite a challenging year for the property market.

The developers planned to price their mostly residential properties from between RM480,000 and RM3.3mil.

The price range came on the heels of this year’s launches of between RM200,000 and RM400,000 in strategic locations.

The developers would be shifting their focus to higher-priced residential properties.The condominium units in Bayan Lepas will be from 1,000 sq ft and priced from RM480,000 while three-storey houses with built-up of 5,300 sq ft will be priced at RM3.3mil in Seri Tanjung Pinang.

The developers are IJM Land Bhd with gross development value (GDV) of RM415mil, Ideal Property Group (RM1.46bil GDV), Hunza Properties Bhd (RM600mil GDV), Eastern & Oriental Bhd (RM650mil GDV) and Mah Sing Group Bhd (RM1.2bil GDV).

Real Estate & Housing Developers’ Association (Penang) chairman Datuk Jerry Chan told StarBiz that developers could be shifting their focus to properties priced from RM400,000 as there was a large supply of housing priced between RM200,000 and RM400,000 targeting first-time buyers.

This did not mean that buyers have lost interest in affordable housing with built-up of 900 sq ft and priced from RM500 to RM600 per sq ft.

Chan pointed out that developers would continue to build housing in the affordable range to leverage on the higher density for plots of land but there would be a gradual shift to the “non-affordable” range.

He added that there would be fewer launches in 2016, due to the difficulties in obtaining bridging and end-financing loans from banks.

Referring to the incoming supply of housing that were currently under construction, Chan said this would be spread over a five- to 10-year period, depending on market demand and the size of the schemes.

The National Information Property Centre (Napic) report revealed that the state would see an incoming supply of 72,114 units into the market.

According to the Napic report, the existing stock of houses in the state stood at 393,303, compared with 383,484 in the first half of 2014.

“We still foresee the volume and value transactions of properties to contract in 2016. However, the contraction this time won’t be so sharp,” Chan said.

Ideal executive chairman Datuk Alex Ooi said the group had developed 4,840 units of affordable projects on the island for the last two years.

“We have sold about 60% of these properties. Moving ahead, the strategy is to move into the non-affordable range priced between RM400,000 and RM600,000.

“Ideal Property still has around 300 acres of land bank on the island. We have some 25,000 units of properties planned for the land bank.

“There are still 8,000 units of properties with more than RM4bil in GDV to be implemented over the next 10 years, priced between RM400,000 and RM600,000,” Ooi said.

‘Moderate to flat’ outlook

Ooi expected property market conditions to be “moderate” to “flat” in the coming year.

Mah Sing (North) senior general manager Law Wei Keong said the company had recently completed a survey on the preference of housing products in the country.

“The study revealed that a majority of the 6,000 surveyed favoured houses priced in the range of RM500,000 to RM700,000,” he said.

Of the RM2bil worth of housing projects launched in the country this year, about 16% were priced from RM1mil, while the remaining 84% are below RM1mil, according to Law.

IJM Land senior general manager (north) Datuk Toh Chin Leong said despite the weak market sentiment, the company would continue to launch properties priced below RM800,000.

“It will be a slow year for the property market in 2016,” Toh said.

 TrehausIJM Land’s pipeline of projects for next year in Penang included the RM232mil Waterside Residence in The Light Waterfront project next to Penang Bridge, the RM64.7mil Trehaus Condo Villa scheme in Bukit Jambul, and the RM118.4mil Senjayu Terrace project in Jawi, South Seberang Prai.

The Trehaus and the Waterside Residences scheme would be launched in the second quarter of 2016, while the Senjayu Terrace would be introduced in late 2016.

“The price of the three property schemes ranged between RM730,000 and RM1.3mil,” he said.

Meanwhile, Ideal would be launching the RM460mil Forestville, RM600mil Queens Waterfront Residences, and RM400mil Camerlina, located in Bayan Lepas, priced between RM480,000 and RM800,000.

“There is still growing need for mid-range houses that is reasonably priced, located within mature township, surrounded and supported by amenities such as schools with good accessibility, lower density with lifestyle concept,” he said.

Eastern & Oriental will develop the recently launched RM482mil Tamarind and 50 units of terraced houses with a RM168mil GDV in Seri Tanjung Pinang.

The Tamarind units, ranging between 1,000 sq ft and 1,770 sq ft, are priced around RM691,000 and RM1.16mil, while the terraced units, with built-up areas of 5,300 sq ft, are priced from RM3.3mil.

Its general manager (marketing and sales) Christina Lau said the Tamarind was scheduled for completion in 2019.

No date has been set for the completion of the 50-terraced properties.

Mah Sing to unveil Ferringhi Residence 2

Mah Sing will launch the RM735mil Ferringhi Residence 2, the RM350mil Icon Residence and an unnamed RM150mil project in Southbay City, Batu Maung.

“We are targeting the Ferringhi Residence 2 launch in the first quarter,” Law said.

The Ferringhi Residence 2 consists of three blocks offering 632 units with built-up areas from 1,208 sq ft to 2,910 sq ft, priced from RM775,265.

Law said the pricing for the unnamed project would be below RM680 per sq ft.

“The units have built-up areas of 750 sq ft to 1,000 sq ft,” he said.

Meanwhile, Hunza will develop the RM600mil Alila 2 project in Tanjung Bungah, 270 units which have built up of between 1,900 sq ft and 3,300 sq ft, priced from RM775 per sq ft.

“We will promote the 9.8acre project in Indonesia, Hong Kong, and Singapore early next year.

“The key attractions are the size of the units, which are extremely scarce on the island nowadays,” group managing director Khor Siang Gin said.

By David Tan The Star

Construction sector to be busy in 2016 with projects worth RM83bil 

KUALA LUMPUR: WITH over RM83bil worth of infrastructure jobs to be awarded next year, it is going to be a busy year for the construction sector in 2016.

“The 11th Malaysia Plan unveiled in May 2015 has reaffirmed the strong pipeline of construction jobs till 2020. The record awards of project delivery partners (PDPs) for four major infrastructure projects with total value of RM80bil have further reiterated the potential works,” said Maybank IB Research in a recent strategy report. This flow of contracts if they are rolled out according to plan, is a new record, outpacing the high of RM28bil dished out in 2012.

The strong job flows are expected to be driven from new tenders in public transport, oil & gas downstream infrastructure and water-related jobs.

New award phase for the Klang Valley Mass Rapid Transit Line 2, is set to take off from the first half of next year while the other rail project coming on strean is the Klang Valley Light Railway Transit (KVLRT) 3. The Gemas-JB double track, which is being reviewed, is another potential.

The total value of rail-related construction jobs was estimated at RM39bil in the medium term, said CIMB Research. “These could be broken into 17-20 chunky packages worth between RM800mil and RM1.5bil each, excluding underground portions,” the research firm said in its recent outlook report.

As for highways, there are the RM4.2bil Damansara-Shah Alam Highway (DASH), the Sungai Besi-Ulu Kelang Elevated Expressway (SUKE), and the remaining West Coast Expressway (WCE) packages to be awarded. In East Malaysia, eleven more packages of the 1,090km Pan-Borneo Highway is expected to be tendered out in phases next year.

As for oil and gas infrastructure, Petronas’ Refinery and Petrochemicals Integrated Development (Rapid) project in Pengerang, Johor, is expected to see investments worth RM18bil based on Budget 2016.

On water-type contracts, CIMB Research reckoned that over RM2bil worth of jobs could be dished out and this excludes potential jobs from the private sector side.

The country’s strengthened ties with China have also injected further optimism into the construction sector.

“Chinese contractors have expressed interest in the rail projects, specifically, the Gemas-JB double track rail and Kuala Lumpur-Singapore high speed rail. Local contractors could partner them in bidding for the projects. With the Chinese companies’ ability to offer attractive financing packages, this would raise their chances of winning the projects, while allaying concerns on project funding issue,” said Maybank Research.

One other key project to watch for is the Penang Transportation Master Plan (PTMP) that is said to have contract value of RM27bil.

As for stock picks, Maybank IB Research has Gamuda Bhd at its top pick. The stock was a likely beneficiary of the PTMP and could also clinch additional jobs from the mega rail projects including KVLRT 3 and Gemas-JB double track rail, the research firm said.

CIMB Research also has Gamuda as its big-cap pick for the largest exposure to MRT 2. Among small/mid-cap it has Muhibbah Engineering Bhd as the preferred stock for the company’s US-dollar theme and exposure to Petronas’ Rapid.

“In the water segment, Salcon Bhd could emerge with a bigger share of wins. The company’s tender book currently stood at RM1bil to RM2bil,” said CIMB Research.

On the other hand, Public Invest Research has a neutral “call” on the sector as “most of the counters under our coverage were already fairly valued.”

“Currently, the construction index is priced at 13 times one-year forward earnings, which is also equal to its long-term mean. Hence, we believe the sector is fully valued for now, with most positives already priced in.”

As for stock picks, the research firm favours WCT Holdings Bhd as its job replenishment was better than expected with RM2.7bil clinched to-date, bumping up its unbilled orderbook to more than RM5bil.

“Hock Seng Lee Bhd is expected to benefit from the Pan Borneo project, while Gamuda also looks attractive after the stock dipped below our fair value.”

By Gurmeet Kaur The Star

Immigration & education drive property prices; Secondary property sales may take lead


Immigration and education are two drivers of property prices in cities in the next 10 years to 2024, said property consultancy Knight Frank International.Its Asia-Pacific reaearch director Nicholas Holt said up to 76,000 Ultra High Net Worth Individuals (UHNWI) from China have immigrated the last 10 years – the highest – while up to 72% of Malaysia’s UHNWI send their children abroad, the highest. (See graphics below).

The cities include London, New York, Hong Kong and Singapore.

Holt was presenting his Wealth Report 2015 updated till third quarter 2015 at the 25th National Real Estate Convention in Kuala Lumpur.

He defined UHNWIs as those with US$30mil and above in investible income excluding their primary residence.

In an Attitudes Survey involving 600 advisors of UHNWIs by Knight Frank, the advisors – bankers included – said about 10% of their Malaysia’s ultra-high net worth clients were considering changing their domicile in the earlier part of this year.

“This compares with an overall 12% in Asia who are considering changing domicile,” said Holt.

Data show drop in primary market transactions

SUBANG JAYA: The ongoing slowdown in the local property sector could see transactions in the secondary property market overtaking that of the primary market.

Citing data from the National Property Information Centre (Napic), PPC International Sdn Bhd managing director Datuk Siders Sittampalam said the economic slowdown has affected transactions in the primary property market this year.

“Siders: ‘Total volume of transactions in the primary market has dropped, and this has also resulted in values dropping. >>

“Total volume of transactions in the primary market has dropped, and this has also resulted in values dropping.

“As such, there will come a time when the secondary market will lead the primary market,” he said at a press conference after the launch of the 25th National Real Estate Convention (NREC) 2015 yesterday.

Siders said it was difficult to provide a specific timeline on when he expected transactions in the secondary market to exceed that of the primary market.

“In terms of value, the primary market will find it harder to match the secondary market due to rising land and building costs,” he said.

Siders said he expected transactions in the primary market to improve once cooling measures imposed on the local property sector have been relaxed.

“Once the economy picks up and Bank Negara backs off on its cooling measures, the primary market will pick up again.”

He also said a drastic hike in interest rates will have an impact on the property sector.

“Over the last few years, the property market had been steadily growing due to various measures such as the developers interest bearing scheme (DIBS). Because of these measures, pricing in the market has been distorted.

“Now, when people have committed to their loans, especially youths and first time buyers, and there is a sudden hike in interest rates, there will be a dip in the market.

“Loans go bad and many properties will go under the hammer. This will not be a healthy market.” Siders said he was hopeful that any interest rate hike by the central bank would be a “sustainable increase.”

Bank Negara maintained its overnight policy rate in September at 3.25%.

The NREC was organised by the Royal Institution of Surveyors Malaysia and the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, Malaysia.

The event highlighted major concerns for the future of the real estate industry in Malaysia during the current economic period.

BY EUGENE MAHALINGAM

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