The single worst financial decision


Buying a new car is regarded as a waste of money

WHEN I discussed whether to buy a car or a house first in my last article, I received a lot of feedback from friends and readers. Someone even sent me an interesting article entitled “Buying a New Car Is the Single Worst Financial Decision”.

The remark was made by Davis Bach, a self-made millionaire who is also one of the American best-selling financial authors, a motivational speaker and an entrepreneur.

That was a bold statement but not without basis. In the article published by CNBC Make It, David Bach said, “Nothing you will do in your lifetime, realistically, will waste more money than buying a new car.”

He pointed out that a car’s value drops 20% to 30% by the end of the first year. In five years, it can lose 60% or more of its initial value. And, most people actually borrow money to buy a car.

“Why would you borrow money to buy an asset that immediately goes down in value by 30%?” says Bach.

His views concurred with the idea I have been sharing in this column over the years.

In my last article, I mentioned the value of my friend’s car dropped 70% from RM140,000 to RM40,000 over eight years. On the other hand, another friend who bought an affordable apartment during the same time, enjoyed a huge capital appreciation as the apartment increased from RM100,000 to more than RM200,000 during the same period.

Both borrowed money to buy their house and car respectively. However, there is a clear contrast between the two items by looking at their long-term values. A house is an appreciating asset, and a loan on such an asset I like to call a “Good Debt”; while a car losses money, and is therefore deemed as “Bad Debt”.

Not only does a car depreciate in value, but owning a car also comes with expenses such as petrol, maintenance, licence, toll, insurance and parking costs. A person who owns a normal sedan car and travels about 1,000 km per month, can easily spend about RM1,500 per month for car loan repayment and other relevant expenses.

With ride-sharing services (such as GrabCar in Malaysia, and Uber & Lyft in other countries) becoming so convenient, and with the LRT and MRT networks being more developed, we can now choose to be car-loan free. Imagine having your own “driver” and able to use your time productively to read a book or relax when being caught in traffic jam. We are now able to enjoy this with ride-sharing services on call.

For a more economical approach, you can even opt for a “hybrid” transportation mode by combining ride-sharing and public transport services.

Chua, a reader from Muar wrote me an email last month. He shared his experience of not having purchased a property when he was young and only bought one when he was in his mid-30s due to some misperceptions.

“Looking back, how wrong I was! But today, there are just as many graduates who think just like myself when I was in my 20s and 30s. Therefore, your constant reminder to Malaysians is valid and practical. Instead of a new car, get a used car. Buy a medical insurance policy, pay EPF and try to buy a small property. These should be the priority of any young Malaysian,” Chua wrote in his email.

Bach, the self-made millionaire said, “If you’re spending US$500 (RM2,000) a month for that car, well, that’s US$6,000 (RM24,000) a year, not including the car insurance or the gas (petrol). That could be two months or three months of your income. Run the numbers and then ask yourself: Do you really need a car that’s nice or could you buy a car that’s less expensive – maybe a little older – but still looks good and runs?”

That’s the sentiment that I had when I wrote about buying a house first before a car.

Buying a car may not be the single worst financial decision for everyone. There are different financial priorities at different stages of life. However, it may be the case if you buy a brand new expensive nice car prior to owning any long-run appreciating asset or investment, like a house!

Food for thought by Alan Tong

Datuk Alan Tong has over 50 years of experience in property development. He was the World president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email bkp@bukitkiara.com

Related posts:

Better to buy a car or a house first?

 

Putting our house in order

Restructuring our household debt

Leaving a legacy by buying a house first before a luxury car …

 

Rich Gen-Y kids making their own success

 

Housing affordability is an income issue, what’s with the fuss?

How to allocate your money wisely: lessons from my father

 

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Flat property market seen for Penang


https://img3.penangpropertytalk.com/wp-content/uploads/2019/02/pptrends.jpg

 

Resilient values: Geh believes that both landed and high-rise units in prime locations will hold their values.

 

Research house says it will be buyers’ market over the short term

THE Penang property market is expected to remain flat yet resilient this year and could bottom out within the next two years.

CBRE|WTW Research in its Real Estate Market Outlook 2019 says it will be a buyers’ market over the short term, particularly for residential properties.

“Under the prevailing subdued market, launches of smaller, single phase developments would reduce in the short-term but larger integrated mixed developments or townships would carry on.

“The property market is anticipated to remain generally soft and flat in 2019. This is in consideration of the challenging global and domestic economy, rising cost of living, as well as supply-demand imbalances, particularly in the high-rise residential sector.”

The property consultancy however adds that Penang’s property market still demonstrates resilience, aided further by recovery in the economy.

“Meanwhile, the current excess in supply will effectively be absorbed by the market. Benefits of reforms undertaken by the new government could also trickle down to the local property market.”

Raine & Horne Malaysia senior partner and FIABCI Malaysian chapter president Michael Geh says transactions and values will most likely remain flat, at best.

“As residential market activity, in terms of transacted units, has been falling over the last few consecutive quarters, at best the year-on-year levels will hold. In light of the overall soft market, property values are not expected to rise in 2019,” he tells StarBizweek.

Malaysian Institute of Estate Agents Penang chairman Mark Saw says the Penang residential market will see “some correction” this year.

“However, long-term planning on infrastructure improvements will go some way towards ensuring those locations currently only accessible by cars are better served with public transport.

“For those who have been holding back their launches the past few years, there may be a need to start selling, especially if land were bought on loans.”

He adds that measures taken by the state government will help to spur the Penang property market.

“With the waiver of the 3% approval fee for foreign purchasers starting from Feb 1, Penang must be seen to be investor friendly and foreign buyers should be encouraged to come.”

Meanwhile, Knight Frank Malaysia in its latest research report Real Estate Highlights for the Second Half of 2018 says the general outlook for the Penang property market “remains mixed without a dominant overall trend”.

“However, resulting from the interplay of supply and demand as well as the general economy, different sectors are performing differently. The residential sector, which is the leading sector in terms of total volume and value of transactions, has shown some improvement during the first half of 2018.

“It registered a 5.4% increase in the volume of transactions year–on-year. This trend is expected to continue.”

Saw says prices of landed property in Penang are unlikely to drop.

“However, the high-rise market will remain challenging and developers will need to continue to offer incentives as well as alternate options of home ownership.

“Developers with deeper pockets or less loans may look into rent-to-buy schemes in tandem with the recently-announced National Home Ownership Campaign by the government.”

Geh believes that both landed and high-rise units in prime locations will hold their values, while speculatively-purchased condominiums will be affected.

“Government announcements on transportation plans, infrastructure and stimulus plans are among actions that can help stimulate the Penang property market tremendously,” he says.


Easing overhang

CBRE|WTW Research says the overhang within the Penang residential property market is likely to ease over the next two to three years, with developers offering special packages and postponing launches, all of which would allow demand to catch up with supply.

“The medium to long-term outlook remains positive given that various policies and efforts are being undertaken by the government,” it says.

Citing data by the National Property Information Centre, CBRE|WTW Research says there are over 2,200 high-rise overhang units worth nearly RM1.6bil as at the second quarter of 2018.

“This is due to the abundant apartment and condominium units launched, constructed and completed within the past three-to-five years, coupled with the high rejection rate of end financing, unreleased bumiputra units and low demand for units in secondary locations.”

In terms of unsold residential units, CBRE|WTW Research says around 34% or 1,300 of the overhang units are in the RM500,001 to RM1mil per unit price range.

“On the other hand, units priced at RM1mil and above form the bulk (58%) of the total overhang valued at approximately RM1.75bil.

The property consultancy adds that high-rise projects, particularly, are experiencing increased sales pressure amidst an oversupply situation.

“Under the challenging market, developers have resorted to offering incentives such as rebates on selling prices, zero or low downpayment, easy instalment payment of up to 24 months, deferred payment of (say) 30% of the selling price over five years at 0% interest, free legal fees and one year’s maintenance fee.

“Complimentary packages include interior design package, kitchen and electrical appliance vouchers as well as referral and reward schemes.”

Office and retail markets

Knight Frank Malaysia says the office sector is still enjoying stable rents and high occupancies, pointing out however that the overall occupancy rates in some buildings have dropped marginally.

“This favourable state of affairs is expected to continue for the next few quarters as new supply is only expected to come on-stream beyond 2020.”

CBRE|WTW Research says pent-up demand for newer and prime offices persists in Penang.

“New supply of offices in Penang in the past ten years was limited. New prime purpose-built office buildings completed within the past three years such as HunzaTower and Straits Quay Commercial Suites are enjoying commendable occupancy rates, although charging new benchmark rentals.

“Newly set-up offices, as well as offices relocated from older office buildings, comprise the tenants in these new buildings. Office occupiers are seeking newer office buildings that serve their contemporary needs and enhance their corporate image.”

It adds that pent-up demand for newer and prime offices would continue in the short-term, as most of the upcoming purpose-built office buildings are scheduled for completion in year 2020 and beyond.

“Older buildings are likely to experience a slide in demand thus lower rentals and capital prices.”

CBRE|WTW Research says stable occupancy rates can be anticipated, adding that rentals will increase.

“As at mid-2018, the overall occupancy rate of purpose-built office buildings in Penang declined slightly to 77% from 82% year-on-year. Occupancy rates are anticipated to generally remain in the region of 80% in near future.

“Rentals of prime office space in Georgetown were between RM2.50 and RM3.50 per sq ft. Prime offices outside George Town, particularly newer buildings in Bayan Lepas/Bayan Baru and Tanjung Pinang (Tanjung Tokong), registered higher rentals of RM3.30 to RM4.50 per sq ft.”

Due to increasing maintenance cost, CBRE|WTW Research says rentals of office space in most buildings are expected to increase in the short term.

“The overall average rental of prime offices would also increase, pulled-up by new entrants with higher asking rentals.”

As for the retail sub-sector in Penang, Knight Frank Malaysia says the current supply remains unchanged, adding that a more challenging scenario is anticipated for this sector with new supply to come on-stream with the expected opening of IKEA in Batu Kawan in the current quarter and the extension of Penang Times Square.

“Other retail centres/expansion of retail centres will be adding on the supply in 2020 and 2022.”

CBRE|WTW Research says the retail sector in Penang is likely to be flat, buffered by cautious optimism.

“Mixed performances will be more evident between the better and under-performing retail complexes, of which the latter is likely to drag down the overall occupancy and average rental rates.

“With abundant supply in the pipeline, shoppers can look forward to exciting shopping experiences.”

It says the overall occupancy rate stood at 72% as at mid-2018, with 79% for Penang island and 63% for Seberang Prai.

“Retail lots on the ground floor of selected prime retail complexes on the island commanded higher gross rental rates of up to RM45 per sq ft.”

Meanwhile, Geh says better-managed malls in prime locations are sustainable.

“These malls have sustained rental rates but vacancy factors have certainly increased by 5% to 10%.

“There is no oversupply but a rise in vacancy factors. Going forward, the general population’s purchasing trend remains cautious and wary of big-ticket items.”

Saw is less optimistic about the Penang retail sector, saying “this sector has been saturated for a few years and there is no end in sight”.

By Wugene Mahalingam, The Star

Related:

 

 

Real Estate Market Outlook 2019 – CBRE | WTW – C H Williams Talhar …

 

 

Property sector expected to recover in first half

Property sector expected to recover in first half

 

Property sector may take up to two years to recover

https://www.thestar.com.my/business/business-news/2019/02/22/property-sector-may-take-up-to-two-years-to-recover/

 

 

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Property goodies with Govt and developers offering various incentives


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A new challenge for the EPF

 

 


 

MANY international experts and organisations have expressed concern about the global economic outlook this year.

Tighter monetary policy, weaker earnings growth and political challenges are confronting major economies.

The long-running US-China trade war and uncertainty around the UK’s
exit from the European Union have soured business and consumer sentiment
in recent months. However, the risk of a recession remains small, say
economists.

Govt-linked companies (GLCs) shake-up as they sing a different tune


EPF Building in Kuala Lumpur.- Art Chen / The Star..
On the rise: A man walks past the Employees
Provident Fund headquarters in Kuala Lumpur. Remuneration of GLC chiefs,
senior management and directors have been on the uptrend following a
transformation initiative to make them more competitive commercially. 

 

Overpaid CEOs and social duties of GLCs set for review

The new government has clearly said that there is a need to review the role of GLCs and the remuneration paid out to their top executives

A GLANCE at one of the annual reports of the country’s government-linked companies (GLCs) reveals that its chief human resource officer earned close to a million ringgit or about RM80,000 per month, last year.

Other senior personnel were also compensated with generous remuneration, with its chief executive taking home over one and the half million ringgit in financial year 2017.

More importantly, this was at a company that had courted much controversy in recent times over allegations of mismanagement and under-performance.

Such a scenario, however, is not uncommon at GLCs, where remuneration of key executives tend to run in the millions but performances sometimes leave much to be desired.

By definition, GLCs are companies where the government has a direct majority stake via their entities such as Khazanah Nasional, Employees Provident Fund, Permodalan Nasional Bhd (PNB), the Armed Forces Fund (Lembaga Tabung Angkatan Tentera) and the Pilgrims Fund (Lembaga Tabung Haji).

In recent years, remuneration of GLC chiefs, senior management and its directors have been on the uptrend following a transformation initiative to make them more competitive commercially.

The thinking behind this is that in order to attract talent – subjective as the definition of that may be – top dollar should be paid.

Some, however, argue that GLCs should in fact prioritise national service a little more.

Universiti Malaya’s Faculty of Economics and Administration professor of political economy Edmund Terence Gomez says GLCs have social obligations.

“What this essentially means is that GLCs cannot operate in a purely commercial manner as they also have to look at the social dimension,” he says. “The GLC professionals have many times articulated that they are doing national service. Going on that alone, one can argue that they shouldn’t be paid private sector salaries,” Terence adds.

And so it is now, there is a disquiet building up among GLCs following the change in government.

The new government has clearly said that there is a need to review the role of GLCs and the remuneration paid out to their top executives and senior management.

In this regard, the Pakatan Harapan government is understood to be mulling over making drastic changes in the appointment and remuneration of key directors at GLCs which include government agencies.

It was reported recently that the Council of Eminent Persons, headed by Tun Daim Zainuddin, who was Finance Minister in the 1980s, has requested details of the salaries of some of the top executives at GLCs as part of the review.

Already, there have been a couple of GLC chief executives who have left and more of this is expected to materialise over the coming weeks.

“It appears to be a purge of Tan Sri Nor Mohamed Yakcop’s boys,” quips an industry observer, referring to the veteran politician who was instrumental in the revamp and transformation of Khazanah which started in 2005 and subsequently, driving the GLC transformation initiative.

UM’s Terence says if the new government is to appoint new individuals, it must ensure that the process is transparent.

“If you are removing these people, who are you replacing them with? More importantly how are you selecting these people?

He adds there needs to be a transparent mechanism in the appointment of this new breed of professionals that will be brought in and what must also be looked into is the kind of check and balances being put in place to ensure governance.

“There should be a debate on these things,” he says.

Economist Yeah Kim Leng believes that a review is timely and appropriate as part of a deeper institutional and structural reform.

“The broad aims are firstly, to reduce excessive payoffs which don’t commensurate with performance and secondly, to address the widening wage and benefits gap between the top and bottom rungs of the organisation,” he says.

Such rationalisation will result in a more equitable salary structure as well as raise the generally depressed wages of middle management and support staff which form the largest number of most organisations, Yeah adds.

Unfair advantage

The role of a head honcho, be it at a GLC or non-GLC, is seldom a walk in the park.

CEOs make critical operational decisions that affect everything from future business directions to the health of a company’s balance sheet and employee morale.

The job generally entails long hours and tremendous pressure to meet expectations of shareholders and stakeholders.

But again, while local GLCs have been key drivers of the economy, one key feature is that they are ultimately owned by the government.

This, some argue, give GLCs unfair advantages such as access to cheap funding and political patronage over their private counterparts.

So, is running a GLC more of a stewardship role as opposed to an entrepreneurship role?

Therein lies the issue that in turn will have a bearing on the remuneration levels of GLC heads.

Minority Shareholders Watch Group (MSWG) chief executive office Devanesan Evanson puts it this way.

“Entrepreneurs have their skin in the game in that there are often the major or substantial shareholder in a company.

“It is in their direct interest to perform as this will be translated into share price appreciation which will impact the value of their shareholdings – this is motivation to grow the entrepreneurial spirit,” he says.

On the other hand, GLC heads do not have their skin in the game save for their limited shareholding through ESOS or share grant schemes.

“If a GLC loses money, the impact on them is limited. They may be prepared to take perverse risks as the eventual loser is the government-linked investment companies or GLICs (and the minority shareholders of the GLC), which eventually are the people who are the members or subscribers of the GLICs.

“In that way, we are not comparing apple to apple and yet, we need talent to run GLCs.

“So we can conclude that, we need to pay for talent at GLCs but it should not be as much compared to what one would pay the CEO of a firm which he started,” Devanesan says, noting that remuneration of some of the GLC heads have risen too fast in recent years.

Rising remuneration is a given, others say, as the government had recruited top talent from the private sector to helm these companies.

A case in point is  Axiata Group Bhd , which has done relatively well with the infusion of the “entrepreneurial spirit” under the helm of president and group CEO Tan Sri Jamaludin Ibrahim, who has helmed the Khazanah-owned telco since 2008, they point out.

Prior to that, Jamaludin was with rival Maxis Communications Bhd, a private company controlled by tycoon Ananda Krishnan.

Other GLCs which have performed consistently over recent years include banks like Malayan Banking Bhd
and CIMB Group Holdings Bhd which have expanded their operations out of Malaysia, carving a brand name for themselves regionally.

Under a 10-year transformation programme for GLCs initiated in 2005, companies were given quantitative and qualitative targets to meet as measured by key performance indicators.

Now, the 20 biggest GLCs currently make up about 40% of the local stock market’s market capitalisation.

One of the principles under the programme was also the national development agenda, which emphasised the principle of equal growth and development of the bumiputra community with the non-bumiputras.

Asian Strategy and Leadership Institute (ASLI) Centre of Public Policy Studies chairperson Tan Sri Ramon Navaratnam says the purpose of establishing GLCs to encourage bumiputras to participate in business has largely been fulfilled.

“Now that the bumiputras are on a strong footing in the corporate sector with able leaders who have wide experience, it (GLCs) could be seen as an erosion to the welfare and progress of the smaller and medium-sized industries, particularly those where other bumiputras are involved,” Ramon says.

Having said that, he says although many GLCs are doing well, they have performed well “mainly because of protective policies and monopolistic practices”.

“The time has come in this new Malaysian era for more competition and less protection.”

Benchmarking

Still, if simplistic comparisons are to be made, the CEOs of the country’s two largest GLC banks, Maybank and CIMB for instance, took home less than the CEO of the country’s third largest bank, the non-GLC Public Bank Bhd
last year.

In 2017, Public Bank’s managing director Tan Sri Tay Ah Lek took home some RM27.8mil in total remuneration while Maybank’s Datuk Abdul Farid Alias earned RM10.11mil and CIMB’s Tengku Zafrul Abdul Aziz made RM9.86mil.

Across the causeway, a survey of CEO remuneration of Singapore-listed companies by one financial portal shows that Singaporean GLC CEOs earned 31% more than their non-GLC counterparts in 2017.

Singapore’s Temasek Holdings-owned DBS Bank, which is Singapore’s largest bank, paid out S$10.3mil (RM30.36mil) to its head honcho, while in the telecommunication sector, SingTel’s remuneration to its top executive was some S$6.56mil (RM19.34mil) for the most recently concluded financial year.

By definition, Singapore GLCs are those which are 15% or more owned by the city-state’s investment arm Temasek Holdings.

UM’s Terence does not think Singapore should be a benchmark for Malaysian companies.

“Singapore is a much smaller country and the manner in which they operate in is also different … their GLCs are deeply conditioned by their holding company, which is the Minister of Finance Incorporated,” he says.

MSWG’s Devanesan notes that determining remuneration is “not exactly science” as there are many parameters to be considered.

Some of the factors to note include whether the companies are in a monopolistic or near monopolistic position and the performance of the GLC heads over the years.

“Based on these parameters, we can instinctively know if a GLC head is over-remunerated,” he says. Over in China, state-owned Industrial and Commercial Bank of China (ICBC), the country’s largest lender by assets, paid out about 63.43 yuan or about RM39mil in total remuneration before tax for the year 2017 to its top executive.

Notably, the Beijing-based ICBC’s net profit’s was at a whopping US$45.6bil (RM182bil) in 2017.

Sources: Gurmeet Kaur and Yvonne Tan The Star

GLC singers sing a different tune

Some officials singing ‘Hebat Negaraku’.

 Swan song for some after ‘Hebat Negaraku’ post-GE14 – CEO think video to showcase musical talents

 

 Several heads of government-linked companies (GLCs) have come together bin a heartwarming music video titled “Hebat Negaraku” (my country is great).

 GLC chiefs show off musical talent in ‘Hebat Negaraku’ music video …

The heads of government linked companies (GLC) who sang a song that later became the theme song for the Barisan Nasional’s election campaign have distanced themselves from the controversial music video.

Those who sang and played musical instruments in the music video titled “Hebat Negaraku” (my country is great) said they did not know the video or the song was going to be a political theme song.

There have been repercussions on the CEOs who appeared in the music video. They have come under scrutiny for making a song that was used as propaganda by Barisan in the last general election.

Three of the GLC bosses in the video have either retired or resigned since the new government took over.

Several more have been speculated to leave in the coming weeks or months but nothing is cast in stone. Sources said this is because most of the CEOs are not known to have campaigned openly for either Barisan or Pakatan Harapan.

“None of the CEOs had a clue it would become a political song. Do you really think the CEOs would have done it if they knew it would become political?” asked one of the CEOs who appeared in the video but declined to be named.

“We have said no to so many things, and we could have easily have said no to this if it was political.’’

Another CEO said he was approached and felt it was “more of a patriotic song and nothing more.”

“At that point in time, we did not think much (of the repercussions). Hebat Negaraku was announced as Barisan’s campaign theme long after the recording was made. We did not know that.’’

Another CEO added: “We thought it was a casual thing when we were approached as some of the CEOs have their own band.’’

It all started when several CEOs were called to be part of a music video and they thought it was to showcase the musical talents of 14 GLCs heads, plus staff members of the 20 key GLCs.

The song is about the greatness, advancement and inspiration of Malaysia. It was released on YouTube on March 22 but has since been taken down.

But fingers have been pointed at the GLCs bosses who made the music video because it became a political video.

Datuk Seri Shazalli Ramly has been said to be the main orchestrator for the group in terms of making the music video. He was also said to be the branding chief for Barisan’s elections campaign.

Barisan lost the elections held on May 9 to Pakatan, which has since formed a new government and is scrutinising all the performance, processes, remuneration and procurement of the government and GLCs.

Shazalli quit his job as group CEO of  Telekom Malaysia Bhd (TM) on June 6. Malaysian Resources Corp
Bhd (MRCB) group managing director Tan Sri Mohamad Salim Fateh Din has retired as group MD last week and it was something he had planned to do.  Malaysia Airports Holdings Bhd
Datuk Badlisham Ghazali did not get his contract renewed. All three were in the music video.

There is a GLC secretariat that now comes under the purview of TM, which was earlier parked under Khazanah Nasional Bhd. The secretariat organised the making of the music video, according to sources. The CEOs were called to attend a session and within a few hours it was all done with no prior rehearsals.

“When you are called, it could be difficult not to comply since it is the secretariat that called you. We have to oblige but we really did not know it was going to be a campaign slogan. This is really unfortunate that it has turned out like this.

“We were surprised when we found out it was a party slogan but it had already been done and what can we do, we are in the picture,’’ said another CEO.

Not all CEOs who were invited took part in the video. Prior engagements were the reason used for declining to appear. – By b.k. Sidhu The Star

Related:

Trapped in US-China trade war when 2 elephantine economices fight …


Tit for tat: The trade scuffle between US and China threatened to escalate to a full-scale war when Beijing fired back with punitive taxes on a wide range of US goods entering China – Reuters

The dispute between the two countries is real and has escalated. Malaysia is feeling the heat, but its palm oil sector is set to shine in this conflict.

THE US-China trade war drummed up by Washington last month threatened to escalate to a fullscale confrontation when Beijing fired back last week with punitive taxes on a wide range of US goods entering China.

And Malaysia, being an open economy with huge exports to China and the United States, is feeling the heat of the tit-for-tat measures rolled out by the two largest economies in the world.

President Donald Trump has given several reasons to act against China. A key reason is trade imbalance and US large trade deficit, which he attributed to China.

In 2017, China exported US$505bil (RM1.95 trillion) in goods to the United States, which in turn exported US$135bil (RM522.4bil) in goods to China.

The Trump administration has also alleged that China sought to misappropriate US intellectual property through joint venture requirements, unfair technology licensing rules, purchases of US technology firms with state funding and outright theft.

Last month, Trump slapped Beijing with punishing tariffs on the import of steel and aluminium products, and warned that there would be higher taxes on about 1,300 Chinese products worth US$50bil (RM193.5bil).

China, which has often stated that it does not want a trade war as it would hurt all, retaliated last Monday by imposing additional duties of 15% to 25% on 128 US products worth up to US$3bil (RM11.6bil). Pork, recycled aluminium, steel pipes, wine and fruits are on the list.

After being criticised by its own elites that it was too soft in its retaliation, China’s State Council announced on Wednesday that it planned to impose additional tariffs of 25% on 106 US products into the country, including soybeans, aircraft and cars. The import value of the goods on the list in 2017 was US$50bil.

Beijing’s Wednesday response came soon after the US Trade Representative Office released details of 1,333 Chinese imports worth about US$50bil that it planned to hit with 25% tariffs, with emphasis on industrial and hi-tech goods.

Global Times, the official mouthpiece of the Communist Party of China (CPC), said in an editorial on Wednesday before its State Council’s statement: “China’s countermeasures should deal a heavy blow, hitting what the United States fears most. We strongly recommend starting with US soybeans and corn products. The ruling GOP will pay a huge price.”

It noted that nervous US soybean farmers, who were big supporters of Trump during the presidential campaign in 2016, had run advertisements to oppose launching a trade war against China.

China’s former finance minister Lou Jiwei reportedly said at a recent forum: “If I were in the government, I would hit soybeans first, and then cars and planes.”

By imposing punishing tariffs on US soybeans, Beijing will hurt US major farmers, given that China was the second largest importer of US agricultural products last year, buying US$19.6bil (RM73.5bil) of goods with 63% spent on soybeans.

As reducing US soybean imports would leave a shortfall for Chinese edible oil consumption and animal feed, this would need to be filled by imports from other countries. One source could be palm oil from Malaysia.

“Malaysia’s palm oil growers would stand to enjoy a windfall gain if China reduces the intake of soybeans from the United States, though our competitors like Indonesia also hope to sell more to China,” says economist Lee Heng Guie, executive director of SocioEconomic Research Centre (SERC).

In fact, the futures contracts of Malaysian crude palm oil (CPO) rose on Wednesday after China’s announcement. The positive impact on CPO prices continued on Thursday.

However, the local stock market – like other markets in the region – plummeted, as many investors believed more tit-for-tat measures covering more industries would be unveiled in this spat. The FBM KLCI lost 1.88% to close at its nineweek low of 1,815.94 points.

The local stock market has been weakening due to fear of this trade war. The technology stocks are particularly jittery as the US tariffs are seen as targeting mainly the Chinese electrical and electronic (E&E) and machinery sectors.

“In our view, the sectors that could be affected by the US-China trade war due to recently proposed import tariffs are semiconductors, building materials and ports in Malaysia,” said CIMB Research in a report on Thursday.

As Malaysia exports many E&E products and parts to China, local players within this supply chain are likely to feel the heat.

“We estimate Malaysia’s ultimate exposure to the United States – including via intermediate goods to China for assembly into final products destined for the United States – at 10% of GDP, about half of which is in electronics products,” Nomura Research says, adding that another 8% is exposed to China’s final demand.

While exports to China account for 13.5% of total annual exports of Malaysia, exports to the United

States make up 9.5%. And E&E products form the biggest export item to both countries.

Nomura sees US trade protectionism and a sharper-than-expected slowdown in China as posing risks to the Malaysian economy, as exports account for 71% of its GDP.

This trade conflict has been listed by Moody’s as a global risk this year.

Consultancy Oxford Economics says the escalation of the trade war could knock 0.5% off global growth in 2019.

Although earlier this year many analysts and business groups in the United States had warned that Washington would not win in this trade war, Trump charged ahead nevertheless.

The modern and economically mighty China, under President Xi Jinping, will punch back decisively and swiftly, many have warned.

The pain points of China are not easy to find. Over a decade ago, Beijing had realised it could not rely on the low value-adding export processing industries.

The country is now focusing on developing its high-technology sector and expanding the domestic consumer market to cut down on reliance on exports.

With so many odds against America, why would Trump insist on taking on China?

According to an analysis by Hong Kong-based International Chinese Newsweekly, the rise of American nationalism and Trump’s gearing up for the mid-term elections is the key reason for the president’s plunge into a trade war.

His focus is on midterm elections and keeping a Republican majority in Senate and Congress. But he will have to deal with the possible backlash from the first round of USChina trade war once it goes full on.

Apart from the soybean sector, the United States’ aircraft and automobile sectors will be hit.

According to South China Morning Post, Boeing Corporation delivered 202 planes to China in 2017, or 26% of its global total. The company has projected that in the next 20 years, China will need 7,240 new planes valued at about US$1.1 trillion (RM4.26 trillion).

On the auto sector, the United States sold more than US$10bil (RM38.7bil) worth of vehicles to China. Last year, General Motors sold 3.9 million cars to China, or almost 39% of its global total. The company expects sales in China to grow to five million by 2020.

The Hong Kong newspaper also warned that if China discourages its nationals from visiting the United States, the impact on US tourism will be painful.

In 2016, three million Chinese visitors and students spent US$33bil (RM127.7bil) while in the United States. The US Department of Commerce expects Chinese visitors rise to 5.7 million by 2021.

The other weapon China could weild against Washington is off-loading its US treasury bonds. This will have an impact on the dollar and US interest rate.

Bejing’s holding of US treasury bonds was close to US$1.2 trillion (RM4.6 trillion) at end-2017.

How long the current trade tension will last is anybody’s guess, given Trump’s unpredictable character. The world still remembers that he showered Xi with praises before turning his back on China.

But one thing is certain: if US protectionism and the trade war escalates, it will hurt not only the two major economies, but also countries which have trade links with the two powers.

“The global repercussions will be highly disruptive and damaging on trade and economy if the US-China trade war deepens and impacts more products and countries. In such widespread trade conflicts, Malaysia’s trade will be significantly dampened,” says Lee from SERC.

By Ho Wah Foon The Star


When 2 elephantine economies fight

Upping the stakes: Trump has ordered his
administration to consider imposing tariffs on an additional US100bil of
Chinese imports. Chinese President Xi Jinping had earlier hit back with
US50bil worth of tariffs on US imports.

Will Malaysia be caught in the middle?

The trade war between the world’s two largest economies is not showing any sign of stopping just yet.

US president Donald Trump initiated the trade confrontation by announcing additional 25% tariffs on Chinese imports worth US$50bil, citing China’s unfair trade advantage. In retaliation, China initially announced higher tariffs on US$3bil imports from the US, but later raised it to US$50bil.

Now, Trump has ordered his administration to consider imposing tariffs on an additional US$100bil of Chinese imports.

While it remains to be seen whether these tit-for-tat announcements will materialise or eventually fizzle out, economists and fund managers generally agree that the US-China trade fight will affect Malaysia’s local industries and several stocks on Bursa Malaysia.

However, they differ on the extent of the impct from the escalating trade war.

In an email interview with StarBizWeek, Asian Strategy and Leadership Institute research and business development director Lau Zheng Zhou says that Malaysia will be hit with losses in trade opportunities, as both the US and China constitute 25% of Malaysia’s total trade.

He points out that investors may adopt a “wait-and-see” approach, which could cause certain sectors to slow down and hence disrupt manufacturers’ resource planning and projection.

“As opposed to exporting finished goods, Malaysian exports have footprints along an extensive supply chains across sectors in Asia such as automobiles, electronics, oil and gas, and machinery.

“With heavy tariffs being imposed by the US, Malaysian firms will be slapped with rising input costs and therefore falling demand for their value-added component products.

“Our logistics sector may also be affected if global trade slows down.

“But China’s tariffs imposed on the US may not directly impact Malaysia as it is strategically designed to cause damage to the US agricultural producers,” he says.

On the other hand, Malayan Banking Bhd group chief economist Suhaimi Ilias indicates that the potential impact from the US-China trade spat is small, or only 0.3% of total trade value, at this juncture

However, greater risks could arise if the additional tariffs spill into services trade and investment.

“In any case, US tariffs on solar panels, steel and aluminum will have some impact on Malaysia but we understand that the International Trade and Industry Ministry is seeking exemptions for these since Malaysia is in talk with the US on the Trade and Investment Framework Agreement (TIFA) as an alternative following the US pulling out of the Trans-Pacific Partnership.

“Meanwhile, China’s tariffs on US products may result in some trade diversions or substitutions that may result in increase demand for Malaysian products from China, and one potential area is chemical or petrochemical products which is a major industry and export for Malaysia,” states Suhaimi.

Currently, the Trump administration has proposed a long list of 1,333 items, which would see the imposition of an additional 25% tariff.

These items include robotics, aircraft seats, machine parts, semiconductors, communication satellites and television components, among others.

It is worth noting that there will be 60 days of public review before the tariffs take effect. Observers believe both China and the US will re-negotiate their trade terms during this period in order to prevent a full-fledged trade war.

More items affected

In the event of the US government imposing tariffs on the additional US$100bil worth of Chinese imports as per Trump’s suggestion, more items will be affected.

China, on its part, has announced that it will slap a similar 25% additional tariff on 106 products from the US, which include soybean, automobiles, chemicals and aircraft.

According to Lau, China’s tariffs are well-targeted to hurt rural, agriculture-dependent communities who were big supporters of Trump during the 2016 presidential election.

Many companies in Malaysia have been involved in the export of raw materials and intermediate goods to China and the US, which are later re-packaged or used in the production of other finished goods.

These finished goods, in turn, are exported by both China and the US to one another as well as to other countries.

Indirectly, the Sino-US trade spat will affect these exporting companies from Malaysia.

Suhaimi calls for accommodative monetary policy and the implementations of major investment and infrastructure projects to buttress Malaysia’s economic activities, if the trade dispute continues to worsen.


Fund managers’ take

Fortress Capital chief executive officer Thomas Yong says that the Malaysian semiconductor sector will be most negatively affected due to the trade spat.

“This is because most semiconductor companies in Malaysia export intermediate semi-conductor components to end-product manufactures in the US, and a tariff on these end-products could indirectly lower the demand from these component players,” he says.

He cautions investors to monitor the ongoing trade war between the US and China closely.

“If the tariffs are implemented, the impact will be very detrimental to the ongoing global growth recovery.

“A trade war will negatively affect stock valuations all around the world,” he says.

Similar to Yong’s perspective, Areca Capital chief executive officer Danny Wong also reckons that export-based Malaysian businesses in the electrical and electronics domain could be affected, especially if their exposure to both China and the US is significantly large.

However, both fund managers believe that the Sino-US trade spat may not be entirely bad for companies in Malaysia.

Wong tells StarBizWeek that the US’ Federal Reserve (Fed) may take necessary actions to remedy any unwarranted implications to the economy.

“If the trade war continues to prolong and ultimately weigh down global growth and trade, it could affect the Fed’s future actions.

“Hence, there is a likelihood for the Fed to put the expected interest rate hikes on hold.

“In the event of such decision, dividend stocks in Bursa Malaysia will definitely benefit.

“On top of that, the real estate investment trust (REIT) stocks will also benefit from the situation, as Reits thrive in the low interest rate environment,” he says.

Meanwhile, Fortress Capital’s Yong adds that stocks related to palm oil production may also benefit from the trade spat.

“Since crude palm oil (CPO) is a substitute for soybean oil, the Chinese tariff on American soybeans can potentially allow China to substitute to CPO to meet their vegetable oil consumption needs, in turn supporting the demand and prices for CPO.

“As Malaysia and Indonesia both account for more than 80% of global palm oil supply, oil plantation companies from these two countries could potentially benefit from the much needed price boost amid the current soft CPO price.

“However, it remains uncertain if China will substitute all of the current soybean oil consumption to CPO, as there are quite a number of other vegetable oils available in the market,” he says.

Earlier, StarBiz reported that the American Malaysian Chamber of Commerce (Amcham) believes Malaysia may see an increased amount of foreign investments, particularly from the US, if the brewing trade war between the US and China escalates further.

Businesses from the US and other countries could make Malaysia an alternative regional production hub for several goods instead of China, to avoid the additional tariffs imposed by the US on products imported from China.

The additional 25% tariff levied on the imports from China would likely make Chinese goods pricier. Under such circumstances, global manufacturers may opt to establish their operations in Malaysia or outsource their production to a domestic company.

Commenting on whether the Sino-US trade war will place Malaysia as an alternative to China in the eyes of investors, Lau says it is not reasonable for investors to do so.

“However, the trade spat may rather increase foreign direct investments, especially from China, in industries with heavy use of steel and aluminium or value-added manufacturing of innovative consumer products.

“This can avoid a ban, restrictions or high tariffs on products which are associated with China,” he says.

By Ganeshwaran Kana The Star

 

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Lost cause: An employee arranging imported American apples for sale at a grocery store in Beijing, President Donald Trump says the US lost a trade war with China ‘years ago’. In a tweet Wednesday after China announced a list of US products that might be subject to a 25 tariff, Trump said: ‘We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US.’ — Bloomberg
Trade war – more of letting off hot air so far – Business News

China to fight back US trade tariffs ‘at any cost’ – Business New

China vows to fight US ‘at any cost’ after Donald Trump threatens $100B ..

 China’s import tariff on US soybean can support CPO prices – Business News

 

 

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Malaysia needs structural reforms says global investor


Middle-income trap, brain drain and high public service spending among Malaysia’s risks

Cheah(pic) thinks the local stock market could go up by between 5% to 10% this year while the ringgit, which has mostly been on an uptrend in recent times, is “still down quite a lot”, against the US dollar.

 

 
Middle-income trap, brain drain and high public service spending among Malaysia’s risks

KUALA LUMPUR: A renowned global investor has called for structural reforms in Malaysia, saying that the country faces “very real” structural issues.

Penang-born Datuk Seri Cheah Cheng Hye (pic) who left Malaysia decades ago counts the middle-income trap, brain drain and high public service spending as current risks to the country.

Based in Hong Kong as the chairman and co-chief investment officer of fund and asset management group Value Partners Group for over two decades now, Cheah who helps manage over US$16bil in funds, however concedes that Malaysia remains a country with huge potential and opportunities.

“I don’t think we should underestimate the importance and attractiveness of Malaysia but what I am saying is that if we don’t want to be stuck forever (being) a so-called middle-income country, we need structural reforms,” he told StarBiz in a recent interview.

“Or maybe… we do want to be stuck because it is a comfortable position and because then, we can make a lot of compromises.”

“ (If that’s the case), we should be frank and say it, don’t pretend that we want to be an advanced country because that requires certain sacrifices.”

“The reality is that we are getting less and less competitive, we ranked number 23 in the latest Global Competitiveness report ,behind France and Australia which are developed countries. (Number 23) is not good enough for a developing country,” said Cheah, who recently made it to the top 40 richest Malaysians list.

Emphasising the issue of brain drain, Cheah, a former financial journalist and equities analyst said Malaysia could perhaps emulate India in this area where the concept of an Indian national overseas card has been introduced.

“I am told there are more than one million Malaysians overseas – (people like) entrepreneurs, these are exactly the type of people we want to stay here but they are not.

“We could introduce a new type of card called the Malaysian national overseas card for Malaysians who have chosen to leave the country and become citizens elsewhere.”

This card will give these Malaysian-born individuals no voting rights but will allow them to come back to work and invest here like everyone else, he said.

Cheah said this could help re-attract talent and there will be no political price to pay, because these people cannot vote here nor transfer this card to their children who would likely be foreigners.

“Some may actually come back, because it is not always greener on the other side… but you must make it easy enough (for them to come back).”

Cheah also pointed out that the amount Malaysia spends on public service is “very high” by any standards.

“Quoting from memory, about 30% of government spending is on civil service salaries and 16.5% of all employment in this country comprise civil servant jobs.

“No matter how you explain it, this is abnormally high ; something that I have learnt from my stay in Hong Kong is, keep the government as small as possible.”

He said although the civil service segment here appears to be bloated, it would be “unrealistic” to fire civil servants.

“Instead, maybe we can consider freezing and redeploying resources.

“Like any corporation, if you have too high a headcount, you freeze hiring and you redeploy people to where they are needed,” Cheah said.

Separately, Cheah, whose investments are mostly China-centric believes that Myanmar could be the next big thing.

“Nowadays, I like Myanmar because it is still cheap.

“It has about 55 million people but its gross domestic product (GDP) is only about US$65bil, Malaysia’s GDP is probably about US$320bil.

“Myanmar has enormous potential, at last they are emerging , gradually reconnecting with the world, they have (a lot of ) raw materials and are in a good position as one of the significant Belt and Road countries, China will go out of its way to invest there.”

Cheah said he would like to set up a Myanmar fund to invest in the country and is in the process of studying this possibility.

Among markets in Asia, Malaysia to Cheah, is “moderately attractive”.

He said consumer sentiment here was finally improving after it took a beating largely due to the implementation of the Goods and Services Tax (GST) back in 2015 plus there are some “interesting corporate restructuring taking place.”

Also, it is General Election year which going by history, tends to send the market higher, he said.

“I think there are good arguments why the Malaysian market is good this year but the arguments are not strong enough to result in a very strong market – and there’s also a global environment that’s not as good as last year.”

“I think the US administration is now focusing on globalisation and world trade and it seems to be moving in the direction of conflict with China over trade.

“If there is a China-US trade war, Malaysia will suffer collateral damage because we are a medium-sized player in a global supply chain, so it will be very disruptive,” Cheah said.

Upside for the Malaysian market could also be limited this year, he said, because its current valuation is relatively high at over 16 times price to earnings.

Cheah thinks the local stock market could go up by between 5% to 10% this year while the ringgit, which has mostly been on an uptrend in recent times, is “still down quite a lot”, against the US dollar.

The local unit appreciated by 8.6% against the dollar last year after losing some 4.5%, a year earlier.

At last look, it was traded at 3.9395 against the greenback.

By Yvonne Tan The Staronline
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Malaysia to end cronyism?


https://youtu.be/vmqElJnDURI

//players.brightcove.net/4405352761001/default_default/index.html?videoId=5717349859001

KUALA LUMPUR: The Government has vowed to end “crony capitalists” whose wealth came at the cost of ordinary Malaysians, said Datuk Seri Najib Tun Razak.

The Prime Minister said lessons had been learnt from past mistakes in planning Malaysia’s economic transformation, after confronting many “legacy issues” along the way.

“Some of the country’s development under a former leader came with an unnecessary price tag, in the form of a class of crony capitalists,” he said in his keynote address at Invest Malaysia 2018 yesterday.

Citing public transport as an example, Najib said massive overhauls had to be done to rectify the issue.

“For decades, public transport was neglected. It was incoherent, with different owners, different systems and certainly no integration

“One man’s obsession with the idea of a national car – which is now being turned around under international joint ownership – led to Malaysia lacking an efficient public transport system.

“This was a serious obstacle to achieve high-income status and for Kuala Lumpur to be a world-class capital,” he said.

Although no name was mentioned throughout his speech, it was an apparent dig at former premier Tun Dr Mahathir Mohamad.

Najib also said that during this time, the Government had signed independent power producer concessions that were lopsided.

“Consumers had to pay far more for energy than they should have, even for energy they were not using.

“This was a real burden to the people, so we renegotiated these concessions – and determined that in the future, we would not allow private companies to earn excessively at the expense of ordinary Malaysians,” he said.

Najib also pointed out that the ringgit had been pegged against the US dollar for “far too long”.

“Investors and global markets lost confidence in us, and it took a long time to win that back. That was a very heavy cost to the country,” he said, stressing that the Government would never repeat that measure.

He also spoke on the challenges at state-owned institutions, such as 1Malaysia Development Bhd (1MDB), which were amplified and used as a tool to suggest that Malaysia’s economy was collapsing.

“I’m not going to brush over this issue. There were indeed failings at the company, there were lapses of governance. There was a valid cause for concern.

“This is why I ordered one of the most comprehensive and detailed investigations in Malaysia’s corporate history, one that involved multiple lawful authorities, including a bipartisan parliamentary body.

“Their findings were taken on board and the company’s board was dissolved, its management team changed and its operations reviewed,” he said.

On another note, Najib rubbished claims that Malaysia was welcoming foreign direct investments (FDIs) by selling out the nation’s sovereignty.

“My Government will never sacrifice an inch of our sovereignty,” he said, adding that while RM63bil in FDI stock came from China and Hong Kong, there was more from Japan at RM70bil.

“You don’t hear anyone warning that we are selling our country to the Japanese.

“Of course not. They are most welcome here. So are investors from Africa, the Americas, China, the European Union, India, Saudi Arabia and around the world,” he said.

Malaysia continues to improve in three key areas

Moving forward: Najib attending the Invest Malaysia 2018 launch together with (from left) Bursa Malaysia Bhd CEO Datuk Seri Tajuddin Atan, Treasury secretary-general Tan Sri Dr Mohd Irwan Serigar Abdullah, Chief Secretary Tan Sri Dr Ali Hamsa, Finance Minister II Datuk Seri Johari Abdul Ghani, Bursa Malaysia chairman Tan Sri Amirsham Abdul Aziz and Malayan Banking Bhd chairman Datuk Mohaiyani Shamsudin in Kuala Lumpur.

KUALA LUMPUR: Malaysia will continue to develop three key areas – transparency, accountability and efficiency – to attract more investments, said Datuk Seri Najib Tun Razak.

The Prime Minister observed that the country’s excellent economic and financial fundamentals had greatly benefitted local and foreign investors, providing them with stability, strength and certainty.

“We will continue to make our country even more business- and market-friendly, which means we are always working to improve transparency, accountability and efficiency.

“The Securities Commission, Bursa Malaysia, Bank Negara Malaysia and the Finance Ministry have continuously introduced and supported measures to increase the dynamism of our capital market.

“Towards this objective, I can assure you that we can expect further measures in the near future,” he said in his keynote address at Invest Malaysia 2018 here yesterday.

The two-day annual event is jointly organised by Bursa Malaysia Bhd and Maybank. A total of 61 local companies, with a combined market capitalisation of RM767.6bil were featured in the event.

The Prime Minister also cited figures that justified the confidence in Malaysia shown by investors and global institutions.

“Our total trade grew strongly by 20.8% between January and November last year, while in November alone, gross exports reached double-digit growth of 14.4%, with the highest receipts ever recorded, at RM83.5bil.

“Last year, foreign net fund inflow recorded a positive RM10.8bil, the highest since 2012, while corporate bond and new sukuk issuance reached RM111.2bil for 11 months of the year, close to 30% higher than the whole of 2016,” he said.

Najib also observed that Malaysia has enjoyed years of strong growth, with figures that most developed economies “could only dream of”, even during times of economic uncertainty.

“In fact, last year Malaysia exceeded all expectations, with the World Bank having to revise its estimate for our growth upwards not once, not twice, but three times – to 5.8%,” he said.

Najib added the World Economic Global Competitiveness index for 2017 and 2018 rate Malaysia very highly out of 137 countries.

The country is ranked third for Strength of Investor Protection, fifth for Pay and Productivity, fifth for the low Burden of Government Regulation and 14th for the Quality of Education System.

“The International Monetary Fund has also praised our sound macroeconomic policy responses in the face of significant headwinds and risks.

“The World Bank also recently confirmed that it believes Malaysia is on track, and that we are expected to achieve high-income status in the next few years,” he said.

Source: The Staronline

 

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EPF investment income rises 5.13% in Q3 to RM12.95 bil, has benefited from overseas equities


The Employees Provident Fund (EPF) reports an increase in quarterly investment income to RM12.95 billion for the third quarter ended Sept 30, 2017 (Q3 2017), despite recorded net impairment of RM791.55mil in the third quarter, more than double the impairment made a year earlier. The EPF posted a 74% surge in investment income to RM11.8bil in the first quarter and a 36.6% growth to RM11.51bil in the second quarter.

 

KUALA LUMPUR: The Employees Provident Fund (EPF) today reported an increase in quarterly investment income to RM12.95 billion for the third quarter ended Sept 30, 2017 (Q3 2017), up 5.13 per cent, from RM12.32 billion recorded during the same period last year.

“The EPF’s overall portfolio performance has benefited from the rally in overseas equities markets in the third quarter of 2017,” Investment Performance, Deputy Chief Executive Officer (Investment) Datuk Mohamad Nasir Ab Latif said today.

He said the pension fund did not see similar returns from the domestic equities market as the FBM KLCI performance was flat compared with other markets, which recorded between two and five per cent growth.

The EPF recorded a net impairment of RM791.55 million, in the quarter under review, in accordance with the Malaysian Financial Reporting Standards (MFRS 139), and this was higher compared with RM349.59 million recorded in the same quarter last year, he said in a statement today.

This is due to the higher provision recorded for domestic equities in the telecommunications and oil and gas sectors.

In the third quarter of 2017, equities, which made up 41.86 per cent of EPF’s total investment assets, contributed RM7.91 billion of income or 61.09 per cent of the total investment income.

The income recorded was 12.75 per cent higher than RM7.02 billion recorded in the corresponding quarter in 2016, he said.

As at September 2017, a total of 50.45 per cent of EPF’s investment assets were in fixed income instruments which recorded an income of RM4.49 billion, equivalent to 34.63 per cent of the total quarterly investment income, said Mohamad Nasir.

Out of the RM4.49 billion, Malaysian Government Securities & Equivalent recorded RM2.17 billion in the third quarter of 2017, an increase of 10.96 per cent or RM213.98 million, from RM1.95 billion recorded in the same quarter in 2016, in line with the growth of the portfolio.

Loans and bonds, however, generated lower investment income of RM2.32 billion compared with RM2.56 billion in the same quarter last year, he said.

Investments in Money Market Instruments and Real Estate and Infrastructure each represented 3.53 per cent and 4.16 per cent of total investment assets, and contributed an investment income of RM274.27 million and RM263.83 million, respectively, in the third quarter of 2017.

“Our current investment in money market instruments is above the targeted three per cent under the Strategic Asset Allocation due to the ongoing regulatory restrictions in new overseas investments.

Over the long-run, the EPF must continue to expand our foreign assets portfolio as it is key to our diversification and allows us to meet our return targets,” said Mohamad Nasir.

As at Sept 30, 2017, the EPF’s overseas investments, which accounted for 30 per cent of its total investment asset, contributed 48 per cent to the total investment income during the quarter.

Diversification into different asset classes in various countries and currencies had helped the EPF to record higher income for the quarter, despite a significant difference in market performance, globally.

Out of the total RM12.95 billion investment income for the third quarter of 2017, a total of RM860.83 million was allocated for Simpanan Shariah, which derived its income solely from its portion in Shariah assets, while RM12.09 billion income was allocated for Simpanan Konvensional, which is generated by its share of both Shariah and non-Shariah assets, he said.

The value of EPF investment assets reached RM771.20 billion, a 5.48 per cent or RM40.09 billion increase from RM731.11 billion, as at Dec 31, 2016.

Out of the total investment assets, RM370.10 billion or 48 per cent, were in Shariah-compliant investments and the balance in non-Shariah assets.

“We still have one more quarter before the year-end and we are confident that our diversification into various asset classes will enable us to meet our real dividend target of at least two per cent above inflation over a three-year rolling period, for both Simpanan Shariah and Simpanan Konvensional,” he added.

The EPF posted a 74% surge in investment
income to RM11.8bil in the first quarter and a 36.6% growth to
RM11.51bil in the second quarter.

Source: BERNAMA

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Highest EPF dividend in two decades – Nation

 

EPF 2Q investment income rises 37% to RM11.5b | The Edge Markets

 1 Malaysian Ringgit equalsvv0.24 US Dollar

Chart of exchange rate values over time

Malaysian Ringgit Forecast – Trading Economics

https://tradingeconomics.com/malaysia/currency/forecast The Malaysian Ringgit is expected to trade at 4.20 by the end of this quarter, according to

Trading Economics global macro models and analysts expectations.

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