Sunday, May 27th, 2018
ISKANDAR PUTERI, May 27 — Johor will become the country’s largest hub for beef production through proposed cattle-breeding projects in Muar, Segamat and Pagoh. Agriculture and Agro-Based Industry Minister Salahuddin Ayub said he would be tabling…
KUALA LUMPUR: Multiple factors are affecting the local financial markets and the recent outflow of foreign funds from equities has raised concerns among many quarters, but analysts opine that conditions will gradually stabilise once government policies are firmly in place.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the markets would remain edgy, at least for the first 100 days of the new government, as market participants await more policy announcements.
He said the markets would normalise once “the dust settles”.
“There have been multiple factors affecting the market. Renewed concerns on geopolitics in North Korea, as well as the Middle East, have caused market participants to stay light and prefer to hold more cash-like instruments as they have become increasingly risk averse,” he explained.
At the same time, anxiety over the state of the government's debt revealed by the Ministry of Finance (MoF) had caused the markets to be wary but its assurance to honour the debt obligations should ease such concerns, he told Bernama.
According to the MoF, Malaysia's total debts and liabilities amounted to RM1.087 trillion, or 80.3% of gross domestic product as at end-2017, after official debt, contingent liabilities and lease payments for public-private partnerships were tabulated together.
“Further foreign fund outflows are still possible in the near term. But given the sheer size of prevailing outflows, it could have been overdone as Malaysia's economic fundamentals are still intact.
“Apart from that, the undervaluation of the ringgit could also attract foreign funds to accumulate Malaysian stocks,” said Mohd Afzanizam.
He added that the ringgit would remain in a tight range of between 3.97 and 3.98 against the US dollar during the first 100-day period.
Meanwhile, Inter-Pacific Securities Sdn Bhd's head of research Pong Teng Siew said the pace of selling in local equities has eased, helped by buying activities by local investors.
“It is going to be a gradual process (to bring in foreign funds). We will have to work hard to restore their confidence. I think we will get there but it will take some time.
“First order of the day when the local funds are buying, I guess they will have to concentrate on blue chips and that might help bring the index back up. I don't think it will reach a historic high but will narrow the losses since the all-time-high on April 19, 2018,” said Pong.
The FBM KLCI clocked its highest of 1,895.18 on April 19, boosted by fund buying of banking and Petronas-linked stocks ahead of the May 9 general election.
Echoing Mohd Afzanizam's observation, Pong said one of the main reasons prompting foreign funds to relinquish their holdings in local equities was concerns over public debt.
“Another reason is the issues surrounding emerging markets (EM). EM (assets) were being sold because of worries about outflows that began with the rise of the US dollar. The greenback strengthened due to higher yield in the US (and it tends), weakening currencies in the EM markets sharply,” he added.
For MIDF Amanah Investment Bank Bhd chief economist Dr Kamaruddin Mohd Nor, the recent announcement on the financial position of the country, especially on the debt and liabilities, was not something new to the financial fraternity albeit a few details which were not made public.
He said the disclosure might raise eyebrows but it was not tantamount to credit rating downgrade.
“Our economic fundamentals are intact and both banking and capital markets are well capitalised and vibrant.
“Naturally, there will be a transition period as the new government is assessing and evaluating the 'as is' to move forward with 'how to'.
“At this juncture, the formation of CEP (Council of Eminent Persons) and a task force to address important issues is a step in the right direction to pacify both domestic and foreign investors.
“With greater clarity on policy direction, market confidence will be restored,” he said.
On the ringgit, he said the currency would be under pressure, gauging from recent developments, both at the domestic and external fronts.
“US dollar rally continues as US bond yield rises unabated and it put pressure on the ringgit. Nevertheless, we are still maintaining our year-end target for ringgit at 3.95,” he added.
PETALING JAYA: Amid a slew of government agency closures to slash costs and excesses linked to the previous government, a former member of the steering committee to set up an aviation commission, Tan Sri Abdul Gani Patail, and a 40-year industry veteran, Datuk Rashid Khan, are throwing their weight behind the Malaysian Aviation Commission (Mavcom).
“I cannot emphasise enough the need for Mavcom. Consumers today are faced with a multitude of situations where their rights are violated. We need an independent entity to look out for us, ” he said in a statement issued on Saturday, after the commission came under fire from Malaysian Public Transport Users Association (4PAM) president Ajit Johl, who questioned the role of Mavcom and the RM1 levy it imposes on travellers.
Calling the travelling public as the largest beneficiary of the independent commission, Abdul Gani said one of the main reasons Mavcom came into being was because of an urgent need to ensure that consumer protection and the rights of passengers were made priority and not fall through the cracks.
Abdul Gani, who is a former attorney-general, opined that the RM1 levy imposed on passengers by Mavcom when departing from a Malaysian airport is a sound investment for peace of mind. Passengers using the Rural Air Services in Sabah and Sarawak are exempted from this charge.
He explained that Mavcom offers a service which neither the Ministry of Transport nor the Malaysia Competition Commission offers, according travellers an avenue to address complaints in a timely manner.
“There is no longer a need to rely on the mercy of commercial entities or being unsure of exactly when conflicts can be resolved,” he added.
Complaints have to be responded to within a set time frame of seven days and resolved within 30 days.
Rashid, who spent the bulk of his career with Malaysia Airline System Bhd, slammed 4PAM's comments against Mavcom, calling them unwarranted accusations, which showed lack of research.
“4PAM claimed that Mavcom has something to hide regarding their accounts. I googled and found Mavcom's financial statement for FY2016 in their website. Clearly, it is out there for public consumption and a simple check of Mavcom's website is all that is needed. This shows sheer negligence by this 'users association' in terms of verification of information,” he said.
“Without Mavcom, we had the likes of Rayani Air and Suasa Airlines getting licences. Clearly, Mavcom is needed in order to ensure a well-regulated aviation sector that is free from political interference. As we kick off a new Malaysia, I hope the Pakatan Harapan government will see the value of an independent regulator for this industry,” Rashid added.
PETALING JAYA: In the absence of a replacement consumption tax, Royal Malaysian Customs Department Director-General Datuk Seri Subromaniam Tholasy has issued a statement requiring businesses to pass on the savings from the zero rating of Goods and Service Tax (GST) to consumers, in the form of reduced prices.
He said the government will not implement Sales and Services Tax from June 1, but a date will be announced later.
“Therefore, all businesses are expected to lower the prices of their goods and prices with the zero rating of GST. The government will take strict measures to ensure the price of goods and services follow the Price Control And Anti-Profiteering Act 2011,” he added.
Businesses can refer to a recently updated Frequently Asked Questions section on the Customs Department website on the transitional period of 6% to 0% for GST.
In his first press conference as finance minister, Lim Guan Eng announced that the SST would be reintroduced at 10% to replace the GST. In the first week of taking office, the Pakatan Harapan government announced it would zero-rate GST as a means to effect changes to the tax regime as soon as possible.
PETALING JAYA: AmBank Research (AmResearch) which projects the gross domestic product (GDP) per capita recede by 0.007% with every 1% gain in public debt and debt service, also foresees a near-term volatility in the local and global equity markets, thanks to noises from the domestic and international front.
“From our analysis, we found an inverse and significant impact between public debt as well as debt service against the GDP based on per capita. It implies that a 1% gain each in debt and debt service, will lower GDP per capita significantly by 0.007% and 0.22% respectively. We also found that a government consumption presents a negative and significant impact on GDP per capita with a drop of 0.05% for every 1% rise,” it said while noting that the current debt level of RM1.09 trillion to the GDP was in line with its projection of over a trillion ringgit in 2018.
A high public debt will result in more spending on servicing the interest for the borrowings, thus straining resources. This is reflected in the low ratio of operating and development expenditure to debt at 0.20x and 0.04x respectively in 2017 from a high of 0.50x and 0.14x respectively in 2008 which is also the lowest reading since 1988.
Noting that public debt levels had been on an upward trend since 2004, the research house said the government’s inability to curb the growth in operational expenditure over development expenditure in its budget especially in Budget 2018, raised concerns on the risk of falling into a debt overhang situation which can potentially hamper the sustainability of growth and transformation measures.
The inability to reduce the operating expenditure, may lead to the need to improve revenue collection while simultaneously driving GDP, which in turn will help improve the debt-to-GDP ratio and fiscal balance position.
Meanwhile, the rising government guaranteed loans and Public Private Partnership (PPP) lease repayments that lacks transparency suggests an easy way to shift the debt figures, while holding public debt below the 55% level.
Since 2004, public debt saw an average rise of 10.2% or equivalent to an average of RM252 billion per annum between 2004 and 2009, while fiscal deficit widened from -4.3% in 2004 to -4.8% in 2008 due to higher spending on development activities amounting to RM27.5 billion in 2004 and RM41.9 billion in 2008.
Operating expenditure rose from RM91.3 billion in 2004 to RM153.3 billion in 2008.
The surge in total public debt was even more glaring from 2009 onwards as it jumped from RM362 billion to RM925 billlion, translating to an average growth of 13.4% or equivalent to RM639 billion per year.
Although the fiscal deficit as a percentage of GDP narrowed from -6.7% in 2009 to -3% in 2017 due to lower spending on development activities, which shrank from RM49 billion in 2009 to RM43 billion in 2017, operating expenditure rose from RM157 billion in 2009 to RM218 billion in 2018.
On lowering the public debt, debt servicing, and government consumption to improve growth, Ambank Research opines the focus areas should be (1) improving the monitoring of the expenditure in each area of the economic activities, especially at the micro level; (2) greater transparency on government-guaranteed loans under public-private partnerships that may not be fiscally responsible; (3) improving and effectively managing government consumption; (5) targeting high-impact and productive businesses to drive growth; (6) boosting investors’ and household confidence by addressing leakages; and (6) an attractive ringgit to support overall business competitiveness.
LONDON, May 27 — When Saudi Arabia and Russia announced a new policy to revive oil production last week, one thing was missing: most of the other partners in their grand coalition. With oil supplies tightening and prices soaring, the two countries…
DUBAI, May 27 — Qatar said it was banning products originating from the United Arab Emirates, Saudi Arabia, Egypt and Bahrain, almost a year after those states imposed an embargo on Doha, accusing it of supporting terrorism. “Products…
BEIJING, MAY 27 — Qualcomm Inc is expecting to meet this week in Beijing with China’s antitrust regulators in a final push to secure clearance for its proposed US$44 billion (RM175.1 billion) acquisition of NXP Semiconductors NV, three sources…
PETALING JAYA: Biro Guaman Wanita (Guamnita) has called for a rebranding of the Domestic Trade, Co-operatives and Consumerism Ministry, which was known purely as an enforcement and regulatory services provider before, to regulate businesses as well as nurture them to grow and prosper.
“Take for example, franchising – given the right personnel with the relevant competencies, the Ministry could expand their function of regulating the franchise industry to that of promoting entrepreneurship and growth of franchise businesses to reduce the probability of business failure.
“It has been proven that 70% of franchise businesses are likely to succeed as compared to 70% of non-franchise business that are likely to fail in the first five years of doing business,” its director Azlinda Baroni said.
In terms of co-operative movements, she said the Ministry could change certain elements of the Co-operative Act to allow for spirit of enterprise to flourish so that co-operatives could grow by leaps and bounds.
This way, they would be able to give members high dividends as supplementary income while helping them purchase goods at lower prices due to the strategic role of co-operatives in cutting the role of middlemen.
The ministry could, also through the Company Commission introduce the concept of business coaching and entrepreneurship mentoring to help small businesses not only to professionalise their management, but to receive advise on how to grow their business so as to flourish and be an engine of economic growth for Malaysia, she said.
“If the idea of expanding this Ministry to cover entrepreneurship development is acceptable, perhaps, other agencies such as Tekun, AIM, SMECorp and Insken could be placed under it.
“After all, we used to have a Ministry of Entrepreneurship Development which was disbanded during the tenure of the previous BN government,” she added.
Azlinda explained that the Ministry, under the Barisan Nasional government, saw its scope of enforcement activities mainly related to the Co-operatives Act, Franchise Act, Price Control, Companies Act, Intellectual Property, Petroleum Development Act, Consumer Tribunal and Direct Selling Act.
“In essence, the public looked upon the Ministry for price control, curbing piracy, preventing pyramid schemes, protecting consumers and ensuring business legitimacy.
“In fact, the Ministry went a step further by issuing Trust Certificates to guide consumers against bogus business websites that were unregistered and fly-by-night businesses,” she said.
She said it would truly be an opportunity lost if the Ministry is not rebranded under the Pakatan Harapan government.
KUALA LUMPUR, May 27 — Multiple factors are affecting the markets but the recent outflow of foreign funds from stocks has raised concerns from many quarters. However, analysts opined that these would gradually stabilise once the government…