Wednesday, October 24th, 2018
KUALA LUMPUR: Glomac Bhd has urged the government to revive the Home Ownership Campaign (HOC) to help tackle the overhang situation in property, which worsened in the first half of 2018.
Group managing director and CEO Datuk Seri Fateh Iskandar Mohamed Mansor said the package of incentives under the HOC, which was carried out in 1998 and 1999 for a period of three months each, had helped to reduce the overhang units during the Asian financial crisis.
At that time, the government gave incentives for properties priced RM250,000 and below. This time, property developers are asking to revive the HOC for homes priced RM500,000 and below, and for first-time house buyers.
Fateh Iskandar said the Real Estate and Housing Developers’ Association Malaysia has approached the Housing and Local Government Ministry, who has agreed in principle to revive the HOC.
“We have also presented it to the Finance Ministry and they’ve also supported us. So the next step is to bring this to the Economic Council,” he added.
On whether developers are willing to take a haircut if the HOC is implemented, he said many developers are already giving out discounts and rebates just to sell their properties while property prices of completed units are at “record low”.
“We thank the Finance Ministry for taking out a few essential items in construction contracts and we hope the state government will also follow suit because we need a comprehensive and holistic approach. Not only on sales and services tax but other things as well. Then we can see something substantial. Right now there will be some savings, but it’s not substantial enough,” he said, adding that house prices will be lower for new projects.
Meanwhile, Glomac plans to launch RM780 million worth of properties for the financial year ending April 30, 2019 (FY19) and aims to maintain its sales performance of 75-80% of total launches.
The group’s focus for FY19 will remain in the mid-market and affordable segments, with some 65% of its new launches priced RM500,000 and below. Last year, the group launched only about RM250 million worth of new properties and achieved RM214 million in sales.
Fateh Iskandar said it revised its new launches last year from RM700 million, due to slow response to bigger apartment units. The first phase of Plaza Kelana Jaya, which was launched about two months ago, saw 80% sales after the developer changed the apartment size to 450 sq ft to 750 sq ft, from the original size of 1,500 sq ft to 2,500 sq ft.
On the commercial side, Glomac has signed on a new anchor tenant for Glo Damansara Mall. The furniture and lifestyle retailer from China will take up 40% of the mall’s space, bumping up the mall’s occupancy rate to 75%.
“The mall was completed a bit more than two years ago, it’s been in operations for more than two years. So far it’s been very challenging, occupancy rate was below 50% before we signed this new tenant,” said Fateh Iskandar.
He said the retailer already has a presence in the US, Australia and the Middle East. Its presence in Glo Damansara Mall will be its first in Southeast Asia and it expects to start operations in January 2019.
NEW YORK, Oct 24 — Wall Street stocks were little changed early today following another round of mixed earnings reports in a market buffeted by worries over slowing economic growth and geopolitical uncertainty. About 15 minutes into trading, the…
PETALING JAYA: The Institute for Democracy and Economic Affairs (Ideas) has urged the government to adopt a new and tougher strategy to reduce illicit trade, as it is drains the government's much-needed revenue and harms legitimate business.
Ideas CEO Ali Salman said in a statement today that it is crucial for the government to step up its efforts and establish a clear strategy, governed at the highest levels to tackle the issue, including increasing penalties and improving cooperation with the private sector.
“Illicit tobacco in particular remains a major problem and the government should hold back from any further increase in prices and review the existing tax structure as well as tightening enforcement on known smuggling routes,” Ali added.
Ideas, which has published a report titled: “Combating Illicit Trade: Lessons from Abroad”, proposes a series of practical recommendations to help combat illicit trade based on experiences from other countries.
The report, which builds on Idea's previous research, “Illicit Trade in Malaysia: Causes and Consequences”, was shared with the Finance Ministry and other government agencies.
The report's main recommendation include: adopt a new cross-government strategy with clear political ownership; set out a new, overarching illicit trade strategy to implement the promises of Buku Harapan; and establish an Illicit Trade Task Force chaired by the Minister of Finance to oversee implementation of the strategy and ensure all agencies contribute.
It recommends the government formalise cooperation with the private sector, by forming a Trade Enforcement Committee with membership from government agencies and industry to share information, consult on new policies and support operations.
Ideas also recommends the government to adopt specific targets for seizures in line with the scale of the problem to ensure consistent and proactive effort by the different agencies.
“The government should publish systematic annual statistics on seizures and penalties, so that the public is able to gauge the overall trends in illicit trade and hold the government accountable for its efforts to reduce it.”
The think tank pointed that the government should not further increase excise duties on tobacco, but consider a review of the current tax regime. This is given that the multiple tax increases on cigarettes have led to a drastic increase in the legal price of cigarettes, which has led to stark increases in the illicit trade in tobacco.
This is in light of experience in other countries, such as Canada and Pakistan, that have successfully reduced illicit cigarette trade after reforming excise duties, it added.
Additionally, Ideas said the government should ban the sale of duty free cigarettes at Langkawi, Labuan and Tioman, as the previous government had admitted that the tax free islands were a source for illicit tobacco.
However, it said this can be done on a time-limited basis, with reinstatement once enforcement capacities have been improved.
Ideas also urged the government to quickly proceed with plans to increase penalties to RM100,000, as the current levels of penalties do not act as a sufficient deterrent.
PETALING JAYA: FGV Holdings Bhd has named its chairman Datuk Wira Azhar Abdul Hamid as the group's interim CEO and disbanded a special board committee set up to perform the functions of the president and CEO.
According to its bourse filing today, Azhar current role as chairman of the FGV board remains unchanged. He is also chairman of MSM Malaysia Holdings Bhd.
“Azhar's appointment is as an interim CEO until a new CEO is appointed. This appointment on an interim basis has been concurred by the Minister of Finance (Inc). The Special Board Committee 2, which took over the responsibilities to perform the functions of the group president and CEO since Sept 18 is hereby disbanded,” FGV said.
FGV formed the Special Board Committee 2 comprising four of its directors, which include Azhar, Datuk Dr Salmiah Ahmad, Dr Mohamed Nazeeb and Datin Hoi Lai Ping, in September when it issued a suspension notice to Datuk Zakaria Arshad as the group president and CEO pending an inquiry. Zakaria quit a day shy of a deadline for him to respond to the notice of inquiry.
About a month after Zakaria's departure, CFO Ahmad Tifli Mohd Talha announced his resignation, to pursue other career opportunities.
Two weeks before Zakaria stepped down, Azhar said in a briefing that several of its board members, including those who have left the group, are being investigated to transactions and investment decision.
According to him, the complete report on a forensic investigation into the group's business practice, which began in January, is expected to complete by end of this year.
The board undertook internal investigations into open credit lines, poor purchasing trading practices and poor palm oil sales that resulted in bad debts of about RM100 million; direct awards of procurement contracts in breach of best practices; and the critical shortage of workers between May 2016 and April 2018 that resulted in financial losses of more than RM170 million over the period.
PETALING JAYA: The risk of contagion effects on Malaysian economy is minimal as it is capable of withstanding external-driven crisis and its economy is fundamentally strong and firm, according to MIDF Research.
By macro perspectives, the economy is driven by domestic spending and lesser exposure to external trade as compared to the period of 1998 to 2009, MIDF said in a report.
Looking at government finance, foreign debt and foreign denominated debt are at low and manageable levels, it added.
Additionally, the research house said that non-resident portfolio outflows was also not as bad as during the slump in oil prices.
For the first nine months of 2018, MIDF said the domestic financial markets continued to experience non-resident portfolio outflows worth RM32.1 billion with the bulk of it seen under government bonds.
MIDF said this was not as high as compared to during the slump in global oil prices which saw a net portfolio outflow of RM52.6 billion.
Nevertheless, MIDF opined that the indirect effects of global trade tension are inescapable to Malaysia and other Asian countries.
Despite Malaysia’s healthy economic fundamentals, at least in the short-term, MIDF said the country’s financial markets cannot avoid the international portfolio flows away from the region.
“On this score, it is notable that in the second quarter of this year which coincided with the start of US-China trade tension, the net flow of foreign equity funds began to turn negative and the local equity market started to lose ground,” it added.
Nevertheless, despite three rate hikes by the Fed so far this year, MIDF said Malaysia just raised its interest rate once in the beginning of the year and expects the overnight policy rate to maintain at 3.25% throughout the year.
“Malaysia is so far spared from the current contagion effects. Current account still recorded a surplus and foreign reserves recorded higher at US$102.4 billion (RM425.9 billion) in 2017 compared to those in 2008 and 1997,” MIDF said.
However, MIDF noted that some of the alarming signals have appeared, including the narrowing current account surplus, larger government debt and budget deficit as well as weakening ringgit against greenback.
SINGAPORE: Moody’s Investors Service expects stronger competition for the Asia Pacific (APAC) telecommunications sector and stronger commoditisation, and slower revenue growth for companies across 11 markets in the region, including Malaysia.
The other markets are Hong Kong, India, Indonesia, Japan, Korea, the Philippines and Singapore.
The rating agency’s report entitled “Telecommunications – APAC: 2019 Outlook” noted that while slower overall revenue growth will be evident in all 11 markets, the emerging market is expected to see a more pronounced slowdown with revenue growth to fall to 3-3.5% in 2019 versus the 3.9% in 2017.
“Comparing overall revenue growth across APAC with GDP (gross domestic product) growth, Moody’s says that companies as a whole will show modest revenue growth of 2-2.2%, with such growth lagging average GDP growth of about 4.6% for the region,” said Moody’s vice-president and senior analyst Nidhi Dhruv.
Meanwhile, new entrants are expected to intensify competition in Singapore, Japan and Australia.
High shareholder returns and capital expenditure levels will continue to temper free cash flow generation, which will consequently make companies to look into diversifying revenue as traditional telecommunications revenues contract.
This will eventually lead to more cross-industry partnerships.
Additionally, while 4G will remain the dominant technology used by telecommunications companies in APAC, 5G will gain some traction in 2019-20.
Japan, Korea and Australia are expected to lead the region in rolling out 5G services in 2019.
Nevertheless, Moody has given a stable outlook for the sector in APAC 2019, with companies in the region likely to show relatively stable leverage and debt levels over the next 12-18 months.
Moreover, while liquidity is weakening, it remains supported by the companies’ access to the banks and bond market at current levels.
PETALING JAYA: RAM Ratings expects Malaysia’s headline inflation rate to pick up slightly to 0.9% in September against 0.2% in August following the reintroduction of the sales and services tax.
“There was a noticeable deflationary trend for discretionary goods in the three-month tax-free window, thereby creating moderate downward pressure on the headline number. We expect this trend to gradually reverse as vendors adjust to the new tax system,” said its head of research Kristina Fong in a statement today.
Having said that, some of the upward pressure is anticipated to be partly offset by the moderation in transport fuel inflation, which should also continue to ease through the rest of this year as low-base effects subside further.
The Department of Statistics is scheduled to release the September inflation data on Friday.
Overall inflation is estimated at 1.3% for 2018 compared with 3.7% in 2017, according to RAM Ratings.
For 2019, headline inflation is expected to accelerate to 1.7-2.5%, with the higher end of this range primarily hinging on the shift to a targeted fuel subsidy mechanism.
“Should fuel subsidies become more targeted, the higher market price of fuel will feature more prominently in headline inflation, thereby elevating the inflationary impact as opposed to the current blanket fuel-subsidy system,” noted RAM Ratings.
It said other possible upside pressure on inflation in 2019 include a potentially higher rate of cost pass-through by firms to consumers on account of higher costs of doing business and a slightly weaker ringgit against the US dollar next year.
The rating agency expects Bank Negara Malaysia to maintain the benchmark interest rate at 3.25% through 2018 and 2019, given the need to balance between capital outflows and risks to gross domestic product expansion.
“Although headline inflation is envisaged to accelerate from the benign level of 2018, the pace of increase is still rather nondescript as a trigger point, relative to the downside risks to growth from ongoing fiscal consolidation, volatile capital markets and rising trade tensions.”
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SINGAPORE: When James Dyson, the billionaire British inventor of the bagless vacuum cleaner, unveiled a plan to build an electric car plant in Singapore, it raised a few eyebrows.
Not only does the land-starved city state have some of the highest average salaries in the world, but it has been nearly 40 years since Ford closed its factory in Singapore, effectively ending car production there.
“It is a bit of a surprise because of the cost base and no other car manufacturing plant being here,” said Shantanu Majumdar, a regional director at consultancy JD Power.
Dyson said on Tuesday the decision was based on supply chains, access to markets and the availability of expertise, which offset the cost factor.
But what other factors could have influenced the decision?
Why not head straight to the biggest electric vehicle market in the world, China, like rival Tesla?
Here’s a look at some of the less obvious pros and cons:
1. High Costs vs Generous Incentives
Compared with other global cities, Singapore has some of the highest average salaries in the world after tax, according to studies by Deutsche Bank. Land available for industrial use is scarce and expensive, and it ranks highly in general cost-of-living indexes.
But aside from its skilled engineers and scientists, for a high-tech firm like Dyson, Singapore offers generous incentive schemes. Some schemes include tax breaks for five years, which can be extended, and grants that can cover up to 30% of the cost of projects to improve business efficiency.
Singapore declined to comment on whether Dyson benefited from any such schemes.
To shore up productivity in its manufacturing sector, which makes up less than quarter of its output, Singapore has focused efforts on attracting high-end manufacturers and those who adopt automated production processes.
2. Small Market vs China Gateway
Dyson may have decided to make electric cars in Singapore, but few are likely to be driven here or anywhere in Southeast Asia for that matter.
The number of privately owned electric vehicles in Singapore is in single digits, and Tesla CEO Elon Musk has criticised Singapore for not being supportive of electric vehicles.
Singapore is one of the world’s most expensive places to own a car because the government strictly controls the vehicle population by charging owners a variable rate for the right to own and use a vehicle for a limited number of years.
In Southeast Asia, only 142 electric vehicles are forecast to be sold this year, data from consultant LMC Automotive shows. By contrast, sales in China are forecast to almost reach 700,000 vehicles this year, more than double the combined sales from the United States and Europe.
But with one of the world’s busiest ports on its doorstep, Dyson can roll a car off the production line in Singapore and within the hour it can be on its way to China or other sizeable electric vehicle markets like South Korea or Japan.
Dyson products – which include bladeless fans, air purifiers and hair dryers – are becoming a premium brand in China and other Asian markets. Asia accounted for over 70% of its growth last year, the firm said.
3. Familiarity vs New Frontier
Dyson’s history with Singapore probably also played a role. It already employs 1,100 people in Singapore, making 21 million digital electric motors a year. It also has manufacturing hubs in Malaysia – connected to Singapore via two road bridges – and the Philippines.
“This is obviously a surprise but since Singapore is at the heart of Southeast Asia, Dyson would be best placed to source many components from neighbouring countries and, locally, assemble and manufacture the high-tech car here,” said a corporate banker who deals with multinational firms in the region. – Reuters