Hong Kong’s IBN launches RM1.5b Bukit Bintang project

KUALA LUMPUR: Hong Kong-based property developer, IBN Corp Ltd, officially launched the RM1.5 billion gross development value (GDV) mixed-use project, the IBN Bukit Bintang, off Jalan Bukit Bintang today with a ground-breaking ceremony.

Director Datuk Seri Michael JW Yang said the project would be developed over three years at a cost of RM650 million.

“It will include the development of a combined hotel and residential tower in a single 68-storey building with a total built-up area of 730,062 sq ft on a 0.31ha plot of land in the heart of the city.

“The development order has been approved by DBKL. We are currently waiting for approval for the current building (Hotel Fortuna, which is no longer in operation) to be demolished,” he told reporters after the ground-breaking ceremony.

Yang said approval for the demolishment was expected within the next two to six months.

The property development project is a partnership between IBN Corp, a wholly owned subsidiary of Shenzhen ZRPZ Group, and land owner KKH Pavilion Development Sdn Bhd.

Yang said the development’s limited freehold residential units would be priced starting from RM2,000 per sq ft.

He said the targeted take-up would comprise 70% local buyers and the rest from the Middle East, China and India.

“The project will be slightly shorter than the Four Seasons Kuala Lumpur Hotel (343m). Upon completion, the building will among the five tallest buildings in Kuala Lumpur.

Yang said IBN Corp would be announcing another project in Kota Kinabalu in the third quarter of this year, but was tight-lipped about the details.

Currently, IBN Corp has projects across Southeast Asia with a GDV exceeding RM20 billion and growing with the completion of one of its core projects in Genting Highlands, IBN Highlands City.


Global sovereign sukuk issuance to rise to US$100b in 2020

KUALA LUMPUR: Moody’s Investors Service Ltd expects total gross sovereign sukuk issuance, including short-term securities, will recover in 2019 and surpass its record-high volumes of US$93 billion (RM379 billion) reached in 2012, by 2020.

Moody’s vice-president and senior analyst Alexander Perjessy said the international rating agency projects global sovereign sukuk issuance to increase to US$87 billion in 2019 and rise towards US$100 billion in 2020, from US$78 billion in 2018.

“This recovery will be driven by a combination of various sovereigns’ commitments to further sukuk market development, higher sukuk refinancing needs and our expectations of higher budget deficits for the major sovereign sukuk issuers in 2019-2020,“ he said in a report themed “Sovereigns-Global: Sovereign Sukuk Issuance to Recover Amid Moderate Oil Prices and Higher Refinancing Needs” released today.

Perjessy said he expects gross sovereign issuance to also rise further in the medium term as the sukuk issued by Gulf Cooperation Council (GCC) governments begin to mature.

Global gross sovereign sukuk issuance declined 5% to US$78 billion in 2018, from US$82 billion in 2017.

Perjessy said Malaysia has by far the largest stock of outstanding long-term sovereign sukuk worth US$84 billion, followed by Indonesia (Baa2 stable) and Saudi Arabia (A1 stable), with around US$40 billion each.

“The three sovereigns and Qatar (Aa3 stable) have been the most active in promoting the market’s development,“ he said.

He said during 2015-2018, sukuk issues filled nearly 80% of Malaysia’s fiscal deficit financing needs, whereas they covered about a third of Qatar’s and Indonesia’s fiscal deficit and around 14% of Saudi Arabia’s.

Moving forward, Perjessy said Moody’s expects the three largest issuers – Malaysia, Saudi Arabia and Indonesia – to gradually increase their share of sukuk in fiscal deficit financing, further supporting the market’s growth prospects.

“In the medium term, gross issuance will rise further, particularly when GCC sukuk instruments issued after 2016 begin to mature in 2022 and beyond and are refinanced by issuing new sukuk instruments,“ he said.

He added that the Islamic Development Bank (IsDB, Aaa stable) remains by far the largest issuer among the supranationals, with more than US$16 billion of outstanding sukuk at the end of 2018.


Zeti: Strong economic momentum to continue this year

KUALA LUMPUR: Former Bank Negara Malaysia (BNM) governor Tan Sri Zeti Akhtar Aziz (pix) has described Malaysia’s 2018 gross domestic product (GDP) growth of 4.7% as steady despite the challenging environment and expected the strong economic momentum to continue in 2019.

She noted that the growth of between 4% and 6% in 2019 remained positive amid the current economic situation.

“For this year’s outlook, it should be as good if not better and this would be presented by all the investment houses, as well as the official one by the central bank and the Ministry of Finance,” she told reporters on the sidelines of the Nomura Islamic Asset Management 10th Anniversary Investment Forum today.

BNM, last week, reported that the Malaysian economy, as measured by GDP, grew 4.7% in the fourth quarter of 2018 from a year earlier, bringing full-year 2018 GDP growth to 4.7%.

The central bank said private sector activity remained the main driver of growth, while a rebound in exports of goods and services contributed towards net export growth.

BNM is expected to announce the Malaysian economy 2019 outlook next month.

Zeti, who is Permodalan Nasional Bhd (PNB) chairman, said while economists and research houses projected lower GDP growth this year, PNB’s dividend would not be affected by a possible slowdown in the economy, driven by the fund’s diversified investment portfolio.

“Investment is all about diversification. If you learn to diversify, when one market does not perform, another does.

“The idea is to achieve a sustainable return and I have full confidence in PNB team that they will give their best effort to achieve such sustainable returns,” she said.

On the formation of the Economic Action Council (EAC), of which she is a member, Zeti described it as a great opportunity to get the economy going again.

Asked about top priorities to be discussed at the first EAC meeting, she said, “I want to save it when the meeting commences in the next few weeks. It will be very soon.”

On Feb 11, the Prime Minister’s Office announced the appointment of 16 members of the EAC which would be chaired by Prime Minister Tun Dr Mahathir Mohamad.


‘Impressive’ inflow of foreign funds into Bursa

KUALA LUMPUR: Foreign investors were net buyers in the Malaysian equity market, pumping in RM138.6 million last Monday and Thursday, compared with RM146.8 million recorded during the previous week.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the inflow of foreign funds was quite impressive despite external uncertainties.

“Perhaps, expectation that the US Federal Fund Rate will reach a peak of 2.5% may have driven funds from abroad to look at emerging market assets.

“Global prospects were also quite weak based on the recent Global Purchasing Managers’ Index (PMI) for the manufacturing sector which fell to 50.7 points in January from 51.5 points in December 2018,” he told Bernama.

However, Mohd Afzanizam said US labour markets remained strong, following the release of better-than-expected non-farm payroll data for January coupled with higher wages which could prompt the US Federal Reserve to resume monetary tightening measures should inflation continues to rise.

“If that happens, it may have an impact on capital flow and currency markets,” he added.

Meanwhile, MIDF Research analyst Adam M Rahim said the month of January 2019 saw foreign net inflow of RM1.03 billion, the first monthly net inflow since September 2018.

He said weekly increase in average daily traded value, which jumped 21% to remain above RM1 billion for the second week running, was only evident among foreign investors.

For the just-ended holiday-shortened week, there were no major corporate announcements as the local market was closed for two days to usher in the Chinese Lunar New Year which fell on Feb 5.

On Friday, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) ended 2.99 points higher at 1,686.52.

Phillip Capital Management Malaysia senior vice-president (investment) Datuk Dr Nazri Khan Adam Khan opined that the small improvement in the fund flow indicated that Malaysia was catching up with other countries such as Indonesia, the Philippines and Thailand.

He said sentiment remained cautious, amid lingering concern following headwinds from trade tensions and global growth.

“The government should encourage more foreign investors to invest in the country as this will propel the inflow of foreign funds into our country,” he said.

On Feb 8, Finance Minister Lim Guan Eng said international investors were confident in Malaysia’s economic potential as well as the government’s ability to drive the economy forward.

He said Malaysia remained an attractive investment destination with investors, especially with the government’s commit-ment to the competency, accountability and transparency principles under Prime Minister Tun Dr Mahathir Mohamad’s leadership.

Lim led a delegation from his ministry on a three-day roadshow from Feb 6-8 to meet Japanese investors and senior government officials in conjunction with the upcoming issuance of the Samurai bond.

As for the ringgit’s outlook, Nazri Khan said the local note was expected to trade at 4.00 against the US dollar next week boosted by mild buying.

“We stay slightly bullish on the ringgit in anticipation of further losses in the US dollar next week,” he said.

On Friday, the ringgit ended at a seven-month high of 4.0670/0720 against the US dollar, a level last seen on July 20, 2018, when it stood at 4.0600/0630.


Annual 3.5% wage growth a must to achieve high-income status

KUALA LUMPUR: Wages in Malaysia must grow at an annual average of 3.5% for the country to achieve high-income status by 2023.

Alliance Bank Malaysia Bhd chief economist Manokaran Mottain said at present, the average wage growth in the country was at 2.4%, weighed on by an abundance of foreign labour.

“To elevate wage growth, you need to address foreign labour. Reduce it and I’m sure wages will go up,“ he told reporters on the sidelines of the 2019 Malaysia Economic and Strategic Outlook Forum today.

He said there were roughly over two million foreign workers in the country currently and the number could easily reach four million if a thorough calculation was made.

Apart from reducing foreign labour, he said the government should also focus on the creation of highly-skilled jobs that provided a higher income.

He said highly-skilled jobs only constituted 25% of the workforce in Malaysia as compared to 50% in the United States.

“We need more initiatives from the government. I hope it can look into more incentives to transform the Malaysian job structure from low skilled to highly-skilled or even technological oriented,“ he added.

On economic policy, Manokaran said he hoped the government would come up with policies that can stimulate the economic environment by May this year.

Meanwhile, during the panel session, Malaysian Rating Corporation Bhd’s (MARC) chief economist Nor Zahidi Alias said he believed the government was still looking at ways to generate additional revenue.

“By comparison with other countries, we are rated ‘A’ by S&P, Moody’s and Fitch Ratings (agencies), and when compared with other single ‘A’ countries, our revenue is more lower.

“If you look at how the government is going to do it, of course it is by either (introducing) new taxes or probably widening the scope of the SST (sales and service tax).

“I think there are things in the SST which have not yet been covered. If the government cannot increase the (current) tax or introduce new taxes, they are going to widen the SST,“ he added.


Customs optimistic 2019 SST collection will top RM22b target

KUALA LUMPUR: The Royal Malaysian Customs Department is optimistic that this year’s sales and service tax (SST) collection will surpass the RM22 billion target.

Customs Director-General Datuk Seri Subromaniam Tholasy said this was based on the expansion of services subjected to SST to include amusement park operations, securities, brokerage and underwriting, commercial and industrial building cleaners, as well as training and coaching.

“We can easily surpass this target and collect slightly more than RM22 billion,” he told reporters at the “Sales Tax and Service Tax – Latest Updates and Ongoing Goods and Services Tax (GST) Issues” seminar here today.

Subromaniam said the expansion of services subjected to the SST, beginning March 1, was expected to garner at least 10,000 new registrations.

“Unregistered night clubs, dance hall, cabarets, health and wellness centres, massage parlours, public houses and beer houses will also be subjected to the SST. This is to be fair to registered businesses that pay SST,” he said.

Meanwhile, Subromaniam said the exclusion of big-ticket marine vessels such as cruise ships, excursion boats, ferries and cargo ships was because these were considered to be investments.

Other big-ticket items excluded from the tax were barges, passenger and goods transportation vessels, fishing vessels, factory ships and other vessels used for processing or preserving fish products.

He said from a tax policy perspective, investment items should not be taxed as it would not benefit businesses in the country.

“If we tax investment items, people can always buy from other countries such as Singapore and Hong Kong, where there are no taxes on these items and yet, these ships can be used in Malaysia. This will not benefit anyone,” he said.

Subromaniam added that taxing big-ticket items considered to be investment items would also be detrimental to the local business as it would cause them to lose customers.


Tax refunds to boost GDP this year: Economist

KUALA LUMPUR: Malaysia’s gross domestic product (GDP) is forecast to grow at 4.9% this year, boosted by a tax refund programme and continuous support from consumer demand, said an economist.

Standard Chartered Bank chief economist (Asean and South Asia) Edward Lee Wee Kok said the GDP growth would be higher than the 4.7% estimated for 2018.

He said the tax refund was worth 2.5% of the GDP and could provide a massive fiscal boost even in an economically cautious environment.

“Assuming half of it (the tax refund) goes to individuals and a very cautious amount of 10% to be taken out for consumption, that is still easily worth around 0.1% to 0.2% of GDP,” he told reporters at a briefing on 2019’s economic outlook today.

Lee said another factor that would contribute to better GDP growth this year would be the mining sector’s recovery.

“There was a disruption in the mining sector last year that took off about 0.2% growth,” he said.

Meanwhile, Lee said consumer demand remained GDP’s main growth pillar and would be supported by a healthy labour market, favourable tax changes and a minimum wage increase.

He said the reintroduction of the sales and service tax to replace the goods and services tax implied an estimated 0.5% to 1% of GDP worth of fiscal receipts returned to the government.

“A new standardised minimum wage of RM1,100 introduced on Jan 1, will also support consumer spending,” he said.

However, Lee said net external demand was projected to be less supportive this year amid slower growth in major economies and ongoing trade tensions between the US and China, adding that Malaysia as a small and open economy would be negatively affected by declining external demand.

Nevertheless, the economist said a prolonged US-China trade dispute could benefit Malaysia in the medium term from supply chain movement out of China.

“We (Malaysia and China) sell a lot of similar products to the US and countries that tend to benefit (from the supply chain movement) are those that are already exporting to the US because the supply chain is already in existence.

“So, I do expect more orders from the US to come as an indirect positive effect from the trade war,” he said.

Lee said Malaysia was the third most successful country after Vietnam and Mexico in terms of attracting supply chain movement away from China.

“However, it will take time before we see the positive impact as it involves investment decisions,” he added.