China leads the way as world's billionaires get even richer

The United States created 53 new billionaires in 2017, down from 87 five years ago

China produced around two new billionaires a week last year as the fortunes of the world's ultra-rich soared by a record amount, a report said Friday.

Read more at: https://phys.org/news/2018-10-china-world-billionaires-richer.html#jCp

China produced two new billionaires a week last year as the fortunes of the world’s ultra-rich soared by a record amount - AFP

 China produced around two new billionaires a week last year as the fortunes of the world's ultra-rich soared by a record amount, Swiss banking giant UBS and auditors PwC said.

Billionaires' wealth enjoyed its "greatest-ever" increase in 2017, rising 19 percent to $8.9 trillion ($7.8 billion euros) shared among 2,158 individuals, said the report by Swiss banking giant UBS and auditors PwC.

But Chinese billionaires expanded their wealth at nearly double that pace, growing by 39 percent to $1.12 trillion.

"Over the last decade, Chinese billionaires have created some of the world's largest and most successful companies, raised living standards," said Josef Stadler, head of Ultra High Net Worth at UBS Global Wealth Management.

"But this is just the beginning. China's vast population, technology innovation and productivity growth combined with government support, are providing unprecedented opportunities for individuals not only to build businesses but also to change people's lives for the better."

The report said China minted two new billionaires a week in 2017, among more than three a week created in Asia.

In the Americas region, the wealth of billionaires increased at a slower rate of 12 percent, to $3.6 trillion, with the United States creating 53 new billionaires in 2017 compared to 87 five years ago.

Currency appreciation saw European billionaires' wealth grow 19 percent although the number of billionaires rose by just 4.0 percent to 414.

Wealth transition from just five families accounted for 30 percent of the continent's wealth expansion, the study said.

It warned of lower economic growth in the United States and China if the trade war between the two countries escalates.

"US and Asia ex-Japan equities could fall by 20 percent from their mid-summer 2018 levels."

Asia challenging US dominance

For China's young billionaires "the country's fundamentals of a huge population and rising technology will continue to offer fertile conditions for entrepreneurs to grow their businesses," the study said.

It there were only 16 Chinese billionaires as recently as 2006.

"Today, only 30 years after the country's government first allowed private enterprise, they number 373 – nearly one in five of the global total."

It said 97 percent of them are self-made, many of them in sectors such as technology and retail.

Billionaires from Asia, especially in the Chinese city of Shenzhen, are now challenging the traditional dominance of Americans as technology entrepreneurs.

"In 2017, they equalled America's level of venture capital funding for start-ups, registered four times as many Artificial-Intelligence-related patents and three times as many blockchain and crypto-related patents as their US counterparts."

Ravi Raju, head of Asia Pacific Ultra High Net Worth at UBS Global Wealth Management, said Asia's billionaires "are young and relentless. They are constantly transforming their companies, developing new business models and shifting rapidly into new sectors."

The report said that globally, self-made billionaires have driven 80 percent of the 40 main breakthrough innovations over the last 40 years.

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© 2018 AFP /Phys.org

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Asia's billionaires led by Chinese tycoons enjoyed the fastest increase in their wealth this year compared to their peers in the rest of the world, a report said Wednesday.

Read more at: https://phys.org/news/2018-10-china-world-billionaires-richer.html#jCp

Asia's billionaires see fastest wealth growth: report

September 17, 2014

Asia's billionaires led by Chinese tycoons enjoyed the fastest increase in their wealth this year compared to their peers in the rest of the world, a report said Wednesday.

Read more at: https://phys.org/news/2018-10-china-world-billionaires-richer.html#jCp

Vanishing Jobs Growth Spells Deep Trouble for South Korea

 

Not-so-nice figures: Moon has seen his popularity slide amid criticism that he’s hurting employment by aggressively increasing the minimum wage. — AP

Unemployment and jobs growth in South Korea haven’t looked so bad since the wake of the global financial crisis, undermining President Moon Jae-in’s economic agenda.

Data released Wednesday show the unemployment rate jumping to 4.2 percent, the highest since early 2010, and much greater than any economists forecast. Jobs growth slumped to just 3,000 last month, also the worst figure in more than eight years.

Moon, who came into office pledging to create jobs and raise incomes for regular workers, has seen his popularity slide amid criticism that he’s hurting employment by aggressively increasing the minimum wage.

While pay hikes planned for this year and 2019 are here to stay, Finance Minister Kim Dong-yeon said the government would consider adjusting some policies.

He conceded that the jobs market wouldn’t improve much anytime soon.

Disappearing Jobs Growth

• Number of jobs added: South Korea added just 3,000 jobs in August, the least since 2010

Source: Statistics Korea

Moon’s administration points to the fallout from corporate restructuring and the shrinking working-age population as the source of the problems in the labour market. Businesses counter that hiking the minimum wage 16% this year, with another bump of almost 11% to come next year, has made job layoffs inevitable.

Small business owners in particular, from convenience stores to fast-food franchises, have shed workers.

Adding to the economic unease in South Korea is the risk that US President Donald Trump may hit car exporters with auto tariffs, even after Seoul agreed to renegotiate its trade deal with the US.

Unemployment Spike

South Korea's unemployment rate in August reached the highest since 2010

• Seasonally adjusted unemployment rate

Source: Statistics Korea

South Korean bonds climbed and the won fell after jobs figures, which appeared to squash any near-term prospect of the central bank raising interest rates.

The finance minister said economic policies that are geared toward wage-based growth are moving in the “right direction”. Yet the government also acknowledged the need for more communication and market analysis in order to gain trust from companies and the people, he said.

The presidential office described the recent increase in unemployment as inevitable pain that accompanies a change in the structure of the economy, Yonhap News reported.

Like many other countries, South Korea is experiencing a widening gap between the rich and the poor. It’s confounding policy makers and exacerbating political divisions. — Bloomberg

Getting Richer. Getting Poorer

Change in income for the most wealthy and the least wealthy households

• Top 20%
• Bottom 20%

Source: Statistics Korea. Quarterly figures, measures versus year earlier

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Malaysia's economy: stronger but eroding purchasing power

The story is the same everywhere – the rising cost of living has not been accompanied by an increase in wages.

HERE we go again – another set of impressive growth figures. Bank Negara has announced Malaysia’s latest economic growth at a commendable 6.2% in the third quarter of 2017.

The pace of economic growth for the three months up to September was faster than the 5.8% registered in the second quarter of the year.

This growth rate was the fastest since June 2014.

On a quarter-on-quarter seasonally adjusted basis, the Malaysian economy posted a growth of 1.8% against 1.3% in the preceding quarter, according to the Statistics Department.

Malaysia’s robust economic growth has been attributed to private-sector spending and a continued strong performance in exports.

To quote Bank Negara governor Tan Sri Muhammad Ibrahim last Friday: “Expansion was seen across all economic sectors.”

But try explaining this impressive economic growth rate to the average salaried worker struggling to pay his monthly household bills.

Stretching the ringgit is especially great for those living in urban areas, and Malaysia is increasingly becoming urbanised.

The story is the same everywhere – the rising cost of living has not been accompanied by an increase in wages.

Compounding matters is the depreciation of the ringgit, reducing the purchasing power of the ordinary folk. They can’t buy the same amount of food as they used to previously.

Employers are being forced to cut operating costs to match declining profits.

Job security is becoming paramount. Many are fearful of losing their jobs, as companies cut cost to cope with the challenging business landscape.

And the reality is that many companies are not hiring, as evident from the unemployment rate of 3.4%.

The Malaysian Employers Federation (MEF) has cautioned that more people would be out of a job this year due to the current economic challenges.

Apart from the challenging landscape, technology has disrupted several brick-and-mortar businesses, forcing them to change their way of doing business.

According to MEF executive director Datuk Shamsuddin Bardan, economic challenges will compel bosses to review their workers’ requirements.

While official statistics show that the economy is charting a strong growth path, the trickle-down effect is not being felt.

Why is the sentiment on the ground different from what the politicians and officials are telling us? Why is there a disconnect in the economy?

Are the figures released by the government officials more accurate and authoritative compared with the loud grumblings on the ground that are anecdotical in nature devoid of proper findings?

We hear reports of supermarkets and hypermarkets closing down, but could that be because their business model no longer works as more Malaysians turn to online shopping, with e-commerce companies announcing huge jumps in traffic?

It is the same with the malls – retail outlets are reporting lower sales and this is compounded by the fact that there is an oversupply of malls.

International restaurant chains such as Hong Kong’s dim sum outlet Tim Ho Wan and South Korean bakery Tous Les Jours and South Korean barbeque restaurant Bulgogi Brothers have ceased operations.

But then again, it could be that their offerings and prices had failed to compete effectively against the local choices.

According to the central bank, demand is anchored in private-sector spending.

“On the supply side, the services and manufacturing sectors remain the key drivers of growth,” Muhammad said.

Looking ahead, the governor said that the economy this year is poised to register strong growth and likely to hit the upper end of the official target of 5.2%-5.7%.

The trickle-down effect is not being felt simply because there is uneven growth in the various sectors of the economy.

The property sector, which provides the biggest multiplier effect, continues to be in the doldrums.

The weak ringgit has had a big impact on the price of food, especially processed food and beverages that make up 74.3% of Malaysian household spending.

It was reported that Malaysia had imported a whopping RM38bil worth of food between January and October last year.

In recent weeks, the ringgit has strengthened to about RM4.16 against the US dollar. But it is still far from RM3.80 to the dollar and the outlook of the currency remains uncertain.

We can’t even hold our heads up against the Thai baht and Indonesian rupiah – two currencies that have appreciated against the ringgit.

The headline economic numbers are showing good growth, but Malaysians’ purchasing power has dropped and our living standards have eroded. That is the bottom line. We are living in denial if we do not admit this.

This column first appeared in StarBiz Premium.

Source: On the beat by Wong Chun Hai, TheStaronline


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Make public TPPA cost, says Jomo

http://www.thestar.com.my/business/business-news/2016/01/12/jomo-make-public-tppa-cost/

KUALA LUMPUR: A former senior United Nations official and economist Jomo Kwame Sundaram said that while there are benefits to signing the Trans Pacific Partnership Agreement (TPPA), the cost of such an agreement must also be made known to the public.

He said at the 2016 TPPA Forum organised by the Malaysian Economic Association that gains from signing the TPPA in terms of economic growth were only “very modest” because Malaysia was already an open economy.

“These were also based on very questionable assumptions. Having more trade does not mean more economic growth. You have to note that having more trade may mean you export more but the country will also import more. So the (net) trade gains are very modest and the economic growth (accrued) is very very low,” Jomo said.

“However, there are huge risks involved because this is not just a trade agreement but more of a partnership agreement and most of the other requirements of the TPPA will introduce many constraints on the ability of Malaysia and others to catch up and accelerate growth and to develop the economy,” he said.

He said while there were various models to stimulate the outcome of the TPPA on the country, there was no disagreement among the different models that the increased trade benefit in terms of economic growth were only very modest.

“There will be increased trade but the benefits in terms of economic growth will only be realised only after 10 years and some countries may not even benefit in terms of growth,” Jomo said.

Jomo also said that there will be some impact on local companies that will face challenges because there will be fewer constraints on international companies.

However, the chief negotiator from the Ministry of International Trade and Industry Datuk J Jayasiri said that there will be gains for small and medium enterprises (SMEs) if they have enough capacity.

“SME Corp is helping in the upgrade of local SME’s capabilities while Matrade is promoting SMEs extensively to capitalise on the opportunities overseas,” Jayasiri said.

Jomo said that there should be an objective discussion on the matter noting that the gains were being described in such as way that the benefits were being presented without talking about the cost.

“We need to go into any deal with our eyes wide open and to be fully aware of the risks and cost as well as the potential benefits and the likelihood of achieving those benefits. So we have a slightly one-sided picture of what we do get from the TPPA,” he said.

“For people to say that we can pull out of this TPPA after six months of being in it is very deceptive. That is not the way the world works and is a very naive assumption. Say if somebody here doesn’t swim we cannot throw him into the deep end of the pool and say he will learn how to swim,” he added.

On another matter, Jayasiri said that Malaysia will be able to maintain export duties that will be imposed from the TPPA.

“For us in the Ministry, we feel that any market opening measures mean that exporters will have opportunities to go into new markets. If markets are closed it will be difficult for exporters to go into those countries,” Jayasiri said.

“Say if we are out of the TPPA, and our competitors are in the TPPA then it means our exporters will be at a disadvantage so it means we have to be in the TPPA to enjoy the preferential treatment through this,” he added.

By Daniel Tan The Star/Asia News Network

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Malaysia's growth forecasts raised after the actual 5.4% in Q2, 2012

 Malaysia's economy up 5.4% in Q2, manufacturing, demand support growth 

KUALA LUMPUR: Malaysia's economic growth, as measured by gross domestic product (GDP), for the second quarter ended June 30 rose by an unexpected 5.4% year-on-year, underpinned by an expansion in manufacturing and robust domestic demand.

GDP growth for the first quarter was revised to 4.9% from 4.7%, while growth for the first half of the year stood at 5.1% compared with the same period a year ago. Compared with the first quarter, GDP expanded by 3%.

In the supply side of the economy, only the agricultural sector saw a contraction due to lower crude palm oil production. Manufacturing, services, construction and mining all posted growth. Domestic demand jumped 13.8% for the quarter and rose 11.8% for the first-half.

The country's second-quarter GDP numbers came as a surprise to many economists, whose median forecast was for a 4.6% expansion. Growth for the quarter even exceeded the most optimistic forecast of 5.2%.

Zeti (far right) attending the briefing. With her are other Bank Negara officials

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said at a briefing following the release of the GDP data that the surge in private investment was the most encouraging aspect of the economy.

“Private investment has made a strong return because the investment climate has improved tremendously, with Malaysia moving up the rankings of various surveys in terms of competitiveness, costs and ease of doing business,” she said.

Zeti said the improvement was underscored by the higher implementation of investments by domestic and foreign investors. She added that civil engineering projects in the oil and gas, transport, utilities and services industries had helped spur growth in the construction sector.

By numbers, investments from the public and private sectors jumped 26.1% year-on-year for the quarter under review, with the first half rising 21.3%.


By sector, private investments rose 24.6% while public investments surged 28.9%. For the first half, private sector investments grew 22.4% while public sector investments expanded 19.5%.

Consumption rose 8.9% for the quarter and 11.8% in the first half. By sector, private consumption increased 8.8% for the quarter and 8.1% for the first half while public consumption expanded 9.4% for the quarter and 8.4% in the first half.

Zeti said monetary policy continued to be supportive of growth and that for the rest of the year, risks weighed on growth rather than on inflation with external headwinds still overshadowing the outlook.

She said it would take time for the global economy to recover and this would need action from various stakeholders.

“At this point, we're maintaining our forecast of 4% to 5% GDP growth for the year but this may change when the budget is announced (on Sept 28). This will come in at the upper range of the forecast if growth is robust,” Zeti added.

Alliance Investment Bank Bhd chief economist Manokaran Mottain has revised GDP growth for the year to 4.7% from 4.5% previously, with the second half to record growth of 4.5%.

He told StarBiz the third quarter would see expansion at its slowest.

Manokaran said despite the surprising growth figures, the global and domestic economy's outlook for the rest of the year would still be dampened by the eurozone debt crisis, slower expansion in China and tepid growth in the United States.

“We believe the eurozone crisis will continue to have an impact on trade and this will show itself in slower exports growth,” he said.

He added that with a drop in manufacturing activity, sentiments would be affected, leading to slower growth in the domestic-oriented services sector as consumption slowed.

Manokaran said Purchasing Managers Index (PMI) for July indicated that exports would slow as demand dropped in developed markets.

CIMB Investment Bank Bhd economic research head Lee Heng Guie said in a report that the leading index for June suggested that the economy could weaken in the second half.

“We caution that a sharply high base in the second half of last year poses a hurdle to year-on-year growth,” he said.

He pointed out that the global Organisation for Economic Co-operation and Development composite leading together with regional high-frequency indicators, including trade and PMI, were still under external pressures.

Meanwhile, the Statistics Department released data showing that July prices as measured by the Consumer Price Index gained 1.4% year-on-year to 104.8 and remained unchanged compared with the previous month.

By FINTAN NG fintan@thestar.com.my The Star/Asia News Network

Economists turn bullish following better-than-expected growth in Q2

 
PETALING JAYA: Several economists have raised their gross domestic product (GDP) forecasts for Malaysia following better-than-expected growth for the second quarter ended June 30.

Malaysia's economic growth for the second quarter rose by an unexpected 5.4% year-on-year underpinned by an expansion in manufacturing and robust domestic demand.

GDP growth for the first quarter was revised to 4.9% from 4.7%, while growth for the first half of the year stood at 5.1% compared with the same period a year ago.

Compared with the first quarter, GDP expanded by 3%.

Hong Leong Investment Bank's (HLIB) research unit said that following the strong-than-expected second quarter data, it had raised its full-year 2012 GDP forecast to 5% (previously: 4.5%).

For the second half of 2012, HLIB Research expected GDP growth to dip to 4.5% year-on-year in the third quarter (dragged by subdued trade and manufacturing and higher base in the third quarter of 2011) before improving to 5.1% year-on-year in the fourth quarter, yielding an average of 4.8% year-on-year (first half: 5.1% year-on-year).

“We are still positive that line-up of the Economic Transformation Programme projects for the second-half and 2013 could still provide a strong support to GDP growth despite external uncertainty,” said HLIB Research.

According to Bloomberg, Goldman Sachs also raised Malaysia's GDP growth predictions to 4.6% from 3.8% for 2012, and to 5.3% from 5.2% for 2013.

Meanwhile, CIMB Investment Bank Bhd economic research head Lee Heng Guie said given the steady performance in the first half, he had raised the 2012 growth estimate to 5%, from 3.8% previously.

“However, this still implies a slower growth of 4.5% to 5% in the second half versus 5.1% in the first half,” said Lee in a report.

Lee warned that external headwinds still warranted caution as they remained hurdles to Malaysia's export growth.

Meanwhile, Maybank Investment Bank (IB) Research said its 2012 and 2013 growth forecasts of 4.4% and 5.1% respectively were under review.

“Provisionally, we expect 2012 growth to be around 5%, which implies a slightly slower growth of 4.8% in the second half as the global purchasing managers index in July signals that the global economy hence external demand will remain soft in the third quarter.”

Maybank IB Research said domestic demand would continue to be well supported by initiatives to sustain consumer spending, policies and measures to spur investments, and the roll-out and progress of big ticket infrastructure projects and capital expenditures in industries like oil, gas and energy.

By THOMAS HUONG huong@thestar.com.my The Star/Asia News Network

Malaysia's loan growth strong in sight

Analysts still bullish on strong loan expansion

PETALING JAYA: Despite slower banking loan growth indicators for June, analysts and industry observers are still bullish of a double-digit loan growth this year.

 Malaysian Rating Corp Bhd (MARC) chief economist Nor Zahidi Alias said on the whole, the rating agency still foresee a relatively strong expansion in loans this year, notwithstanding the recent dip in loan applications and approvals.

Strong corporate demand would likely offset the moderation in household demand for loans, he said, adding that the agency envisaged loan growth to moderate slightly to about 10% to 11% this year amid the weaknesses in the external environment.

Nor Zahidi: “Loans have expanded at a relatively strong pace.’

“The banking sector's loan growth has remained resilient despite a slowdown in the country's economic activity as reflected in slower GDP growth in the past few quarters. Overall, loans have expanded by double-digit rates in the first six months of the year, after reaching the peak of 13.8% in September 2011.

“At the end of June, loans expanded at a relatively strong pace of 12.6%, supported by strong corporate demand for loans which grew by 13.6% year-on-year, offsetting the slower pace of loans to the household sector. Household sector's loan growth had softened to 11.8% in June from a cyclical high of 13.9% in November 2010, Nor Zahidi told StarBiz.

Based on Bank Negara's latest banking statistics for June 2012, loan growth was stable at 12.6% year-on-year versus 12.5% in May the same year. The growth was slightly higher for both consumer and business loans at 11.8% and 13.6%, respectively, in June.

The growth in loan applications moderated from 15.1% in May to 10.5% in June, while approvals contracted by 2.1% year-on-year, versus an increase of 18.2% in May. On an annualised basis, loans grew by 12.7% in June compared with 11.4% in May.

The pace of loan applications and approvals has been volatile partly due to the responsible lending guidelines. In the first six months of this year, the average growth in loan applications fell to 14.9% year-on-year compared with an average expansion of 25.5% recorded in the similar period last year. The average growth rate in loan approvals during the period shrunk to 2.8% against 22.6% average expansion in the first half of last year.

RAM Ratings head of financial institution ratings Wong Yin Ching said the total banking system's year-to-date loan growth was 6.4% in the first half compared with 13.6% for the whole of last year, adding that the growth was driven by lending for purchase of residential properties, working-capital financing, as well as financing for purchase of non-residential properties.

“We expect the growth momentum to be sustained in the second half of this year supported by stronger financing demand from the corporate and commercial sector, as the rollout of projects under the Economic Transformation Programme (ETP) and 10th Malaysia Plan gradually gains traction. In recent months, we have observed a pick-up in loan applications from the business and services sectors,” she noted.

Wong expects household loan growth to moderate following the various prudential measures introduced since late 2010. To this end, she said it had seen a sharp slowdown in loans extended for personal use, which only grew by 3.2% in the first half of 2011 (full-year: 20.1%).

Loan growth for residential mortgages also moderated slightly to 6.3% in the first half of 2011 (full-year: 13.2%). She said the rating agency also noted a slight shift towards lending for the purchase of non-residential properties following the tighter criteria for residential property financing.

Meanwhile, Alliance Research Cheah King Yoong said the brokerage was maintaining its forecast of 11 % domestic loan growth this year, for now. Nonetheless, he said it foresaw there was increasing likelihood of an upside risk to its 11% domestic loan growth forecast in view of the strong pick-up of loans in June.

Should the loan growth momentum continue to be sustained in the second half with ETP related loans gaining pace, Cheah added he would not be surprised if this year loan growth could match last year's growth of 13.6%.

Based on the latest statistics, although property loans remained the key driver, where loans to purchase residential and non-residential properties constitute 46% of the annualised 12.7% loan growth for June, he said loans for “other purpose” and working capital had been gathering pace, contributing 28.8% and 22.3% of the loan growth drivers respectively.

He said business loans had recorded a commendable annualised growth of 15.9%, ahead of household loans' annualised growth rate of 10.1%.

Cheah said this reaffirmed Alliance Research's expectations that despite having a slow start in early 2012, overall domestic lending activities were picking up, with stronger growth of business loans stemming from the roll out of ETP's Entry Point Projects, which filled up the vacuum left by the moderation in property loans.

Kenanga Research said despite the lending indicators showing a slowdown, it still believed loan growth would be able to outperform its industry forecast this year.

“Having already achieved a 12.6% loan growth this month, we believe that the banking industry will be able to outperform our industry loan growth forecast of 11% to 13% despite a slightly weaker set of lending indicators,'' it noted.

A banking analyst with a bank backed brokerage felt it was too premature to indicate whether loan growth for the second half would pick up solely based on slower loan indicators alone. Loan growth may slow down in the second half but much would depend on how the results season pans out, he said, adding that, nonetheless, he still expected loan growth this year to be around 10.5%.

By DALJIT DHESI daljit@thestar.com.my

Malaysian GDP grew 4.7% in Q1, 2012

Malaysia's economic growth slowed to 4.7 percent in the first quarter, the government said Wednesday, due to weakening exports sparked by a stuttering global economy and debt woes in Europe.

The slower expansion in the export-dependent Southeast Asian country came after the economy grew at a 5.2 percent clip in the fourth quarter of 2011.

Malaysia is one of the fastest growing developing countries

"Domestic demand remained firm, supported by both private and public sector economic activity, while exports moderated amid weaker external demand," Bank Negara, the central bank, said in a statement.

The bank has projected growth to expand four to five percent this year, slower than the 5.1 percent seen in 2011.

Economists said the slower growth indicated that the economy was "moderating at a better pace than expected" in light of the eurozone crisis.

"One of the headwinds hitting not just Malaysia but also regional economies is the very weak growth in Europe with some countries mired in recession," said Yeah Kim Leng, chief economist with financial research firm RAM Holdings.

"The concern here is of course the slowdown is affecting Asian exports including Malaysia, given its sizeable export sector."

But Yeah said he expected the Malaysian economy to grow at 4.6 percent in 2012, backed by strong domestic demand.

In early May, the central bank kept its key interest rate at 3.0 percent for the sixth time in a row to drive domestic demand.

Inflation was 2.3 percent in the first quarter and is expected to moderate to 2.5-3.0 percent for 2012 amid lower global commodity prices and modest growth in domestic demand.

The central bank said that while the challenging external environment would remain a risk to Malaysia's growth prospects, "domestic demand is expected to remain resilient".

Prime Minister Najib Razak, who must call fresh elections by April 2013 and faces a strengthening opposition, has set a goal of Malaysia becoming a "high-income developed nation" by 2020.

He said last year that annual growth of at least 6.0 percent was needed to achieve that.

Under the plan, Najib aims to double per capita income to 48,000 ringgit ($16,000) by 2020.

The government has promised major infrastructure projects and financial market liberalisation to attract foreign investment and boost growth, but critics say the results have been limited.

Malaysia's household debt rise a concern

PETALING JAYA: While not an imminent danger, the level of household debt is of concern and warrants close monitoring, RAM Ratings head of financial institution ratings Wong Yin Ching said,

The nation’s household debt as a percentage of gross domestic product (GDP) had risen to 77% as at end-2011 compared with 69% at end-2006, and its household debt-to-GDP ratio was considered high when compared with other countries in the region, especially in relation to GDP per capita.

Wong was speaking to StarBiz after the release of the rating agency’s Banking Bulletin 2012. Home loans remained the largest component, contributing about 45% of the total household debt, she added.

However, unsecured financing in the form of personal loans and credit-cards had been growing rapidly, accounting for about 15% and 5% of total household debt, respectively.

Development financial institutions, cooperatives and building societies that offer personal financing facilities to civil servants under salary-deduction schemes contributed to the bulk of the growth, she noted.

“We view positively Bank Negara’s various pre-emptive measures implemented since late 2010 to rein in growth in household debt and safeguard the soundness of the financial system.

“On top of the tighter measures on residential property financing, stricter guidelines have also been implemented on credit cards, such as increasing the income eligibility criteria.

“We do not discount additional prudential regulations to be imposed in future,” Wong said.

Effective Jan 1, banks are required to use net income calculation method instead of gross income when computing debt-service ratio.

Wong added that unemployment rate was still relatively low at 3% and the credit quality of household sector was also healthy, with a low gross impaired-loan ratio of 1.8% as at end-January 2012 (end-2010:2.3%).

Nevertheless, she said the debt-servicing ability of households in the lower-income segment might be more vulnerable to economic down-cycles, greater variability in income and inflationary pressures.

On loan growth, RAM Ratings expects the overall banking system’s loan growth to taper to about 8% to 9% this year, after clocking in a strong 14% expansion in 2011. This is supported by a projected 4.6% real GDP growth this year, which is slightly lower than the 5% in 2011.

Private investments, she said were expected to remain strong, although a weakening in global demand would have some bearing on export performance.

Wong anticipates the central bank to remain accommodative in its monetary policy by maintaining the overnight policy rate at 3% with a downside bias in 2012, as preserving growth momentum would take precedence over curbing inflationary pressures.

While a more moderate household loan growth was anticipated due to the prudential regulations introduced, she added this would be balanced by stronger financing demand from the commercial and corporate sector from the rollout of projects under the Economic Transformation Programme and 10th Malaysia Plan.

For non-performing loans this year, she said the industry’s gross impaired-loan ratio was expected to be kept healthy this year, with a slight uptick to about 3% from the current all time low level of 2.7%.

“In terms of capitalisation, all the domestic, all the domestic banks were well poised to meet the new capital requirements under Basel III, of which the implementation would be phased in from 2013,” she added.

Although these new capital measures would elevate banks’ funding costs, which may in turn be passed on to consumers, it would ensure the banking sector was safeguarded against unexpected shocks, Wong said.

As at end-January, the banking system’s capitalisation was strong with a tier-1 risk-weighted capital adequacy ratio of 12.9%.

Banks’ profitability, she said had been on a steady rise over the last couple of years on the back of strong loan growth, benign loan impairment charges and growing fee income. However, net interest margins (NIMs) had been under pressure due to stiff price competition, particularly in certain loan segments such as residential mortgages.

NIM is a measure of the difference between interest income generated by banks and interest paid out to depositors.

Source: By DALJIT DHESI  daljit@thestar.com.my

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World Bank warning of another global recession; Mier: Worse to come!

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(Shanghai Daily)
 

THE World Bank is warning developing countries to prepare for the "real" risk that an escalation in the eurozone debt crisis could tip the world into a slump on a par with the global downturn in 2008/09.

In a report sharply cutting its world economic growth expectations, the World Bank said Europe was probably already in recession. If the debt crisis deepened, global economic forecasts would be significantly lower.

"The sovereign debt crisis in the eurozone appears to be contained," Justin Lin, chief economist for the World Bank, said in Beijing yesterday. "However, the risk of a global freezing-up of the markets as well as a global crisis similar to what happened in September 2008 is real."

The World Bank predicted world economic growth of 2.5 percent in 2012 and 3.1 percent in 2013, well below the 3.6 percent growth for each year projected in June.



"We think it is now important to think through not only slower growth but sharp deteriorations, as a prudent measure," said Hans Timmer, the bank's director of development prospects.

The report said if the eurozone debt crisis escalates, global growth would be about 4 percentage points lower. It forecast that high-income economies would expand just 1.4 percent in 2012 as the eurozone shrinks 0.3 percent, sharp revisions from growth forecasts last June of 2.7 percent and 1.8 percent respectively.

It cut its forecast for growth in developing economies to 5.4 percent for 2012 from its previous forecast of 6.2 percent.

It saw a slight pick up in growth in developing economies in 2013 to 6 percent. But the report said threats to growth were rising.

It cited failure so far to resolve high debts and deficits in Japan and the United States and slow growth in other high-income countries.

On top of that, political tensions in the Middle East and North Africa could disrupt oil supplies and add another blow to global prospects.

China's growth - forecast in the report at 8.4 percent - could help bolster imports and gives it "big fiscal space" to respond to changing conditions, Lin said.

But the World Bank report added: "No country and no region will escape the consequences of a serious downturn." 

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Mier: Worse to come

By LEONG HUNG YEE  hungyee@thestar.com.my

Eurozone crisis, slower China growth likely to hurt economy

KUALA LUMPUR: The Malaysian Institute of Economic Research (MIER) expects gross domestic product (GDP) for 2011 to be 4.9% but to decelerate to 3.7% in 2012.

MIER executive director Dr Za-kariah Abdul Rashid said this year would not be as bad as 2008 or 2009 but might not be as good as 2011, pulled down by the eurozone crisis as well as slower growth in China's economy.

He said if the eurozone crisis turned worse, the country's economy might be affected and the GDP could reach the 2008/2009 level.

“There's some avenue if the Government wants to spur the economy by spending on development. It will depend on the private sector whether our economy turns out to be strong this year,” Zakariah said at a briefing to present Malaysia's economic outlook.

Zakariah: ‘The private sector has done a lot for the economy.’

“However, the private sector has done a lot for the economy. We can't expect much more from the private sector.”

He said MIER had previously forecast 2011 GDP growth to be 4.6% but revised it upwards after looking at the latest numbers and the crisis in the eurozone.

“Growth in the last quarter of 2011 is expected to be much lower on account of external developments. The latest monthly economic indicators are already suggesting that,” MIER said in a report.

It added that economic growth would likely get “bumpier” in the months ahead.

Meanwhile, Zakariah said that there was “room for 25 to 50 basis-point downward revision” in the overnight policy rate (OPR). However, he said the revision would depend on the situation and had to be done vigilantly.

Based on MIER's Business Conditions Index (BCI), the business sentiment had worsened from the second quarter of last year. The BCI fell to 96.6 in the fourth quarter of 2011, the first time it had dipped below the 100 threshold since the fourth quarter of 2010.

“It usually shows a contraction mode when the index sinks below 100. The BCI had been dropping since the second quarter of 2011,” Zakariah said.

Sales, local and foreign orders, as well as capacity utilisation were significantly lower in the fourth quarter of 2011, with companies expecting to scale back production over the next three months as inventory builds up.

Concurrently, consumer sentiment also fell to a two-year low of 106.3 on the Consumer Sentiments Index as household incomes lost momentum, and finances and job became a growing concern.

Zakariah said the index pointed out that consumers were also holding on to purchasing big tickets items as spending plans took a backseat.

Separately, Zakariah said it would be better for the Government to call for general elections early as uncertainty over the nation's political future would hurt the economy.

He said private investors were currently holding back investments on concerns that government policies could change due to the political climate here.

“If you ask me as an economist, I would rather see the problem solved once and for all. The earlier they settle the political matters, the better, we can focus on the economy.

“Right now everything is still hanging. People are postponing because of the elections. So if they settle it once and for all and immediately, it would be better,” Zakariah said.  

India's increasing troop may go nowhere

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By He Zude, Fang Wei (China Youth Daily)

India plans to recruit 100,000 soldiers over the next five years and send them to the China-India border areas to cement its military strength there, according to a report by the Times of India on Nov. 2. India's defense ministry has already approved a 13 billion-U.S. dollar military modernization plan.

The average growth rate of India's military spending has stood at 7 percent to 8 percent for more than a decade, and its military spending ranks ninth in the world. India is also the world's largest arms imports country. The spread of the "China threat" theory, the increase of troops to the disputed areas near the China-India border, and the display of a tough attitude toward China all aim to make a breakthrough in further increasing military spending.

Despite India’s huge military spending, its economic growth has recently been slow, with last year’s economic growth rate hitting a six-year low. It is very difficult to considerably increase military spending for military buildup amid the economic downturn, so India needs to first create a tense atmosphere and transfer domestic problems in hopes of securing more military spending.

India plans to recruit 100,000 soldiers over the next five years and send them to the China-India border areas to cement its military strength there, according to a report by the Times of India on Nov. 2. India's defense ministry has already approved a 13 billion-U.S. dollar military modernization plan.

India has continued to hold joint military drills with China's neighboring countries over a recent period, showing it evidently intends to contain China. Furthermore, India's move to send an additional 100,000 soldiers to the China-India border areas is consistent with its earlier actions aimed at containing China.

In addition, the United States needs to rely on India to restrict China. India needs to show its value to the United States by flexing its muscle toward China so that it could gain U.S. military support and help raise its international status. India's troop increase on the border between China and India is aimed at meeting the requirements of the United States and then getting support from the United States. However, will India realize its goal?



First, the action will tense the situation of the region and harm India's own interests. Increasing troops on the border area is always a sensitive move and it is especially sensitive to increase troops on a disputed border area.

Second, the action is completely not worthwhile. Currently, India has 40,000 troops in the disputed area, and if the further 100,000 is deployed, the total number of the troops will reach 140,000. In an era when precision-guided weapons are developing rapidly, everyone with common sense knows that concentrated troops could be eliminated easily. Meanwhile, 13 billion U.S. dollars is really a lot of money for India, and it is still unpredictable whether the future cost of maintenance will be guaranteed.

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Property loans to keep lead; Malaysia's property mart unaffected by forays abroad

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Property loans to keep lead

BY DALJIT DHESI daljit@thestar.com.my

PETALING JAYA: Analysts expect property loans to maintain their position as a key growth driver of credit expansion with some estimating them to grow between 10% and 12% this year due to the low interest rate environment and ample liquidity in the banking system.

We believe that the full year loan growth for residential property loans will be in the 10%-12% range.- RAM Ratings head of Financial Institution Ratings Promod Dass.

While holding to this view, some feel the external environment, like the slowing US economy coupled with the sovereign debt crisis in the eurozone, could dampen demand for properties.

For the first seven months of this year, property loans remained the key growth driver, accounting for 40.6% of the banking system's overall credit expansion, followed by working capital loans at 23.6%. Residential property loans currently accounted for about 27% of the system's total loans.

RAM Ratings head of financial institution ratings Promod Dass toldStarBiz that the credit environment to date had continued to be accommodative for borrowers with ample liquidity in the banking system and a stable economic environment. Coupled with attractive promotional packages offered by some developers, he said residential property loans had already shown a healthy 7.1% growth in the seven months to July (or 12.1% annualised), which was more or less at a similar pace compared with the overall total banking system's year to date loan growth of 7.5%.

“We believe that the full year loan growth for residential property loans will be in the 10%-12% range although we are closely observing the sovereign problems still brewing in Europe as well as concerns on the US economy and the consequent impact on Malaysia's economic growth stamina, which could affect consumer sentiment in property purchases,” he reckoned.

Dass said that while there was a slowdown in loan applications for residential mortgages in the few months after the implementation of the 70% loan-to-value cap on the third and subsequent house financing, the momentum had picked up again since March.

The move to curb the third and subsequent home financing was introduced by Bank Negara on Nov 2 last year to quell speculation on residential properties.

Alliance Bank Malaysia Bhd consumer banking head Ronnie Lim said he was bullish on property loans. He noted that in Malaysia, housing loans currently accounted for 50% (or RM255bil) of total household debt (RM510bil) and would continue to be one of the key growth drivers of retail credit expansion this year and in the near future.

“One of the main growth areas for properties is Klang Valley, which accounts for close to 60% to 65% of all property transactions. In addition, the population growth in Klang Valley is expected to reach 10 million by 2020 and the demand for residential property is expected to be fuelled by residents of Klang Valley whose average age is 34 years old.

“Coupled with the shortage of land in Klang Valley, demand will always out-strip supply. The economic growth and the low unemployment rate in the country is another catalyst for housing loan growth. The recentEconomic Transformation Programme (ETP) announcement will further accelerate demand for residential properties as more affordable properties are being developed,'' he said.

Lim said prices of properties in Malaysia were still one of the lowest in the region when compared with countries like Thailand, Hong Kong and Singapore. The industry's total housing loan outstanding stood at RM255bil as of July 2011 compared with RM234bil in December 2010, he noted, adding that this represented a 14% annualised growth.

Given the positive environment and the above factors, Lim said the bank was confident the current growth rate could be maintained despite the recent global market unrest.

An MIDF Research banking analyst said property loans would hold up as a key growth driver of credit expansion this year as the persistent demand for property loans would be driven by low lending rates as well as the sustainable growth of the property market.

Local property mart unaffected by forays abroad

THE increase in foreign property investment by Malaysian housebuyers will not have much impact on the local property market, according to those in the local building industry.

“Those houses won’t be their primary home. The primary home is still here where people are used to the local environment and local condition,” says Real Estate and Housing Developers’ Association Malaysia president Datuk Seri Michael Yam.

He adds that people who invest overseas are those with spare cash who wish to diversity their portfolio of investment. They also buy for a specific reason.

“There is the emotional objective which is to be with their children studying overseas,” he observes.
He advises those buying for short-term investment or speculation to be cautious.

“Unless the capital appreciation is great, you may run into currency risks. Both objectives have to work positively in order for the property invested to be well-worth it,” Yam explains.

On the local property front, he acknowledges that prices have shot up in the last two or three years but says one of the reasons is due to a “catching-up exercise”.

“There was adverse risk from the global financial crisis earlier, so many developers chose to defer their launches. During this time, the prices of construction materials have gone up,” he elaborates.

Association of Valuers, Property Managers, Estate Agents & Property Consultants in the Private Sector Malaysia (PEPS) president Choy Yue Kwong says properties in major cities are still beyond the reach of average income earners.

“Those who earn a combined household income of RM20,000 a month (or less) are not likely to be able to afford a central London property where a 700 sq ft apartment could cost about £600,000 (RM2.8mil). Of course, the affordability is likely higher outside of central London,” he adds.

On US properties, he says that while one can find an affordable bungalow, the location “could be in the middle of nowhere”.

On the escalating prices of local properties, he says people have started diversifying their investments and put their eggs in different baskets.

“While it is true that property management overseas are very professional, buyers need to pay a price for their professionalism. In Malaysia, enforcement is not strict. We have laws against default in service charge or tenancy payments but these are not strictly enforced.”

National Housebuyers Association (HBA) honorary secretary-general Chang Kim Loong says in countries like Australia, a buyer only needs to pay 10% of the property price upon signing the sale and purchase agreement and settle the remaining 90% upon completion of the project and issuance of the Certificate of Fitness.

“The 10% is paid to a solicitors’ fidelity fund that is guaranteed by the government. It is therefore in the developer’s interest to quickly complete the project,” he points out.

“Another attraction is the guaranteed returns to be deducted outright from the purchase price. With ready tenants, the property’s yearly lease can be deducted from the purchase cost, so buyers need not pay in full."

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