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Showing posts with label investments. Show all posts
Showing posts with label investments. Show all posts

Wednesday 6 September 2023

NIMP 2030 Sets Breakthrough Agenda, poised to attract more investments

 


PM Launches Malaysia’s 4th Industrial Master Plan

IT is a pivotal moment for Malaysia’s industrial development.

Malaysia’s manufacturing sector has to accelerate the Fourth Industrial Revolution, taking advantage of smart technologies to move its production base up the value chain while conforming to environmental, social and governance and meeting net-zero target.

Amid increasing geo-economic complexity and the escalating impact of climate change, Malaysia needs a new generation of sustainable industrial transformation to lever up the economy to sustain resilient and competitive advantage internationally.

The manufacturing sector remains one of the primary engines of growth (2022: 24.1% of gross domestic product or GDP: 84.2% of total exports and 16.8% of total employment) and had expanded at steady rate of 4.8% per annum in 2015-2022 (4.9% per annum in 2011-2015).

The New Industrial Master Plan (NIMP) targets to increase the manufacturing sector’s value-added by 6.5% per annum to RM587.5bil by 2030 (RM364.1bil in 2022); employment growth of 2.3% per annum to 3.3 million in 2023 (2022: 2.7 million persons); while median salary will increase by 9.6% per annum to RM4,510 in 2030 (2021: RM1,976).

The country has prematurely deindustrialised since early 2000s, mainly due to increased global competition and slow progress in moving up the value chain.

Malaysia’s Economic Complexity Index ranking (24th in 2021), which indicates the productive capability of an economy, was lagging behind advanced economies (first for Japan, fourth for South Korea and sixth for Singapore); other developing regional peers are fast catching up (29th for Thailand); and labour productivity growth has moderated and stagnated (2.3% per annum in 2013-2022).

Our regional peers are receiving more foreign direct investment (FDI) inflows in recent years.

During the period 2017-2022, Malaysia registered FDI inflows of US$9.4bil per year compared to US$96.4bil per year for Singapore, US$20.9bil per year for Indonesia and US$15.8bil per year for Vietnam.

The Philippines is catching up fast (US$9.2bil per year) while Thailand’s FDI has dwindled to US$7.1bil per year.

The NIMP 2030 sets the breakthrough agenda for Malaysia’s manufacturing sector’s next take-off in the new green industrial age.

The NIMP maps out a comprehensive industrial direction, strategies and enablers with the aim of positioning Malaysia for new growth catalytic sectors and industries in the decades ahead.

The NIMP 2030 calls for a “Whole-of-Nation” approach and adopts a mission-based approach to drive the manufacturing transformation in four ways:

> Advancing economic complexity,

> Tech-up for a digitally vibrant nation,

> Pushing for the net-zero target, and

> Safeguarding economic security and inclusivity.

The master plan will chart a new generation of sustainable industrial policies, underpinned by four enablers, 20 strategies and 56 action plans.

Domestic manufacturing industries have to strengthen their resilience and competitiveness to counter operational challenges caused by geo-economic conflicts that disrupt supply chains, resource scarcity that threatens energy and utilities security, and adverse climate change disruptions.

The identified five pivotal sectors are:

> Electrical products and electronics,

> Chemical and chemical products,

> Advanced materials,

> Aerospace, and

> Healthcare (including medical devices and pharmaceuticals).

All industries will be driven strategically to embrace these four missions for reconstructing and developing a solid and sustainable manufacturing sector and also for exporting resilience.

The services sector must also move up the value chain to support the manufacturing sector.

While the lead agencies and parties involved were identified to implement the mission-based projects, accountability and responsibility are therefore critical to ensuring a successful implementation of the mission-based projects.

We need a strong accountability to ensure alignment and coordination among the stakeholders and parties to clearly define the project scope and deliverable.

Roles and responsibilities across ministries on investment issues tend to be unclear and sometimes lack co-ordination.

Hence, an effective implementation of a one-stop centre is a crucial investment facilitation mechanism whereby relevant ministries and government agencies are coordinated at a single point to provide prompt, efficient and transparent services to investors to shorten and simplify administrative procedures and guidelines ultimately, thereby removing bottlenecks faced by both local and foreign investors in establishing and running businesses in Malaysia.

Investment climate reforms are necessary. While the government has made efforts on transparency, the rule of law, weeding out corruption and strengthen the quality of institutions, they have not been sufficiently consistent to improve investor confidence and ensure responsible business practices by both foreign and domestic companies.

The government has to bolster collaborations between the federal government, state governments and local authorities to facilitate investment.

We support the Investment, Trade and Industry Ministry’s efforts to streamline the 31 Investment Promotion Agencies, with the Malaysian Investment Development Authority leading the way.

Domestic direct investment (DDI), especially by micro and SMEs (MSMEs), are crucial for supporting industrial ecosystem.

The inclusion of DDI as a key performance indicator is a positive step to facilitate and raise the quality of domestic investment.

MSMEs should be provided with opportunities to gradually scale up their industries through horizontal and vertical integration as well as to embrace green practices.

This necessitates capital investment in advancing technological and digitalisation capabilities, ensuring an ample supply of highly skilled and knowledge-based human capital, and more importantly, access to financing, grant and development fund.

It is estimated that a total of RM95bil will be invested throughout seven years to implement NIMP, predominantly coming from the private sector.

We support the action plans to mobilise the financing ecosystem (financial institutions and capital market), including the introduction of the NIMP Strategic Co-Investment Fund and NIMP Industrial Development Fund to support strategies, action plans and mission-based projects as well as for industries and businesses, especially MSMEs.

However, the NIMP did not provide an estimation of the amount of financing and funds needed to support the industrial transformation.

As SMEs often encounter challenges in accessing financial resources and credit facilities, it is therefore necessary to broaden the range of financing instruments available to SMEs and entrepreneurs, by improving understanding about a full range of financing instruments they can access in varying circumstances, and by encouraging discussions among stakeholders about new approaches and innovative policies for SMEs and entrepreneurship financing.

For SME green facilitation, we proposed:

> The creation of a web-based tool in partnership between the industry associations and environmental regulator to provide free environmental guidance to SMEs; and

> The provision of an ESG assessment toolkit to guide SMEs embark on their ESG journey by identifying gaps in their management system based on the 12 ESG indicators identified.

Manpower and integration with technology is integral for the industrial transformation. Swift action must be taken to review and address the manpower planning and development programmes.

These include the supply of skilled manpower; adaption; and reskilling and upskilling of workers that are future proof, including the hiring of foreign talent to supplement domestic pool of workforce.

The quality assurance of Technical and Vocational Education Training has to be revamped and enhanced.

We support the implementation of the multi-tier levy model to reduce over-dependency on low-skilled foreign workers, but the levy must not be too steep during the transition period as it would be significantly burdening the employment and operating costs of MSMEs.

The implementation of Progressive Wage System on a voluntary basis and incentive-based approach for MSMEs for the skill set categories along with the minimum wage must be productivity-linked.

We support the action plans to drive promotional activities of Free Trade Agreements (FTAs), including the Regional Comprehensive Economic Partnership (RECP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and export consortia, given the low utilisation rate and awareness among the business community.

We propose:

> The design of a tariff finder to support traders to maximise benefits from the RCEP and CPTPP to help businesses, to get up-to-date information on the preferential tariffs and the rules of origin criteria used to determine a product’s eligibility for preferential tariff treatment, and

> The setting up of a one-stop advisory centre for all FTA-related enquiries from businesses; gather feedback on tariffs and non-tariffs issues for better trade and investment facilitation.

Strategic planning is hard but the real challenge is execution. Without a careful and planned approach to execution, strategic goals cannot be attained.

Hence, we need a pragmatic approach to monitor and track the progress of the proposed action plans and mission-based projects; and make timely interventions and facilitation across collaborations between ministries and agencies as well as provide resolutions to achieve the deliverables.

- Lee Heng Guie is Socio-Economic Research Centre executive director. The views expressed here are the writer’s own.

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NIMP 2030 Sets Breakthrough Agenda For Manufacturing ...


NIMP 2030 poised to attract more investments



PETALING JAYA: The current investing focus on environmental, social and governance (ESG) and sustainability will likely help the New Industrial Master Plan 2030 (NIMP 2030) attract further targeted investments into the country.

The plan also appears to aim to capitalise on the opportunities from the recent shift in investments away from China due to the global trade tensions.

According to CGS-CIMB Research, the NIMP 2030 is a comprehensive plan, noting that the government appears to understand the limitations and hurdles of the current industrial setting such as the reliance on cheap foreign labour and low research and development adoption.

“If this strategy works, ESG-conscious companies could be more interested in investing in Malaysia such as Tesla.

“We also see a new set of industries being emphasised, in particular electric vehicles (EVs) and carbon capture, utilisation and storage, which capitalise on Malaysia’s existing strength and advantages,” CGS-CIMB Research said.

However, it also noticed certain sectors were receiving less emphasis than in previous plans such as biotechnology, although pharmaceutical, a subset of biotechnology, was highlighted in the report.

“A few policy suggestions in the NIMP 2030 are not new, for instance, the multi-tier levy system for foreign workers, which has been delayed, given the pushback by industry players. Hence, successful execution is key,” it said.

“Thus far, the NIMP 2030 certainly improves the long-term prospects for gross domestic product (GDP) growth, but we maintain our 2023 GDP growth forecast at 4% year-on-year and 4.6% in 2024,” the research house added.

Meanwhile, UOB Kay Hian (UOBKH) Research said it believes the electrical and electronics (E&E) industry is poised to be the largest beneficiary of the plan.

“The NIMP 2030 is a catalyst for trade diversion for foreign direct investment, the creation/entrenchment of regional champions, and new emerging industry clusters such as EV and renewable energy (RE),” UOBKH Research said.

It noted the E&E industry, which accounts for some 40% of the country’s exports, is poised to grow further from the NIMP 2030 catalyst.

“The well-strategised plan targets to enhance the sector’s value-add, employment and wage dynamics by deepening the economic complexity of the supply chain, upskilling and support for small and medium enterprises,” UOBKH Research said.

“While we await the granularity of incentives and rollouts, our top manufacturing picks include Cape EMS Bhd, Inari Amertron Bhd and NationGate Holdings Bhd,” UOBKH Research said.

These companies are noted for their alpha growth on strong visibility of better order loadings from their new and key customers from the supply chain reconfiguration amid the trade diversion, it said.

For the outsourced semiconductor assembly and test players, it likes Inari for its strong growth trajectory premised on its new flagship programme, inventory replenishment and the fruition of its new business collaboration.

Other companies such as Greatech Technology Bhd are noted for their solid order-book backlogs with more than 50% exposure to the high-margin EV and RE sectors alongside their unique value proposition while other beneficiaries include packaging company L&P Global Bhd, it said.

Meanwhile, Hong Leong Investment Bank Research said the NIMP 2030 is a positive move, but noted the key to its success will depend on the strong cooperation across multiple key stakeholders that cuts across federal and state governments as well as agencies.

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Sunday 5 March 2023

A good payday for EPF contributors, as EPF declares 5.35% dividends for 2022

 Dividend a surprise, much more than economists predicted, says ecperts

PETALING JAYA: With the current economic challenges, the 5.35% dividend by the Employees Provident Fund (EPF) for 2022 is considered good for contributors, say economists.

Sunway University Economic Studies Programme director Prof Yeah Kim Leng called it laudable given last year’s challenging local and international financial as well as capital market conditions.

The Russian-Ukraine conflict and spikes in inflation and interest rates weren’t of help either, he said.

ALSO READ: RM145.5bil in EPF withdrawals made since 2020 

“Though lower than last year’s 6.1%, the 5.35% is above earlier expectations that were close to 5%,” said Prof Yeah.

“The performance is also respectable as the fund had to adjust its portfolio to meet the large withdrawals allowed as part of the Covid-19 pandemic support packages,” he said in response to EPF’s announcement yesterday.

The EPF declared a dividend rate of 5.35% for conventional savings, with a total RM45.44bil payout, as well as 4.75% for syariah savings. This amounts to RM5.7bil in payout.

ALSO READ: When wages go up, so will EPF’s funds, says CEO

In total, EPF will be paying RM51.14bil to contributors.

As for unhappiness among contributors over the dividend rates, Prof Yeah said it is not surprising for them to compare EPF returns with other pension funds as such funds are typically more conservative and earn lower but have more stable returns.

“By contrast, funds that generate higher returns entail taking higher risks. Therefore, many growth funds are earning much lower returns because of the financial market downturn in 2022 as evident by the nearly 20% decline in the Global MSCI (Morgan Stanley Capital International) benchmark,” he pointed out.

ALSO READ: Low wages must be addressed, 81% of active EPF members earn RM5,000 or less

Economist Datuk Jalilah Baba said EPF’s dividend rate still exceeded many pundits’ expectations.

“People will still receive payouts, which is a good sign. Perhaps it may not be what was expected but even I expected it to be around 4.5% to 5%.

“Based on EPF’s calculations, they can still afford to give people money, so it is good news for contributors. On the average, this is considered stable.

“If people were to compare, say with 2017 with its 6.9% dividend rate, you also have to look at the economy at the time because now the situation is totally different and filled with uncertainties.

ALSO READ: COMPETITIVE RETURNS AMID TOUGH INVESTMENT CLIMATE

“As such, the scenario has to adjust to the collection they have,” she said.

Meanwhile, corporate executive P. Suganya, 37, from Subang Jaya, Selangor said if EPF continued to give lower rates than previously, Malaysians might have to set aside their savings for other investment schemes as they might not have enough EPF savings for their retirement due to the volatile market.

However, she said most Malaysians could not afford to set aside part of their income for investments due to the high cost of living as well as the anticipated recession.

“This is worrying and the EPF is a fixed and reliable investment most Malaysians rely on. And the contributions are automatic and accounted for,” she said.

ALSO READ: EPF's assets under management drop for first time since 1985

“EPF has to be cautious in its investments in the current volatile market since the fund cited this as a reason for the lower gross investment returns,” she added.

Facebook user T. Gopal Thirumalai commented that even though people were worried about the shrinking size of the funds in EPF, it was important to know that good fund managers would get rid of low-yielding investments, shares and assets that actually give better returns.

“When high returning funds are no longer available and your fund size keeps increasing every month, what would you do with excess funds, month after month?

“On top of that, unlike instruments with fixed dividends, when you invest in shares, you cannot predict future returns.

“A share with historical high returns can become the opposite during uncertain times.

“At that time, you decide on what to do,” he posted on the social media platform. 

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Tuesday 22 November 2022

APEC 2022: Boosting global governance


 

 

Xi's landmark South-East Asia trip expands partnerships

Two multilateral meetings, close to 20 bilateral talks and a sit-down with United States President Joe Biden – President Xi Jinping’s six-day trip to South-East Asia has charted the way for global governance, expanded China’s global partnerships and steadied ties between the world’s two largest economies.

Xi travelled to Bali, Indonesia, from Monday to Thursday for the G20 Summit before attending the 29th Apec Economic Leaders’ Meeting in Bangkok and visiting Thailand – the first time he has attended the events in person in three years. Xi returned to China on Saturday evening.

The back-to-back meetings held by Asian countries took place amid spillover from the Ukraine crisis, which fuelled global financial, energy and food crises, with some countries advocating division, confrontation and decoupling.

The world is again standing at a crossroads, and Asia has embraced a crucial moment in promoting global governance, State Councilor and Foreign Minister Wang Yi said after the conclusion of Xi’s trip.

Wang, who is also a member of the Political Bureau of the Communist Party of China Central Committee, said Xi’s proposals at the G20 Summit indicated that he has always kept the interests of developing nations in mind and maintained the outlook in his diplomatic activities that true development can only be attained with the common development of all countries.

At the summit, Xi said Beijing supports the African Union in joining the G20.

China’s support for multilateralism and its contribution to G20 cooperation is also evidenced in the fact that the 15 projects and proposals put forward by Beijing were included in the list of projects for pragmatic cooperation at the summit.

Bernard Dewit, chairman of the Brussels-based Belgian-Chinese Chamber of Commerce, said Xi’s proposals at the Apec meetings were not only inspiring for the Asia-Pacific region but also for other countries around the world, especially in Europe.

“At a moment when the COP 27 is closing, Xi insists that his country will push further for green and low-carbon development.

“Every government in the world should approve of his words when he says protecting the ecological environment and tackling environmental changes is the common challenge facing all humanity.”

Raymund Chao, chairman for the Asia-Pacific region and China of professional services provider PwC, said Xi’s written speech delivered to the Apec CEO Summit has boosted the confidence of business leaders in the Asia-Pacific region in responding to risks and turning crises into opportunities. — China Daily/ANN

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President Xi has met a number of foreign leaders and delivered important remarks while attending the G20 summit in Bali, Indonesia, showing charm of major-country diplomacy. Check out the graphic to learn more:
 

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Wednesday 28 September 2022

Steady residential property sector and positive 1H property market data trends, Malaysia

 


Market spurred by latent demand post pandemic

 

“Residential property transaction volume and values are up year-on year in 1H22.” Datuk Siders Sittampalam >>
SINCE the resumption of economic activities and reopening of international borders, the residential property market has seen a pick-up in activity.

According to the National Property Information Centre (Napic), the residential property sector recorded 116,178 transactions worth Rm45.62bil in the first half of 2022 (1H22), which was an increase of 26.3% in volume and 32.2% in value year-on-year.

However, in light of prevailing uncertainties such as the upcoming Budget 2023, potential 15th General Election and macroeconomic headwinds, can the steady trend so far be sustained for the remainder of 2022?

PPC International managing director Datuk Siders Sittampalam says it’s “anyone’s guess” how the local residential property market will fare for the remainder of this year.

“With plenty going on such as the looming elections and global economic uncertainty, it could have an indirect effect on the property market,” he tells Starbizweek.

Still, Siders says the residential sub-sector has been off to a good start this year.

“Residential property transaction volume and values are up year-onyear in 1H22 and it’s been the highest increase since 2016.

“This can be attributed to latent demand, post pandemic. Many that held back purchases in the market are now back again (since January 2022),” he says.

Siders adds that loan approvals have also picked up, adding however that approval rates are still below pre-pandemic levels.

He also points out that the increase in interest rates so far this year has not had an impact on the market (in terms of demand).

“Going forward, I believe that volume and values should sustain, just like how they were in the first half of this year. It will be steady, barring unforeseen factors, be it domestically or externally.”

According to Napic, the property market performance recorded a rebound in 1H22, a reflection of normalising economic activity as the country moved towards endemicity.

“With the positive projection on economic growth by Bank Negara (at between 5.3% and 6.3% in 2022), supported by the implementation of various government initiatives and assistance, the property market performance is expected to be on track.”

Meanwhile, CBRE|WTW in its property market performance for 1H22, believes that moving forward, transactional activities should remain resilient in locations with good accessibility and comprehensive amenities.

“Developers are anticipated to remain prudent, focusing on established townships and mature locations. In addition, upcoming launches would see a shift towards more sustainable elements to meet buyers’ shift for cost-efficient and eco-friendly homes.”

As at the first quarter of 2022, CBRE|WTW says the Klang Valley landed residential sector remained encouraging.

“Average transacted prices rose 6.8% year-on-year while transacted volume increased 11.2% year-onyear (more than 9,100 units), but was less than the 10,000 units transacted in the fourth quarter of 2021.”

CBRE|WTW says new launches picked up slightly in the second quarter, despite developers maintaining a cautious approach.

“Landed launches continue to perform well and launch prices of terraced houses remained between RM500,000 and RM800,000, except for some priced above the Rm1mil mark in the City of Elmina, Setia Eco Templer and KL East.”

Meanwhile, locations such as Klang Valley South, such as Sepang, Salak Tinggi and Kuala Langat remain the hotspots, says CBRE|WTW.

It says these locations recorded consistent growth, encouraged by industrialisation and good road accessibility.

“Several areas located in the north of Klang Valley are also hotspots of new launches, typically in Rawang, Puncak Alam and Sungai Buloh.”

As for high-rise residential units, Siders says a market study needs to be conducted to ease the oversupply of such properties.

“Comparatively, landed properties tend to do well as there’s always demand,” he says.

Siders also believes that the government could consider bringing back the Home Ownership Campaign (HOC) to spur the market.

To help drive the sector, the government introduced the HOC in June 2020 under the Penjana initiative.

The campaign ended on Dec 31, 2021. Many industry observers and property players believed that the HOC was a huge help to the market and urged the government to extend the campaign period into 2022.

Meanwhile, CBRE|WTW says additional measures are still required to improve market activities for the high-rise residential sub-sector.

“The waiver of stamp duty should continue. A continual increase of the overnight policy rate (OPR) is expected in 2H22 amid the global high-cost environment.

“Since project launches have been limited, competition would also not intensify, with prices remaining stagnant. The cost of borrowing may further impact demand and prices if there is an additional OPR hike 2H22.”

CBRE|WTW adds that the upcoming launch of Mass Rapid Transit 3 may benefit property valuers along the route, including an increase in project launches, particularly in Mont Kiara.

“Moving forward, developers may shift focus to offerings emphasising exclusivity and low-density living with better facilities.”

CBRE|WTW says the existing supply of high-rise residential units stood at 68,555 units in 1H22, whilst 219,398 units are in the pipeline for completion by 2024.

“The bulk of incoming supply will be in central Kuala Lumpur, namely the golden triangle area (30%).”

On market activity, CBRE|WTW says both the average transacted value and asking rents are stable at RM779 per sq ft and RM3.80 per sq ft, respectively, supported by the increased interest from homebuyers and renters.

“The average occupancy rate also increased slightly to 64% due to improved market conditions. Following that, project launches have been limited and the focus is still on the sales of ongoing projects.

“Nonetheless, two transit-oriented development projects were launched in 1H22 in Pudu and Bukit Damansara, with unit sizes ranging from 480 sq ft to 1,080 sq ft priced from RM360,000 and units sized from 1,001 sq ft priced from Rm1.8mil and above.”

According to Napic, Penang, Kuala Lumpur, Johor and Selangor formed about 47% of the total national residential volume in 1H22.

“More than 10,000 units of new launches were recorded, down by 66.7% against 31,687 units in 1H21.”

Against 2H21, the new launches were lower by 13.3% (2H21: 12,173 units),” it says.

“Sales performance for new launches stood at 20.3%, slightly lower than 1H21 (20.6%) and 2H21 (28.1%).”

According to Napic, Johor recorded the highest number of new launches in the country, capturing nearly 23.8% (2,509 units) of the national total with sales performance at 31.8%.

Sabah recorded the second highest number (1,335 units, 12.7% share) with sales performance at 10.6%. This was followed by Perak (1,317 units, 12.5% share) with sales performance at 19.4%.

Terraced houses dominated the new launches. Single storey (2,047 units) and two-to-three storey (5,150 units) together contributed 68.2% of the total units with sales performance at 22%, followed by condominium / apartment units at 19% share (2,009 units) with sales performance at 12.4%. 

  • By eu.ene MAHALIN.AM eugenicz@thestar.com.my

 

Positive 1H property market data trends

 

THE recently released property market data for the first half of 2022 (1H22) by the National Property Information Centre (Napic) showed that the Malaysian property market has found a firmer footing over the review period.

On a half-yearly basis, while transaction volume and value surged to a new record high of 188,002 units worth Rm84.4bil, what was most revealing is that the overhang market trend has finally eased, while future and planned supply was reduced.

For the past four years, this column has been calling for stricter measures to control the market’s oversupply situation and for property developers to be more mindful of the market’s overhang status.

The data for the 1H22 shows that finally, some sanity has set in. 


Having said that, as far as prices are concerned, the Malaysian House Price Index (HPI), as seen in Figure 1, continues to show a declining trend with the growth in the 1H22, slowing down to just 0.5% year-on-year (y-o-y), dragged by a 2.5% y-o-y drop in Penang HPI, and in terms of segment, detached homes and high-rises continue to dictate the downtrend with a 2.3% and 0.5% y-o-y drop respectively.

An improved picture

For property overhang, this column aggregates the supply in the residential segment and takes the data from both service apartments and the Soho sub-segment to gauge the market’s overall residential overhang status.

After all, it is the combination of the three that is the real market supply in the residential market segment as shown in Figure 2. 


In total, the residential overhang eased to 59,321 units valued at Rm42.59bil.

Although compared with a year ago, the number of overhang units and value increased by 3.8% and 2.5% respectively, the overhang situation for the residential segment improved as both the number of units and value dropped by 6.5% and 4.4% respectively compared with six months ago.

Nevertheless, the overhang situation within the high-rise segment (which includes residential high rise, commercial service apartments, and Soho units) remains elevated.

For the 1H22 period, Napic data showed that the overhang data is now at a new record high of 45,502 units against 44,800 units as at end of 2021.

Only in terms of value, the 1H22 figure is relatively flat at Rm33.22bil against Rm33.32bil six months ago.

Overall, this translates to 76.7% of the overall market overhang in volume and almost 78% of the total value.

The overhang situation within the high-rise segment has indeed increased as more than three out of four unsold properties are highrise units.

A steep drop

Figure 2 also shows the property market’s unsold units that are under construction.

From here, one would note that the 1H22 data showed a total of 108,826 units remained unsold valued at Rm60.95bil, down by 12.5% and 9.6% compared with a year ago, and lower by 9.7% and 6.4% when measured against the market’s position six months ago.

With the lower overhang and those under construction, overall, the market saw total unsold properties down to 168,147 units worth some Rm103.54bil.

Compared to a year ago, when the figure was 181,460 units worth Rm108.93bil, the data for 1H22 saw a drop of 7.3% in volume and 4.9% in value respectively.

When compared with the 183.918 units worth Rm109.69bil as at end of 2021, the 1H22 data showed a reduction of 6.4% in volume and 8.6% in value respectively.

For the residential segment by state, the key overhang is located in Kuala Lumpur and the states of Selangor, Johor, and Penang as they account for 59% of total overhang units worth some Rm16.2bil, which translates to 74.5% of the total overhang value in the residential segment.

In terms of price points, properties marketed at above RM500,000 account for 43.4% of the market’s overhang.

For service apartments, Johor, Selangor, and Kuala Lumpur are key geographical areas with the most overhang with a total of 96.8% of the segment’s overhang in terms of units and 97.5% in terms of value.

Johor alone accounts for 68% of the segment’s total number of units and nearly 69% of the segment’s total value at Rm13.34bil.

Interestingly, in terms of the number of units, 89% of service apartment overhang in Malaysia are priced at RM500,000 and above, valued at Rm18.36bil, and they represent 95% of the total service apartment overhang valued at Rm19.32bil. As this column has repeatedly highlighted in the past that Malaysia has a serious overhang issue, we are now finally seeing some light at the end of the tunnel as the market has now seen a drop in future supply.

For easy reference, the data in Figure 3 for future supply includes starts, incoming supply, planned supply, and planned new supply. 


Overall, other than a 34% jump in purpose-built office space to 2.59 million sq m, all other segments are seeing a downtrend in future supply with a reduction in the total number of units by between 8.1% for the industrial segment to as much as 26.2% in future hotel room supplies. The residential, service apartments and the Soho segment saw a reduction of 16.3% in the total number of units to 1.196mil units from 1.430mil units six months ago.

As a percentage of total in-stock, the future supply is lower by between 0.8 percentage points (pps) for the industrial segment to 21.1 pps for the residential segment.

A word of caution though. Despite the reduction in future supplies, the incoming supply for both the service apartment segment and Soho remains significant at 104.4% and 92.8% respectively.

Despite the positives, the property market remains challenging as we are still saddled with a high overhang as well as incoming supply. While the positives are there based on the 1H22 data, it is not time to pop the champagne just yet as it will still take a while (three to five years) for a more positive trend to emerge.

Overall, the Malaysian property market is still up against a massive over-supply situation and prices too are not expected to improve much, as evident from the flattish growth or worse, negative, in the Malaysian HPI.

Given the higher borrowing cost with an increase in the overnight policy rate, homebuyers are expected to remain cautious.   

  StarBiz PANKAJ U. KUMAR 

 

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House prices down in 2Q, Penang residential market picking up pace

 

  PETALING JAYA: House prices in Malaysia fell in the second quarter of 2022 (2Q22), marking the worst quarterly contraction since the star

 


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Saturday 9 July 2022

Financial literacy and bankruptcy

 

Stretching your ringgit: The importance of knowledge in this space cannot be more timely, especially when Malaysians are doing their level best to stretch their ringgit in order to cope with the increasing cost of living from inflationary pressures, which are spiralling out of control.

It is not enough to be good at your job. Managing your money well is as important as having good hygiene.

Lack of financial discipline reasons for bankruptcy

Using a credit card or apps wisely to accumulate points for future spending, waiting for bargains such as free shipping options or vouchers on ecommerce platforms on special days of the months to purchase necessities are just a few examples of being financially aware. 

FINANCIAL literacy is an important agenda for a country’s economic well-being.

Most governments around the world would like for their citizens to be financially literate, be it entrepreneurs, working professionals, white collar or blue collar workers.

It is not enough to be good at your job. Managing your money well is as important as having good hygiene.

Recently, the Malaysia Department of Insolvency (MDI) reported that 287,411 people in the country have been declared bankrupt as of March 2022.

Between 2018 and May 2022, there was an increase of 46,132 new bankruptcy cases.

Of this number, 59% (amounting to 27,365) of the bankrupt were aged below 44.

This led to the Prime Minister highlighting his concern on youth bankruptcy and requesting for the relevant authorities to look into this matter including potentially revamping the laws on insolvency.

It is important to note that due to the pandemic, our government has in fact raised the threshold of bankruptcy from RM50,000 to RM100,000 in 2020.

Many legal actions against defaulters of loans were also postponed due to the effects of the pandemic.

Personal loan main reason for default

Diving into the MDI’S statistics, I realised that the main reason for bankruptcy was due to default of personal loans with an overwhelming percentage at 42%, followed by hire-purchase loans (15%) and business loans (13.5%).

Personal loans have often been touted to charge exorbitant interest rates, especially credit card schemes.

A simple illustration: when month end comes, there are often three options to settle your credit card bill, namely statement balance, outstanding sum or minimum sum.

The right thing to do would be to settle the statement balance. Settling the outstanding sum in full means that the credit card user is paying down the credit card debts which isn’t yet due, which defy the purpose of utilising credit card in the first place.

Paying only the minimum sum, which many people often do, would lead to one incurring high interest on the outstanding credit card debt.

This would snowball to levels which are highly exorbitant.

The statistics above is telling because it shows that excess consumption pattern is a key reason for bankruptcy.

In terms of youth bankruptcy, it makes sense especially with social media propagating binge spending, splurging on luxury goods and the shallow mindset of keeping up with the Joneses.

Living beyond one’s means owing to social pressure simply isn’t going to go out of fashion, more so in today’s digital age.

Proliferation of get-rich-quick schemes and scams

There is no doubt the lack of financial discipline and bad spending habits are reasons which contribute to this social issue.

However, I believe another major contributing factor is the increasing number of scams and get-rich-quick schemes. These schemes often tap on the most vulnerable segment of the society, namely those who are greedy, desperate or naive.

Greed is one of human nature’s biggest weaknesses. Despite the evolution of mankind, this primal instinct has continued to flow through the DNA of mankind. I do not doubt the importance of greed as a driver for progress, but too much and it becomes fatal.

Desperation, especially in the case of hardcore poverty or extreme emergency without anyone to rely on, there is hardly any choice to seek help.

We have seen this episode played out, especially in the times of economic recession, high unemployment not unlike the period of pandemic we have all been through recently.

Of the three, the most addressable would be the one who is naive, in short, one who lacks the necessary knowledge.

Stretching your ringgit

The importance of knowledge in this space cannot be more timely, especially when Malaysians are doing their level best to stretch their ringgit in order to cope with the increasing cost of living from inflationary pressures, which are spiralling out of control.

I would like to put it on record: Accumulating financial knowledge does not mean becoming an investment prodigy. It can be as simple as understanding the various options for people to stretch their money.

One of the most common savings hacks would be to channel your monthly salary to a “flexi” or “semi-flexi” home loan account. This simple gesture every month automatically lowers the interest on the loan to be incurred.

Your unused funds will be utilised to further reduce the principal and interest while you have the option to withdraw the excess amount if you require to use the funds.

Using a credit card or apps wisely to accumulate points for future spending, waiting for bargains such as free shipping options or vouchers on ecommerce platforms on special days of the months to purchase necessities are just a few examples of being financially aware.

Of course, the best thing to do is to be prudent in spending, in essence practicing delayed gratification at all times.

The best investment is knowledge

It is a good sign that there is an increasing number of licensed financial professionals such as Chartered Financial Analysts and Certified Financial Planners out there today.

We also do see many more collaborative efforts between industry professionals working hand in hand with regulators in adopting social media to reach out to the masses.

With the advent of social media, it is also crucial to sift out genuine financial literacy advocates. After all, there are many free resources online today.

It is not to say the smartest people from the top of their professions cannot be hoodwinked. We have seen how 34-year-old Ng Yu Zhi of Envy Asset Management and Envy Global Trading swindled prominent people like the general counsel for Temasek Holdings Pek Siok Lan, criminal lawyer Sunil Sudheesan, ex-president of the Law Society Thio Shen Yi, chairman of Vickers Capital Group Finian Tan and CEO of Chuan Hup Holdings Terence Peh, among others.

This purported nickel trading scheme amounting to S$1bil (Rm3.2bil) was the largest fraud or Ponzi scheme in Singapore’s history. The best part, red flags were obvious where both of the perpetrator’s entities above were not licensed by Monetary Authority Singapore and he was promising 15% returns in three months to his clients.

Ultimately, it comes down to the individual and a good sense of financial awareness when managing one’s own hard-earned money.

The best investment is in yourself. Whether it is learning a new skill or advancing your education, self enrichment gives the best return on investment.

As Benjamin Franklin once said, “An investment in knowledge pays the best interest”. He can’t be wrong considering his face is literally on the US dollar bill even till today. - StarBiz,

Ng Zhu Hann, the CEO of Tradeview Capital. He is also a lawyer and the author of “Once Upon A Time In Bursa”. The views expressed here are the writer’s own.

 

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Saturday 23 April 2022

Fear-of-missing-out factor in property market

 

FOR those who are interested to know about the health of the residential property market, Bank Negara Malaysia’s article “Developments in the Residential Property Market” (https://bit. ly/373eyeg) is a must-read.

The article, published in Bank Negara’s latest Financial Stability Review, states that house prices in Malaysia are seriously unaffordable at 4.7 times median house price to annual median income (median multiple). A house is considered affordable if the median multiple is 3.0 or below.

Why do Malaysians find houses seriously unaffordable? On the supply side, there is a mismatch due to market failure to provide enough affordable housing. On the demand side, housing affordability is limited by insufficient income and high indebtednes for some.

I think buyers’ buoyant sentiment or fear of missing out (FOMO) also contributes to the high median multiple or price-to-income ratio.

The most probable reason why investors buy houses is because they think the price will go up further. Yes, the current house prices are high and stagnating, but they reason that in the long term, prices will maintain their upward trend.

For investors, property investment can be even more lucrative compared to stocks because they can have a bigger leverage, which make their returns much higher if prices go up.

Also, they do not receive margin calls even if prices decline as long as they can service the monthly mortgage repayment.

For owner-occupiers, one of the reasons for buying houses at the current high prices is the fear that if they do not buy now, the price may go up later.

In the same article, Bank Negara pointed out that 57.3% of approved housing loans in the second half of 2021 were granted to owner-occupiers. Presumably, the other 42.7% of approved housing loans were granted to investors.

Researchers at the Federal Reserve Bank of Dallas, United States, recently published a study titled “Real-time Market Monitoring Finds Signs of Brewing U.S. Housing Bubble” (https://bit.ly/36zs0jj).

Here is what they say: “But real house prices can diverge from market fundamentals when there is widespread belief that today’s robust price increases will continue.

“If many buyers share this belief, purchases arising from a ‘fear of missing out’ can drive up prices and heighten expectations of strong house price gains.

“This self-fulfilling mechanism leads to price growth that may become exponential (or explosive), resulting in the housing market becoming progressively misaligned from fundamentals until investors become cautious, policymakers intervene, the flow of money into housing dries up and a housing correction or even a bust occurs.”

The study listed the many consequences associated with explosive appreciation in real house prices. “Expectations-driven explosive appreciation (often called exuberance) in real house prices has many consequences, including the misallocation of economic resources, distorted investment patterns, individual bankruptcies and broad macroeconomic effects on growth and employment.”

I think an extreme example is Japan. For 30 years or so since 1950, house prices in Japan had only gone up.

Property prices rose by as much as six to seven times during the 1980s asset bubble as Japanese house buyers, whether investors or owner-occupiers, were all piling into real estate for fear of missing out based on the belief that prices could only go up.

Property prices in Japan continued to rise until the early 1990s and then started a drastic decline. Even some 30 years later, they have still not recovered.

In sum, should the FOMO sentiment be prevalent, prices will continue to be high relative to income or rent until the trend changes.

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Sunday 6 March 2022

On the recovery path

 

Penang property market to rebound amid lingering challenges

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THE Penang property market, which had actually started seeing a rebound in transactions since last year, is expected to resume its recovery path into 2022.
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CBRE|WTW director Peh Seng Yee says the Penang property market can expect a “rebound amid lingering challenges” this year.
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“We do expect a recovery in market activity for 2022. Prices of landed properties will continue to remain resilient.
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“For the high-rise sub-sector, it will continue to be a buyers market,” he says at the launch of CBRE|WTW’s 2022 Market Outlook Report, recently.
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Peh adds that future launches will generally comprise self-sustained developments that will be on a smaller scale, while at the same time fulfilling the demand for affordable units.
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Knight Frank Penang executive director Mark Saw also says the residential sub-sector in Penang has improved, posting higher volume and value of property transactions as of the third quarter of 2021.

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“The Penang state government’s commitment to increase home ownership with plans for a range of affordable homes in various strategic locations, extension of the Penang Home Ownership Campaign until June 2022 and enforcement of mandatory installation of fibre optic telecommunication infrastructure for all new developments, will spur the state’s residential property market.”
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In terms of challenges, Peh says scarcity of sizeable land in Penang will still continue to pose development constraints.
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“Additionally, the prolonging effects of the pandemic, especially with the new Omicron variant, could result in cautious spending and a wait-and-see approach.
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“Stringent lending guidelines and concerns over job security could also potentially derail the market,” says Peh.
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On the outlook of the Penang office market, Peh says the segment is expected to remain healthy this year, with stable rentals and occupancy rates.
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“The prospects of co-working spaces still remain encouraging,” he says.
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As for Penang’s retail sub-sector, Peh says the removal of movement restrictions since last year has been a boost to this sector.
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“We see normalisation amid ‘freedom euphoria’. However, we expect rentals to be flattish and a widening gap between the newer and older shopper complexes.”
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As for Penang’s hotel sub-sector, Peh says this segment is set for a steady recovery if the pandemic is significantly contained.
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“The segment can be spurred further by travel bubbles and other government initiatives.
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“We also see pent-up demand for medical tourism and intensifying market competition for the hotel sub-sector.”
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Meanwhile, Knight Frank Malaysia in its real Estate Highlights for the second half of 2021, says the Penang residential market is expected to pick up this year, supported by a series of measures announced under various stimulus packages and Budget 2022.
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“This will encourage people from various income levels to purchase their dream homes. The overhang of high-rise residential properties, especially in the category of condominiums and apartments, has also been growing.”
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With limited new supply of purpose-built offices in the state (existing and future), Knight Frank says the occupancies and rental rates for better grade purpose-built office buildings are expected to hold steady.
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“Meanwhile, with the growing work-from-home trend, some business premises have been converted into co-working space.”
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Knight Frank noted that the country’s vaccination rate has continued to improve and with further easing of restrictions, the retail segment is expected to slowly recover.
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“Selected retailers are expected to embrace the rise of eCommerce as they head down the path of recovery.”
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It adds that Penang’s industrial segment has continued to remain strong and steady throughout the pandemic.
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“This is especially with the Penang state government’s commitment to expand another two industrial parks in Batu Kawan, with focus on the logistics industry and the remaining phases for mixed industries.
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“This industrial park is set to continue its history of the successful Bayan Lepas Industrial Park.”
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Meanwhile, CBRE|WTW in its 2022 Market Outlook Report says property transaction activities in Penang increased for the period of January to September 2021.

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“A total of 11,981 properties valued at RM7.23bil were transacted, reflecting 13.9% and 33.9% increase in volume and value, respectively, year-on-year.
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“As more businesses are allowed to operate, the Penang property market has generally rebounded.”
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CBRE|WTW is optimistic that the rebound will extend into this year.
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“However, the rebound would be gradual as the pandemic lingers on, along with a sluggish economy and higher cost of living.”
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CBRE|WTW also expects to see more bargain hunting for residential units this year.
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“The overhang remains a concern. Prospective purchasers can negotiate for more discounts in addition to the incentives offered,” it says.
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According to the National Property Information Centre (Napic), there were 30,290 unsold completed residential units (overhang) worth RM19.75bil as at September 2021, compared with 30,926 units worth RM19.99bil in the previous corresponding period.
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Of the 30,290 overhang units, 18,829 units (or 62.2%) comprised high-rise units, while 6,803 units (22.5%) consisted of terrace houses.
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The bulk of the overhang units were focused mainly in Johor (6,441 units), Penang (4,638 units), Kuala Lumpur (3,863 units) and Selangor (3,376 units).
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Napic says 33.7% of the overhang properties consisted of units ranging between RM500,000 and RM1mil, while 28.4% comprised units ranging between RM300,000 and RM500,000.
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Units below RM300,000 comprised 25.5% of the total overhang, while units above RM1mil (12.4%) consisted of the remaining unsold units during the period under review.
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Knight Frank concurs that the overall property overhang status continues to remain elevated, especially in the high-rise residential segment.
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“The performance of the residential sub-sector is improving gradually, registering higher volume and value of property transactions as of the third quarter of 2021,” it says.

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