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For The Property Market To Recover, Foreign Direct Investments (FDI) is Key

Experts tell The Edge Malaysia that foreign direct investment (FDI) is critical for the local property market to rebound.

FDI, according to Foo Gee Jen, group managing director of CBRE | WTW, is a stimulus for property. “Once it is in place, we will see a surge in high-value assets and properties,” says the expert. He stated, “We need additional investments, particularly from foreign investors.”

The property market, according to Stanley Toh, executive director of LaurelCap Sdn Bhd, “could revive if confidence returns to the market.”

Some real estate specialists believe that any rebound in the property market would be “slow and steady” in the future.

“It is time for Malaysians to understand that the heyday of great price growth is long gone,” says Siva Shankar, CEO of real estate agency Rahim & Co.

In the long run, any rebound we see from now on will be more organic and sustained growth. Rather than the dizzying highs and crashing lows of prior years, we need to become acclimated to this type of growth.”

Foo does not believe that the property boom years of 2008 to 2013 will be repeated.

 

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KUALA LUMPUR (Aug 14): Foreign direct investment (FDI) is an essential factor if the local property market is to recover, experts tell The Edge Malaysia.

Foo Gee Jen, group managing director of CBRE | WTW says that FDI is a catalyst for property. “Once it is there, we will see an increase in high-value assets and properties. We need new investments, especially from foreign investors,” he said.

“This may then generate more employment and business in the country. Massive additional new infrastructure investments are not necessary, only a government that is supportive and responsive to the needs of the business community on an all-inclusive basis,” said Foo.

“A revision of the current policies and incentives are crucial to rebuild the confidence of foreign investors in our country. Viewing foreign investors who have been in Malaysia for many years through a ‘them and us’ lens is an outdated approach that must be replaced,” he added.

Stanley Toh, executive director at LaurelCap Sdn Bhd told the business weekly that the property market “should recover once confidence returns to the market”.

“We are currently lagging behind two to three years when compared with other countries. Historically, when FDI comes in, it creates a feel-good factor and we see a boost in the property market,” Toh explained.

But Toh also felt that political instability has “hampered” foreign investments.

Many “business decisions related to real estate” have been shelved owing to “the current political scene in Malaysia” he added.

Some of the real estate experts are also of the view that any property market recovery moving forward will be “slow and steady”.

Siva Shankar, CEO of real estate agency at Rahim & Co that: “It is time Malaysians accept that the heyday of fantastic price increases are long over. Any recovery we see from now on will be steady growth and more organic in the long term. We need to get used to this kind of growth rather than the dizzying highs and crashing lows of previous years.”

Foo does not expect a repeat of the property boom years of 2008 to 2013.

 

Source: Edge Prop

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Penang Has Approved RM14.1 Billion In Manufacturing Investments

Penang received RM3.5 billion in total authorized manufacturing investments in the fourth quarter of 2020 (4Q20), taking total inflows to RM14.1 billion in 2020.

According to InvestPenang, the investment achievement for 2020 was the second-highest in the company’s history, falling just short of the previous high of RM16.9 billion set in 2019, demonstrating investors’ continued trust in Penang as a viable investment destination.

It said that foreign direct investment (FDI) accounted for RM10.6 billion, or 75%, of the RM14.1 billion, making Penang the third-highest manufacturing FDI recipient in Malaysia, thanks to projects from DexCom Inc, Ultra Clean Holdings, and Bruker Malaysia, among others.

Besides that, Penang’s domestic direct investment (DDI) is expected to reach RM3.6 billion in 2020, demonstrating the state’s vibrant industrial ecosystem as a forum for local players to participate and prosper.

According to InvestPenang, the state’s main promoted industries, such as electronics and electrical (E&E), machinery and equipment, and scientific and measuring equipment (including medical devices), accounted for the majority of the total approved manufacturing investments.

According to the Malaysian Investment Development Authority (MIDA), investment inflows included 58 projects in 4Q20, which are expected to create 13,268 jobs in the state when combined with projects approved during the first nine months of last year.

According to InvestPenang, DDI was RM1.8 billion in 4Q20, while FDI was RM1.7 billion.

 

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GEORGE TOWN (March 4): Penang recorded total approved manufacturing investments of RM3.5 billion in the fourth quarter of 2020 (4Q20), bringing cumulative inflows to RM14.1 billion in 2020.

InvestPenang said the investment achievement for 2020 was the second-highest in its history, which was only short of 2019’s historical high of RM16.9 billion, reflecting investors’ continued confidence in Penang as a sustainable investment location.

Of the RM14.1 billion, it said RM10.6 billion, or 75%, were made up of foreign direct investment (FDI), making Penang the third-highest manufacturing FDI recipient in Malaysia, attributed to projects from DexCom Inc, Ultra Clean Holdings and Bruker Malaysia, among others.

Meanwhile, domestic direct investment (DDI) in Penang amounted to RM3.6 billion in 2020, a testament to Penang’s robust industrial ecosystem as a platform in which local players can participate and thrive.

InvestPenang said the total approved manufacturing investments were primarily related to the state’s key promoted industries, such as the electronics & electrical (E&E), machinery and equipment, and scientific and measuring equipment (including medical devices) industries.

“Cumulatively, investments in these sectors accounted for 89% of Penang’s total approved manufacturing investments in 2020, which in turn accounted for 50% of Malaysia’s investments in these three sectors.

“Investors’ continuous trusts in Penang indicate that the state’s strong fundamentals and versatile ecosystem have the capacity and capability to support needs of the industries’ next-generation technologies, products and long-term growth strategies,” InvestPenang said in a statement.

It said, according to the Malaysian Investment Development Authority (MIDA), investment inflows involved 58 projects in 4Q20, whereby, together with projects approved during the nine-month period of last year, they are expected to generate 13,268 jobs in the state.

In 4Q20, InvestPenang said, the state recorded DDI of RM1.8 billion, while FDI was at RM1.7 billion.

 

Source: Edge Prop

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Porsche AG Has Picked Malaysia As Its Southeast Asian Centre

With all the recent news about many foreign investors fleeing Malaysia amid the country’s increasingly unstable politics, the financial and economical state of Malaysia is in need of a serious boost.

But luckily, in a recent report done by multiple credible sources citing The Edge, Porsche AG is setting up an assembly plant in Malaysia after the German automaker decided to make the nation its Southeast Asian centre.

Porsche AG is a German manufacturer of automobiles which specializes in high-performance sports cars, SUVs and sedans. Porsche AG has its headquarters in Stuttgart, and the company is owned by Volkswagen AG, of which Porsche Automobil Holding SE is the majority shareholder.

The Edge said that Porsche would partner with Inokom Corp (a Sime Darby Bhd unit) in the venture that will be based in the northern state of Kedah. The facility will be the first assembly plant outside of Germany for the group, the report said.

The Edge announced that Christian Weiss, Deputy Director of Corporate Communications at Porsche, said Southeast Asia has great potential and that the company is constantly exploring options for further growth in this market.

Porsche’s move will be a much-needed boost to Malaysia, which has lagged behind Indonesia and Thailand in securing major global automakers’ investments, the report said.

 

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(Bloomberg) — Porsche AG is setting up an assembly plant in Malaysia as the German automaker looks to make the nation its Southeast Asian hub, the Edge weekly newspaper reported, citing people familiar with the matter it didn’t identify. Porsche will partner with Inokom Corp., a unit of Sime Darby Bhd., in the venture, which will be located in the northern state of Kedah, the Edge said. The facility will be the company’s first assembly plant outside Germany, the report said. The move by Porsche will be a much-needed boost to Malaysia, which has lagged behind Indonesia and Thailand in securing big investments by global automakers, the report said. Christian Weiss, Porsche’s deputy director of corporate communications, said Southeast Asia has great potential and the company is continuously examining options for further growth in this market, the Edge reported.

Source: Bloomberg News

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Investors Are Still Investing In Us Despite Poor Performance In Q2 Of 2020

Malaysia remains confident about sustaining its investments, considering the low growth rate of the second quarter of 2020. The confidence in the business community and investor community has been enhanced by government progress in resolving the Covid-19 pandemic, Datuk Seri Mohamed Azmin Ali said.

He assumed that the Gross Domestic Product ( GDP) forecast growth of 6.3% to 7.5% by the International Monetary Fund ( IMF) and World Bank for next year also added to the investors’ positive sentiments about the country.

During the 2nd quarter of 2020, Malaysia posted its GDP contract of 17.1 percent – the worst quarterly double-digit decrease reported since 1998, as a result of the introduction by the Government of the Movement Control Order (MCO).

The Malaysian Investment Development Authority (MIDA) has brought 32 projects to Malaysia as of 31 May 2019, totalling RM 17.5 billion. Of these, 28 projects have been accepted, and four are still being evaluated.

Azmin Ali added that, while attracting more foreign investors, the Government remains committed to holding the country as a competitive investment destination.

 

For further reading, please refer to the article below:

Despite Malaysia’s low growth in the second quarter of 2020, local and international investors remain optimistic of keeping their investments in the country.

Senior Minister cum International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali said the confidence of the business community and investors have been strengthened by the government’s success in tacking the Covid-19 pandemic, the decline in unemployment rate and the government’s commitment via the economic stimulus packages worth RM295 billion, reported Bernama.

He believes that the International Monetary Fund (IMF) and World Bank’s forecast of 6.3% to 7.5% growth in gross domestic product (GDP) for next year also contributed to the positive sentiment of investors towards the country.

“Although this is just a projection, it shows the level of confidence of foreign and local investors in Malaysia and the Perikatan Nasional (PN) government,” he told Bernama following the launch of the National Month Celebration 2020.

“In order to record a positive growth as projected by the IMF and World Bank, we need to accelerate the country’s economy from now onwards.”

He shared that the government remains committed to keeping the country as a competitive investment destination, while still attracting more foreign investors.

And given the strides made by the government, Azmin is confident that Malaysia’s economy will return on a better path next year.

In the Q2 2020, Malaysia saw its GDP contract 17.1% – the worst double-digit quarterly drop registered since 1998 due to the government’s implementation of the Movement Control Order (MCO) to curb the spread of Covid-19.

As of 31 May 2019, the Malaysian Investment Development Authority (MIDA) lured 32 projects to relocate to the country with investments totalling RM17.5 billion.

Of these, 28 projects have been approved, while four projects are still under evaluation.

Source: Property Guru

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Not Sure If Short-Term Rental Or Long-Term Lease Will Make You Money?

The time for buying houses now is better than ever with waivers for stamp duty and a guaranteed 10 % discount on residential properties under the Home Ownership Program. It is smart to rent it out to gain some revenues while waiting for the value you would enjoy.

According to CEO of Homestay brand Victoria Home (VH) Premier Group, Yong Yik Cai, the final returns for both rental options are not far off after taking into account running costs, currently. He also emphasised that STR is an effective option for property investors in the over-fuelled real estate market instead of focusing on leasing income. Average STR yields are likely 10%-20% higher than LTR yields. Depending on the place and amenities, some houses can get higher rates.

A good place is still the number one concern for many. Preferably, places close to local attractions and public transport. VH’s Yong added that recreational facilities attract visitors and the STR customers enjoy leisure facilities such as swimming pool, fitness centre, barbecues pits and more.

In the eye of the law, it is lawful to operate STR in Malaysia in most circumstances. The owners of the property may seek clarification of management rules from the Joint Management Board of the building (JMB). The Malaysian Productivity Council (MPC), with the approval of the Malaysian Tourism Board, held a public consultation on October 9th 2019.

“When applying for a bank loan, the MPC has submitted a set of guidelines on short-term residential facilities covering issues such as licence, safety and protection, maximum occupancy, noiseless inspection and taxation. Airbnb earnings can also be recognised as income, depending on the situation”, said Yong.

In 2019, Airbnb’s users invested more than 4.4 billion ringgit in Malaysia, which produced over 50,000 local employees with a contribution of 3.98 billion ringgit to the gross domestic product. Nearly 40% of local Malaysian hosts had Airbnb hosting, and over 25% said it helped prevent eviction in the same year.

 

For further reading, please refer to the article below:

With the exemptions on stamp duty and minimum 10% discounts for residential properties under the Home Ownership Campaign, now is a better time than ever to purchase a house.

But for those planning to purchase a house for investment purposes, there is a dilemma. While waiting for the value to appreciate, it would be wise to rent it out to earn some returns.

Long-term rental (LTR) can get messy in terms of collecting the rent every month. So, is short-term rental (STR), such as via Airbnb, a better option?

Yong Yik Cai, CEO of VH Premier Group that owns homestay brand Victoria Home, told Property Advisor that comparing STR and LTR is like comparing apples and oranges, especially if the properties are in varying states of repair.

Another common mistake is to compare gross revenue from STR to normal rental.

In fact, after factoring in operating costs (for example, housekeeping, laundry, cost of utilities and labour cost), the final returns will not be too far off for both rental options for properties that are in a similar condition.

“Instead of concentrating on rental returns, we wish to highlight that STR is a strong alternative to property investors in this oversupplied property market.

“First, LTR relies primarily on the working adults and student markets. STR (and mid-term rental [MTR]) taps local and foreign tourists as well as business travellers.

“Generally, STR offers more flexibility to property owners. With LTR, owners tend to spend more time securing a replacement tenant. Meanwhile, with STR and MTR, the turnover of guests/tenants is faster, hence, the returns are better overall,” said Yong.

He said the average returns from STR are potentially 10% to 20% higher than LTR returns. Some buildings can fetch even higher rates depending on locality and facilities.

An Airbnb owner, Lam, said his income from Airbnb depends on the season. “To a certain extent, STR can provide better profit, provided you get enough guests.

“For example, during peak season, rooms are fully booked and I can earn RM2,000 to RM3,000, which is quite promising since I provide only four rooms in my homestay. But during off-peak season, I sometimes record zero guests for a couple of weeks.”

An Airbnb spokesman told Property Advisor that last year alone, Airbnb guests spent more than RM4.4 billion in Malaysia, which contributed as much as RM3.98 billion to gross domestic product and supported over 50,000 local jobs.

“We know many Malaysian families depend on Airbnb to earn extra income and grow their small businesses.

“In 2019, close to 40% of local Malaysian hosts said hosting on Airbnb helped them remain in their homes and more than 25% said it helped them avoid eviction or foreclosure.”

 

Is it legal?

Under most circumstances, it is legal to operate STR in Malaysia. However, property owners are advised to seek confirmation from the building’s joint management body (JMB) on the management’s rules before they decide to operate STR in an apartment or condominium, whether on their own or through a property management company (STR operator).

“Based on our management experience, a substantial number of building managements in Malaysia allow STR in the building.

“In fact, many JMBs are friendly and cooperative towards accommodating STR operators’ requests in terms of unit and guest management,” said Yong.

“A public consultation was held on Oct 9 last year by the Malaysian Productivity Council (MPC) under the authorisation of the Malaysian Tourism Board.

“MPC presented a set of guidelines on short-term residential accommodations covering such issues as licensing, safety, maximum occupancy, nuisance control and taxes. The legalisation process is underway in Malaysia and we are expecting clearer frameworks and rules in the near future,” said Yong.

As it is, earnings from Airbnb can already be recognised as income when applying for a bank loan, depending on the circumstances.

“If your property is operated by a property management company/STR operator, the monthly statement provided by the operator can serve as proof of income in applying for a bank loan. If property owners operate the STR themselves, they can treat it as an income for loan purposes too.

“However, proof of income might be complicated by the number of transactions shown in their accounts, which are usually unconsolidated, depending on the number of units they manage and the scale of management. Very often, the income amount shown is gross revenue (including all operating costs); hence it might not reflect the accurate income that the owners would have received,” said Yong.

 

Choosing a good property for STR

Lam suggested several points to consider when investing in a house for STR purposes.

“A good location (preferably near local attractions and public transport) is still the number one concern. Other than that, the operator must always be there to communicate with the guests though it is not necessary to stay there.

“The operator also needs to maintain cleanliness and hygiene, which cannot be compromised on. And selecting a special theme for the homestay will leave a lasting impression on guests.”

VH’s Yong added that building facilities play a role in attracting guests. “STR guests value good facilities such as an infinity pool, a gym with good equipment, barbecue facilities and so on.”

 

Source: Free Malaysia Today

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Full list of bank that won’t compound interest during BNM’s 6-month loan holiday

1. OCBC Bank (Malaysia) Bhd
OCBC said it will not be compounding interest and profit on mortgages and loans for SMEs during the period.

This means that these customers will not be charged any interest on the interest that arises from the moratorium period, it said in a statement.

“These are both trying and uncertain times. So we are seeking to alleviate our customers’ burdens as much as we can. Although compounding might be allowed for, we have elected not to do so in light of the pressing circumstances,” said OCBC Bank chief executive officer Datuk Ong Eng Bin.

2. Malayan Banking Bhd (Maybank)
Maybank also announced that it will not compounding interest for all individual, SMEs and non-retail and corporate customer loan facilities that qualify for the loan moratorium.

It noted that its fixed-rate hire purchase loans already do not have compounding interest, while eligible products under the moratorium include personal, mortgage, ASB, education and SME loans.

All Islamic financing facilities’ profit rates are already not compounded in line with Shariah principles.

“The bank hopes that with this additional measure, it will be able to provide them further relief from their financing obligations for this period and help them weather the other challenges they may be facing. The Covid-19 pandemic is an unfortunate situation and the bank is taking this opportunity to do the right thing in line with its mission of humanising financial services. Maybank is committed to relieving its customers’ distress during these trying times, and to allow them to focus on what matters most, which is their family and health,” it said.

3. CIMB Group Holdings Bhd
CIMB Bank and CIMB Islamic Bank are also waiving compounded interest and/or profit on its deferred loan and financing repayments.

For individual customers, eligible Islamic and conventional products under this moratorium include ASB Financing, home financing, auto financing and personal financing (Express Cash, Cash Plus Loan and Awam-i).

Whereas for SME customers, the moratorium applies to all existing term loans/financings and industrial hire purchase.

“CIMB welcomes the proactive measures announced by Bank Negara Malaysia to support Malaysians who are experiencing financial constraints during this challenging period. As a financial group that has always prioritised the well-being and advancement of people and communities, we hope this will help our customers who are faced with financial adversities and allow them to focus on other more critical areas of their livelihood,” said CIMB Group chairman Datuk Mohd Nasir Ahmad.

4. RHB Bank Bhd
RHB Bank Bhd will not be compounding interest for its retail and SME customers during the moratorium period.

The bank said that interest for all retail and SME banking facilities would not be compounded during the moratorium period, with instalment payment amounts remaining unchanged upon the conclusion of the six months.

RHB Banking Group managing director Datuk Khairussaleh Ramli said these additional measures introduced by BNM in partnership with the banking industry provides critical relief to ease the financial burden of individuals and businesses, particularly the SMEs, during this extremely challenging period.

5. Public Bank Bhd
Public Bank will not be compounding interest on monthly instalment payments for loans held by individual and business customers.

For Islamic financing, profit will continue to accrue on the outstanding principal amount; however, it will not be compounded, in accordance with Shariah principles.

“Following Bank Negara Malaysia’s announcement on March 25, 2020, Public Bank further extends the relief assistance to its customers by not charging any compounding interest on the interest that accrues during the moratorium period

“With the escalating Covid-19 outbreak, Public Bank is very concerned about its impact on the nation and hopes this extended financial assistance will provide additional relief to its customers,” said Public Bank managing director Tan Sri Tay Ah Lek in a statement.

6. AmBank and AmBank Islamic
AmBank and AmBank Islamic will not be compounding interest or profit on loans and financing during the six-month pause on loan repayments.

“We welcome BNM’s recent move to provide flexibilities for banking institutions like AmBank to respond speedily to customer needs in times like this. It is our responsibility as a trusted homegrown financial institution to come to the aid of our customers in their time of need. Forgoing compounding interest on top of the six-month payment deferment initiative and the credit card balance conversion programme is our way of giving back,” said AmBank Group chief executive officer Datuk Sulaiman Mohd Tahir in a statement.

7. Affin Bank and Affin Islamic Bank
Affin Bank Bhd and its Islamic counterpart Affin Islamic Bank Bhd announced that they will not be compounding interest and profit for term loans and term financing during BNM’s moratorium.

In line with BNM’s guidelines, all retail and SME customers from both banks will be enrolled in the six-month deferment automatically.

For Islamic financing facilities under Affin Islamic Bank, profit rates are already not compounded, in line with Shariah principles.

“As the current situation is both challenging and filled with uncertainties, we hope the gesture announced today can make this difficult time easier for the customers and communities we serve. We are also committed to consistently identify more ways we can best help our customers”, said Affin Bank chief executive officer Kamarul Ariffin Mohd Jamil via a statement today.

8. Standard Chartered Bank Malaysia Bhd and Standard Chartered Saadiq Bhd
Standard Chartered Bank Malaysia Bhd will not be compounding the interest on its conventional loans while profit on Islamic financing by Standard Chartered Saadiq Bhd will not be compounded, in compliance with Shariah law, during the six months.

Products included in the automatic loan deferment programme are personal loans/personal financing-i, residential mortgage/Saadiq MyHome-i or Saadiq MyHomeOne-i and commercial mortgage loan/BizProperty Equity-i and business instalment loan/guaranteed instalment loans/biz-financing-i.

“The uncertainty caused by the pandemic has left many individuals and businesses in the lurch and this is our way of helping them cope and navigate through this tough period,” said managing director and chief executive officer Abrar A. Anwar.

9. HSBC
HSBC Malaysia announced non-compounded interest or profit during the moratorium period for retail and SME customers.

10. Alliance Bank
Interest on conventional loans will not be compounded during the moratorium period.

Profit for Islamic financing is not compounded but the interest/ profit on the deferred loan and financing repayments will continue to accrue during the 6-month period.

Other banks includes the following. However, please do contact your Bank for more details as each  bank T&C is different and subject to change without prior notice.

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NPL growth may overtake loan growth

PETALING JAYA: Non-performing loan (NPL) growth for banks in Malaysia could be higher than their loan growth this year as the industry deals with the economic fallout from the coronavirus (Covid-19) outbreak.

S&P Global Ratings projects the NPL ratio could peak to between 1.7% and 1.8% of outstanding loans this year compared with 1.5% as of Dec 31,2019.

The ratings house also revised down its credit growth forecast for Malaysian banks, from the previous 3%-5% to 1%-3% in 2020.

S&P Global Ratings credit analyst Nancy Duan said: “The global outbreak of Covid-19 and renewed domestic political uncertainty add obstacles for Malaysian banks, which are already grappling with the effects of a slowing economy and dampened investor and consumer sentiments over the past year.”

In particular, the global health emergency and domestic political upheaval are affecting oil prices, consumer confidence and the broader economy in Malaysia.

S&P Global Ratings’ forecasts are based on the assumption that the Covid-19 outbreak will subside and the domestic political stability can be restored over the coming months.

Should these risks prolong beyond the second quarter of 2020, the forecast figures would need to be revisited.

A banking analyst disagrees with the assumptions of the foreign credit agency and expects loan growth in 2020 to be about 4%, in line with gross domestic product (GDP) growth.

“Looking at the 1.6% NPL ratio recorded in January 2020, there could be a slight uptick going forward.

“This will depend on the depth of external factors apart from Covid-19, such as the US-China trade tensions, which is still ongoing, ” he said.

When asked if the overnight policy rate (OPR) cuts can help boost loan demand, the analyst opined that this would be dependent on market sentiments, as further rate cuts may not translate to improved consumer purchasing power.

Kenanga Research, in a sector report, said accommodative interest rates will continue to support a resilient household loan segment, alleviating the moderation in business loans.

Given the banks’ modest target for 2020 after the recent results season, the research house forecasts loan growth at 4% to 4.5% for the year, driven by resilient household and business loans, with a fiscal push expected in the second half of the year.

“The soft interest rate regime is expected to support loan growth coupled with ease of application.

“While the uptick in impaired loans is a concern, it is still below its five-year peak of 1.67% in February 2015, ” said Kenanga Research.

Meanwhile, S&P Global Ratings also expects more potential easing from Bank Negara to support the economy, leading to a further five to 10 basis point compression of banks’ net interest margin in 2020.

“Our base case assumes stable capital adequacy ratios.

“However, risks are now tilted to the downside, given added drains on profitability and the rising dividend payouts announced by some banks last week, ” it said.

On the government’s RM20bil stimulus package, S&P Global Ratings expects it to have a neutral impact on local banks.

“Supportive policies in the package could strengthen lifelines to banks’ affected clients.

“However, we feel the special credit facility of RM2bil is more symbolic than material, and that credit demand will weaken visibly, especially over the first half of 2020.

“Transitory asset-quality problems could become permanent if the severity and duration of the disruptions were prolonged.

“This in turn would eventually push up banks’ credit costs – meaning the allocation of provisions for impaired and potentially impaired loans, ” the credit risk research house noted, projecting sector-wide credit costs to be 20 to 25 basis points of total loans in 2020.

It is interesting to note that Malaysian banks’ direct exposure to the most disrupted sectors by Covid-19, such as hotels, restaurants and airlines, is small, at only a single-digit percentage of loan books on average.

Duan added that Malaysian banks are fundamentally strong, backed by low NPL ratios, light credit costs, and large capital buffers.

“The banks’ credit profiles have remained solid despite muted profitability in recent years. Conditions in 2020 will put the banks to a much bigger test to their resilience, ” she said.

Source: TheStar

 

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US firm Lam Research to invest RM1 billion in Penang

GEORGE TOWN: A big-name semiconductor equipment manufacturer from the United States plans to invest close to RM1 billion to build a factory in Batu Kawan, Penang, in the first quarter of this year, providing 350 high-value jobs when it opens in 2021.

Lam Research, a supplier of wafer fabrication equipment and services to the semiconductor industry, will open its eighth factory on a 138ha site comprising offices, manufacturing facilities and a warehouse. It will cost US$225 million (RM922.5 million).

It has factories in countries such as Austria, South Korea and the US.

In announcing the investment today, Chief Minister Chow Kon Yeow said Lam Research’s entry would provide a significant boost to the thriving electronics and electrical (E&E) ecosystem in the state.

“It will have far-reaching impact, especially on supply chain localisation opportunities, which will, in turn, better the skillset of the technical workforce,” he said in Komtar today.

Lam Research senior vice-president (global operations) Kevin Jennings said it made perfect sense to open in Penang as the electronics and electrical ecosystem here was robust.

“We are the market leader in atomic-level processes critical to semiconductor scaling and manufacturing. In Penang, we will spend about US$150 million and will commit another US$75 million in incremental value for warehousing.

“We are excited to join Penang and partner with the Malaysian government as we add to our global footprint,” he said via a Skype call at the event.

Lam Research, a Fortune 500 company, had revenue of US$9.5 billion in 2019.

Penang already has renowned E&E companies such as Keysight Technologies, National Instruments, Bruker Corp and Agilent.

Source: FreeMalaysiaToday

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What causes the penny pinch?

Despite Malaysia’s low inflation rate, many still struggle to get by. Why is this so? The World Bank’s latest Malaysia Economic Monitor report highlights areas that may contribute to our high cost of living.

MALAYSIANS say they are struggling to get by financially with the prevailing perception being that that cost of living is cripplingly high.

This is despite the fact that Malaysia experiences consistently low rates of inflation. Headline inflation averaged less than 2% per year since January 2015 and moderating to less than 1 per cent since January 2018 – well below the growth rates of the economy and average nominal incomes.

Why then, are Malaysians feeling the pinch?

In its latest Malaysia Economic Monitor (MEM) report released on Monday, the World Bank Group Malaysia identified four factors that impact the cost of living and may account for Malaysians’ difficulty in making ends meet.

They are (i) inadequate income, (ii) insufficient affordable housing, (iii) high household debt, and (iv) consumer price inflation differentials.

Inadequate income

According to the Gallup World Poll, as of 2018, nearly 30% of Malaysians felt that they do not have enough money for food and 23% reported having inadequate money for shelter.

In fact, the World Bank found that approximately 27% of households in Kuala Lumpur earn less than Bank Negara’s 2016 estimated monthly living wage – RM2,700 a month for a single person, RM4,500 for a couple without a child and RM6,500 for a couple with two children in the city.

Although median incomes continue to outpace inflation, the MEM report found that wage growth for the youth and workers without tertiary education has been slow-moving.

How do we bring down costs?

According to Khazanah Research Institute’s (KRI) director of research Dr Suraya Ismail, government-led social programmes have a positive impact on consumption expenditure by lowering living costs.

“The expenditure for households will be lower in countries where the provision of government services is extensive and cover households’ basic needs. Examples would include universal healthcare, free formal education, subsidised childcare and subsidised mass transportation systems, ” she says in an email interview with Sunday Star.

One way to finance these initiatives is through progressive tax.

“As reported in MEM, the total tax revenue is only 14% of GDP. This is not enough even when compared to international benchmarks. More could be done to increase this percentage, by increasing taxes on personal wealth as well as the top income earners, ” says Suraya.

Apart from progressive tax, the MEM suggests increasing stamp duty on purchases of higher-value properties and widening the scope of the real property gains tax.

Sunway University Business School economist Professor Yeah Kim Leng believes that the issue of low wages can be overcome by raising the quality of the education system, improving industry competitiveness and productivity, and accelerating the shift to higher value, knowledge-based and technology-driven activities.

“This will require sound, prudent macroeconomic management that not only ensure a stable price environment but a well-functioning economy that engenders investor confidence, ” says Yeah, who is also Malaysian Economic Association Deputy President.

“Investor confidence will lead to sustained domestic and foreign investment that in turn generates the demand for skilled and high-paying jobs, thereby creating a virtuous cycle of investment, employment and wage growth that banishes the low wage-high living cost conundrum, ” he explains.

Furthermore, Yeah suggests that given the country’s low labour income share, companies that achieve a certain minimum profitability could be encouraged to adopt the shared prosperity goal.

In this model, B40 employees would be given greater emphasis in salary and wage allocation of company budgets and performance incentives.

“A 10-10 “double happiness” formula of at least 10% annual salary increase and a bonus of at least 10% of the employee’s annual salary would not only address increase employees’ morale but also contribute to a more equitable society, ” he says.

Variation in consumer price inflation

In Malaysia, living costs vary significantly depending on geography. The MEM report found that although household incomes tend to be higher in high-cost areas like Kuala Lumpur, oftentimes the extra income is not enough to fully offset higher prices.

This is why many in urban areas say that they feel especially burdened by high costs.

Suraya explains that costs of living will always be more pronounced in urban settings, hence why the calculation of living wage for families are normally calculated for a specific metropolitan area.

“This is to give an indication to both families and employers the comparatively high costs of living in cities. For families, this the compensation needed to attain a decent life in this area and for firms, this is the price to retain good talent, ” she says, explaining that food, shelter and transportation are the three main contributors to the high costs of living.

She says that the price of housing and food items need continuous monitoring by the government to ensure they remain competitive.

The MEM report also recommends the development of a spatial price index in addition to a cost of living index can also help consumers manage their finances.

Shortage of affordable housing

According to the MEM report, various studies have found that housing affordability has deteriorated over the years to the point that overall housing is considered “seriously unaffordable” in Malaysia using the price-income ratio (PIR) as a measure.

The report found that the lack of affordable housing is particularly severe among households earning less than RM5,000. Furthermore, only 18% of newly-launched home units in 2016 were priced below 200,000.

Apart from prioritising low to middle income households in current housing policies, the MEM points out that Malaysia can strengthen the rental market by enacting the Rental Tenancy Act, establishing a Tenancy Tribunal and developing a rental database and rental affordability indicators.

“The MEM mentioned that since 2004, real growth in employment income for 20-29 year-olds with post-secondary education has been marginal. The ensuing age cohorts; 30-39,40-49,50-59, fared better during the same time. If the trend suggests that wage stagnation occurs during this period for the youth (20-29), it is prudent not to purchase any big-ticket items on debt or loans (cars and houses included), ” says Suraya.

Instead, she illustrates how more can be done to assist this group with the provision of affordable rental facilities and efficacious public transport systems.

The Institute for Democracy and Economic Affairs (Ideas) Senior Fellow Dr Carmelo Ferlito takes a step back and questions whether Malaysia should even implement policies to improve home-ownership.

“How much the problem is a real one and how much a perceived one? Let’s not take PIR in isolation. Let’s look at PIR in combination with the fact that home-ownership rate is 76% and household debt is 82% of GDP, ” he says in an email interview with Sunday Star.

“Should we address the former figure or the latter? Probably household debt is more an issue than homeownership. Have we reflected on the fact that there is a rising number of unsold affordable housing? We should reflect more broadly on the factors of such weakness of demand: how much is really due to prices (as affordable units go unsold) and how much to a change in the system of preferences, which means with new generations preferring mobility to stability, traveling today rather than building a house for tomorrow?, ” he questions.

“I think that if we allow the market to correct itself, rather than trying to interfere with its readjustment process, the market will provide the necessary solutions, ” he says.

However, Ferlito believes that the government should eventually focus on addressing the shelter issue for those most in need, the B10, not by forcing them to get a home loan but by implementing supported rental schemes.

Source: The Star

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Strong interest from mainland Chinese buyers expected next year

CHINESE international property portal Juwai.com, forecast there will be stronger interest from Chinese buyers next year with the lowering of the minimum price threshold for foreign buyers on high-rise property.

In its 2020 budget, the government proposed helping the industry sell some of its unsold new homes by temporarily lowering the minimum price threshold for foreign buyers on high-rise property in urban areas from RM1 million to RM600,000.

The lower threshold will only apply between January 1 and December 31, 2020, after which date the threshold reverts to RM1 million.

Juwai IQI executive boardmember, Kashif Ansari said, the real estate industry views positively the government’s move to temporarily reduce the minimum price threshold for foreign buyers.

That is the conclusion of the Juwai IQI survey of 386 Malaysian real estate agents, conducted between 6 and 21 November 2019, he said.

“With the lower threshold in 2020, we forecast stronger interest from our buyers. Is it good, or is it bad? Nationwide, 71 per cent of surveyed agents approved, calling the lower threshold either “a little good” or “very good.” More than one-third, or 35.1 per cent, of surveyed agents believe the lower threshold is “very good.”

“The fact that everyone agrees upon is that the markets are suffering from an excess of unsold property. By lowering the price threshold for a short time, the government hopes some of these unsold properties will find buyers. Developers will then have the funds to invest in and begin construction on projects more suited to the local buyer in today’s market,” said Kashif.

Kuala Lumpur, Penang, Selangor, and Johor combined have an overhang of 9,315 high-rise units valued at RM6.775 billion.

Data from the Valuation and Property Services Department of Malaysia (JPPH Malaysia) shows that Kuala Lumpur has the highest overhang of unsold completed condominiums and apartments. As at the first quarter of 2019, the high-rise overhang in Kuala Lumpur stood at 2,544 units, worth about RM2.338 billion, followed by Penang with 2,684 units valued at RM2.13 billion, Selangor (2,113 units; worth RM1.144 billion) and Johor (1,974 units; RM1.163 billion).

According to Kashif, the property market was most positive about the lower thresholds in Kuantan, Penang, Melaka, and Sarawak.

Kuantan had the highest rate of approval, with 75 per cent of agents from that state calling the initiative “very good,” he said.

In every state with sufficient survey responses for analysis, at least 62.5 per cent of respondents consider the lower threshold to be “a little good” or “very good.”

The states with the highest number of negative responses, in which agents call the lower price thresholds either “a little bad” or “very bad,” are Melaka (15.8 per cent), Kuala Lumpur/Selangor (7 per cent), and Sabah (8.1 per cent). Nationwide, 8.6 per cent called the change “a little bad” or “very bad,” said Kashif.

Malaysia a good market for mainland Chinese

Kashif said, recent reports by Juwai found that mainland Chinese buyers accounted for RM8.4 billion (US$2 billion) of total Malaysia residential property sales per year, and less than one per cent of all transactions.

He also said, Chinese buyers made 16.5 per cent more enquiries on Malaysian property in the third quarter of this year than in the same quarter of 2018.

In the first half of 2019, Malaysia was the fifth most popular country for Chinese property buying inquiries in the world, he added.

“Malaysia is especially appealing to buyers motivated by lifestyle, retirement, or education. It has affordable standards of living, high quality of life, medical facilities, and accessible educational institutions. Malaysia consistently ranks among the best places to live,” he said.

Kashif said the trade war encourages global corporations to relocate their operations to Malaysia due to the country’s productive labour force and strategic location.

These new investments in factories and distribution centres also lead to a certain amount of housing investment as foreign business people move to Malaysia.

“Malaysia is an essential player in the Belt and Road Initiative, as 80 per cent of China’s trade moves through the Straits of Malacca. The difficulties in Hong Kong have contributed to a strong increase in demand from Hong Kong. Total numbers of Hong Kong buyers will not be as large as some imagine because Hong Kong itself has a relatively small population,” he said.

Source: News Straits Times

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