3 Key Takeaways from Bank Negara Malaysia Annual Report 2017

Against a background of broad-based global recovery and the relatively low volatility in the international financial markets, the Malaysian economy performed strongly in 2017. The Annual Report provides an analysis of the developments in the Malaysian economy and outlines the future challenges.

Key highlights:

In 2017, the Malaysian economy recorded a robust growth of 5.9% (2016: 4.2%), supported by faster expansion in both private and public sector spending. A key highlight of the year was the rebound in gross exports growth as global demand strengthened. This was due mainly to higher demand from major trading partners following the upswing in the global technology cycle, investment expansion in the advanced economies and the turnaround in commodity prices.

Economy to grow between 5.5% - 6.0% in 2018

Headline inflation increased to 3.7% in 2017 (2016: 2.1%). Inflation remained volatile during the year and was primarily driven by higher domestic fuel prices. Higher global commodity prices and disruptions in domestic food supplies also contributed to the higher inflation.

This, however, was mitigated by the stronger ringgit exchange rate since April 2017, which helped contain the rise in production costs for domestic goods. Core inflation was also higher in 2017, averaging at 2.3% for the year (2016: 2.1%). Nevertheless, demand-driven inflationary pressures remained largely stable given the lack of persistent tightness in capital stock and the absence of significant wage pressures.

Headline inflation expected to be between 2.0% - 3.0% in 2018

Malaysia’s external position improved considerably in 2017, benefiting from the favorable global economic landscape and relatively lower volatility in the international financial markets. Malaysia recorded a higher current account surplus, largely due to a higher goods surplus following the strong export performance, which more than offset widening deficits in the services and primary income accounts.

Gross exports rebounded to grow strongly by 18.9% (2016: 1.2%), driven mainly by export volumes, particularly in manufactured exports. Gross imports also registered double-digit growth of 19.9% (2016: 1.9%), mainly reflecting higher imports of intermediate goods, capital goods, and goods for re-exports. The increase in imports was in line with the robust manufacturing exports, more rapid investment in the manufacturing and services sectors, and robust global demand. 

Gross export will continue to record above-average growth in 2018

Source: Bank Negara Malaysia Annual Report 2017

Why M-REITs are suffering now ??? (March 2018)

Real estate investment trusts (REITs) has been the favorite for those investors seeking stable yet attractive yield. Instead of putting money in bank's fixed deposit, many of us would rather be investing the money into REITs.

CMMT suffers the most YTD with around 30% price drops.

However, things turn worse recently (especially since the beginning of 2018) due to a few reasons. Prices of REITs suffers and no longer considered 'stable' anymore, thus pushing the dividend yield abit higher now.

Dividend yield higher seems to be more attractive ???

First of all, we must understand that higher yield doesn't necessarily mean it's good. It could be due to falling prices of the stocks, and not higher income receives. And, the current yield is based on the past one-year dividends payout over current market price. Whether or not the dividends could be sustainable is a concerned to investors.

And, why all M-REITs are suffering now ???

1. Oversupply issue
   Property market already stagnant (if not decline) since 2016 until now. The oversupply of office spaces and shopping malls exacerbated further, especially in Klang Valley. Retailers were suffering from the impact of e-commerce which change the patterns of people spend money nowadays, moving from visiting malls. Food and beverages operators also facing stiff competition amid falling footfalls in malls.
   
   
   Over-supply spaces plus under-demand from consumers resulting in difficulties faced by REITs managers to optimize the spaces they're having now. If they could maintained their current tenants with current rental rates, it considered a blessing already.
   
   
2. Rising interest rate environment
   In January, Bank Negara Malaysia (BNM) started to raised the OPR by 25 basis points, for the first time in 4 years. Every rate hike could dampen the dividend payout to investors because of higher interest charges for loan servicing. Jan is the first hike only, and BNM already guided us that there could be total 2 or 3 hikes this year. Lower income means lower dividends/distributions, and this will make REITs not attractive anymore. 

One new good thing...

Effective 9 April 2018, M-REITs have given the flexibility to indulge themselves into property development. The changes was announced by Securities Commission (SC) recently and under the revised guidelines, REITs can undertake property development activities such as buying vacant land and developing the land, up to 15% of the REIT's total asset value.

Hopefully, M-REITs could ride out from this 'business climate' change.

Happy investing!

[Bursa Malaysia] New trading incentives effective March 2018

Great news for all retail investors!!! You can now have more reasons to expand your investment portfolio and trade more with the new trading incentives that will take effect on 1 March 2018.

These measures were announced on 6 February 2018 by Prime Minister at the World Capital Markets Symposium 2018, hosted by the Securities Commission Malaysia.

What are the incentives???

1. Stamp duty waiver for 3 years
   * Stamp duty on shares of mid and small cap companies will be waived effective 1st March 2018 until 28th February 2021.
   * Exemption will be applicable to listed companies with a market capitalization ranging between RM200 million and RM2 billion as at 31 December 2017 for eligibility in 2018.
   * For eligibility in 2019 onwards, the companies will be based on their market capitalization as at 31 December 2018.
   * The list of companies will be static until the annual review.
   * Download the list of mid and small cap companies eligible for stamp duty exemption here
   
   
2. Fee waiver on trading and clearing fees for six months
   * Eligible to first time individual investors who open a CDS account from 1st March 2018 to 31st August 2018
   * No other CDS account has been opened before (including closed account). Don't try to cheat ya :)
   * Applicable to new investor’s trading within waiver period (Meaning, open account early and start trading will be the best!)
   * Eligible to direct individual accounts only, NOT nominee CDS account. What's the difference? Click here to find out...

(Source: Securities Commission Malaysia & Bursa Malaysia)

[Update] EPF MIS approved unit trust funds for 2018/2019

Effective from 1 March 2018 until 28 February 2019, below is the list of Fund Management Institutions (FMIs) and unit trust funds that qualify for offering under the EPF Members Investment Scheme (EPF MIS). For the 2018/2019 period, there are 268 funds from 22 FMIs qualified.

“The list of unit trust funds offered under the EPF MIS is evaluated annually based on the criteria established by the EPF and approved by the Ministry of Finance Malaysia. Any unit trust fund which falls below the minimum eligibility score will be suspended and will not be offered during the period.”

Does your fund in the list this year?

Below are some of the most popular fund houses sorted by alphabet...

AFFIN HWANG ASSET MANAGEMENT

AMFUNDS MANAGEMENT

CIMB-PRINCIPAL ASSET MANAGEMENT

EASTSPRING INVESTMENTS

KENANGA INVESTORS

MANULIFE ASSET MANAGEMENT

PUBLIC MUTUAL

RHB ASSET  MANAGEMENT

For the complete list of funds from other fund houses, click here...

(Source: EPF)

[Banks] BR, BLR/BFR and Indicative Effective Lending Rates as at 19th Feb 2018

After the latest Overnight Policy Rate (OPR) hike by Bank Negara Malaysia (BNM) in January 2018, all the banks and financial institutions react to increase their lending rates accordingly.

How about Islamic loans ???

Note:

* Indicative effective lending rate refers to the indicative annual effective lending rate for a standard 30-year housing loan/home financing product with financing amount of RM350k and has no lock-in period.

As at 19 February 2018
Bank Negara Malaysia