MALAYSIAN ECONOMIC MONITOR - WORLD BANK

BOOSTING TRADE COMPETITIVENESS

Following the review of near-term developments and outlook, the thematic chapter of this Economic Monitor analyzes structural trends in trade competitiveness.

Trade competitiveness is measured as Malaysia’s ability to grow its exports and the domestic value-added embodied within them, leveraging foreign demand and knowledge to support its transformation to a high income nation.

Nearly 60 percent of value-added produced in Malaysia was ultimately consumed by foreigners in 2009 – one of the highest shares in the world.

The share of Malaysia’s GDP consumed in foreign markets includes the value-added of exporting firms and also of suppliers to export-oriented industries. Thus the actual significance of external demand to the Malaysian economy is higher than it appears from net exports (22 percent of GDP) or the output from externally-oriented industries (38 percent of GDP).

The export engine appears to have been faltering since before the Global Financial Crisis.

The share of exports of goods and services in Malaysia’s GDP declined by nearly 30 percentage points between 2005 and 2013. Unlike Thailand, Vietnam and Korea, which saw market shares expand, Malaysia’s share shrunk from 1.35 to 1.22 percent in that period. However, Malaysian exports have included a higher portion of domestic value-added, mitigating the impact of the decline in gross shares.

The decline in exports has been concentrated in Malaysia’s core export product segment – E&E products.

E&E exports as a share of GDP declined from about 38 percent between 2002 and 2004 to 18 percent in 2013, and Malaysia’s market share in the period declined from 5.25 percent to 3.74 percent of global E&E exports. Meanwhile, exports of commodities, and commodity-related manufactures such as petrochemicals expanded, but not enough to compensate the decline in E&E exports.

The domestic value-added of Malaysian E&E exports is relatively low due to limited domestic linkages.

Malaysia remains an integral part of the E&E global value chain, but at 44 percent the share of valueadded  in exports is relatively low. This is partly due to limited domestic linkages. Compared to other countries, the contribution from domestic intermediaries to the value-added of exports is only 7 percent in Malaysia compared to 31 percent in Korea. This finding is supported by analysis of enterprise survey data, which finds that multinationals in Malaysia source less than 40 percent of their inputs from domestic firms compared to 46 percent in Vietnam and 82 percent in China.

Exports of services have also lagged and remain an area of significant potential.

Malaysia has few services-exporting firms and at 12 percent of GDP services exports are below what would  be expected for a country at its level of income.

‘Behind the borders’ restrictions hinders export growth and limits linkages between domestic providers and export-oriented industries.

Although the Government has recently embarked on a liberalization of services  sectors, many are still relatively restrictive as measured by the World Bank’s Services Trade. Restrictiveness index and assessment of the burden of non-tariff measures. Professional and transport services are more restrictive on average than most countries in East Asia for example. A restrictive domestic environment reduces incentives for exporting, and for exporting firms to buy more domestic value-added. Barriers are not limited to ownership restrictions, but extend to licensing and regulations that limit domestic competition.

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APA YANG PERLU DILAKUKAN UNTUK MENYELESAIKAN MASALAH EKONOMI? - NIK ZAFRI

Bagaimana untuk memuaskan kehendak yang tidak berakhir dengan sumber yang terhad?

• Apa yang baik perlu diutamakan berdasarkan kehendak dan bagaimana pembekalan dan bantuan dapat memuaskan kehendak yang tidak bernoktah

• Kenalpasti jenis dan perbezaan kehendak manusia, utamakan kehendak dan susun produktiviti bagi memuaskan sebanyak mungkin kehendak yang termampu.

• Tentukan apa yang hendak dikeluarkan atau berikan dahulu apa yang patut untuk memuaskan permintaan

• Pastikan ianya selaras dengan belanjawan dan kuasa membeli yang berbeza-beza

• Modal dan barangan adalah sama penting. Selaraskan antara keduanya.

• Pengeluaran akan lebih cekap jika sumber diuruskan dengan baik.

• Maksimumkan gunatenaga kerja tidak kira jawatan, jenis kerja, corak kerja dll.

• Sistem percukaian yang tidak dirancang boleh menjadi penyebab kepada agihan kekayaan yang tidak seimbang.

• Wujudkan suasana untuk sektor pengeluaran menjadi lebih kompetitif dan meraih keuntungan menerusi penstrukturan semula cukai dan subsidi di mana perlu.

• Lindungi ekonomi dari pengaruh luar yang negatif menyusup masuk dengan pengaruh dasar-dasar yang boleh merosakkan ekonomi.

• Strukturkan kembali cukai untuk industri terpilih seperti besi, pengangkutan, simen dsb.

• Penekanan terhadap R & D adalah lebih baik dari pengeluaran produk yang tidak berguna dalam pasaran - dikeluarkan pula dalam keadaan tergesa-gesa.

• Sektor Perbankan dan Kewangan yang tidak teratur akan menjadi sebab inflasi dan kemelesetan. Kawalan terhadap pinjaman/pembiayaan lebih penting dalam saat-saat kritikal dan bukannya menaikkan kadar faedah atau menstrukturkan kembali pinjaman yang sediada.

• Mereka yang menyewa rumah perlu menukar sewa rumah yang banyak dibayar kepada pembelian rumah. Jadikan deposit sebagai pendahuluan. (Mungkin cadangan ini agak keterlaluan tetapi rasanya boleh dipertimbangkan)

• Hentikan atau kurangkan penjualan aset kepada orang atau negara asing.

• Hentikan atau kurangkan liberalisasi kewangan kepada pelabur asing. Terdapat laporan, ada di antara mereka bertanding secara tidak sihat sehingga merugikan industri tempatan.

• Kurangkan perbelanjaan di luar kawalan terutamanya ke atas program dan inisiatif yang dibiaya oleh pinjaman luar.

• Adakan dasar untuk mengurangkan penggunaan barangan impot

• Lihat bagaimana negara lain berjaya membangunkan kekuatan industri dan cuba ambil contoh

• Kawal imbangan defisit perdagangan. Kurangkan aliran keluar wang yang tidak kembali kepada kita. Wang yang tidak kembali boleh menyebabkan negara luar membeli syarikat-syarikat terbaik di negara kita.

• Semak kembali perjanjian-perjanjian perdagangan atau memorandum-memorandum persefahaman kita dengan negara asing. Kadangkala terdapat undang-undang perdagangan luar yang tidak selaras dengan undang-undang kita menyebabkan perdagangan kita tidak konsisten dan tidak begitu adil.

• Perdagangan bebas kadangkala menjadi satu permasalahan. Ianya perlu digantikan dengan perdagangan lebih pintar supaya ekonomi kita tidak mudah dimanipulasikan oleh pihak asing

• Pengeluaran dalam negara kita lebih menguntungkan dari mencari kepakaran pengeluaran dari luar.

• Pastikan kita tidak kehilangan industri percetakan, automotif, hiburan, besi, elektronik, pakaian dll kerana ini sedikit sebanyak boleh mengancam keselamatan negara dan standard kehidupan

• Pastikan syarikat-syarikat yang disenaraikan dalam Bursa Malaysia betul-betul mendatangkan keuntungan kepada pelabur - bukan hanya dalam beberapa hari selepas disenaraikan.

GDP OF 6% IS FINE - By Nik Zafri

I'm not working with Bank Negara but when "smart" people (who is also not employed with Bank Negara as well) started to question Malaysia's targeted GDP of 6%, they are overlooking inflation, money flooding in without control, rising consumer demand and escalating commodity costs.

Before questioning the credibility of Bank Negara Governor, Tan Sri Zeti, I would like to point some things out for the sake of discussion.

We should consider inflation based on CPI (*energy, food etc) - which is the inflation's benchmark to determine our financial market.

(*I'm looking into the volatility of these prices translated from what I see on the field myself - people at ALL levels especially the medium income and the poor ones rather than sitting comfortably in an air-con office suite and thinking how to get publicity by criticizing Bank Negara)


GDP represents total aggregate output of our economy. As a market watcher, I told the investors that "WE MUST PLAY SAFE" - do not be too ambitious - so 6% is FINE by the standard of investors as the figures have been adjusted for inflation.

Let's say Gross GDP calculated 6% higher than last year, inflation measured 2% over the same period, thus : net growth over the period is reported as 4%.

Investors will look into GDP's annual growth - the primary stock performance driver - in order to determine whether 'to invest or not to invest'. Yes, it's true that if there in no change or a decline in the overall economic output, investors will translate these datum into companies inablity to make profit

So how about TOO MUCH GDP Growth? (or not 'trying to play safe' - take some risk) Definitely inflation will increase - killing the gains in the stock market hence our RM is also devaluated. So here we can see what will happen - more and more crime might happen, prices of food my go 'sky high' and unaffordable, more unemployment, more controlled of financing/loan/grants etc.

Furthermore it sounds good to increase GDP by linking to lowering unemployment rate but it will be out of control when supply decrease faster while services and goods' aggregate demand increase, constraint in the labour market that will result in company raising salary - where will this all end? Consumers definitely - in the form of price going higher. (Yes, in some way, some people are making profits out of these - maybe that's the reason they are restless seeing 6% GDP)

We should learn from what is happening around the world especially from the US. Almost all the US economists will agree with me that GDP growth causes inflation and inflation begets hyperinflation. The process can become a self-reinforcing feedback loop. Everyone in the world will start spending money which they know will be less valuable in due course. So...more increase in GDP = more price increase! Inflation are non-linear - 10% inflation is much more that twice as harmful as 5% inflation.

With that I rest my case.
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FOR READING PLEASURE

HEDGE FUND - PROPER REGULATIONS REQUIRED NOW!! (ALERT) - By Nik Zafri

Article 1 about Hedge Funds (Facebook Version) and Article 2 about Hedge Funds (Blogger Version)

Many disagreed with me at that time -- Yes...because it was written in 2009. (too early) - FYI - I was monitoring the European (EC) market at the time I wrote that article - I saw signs that there is a need to tighten up the loose ends especially on the subject hedge funds which I believe will become a talk in Malaysia (next week - May, 2010)
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Here's latest news from Singapore (Courtesy of Bloomberg) :

Singapore Reviews Hedge, PE Funds as Regulators Boost Oversight
By Netty Ismail

April 22 (Bloomberg) -- Singapore said it will review rules for its investment management industry, including hedge-fund and private-equity managers, as regulators increase oversight globally.

Hedge funds and private-equity firms are under scrutiny from regulators and lawmakers worldwide, who say they are partly to blame for the worst financial crisis in a generation. Singapore’s hedge-fund industry has grown into Asia’s second biggest behind Hong Kong as the government lured investment management professionals with tax incentives and grants.

Hedge funds worldwide posted net outflows of $285 billion last year, leaving assets at $1.6 trillion, according to Hedge Fund Research Inc., a Chicago-based research firm.

The regulator has set up the Investment Intermediaries Department to supervise intermediaries, including alternative investment managers, and to “drive regulatory policies” governing the industry, according to yesterday’s statement.

“MAS adopts an open and consultative approach with the industry, and remains committed to building Singapore as a fund management and alternative investment hub,” the regulator said.

World Effort

World leaders, including the Group of 20 countries that make up most of the world’s economy, have called for stricter oversight of the pools of private capital in the wake of the global financial crisis.

Funds won’t be able to get investment from U.S. banks, under proposals announced in January by President Barack Obama. The European Union’s Directive on Alternative Investment Fund Managers is currently being debated, with the European Parliament scheduled to vote on a final draft this year.

The “business and regulatory environment remains conducive to both traditional and alternative managers” in the city-state, MAS said.

MAS, also Singapore’s central bank, said last year it will fine-tune its “regulatory approach as appropriate,” after moves to make it easier for hedge funds to set up shop in Singapore than in other Asian cities such as Hong Kong and Tokyo helped fuel the industry’s growth in recent years.

Growing Industry

Hedge-fund managers are currently exempt from holding a capital-markets services license, provided they manage funds on behalf of 30 or fewer of what MAS describes as “qualified” investors. “I believe that the exempt fund-manager status should be replaced with light regulation,” said Albert Ee, founder of Singapore-based hedge-fund firm Pilgrim Partners Asia Pte. “As a financial centre, it’s important that hedge funds in Singapore should be run by experienced managers with good risk management processes and strong corporate governance.”

Singapore’s hedge-fund industry has grown to 138 single- strategy hedge-fund managers employing more than 800 professionals from near zero in 1997, according to a survey by the local chapter of the Alternative Investment Management Association. The industry oversees at least $34.9 billion, excluding assets managed by several of the large global firms, it said, making it Asia’s second biggest.

Local Rules

The island-state’s “lighter regulatory touch” has enabled hedge-fund managers to set up business “relatively quickly,” without risking any delay in getting the necessary licenses from the regulator, according to an overview of the industry published by AIMA.

Hedge-fund managers in Singapore are still subject to local rules on securities and futures trading as well as money laundering.

The size of Singapore’s asset management industry shrank about 26 percent to S$864 billion ($630 billion) in 2008 from a year earlier because of the global financial crisis, the authority said in its latest survey released in September.

--Editors: Andreea Papuc
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Nik Zafri's 'Unqualified' Comments (so don't quote me on this)

Yeap, I think Singapore is going somewhere. I did mentioned in one of my 'analysis' that Singapore will boom first and followed by Malaysia. But most definitely; as I said; this issue will become the next talk, next week (May 2010) So, just in case...

On Hedge Funds - fellas, I am not against it - Here's some excerpts :

Excerpt 1

I still think that Malaysia (in particular SC) should keep a close surveillance by having a revised version of regulations to monitor private equity company's especially.

Excerpt 2

European policymakers said:

"They (Hedge Fund Managers) many have exacerbated it by fueling bubbles with leveraged investments in the good times and then offloading assets by the bucket-load in the bad times"

Excerpt 3

Initial proposal from Nik Zafri to anyone out there reading my blog - who wish to listen :

You (Hedge Fund Managers) must first reveal your plan :

(To the proper authorities..I don't know..maybe SC, Inland Revenue, BNM) on:

a) managing level of capital,
b) managing risk,
c) valuation of assets and most important
d) your strategy in doing business.

2nd - STOP NOW if you're involved in any trade relating to MONEY LAUNDERING!! (so, is this the thing you're being discreet about?) Get out now before it's too late!

3rd - It's time to pay based on gains not losses!! Otherwise, we will go back to square 1...make money during down market..gosh...

Having this sort of regulations may help our economic recovery further but of course if the regulations are not strict enough and having loopholes...definitely there can be abuse - some people in the market will always creatively found a way to do 'evasive maneuvers'

AS PREDICTED BY NIK ZAFRI




As Nik Zafri has predicted, there will be signs of recovery for Malaysia from April, 2009

NIK ZAFRI'S HUMBLE FORECAST FOR 2009 - (Made in December, 2008)

2ND SIGN

1ST SIGN


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THE STAR - BUSINESS

Thursday April 16, 2009

Economy expected to perform better, says Bank Negara

KUALA LUMPUR: The economy should perform better in the second half of the year as the fiscal stimulus packages are implemented and the effects of the supportive monetary environment kick in, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said.

"The first quarter was very much affected by external economic contraction taking place, our exports numbers have shown that,” she said.

Malaysian Institute of Economic Research expects local exports to decline 24% this year on sagging worldwide demand, the think tank said in its report yesterday.
Speaking after launching the Interbank Murabahah Master Agreement (IMMA) and Master Agency Agreement (MAA) yesterday, Zeti said the domestic economy was still growing and “this is what we need to sustain the country’s economy”.

Asked if the central bank would revise its economic growth target, she said: “Right now, we have made the assumption that in the second half, the external environment will stabilise and that the fiscal stimulus packages will be implemented.”

“And so, in the current environment, our projection is flat growth as the contraction of the external sector would be offset by domestic demand,” she said.

Bank Negara has projected the economy to register a growth rate of -1% to 1% this year.

On whether the economy had bottomed, Zeti said: “No, it is not clear yet what the direction is in the global economy.”

There was “some stabilisation” taking place but “we still have to wait and see”, she said.

To another query on interest rates, the governor said the central bank had already adopted an aggressive stance and now the focus was to ensure that lending continued.

Zeti said there was no need to raise banks’ minimum capital requirement at the moment.

Non-performing loans were at a historical low now at just over 2%, she said, adding that even if the rates rose, banks were “well positioned to absorb it”.

Zeti said Malaysia did not manage its exchange rate against any specific currency.

“The currency is not a policy instrument but is used to facilitate trade and investment,” she said.

Meanwhile, the newly launched agreements have been adopted by the members of the Association of Islamic Banking Institutions Malaysia (AIBIM) for their deposit-taking and placement transactions.

AIBIM president Datuk Zukri Samat said the adoption of the IMMA and MAA documents would help increase the intensity of Islamic interbank activities.

Like any other money market products, the success of commodity murabahah-based instruments would depend largely on the existence of a standardised document as well as a universally-acceptable structure that was widely recognised by the market, he said.
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Published: Thursday April 16, 2009 MYT 9:39:00 AM
Updated: Thursday April 16, 2009 MYT 9:41:26 AM

TNB powers KLCI early rise

KUALA LUMPUR: Shares on Bursa Malaysia jumped in early Thursday trade, as Wall Street rebound overnight buoyed investors’ sentiment across Asia.

Tenaga Nasional Bhd led rising stocks, adding 25 sen to RM6.75 on brighter outlook despite a drop in profits in the second quarter.

The surge in trading volume in the past few days also helped lift sentiment on the exchange operator, Bursa Malaysia Bhd. The stock climbed 25 sen to RM6.25.

Another big movers among index-linked companies was Malayan Banking Bhd. The counter soared 16sen to RM4.48.

The KL Composite Index advanced 11.44 points, or 1.2% to 968.12 points as at 9.27am. Turnover had surpassed 400 million shares worth at least RM200mil less than half an hour into trade.

The FBM Small Cap index, which track stocks outside the top 100 counters, gained 1.65% to 7,549 points

Around the region, stocks opened higher after stocks on Wall Street staged a late rally overnight. The Dow Jones Industrial ended 1.4% higher to 8,029 and the broader S&P 500 index gained 1.25% to 852 points.

In Tokyo, the Nikkei 225 shot up 3% to 9,007 points, while Seoul’s main Kospi index opened 2.4% higher at 1,365 points. Singapore’s Straits Times index kick off Thursday’s trade with a 2% gain at 1,943 points.
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Thursday April 16, 2009

Local stock market promising, set to make gains: CIMB Research

By EDY SARIF

PETALING JAYA: The local stock market outlook is promising and set for further gains due to the “political succession effect and the bottoming of foreign selling,” CIMB Research said.

“We see an improved outlook for the market due to a few reasons,” the research house wrote in its latest report.

“One is the political succession effect when Datuk Seri Najib Tun Razak took over as prime minister. Historically, the market performed strongly in the three to six months before and after the changes.”

CIMB Research recently upgraded its rating on the local stockmarket to “overweight” from “neutral” and also raised its target for the KL Composite Index (KLCI) to 1,060 points from 1,013.

An imminent “reversal” in the flow of foreign funds would further lift the local bourse, the research house said, noting that foreign shareholdings were at their lowest level in February since September 2003, at only US$3bil (RM10.85bil).

“The slowdown in foreign fund’s net selling should lessen the downside pressure on share prices,” CIMB Research said.

“In fact, a reversal of these trends would provide a fillip to the market given local and foreign funds’ very high cash levels.”

It added that “a reversal should be imminent as the 12 straight months of net selling are unprecedented”.

Fortress Capital Asset Management (M) Sdn Bhd chief executive officer Thomas Yong said the current assessment on how the stock market was doing was much clearer to investors.

“This is supported by a significant amount of rebound in the market as Malaysia, with less foreign ownership, seems to recover much faster as compared with Singapore and Hong Kong,” he told StarBiz.

Aberdeen Asset Management fund manager Abdul Jalil Abdul Rasheed said as a long-term investor, they were not looking much at the daily performance of stock market.

“We don’t strategise ourselves for short-term market rally as what is happening now in the market. We are steadily buying regardless of whether the market is up or down. In fact, we buy more when the market is down,” he told StarBiz.

But some fund managers remain cautious, according to Kumpulan Sentiasa Cemerlang Sdn Bhd research director Choong Khuat Hock.

“These fund managers (would not rush in) to buy the stocks as they are not sure whether the market recovery would be sustainable,” he told Starbiz, referring to recent stock market rallies.