Thursday, December 26, 2013

Malaysia To Continue Growth Trajectory In 2014

KUALA LUMPUR: Economists are confident that Malaysia will continue its growth trajectory next year with the Gross Domestic Product (GDP) set to expand by 4.50-5.3 per cent from 4.5-5.0 per cent this year. 

Growth will be buttressed by continued fiscal reforms, reductions in the budget deficit and financial discipline, leading to economic expansion despite external challenges. 

Malaysian Rating Corp Bhd (MARC) Chief Economist Nor Zahidi Alias said rising consumer prices would be a key concern for consumers in tandem with the government’s commitment to strengthen its fiscal position. 

The government is more optimistic with the 5-5-5 per cent growth projection next year from 4.5-5.0 per cent this year on resilient domestic demand, improving external environment, coupled with higher investment inflow into Malaysia.

Trade figures are also encouraging for the economy, with exports continuing their growth trend at 1.6 per cent in 2014 on improved demand for products and electronic items. 

The World Bank in its recent Malaysia Economic Monitor expects Malaysia's export growth to be driven by higher energy commodity and petrochemical production as new investments start to come online. 

January-October trade rose this year 3.4 per cent to RM1.3 trillion from RMRM1.09 trillion last year, with exports rising 0.9 per cent to RM591.8 billion, partly due to aggressive promotional activities undertaken by the Malaysia External Trade Development Corporation (Matrade). 

The top five trading partners during the period were China, Singapore, the European Union, Japan and the United States. 

Economists also said overall revenue is set to increase with the rationalisation of fuel subsidies and the hike in electricity tariff effective Jan 1, 2014. 

They said this would have a modest impact on the economy, adding that trade prospects would be brighter with the recovery in the global economic front, which should offset weaker domestic demand. 

The World Bank said stronger performance in advanced economies is widely expected to be accompanied by a "tapering" exercise of the US' quantitative easing. 

The US Federal Reserve had announced that it would reduce its US$85 billion a month in bond purchases by US$10 billion beginning January 2014. 

The bond-buying, also known as quantitative easing programme, was launched 15 months ago to kick-start growth in the world's largest economy. 

Under Prime Minister Datuk Seri Najib Tun Razak's stewardship, the economy has drawn a slew of projects under the Economic Transformation Programme (ETP). 

The ETP has attracted RM220 billion worth of investments in three years of its implementation, which is projected to contribute RM144 billion to the Gross National Income (GNI). 

The national transformation programme has also created 435,000 new jobs and generated a knock-on effect that will catalyse the larger economic activities in the country. 

Pertinent is the domestic and international recognition of government measures to boldly enforce the gradual subsidy rationalisation which will ensure sustainability. 

International rating agencies Moody’s and Standard & Poor’s have revised upwards Malaysia’s outlook based on fiscal consolidation, favourable debt structure, high level of domestic savings which will ensure economic resilience accompanied by price stability. 

"The balance of payments remains healthy," Moody’s said in a recent report. 

Standard & Poors expects Malaysia to remain a net creditor, given its strong balanced sheet, open and competitive middle-income economy and considerable monetary flexibility. 

Also, Malaysia’s economic policies are said to be pragmatic and efforts to enhance transparency and corporate governance has improved business environment. 

Undoubtedly, it is clear that Malaysia has pursued responsible management to strengthen fiscal position for long-term sustainability, stability and growth. 

Against such a backdrop, Nor Zahidi said: "The challenge for the government is to balance the need to consolidate its fiscal position and trim down debt level to ensure that Malaysians will not be burdened by the rising cost of living from rising consumer prices. 

Indiscriminate subsidies should be avoided, said Nor Zahidi, adding that subsidies targeted for low-income groups were necessary but on a conditional basis. 

Echoing a similar sentiment was World Bank Senior Economist Frederico Gil Sander who said the move towards more targeted transfer in lieu of fuel subsidies was a positive one. 

An encouraging sign is that political risks have subsided after the 13th General Election in May while a rejuvenation of fiscal reforms will likely result in positive sovereign rating action. 

In supporting the growth momentum, the government formed a Fiscal Policy Committee in June as the premier body for fiscal management and play a leadership role in strengthening fiscal position to ensure fiscal sustainability and macroeconomic stability. 

The investment momentum is expected to accelerate from several high impact projects under the Government Transformation Programme and ETP, including the MY Rapid Transit, Light Rail Transit, as well as oil and gas projects, will continue to spur the economy. 

Nomura Singapore Ltd Executive Director and Economist for Southeast Asia, Euben Paracuelles said the fiscal reforms are clear indications that the Malaysian government is getting its act together to address weak fiscal position. 

"I think there is still a lot of scepticism in terms of the ability to push the fiscal reforms but we're optimistic the government will execute them and also the electricity tariff hike effective Jan 1, 2014. 

"Fuel price increases have also been managed very well," he said. 

AmResearch Sdn Bhd said the subsidy bill would fall by 15.6 per cent or RM7.3 billion year-on-year to RM39.4 billion next year, mainly derived from savings of the recent price adjustments for fuel and sugar. 

Currently, total savings from the petrol pump price adjustments and abolishment of sugar subsidies will amount to about RM3.8 billion in 2014. 

"Hence, we do foresee further price rationalisation amounting to RM3.5 billion next year, out of which RM1.7 billion could potentially come from another round of petrol pump price increase," it said. 

Allocation for fuel subsidy, including cash transfers, would likely increase to RM28.9 billion in 2013 from RM27.9 billion in 2012 as oil prices remain high, averaging at US$98.02 per barrel in the January-November 2013 period against US$94.05 per barrel in 2012. 

Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar said the country’s financial system remains strong and robust, with liquidity, non-performing loans ratio and capital ratios at a strong level. 

However, higher inflation is another consequence of fiscal consolidation. 

Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz has said inflation is likely to reach three per cent next year. 

Inflation measured by the consumer price index rose 2.9 per cent to 108.6 in November from 105.5 registered in the same period last year. 

-- Bernama 

Thursday, December 19, 2013

IMF: M'sian Economy Shows Remarkable Resilient

KUALA LUMPUR: The International Monetary Fund yesterday commended Malaysia for its `adept management' of the economy against a difficult external environment this year. 
The economy showed remarkable resilience in weathering the global financial turbulence in mid-year, reflecting the depth of Malaysia’s financial markets, said its mission chief for Malaysia Alex Mourmouras. 

An IMF team led by Mourmouras, which just completed its annual Article IV Consultation for Malaysia following its visit to Kuala Lumpur and Penang from December 4 till 16, also commended the role of its exchange rate as a shock absorber, coupled with BNM’s strategy of intervening to avoid excessive volatility (in the currency). 

Malaysia’s near-term growth prospects are favourable. 

The Fund expects Malaysia to maintain its growth momentum at its projected 4.5 per cent for 2013 and 2014. 

"The momentum is underpinned by a pickup in private investment and stronger exports, which will more than offset mild headwinds from fiscal consolidation." 

The current account surplus, it added, is projected to narrow to about 3.5 per cent of GDP in 2013, and stabilise at around this level in 2014. 

The Federal Government is on track to reach its fiscal deficit target of 4 per cent of GDP in 2013. 

"The 2014 federal deficit target of 3.5 per cent of GDP is feasible if, as assumed in the mission’s baseline, growth in current spending is contained within a tight envelope." 

It noted that the government has taken important steps to strengthen fiscal management and policy in order to reduce debt and rebuild fiscal buffers. 

It welcomed the setting up of a high-level Fiscal Policy Committee, fuel and electricity subsidy rationalisation, and the introduction of Goods and Services Tax (GST) in April 2015. 

Although inflationary expectations are well anchored, it said vigilance will be required in order to preempt second round effects associated with the implementation of the minimum wage, subsidy cuts, and GST introduction. 

"Should the growth outlook deteriorate significantly, there is ample room for BNM to use monetary policy to support growth." 

It, however warned that the relatively high fiscal deficit and public debt levels provided limited space for a fiscal response and hence, any fiscal stimulus should be temporary and in a `credible medium term fiscal consolidation programme'. 

Structural reforms and the all-important subsidy rationalisation and GST implementation should not be delayed or compromised. 

The IMF also welcomed steps to strengthen financial supervision on the high household debt levels and other risks. 

The Financial Services Act and the Islamic Financial Services Act that came into force in July 2013 provides BNM with additional powers to supervise financial conglomerates. 


Sunday, December 01, 2013

10 Best Cities For A Winter Vacation

Prague, Czech Republic

Salzburg, Austria

Tromsø, Norway

Amsterdam, Netherlands

Nagano, Japan

Reykjavik, Iceland

Berlin, Germany

Ottawa, Canada

Washington, D.C, U S A

Edinburgh, Scotland

Monday, November 18, 2013

Economy On Track To Hit Growth Target

KUALA LUMPUR: The economy chalked up stronger growth of five per cent in the third quarter of 2013, beating market expectations and the Business Times poll.

This places Malaysia well on track to achieve its 4.5 to five per cent growth projection for the whole year.

Exports turned around after seven quarters of contraction, rising by 1.7 per cent.

Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz, in releasing the data, here, yesterday, said the economy will remain on its steady growth trajectory as the external sector recovers gradually apart from domestic demand.

However, Zeti cautioned that international financial markets still face volatility amid uncertainties over the fiscal and monetary policies of the advanced economies, particularly the United States, which may have some impact on Asia.

The gross domestic product (GDP) data in the third quarter pointed to a stronger second half, she said.

Zeti also announced that the second-quarter GDP growth had been revised upwards to 4.4 per cent from 4.3 per cent originally.

Meanwhile, commenting on the strong economic data, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said Malaysia's foreign direct investments (FDIs) are set to surpass last year's number to buck the regional trend.

Net FDIs for the first nine months are already higher at more than RM27 billion from RM25 billion in the same period last year.

"Looking at this trend, Malaysia's FDI for this year is set to surpass last year's RM31.1 billion," Mustapa told reporters, here, yesterday after visiting the Kuala Lumpur International Motor Show 2013.

He said according to the Malaysia Investment Development Authority, most of the FDIs are from the manufacturing sector led by the United States, and followed by Singapore.

Zeti said during the period spanning July, August and September, all the sectors expanded, with the support of the domestic demand and improvement in trade activity.

The services and manufacturing sectors expanded further, while the agriculture sector showed higher growth along with the construction sector, mainly driven by the residential sub-sector.

Bank of America Merrill Lynch has revised its GDP growth forecast to 4.6 and five per cent for 2013 and 2014, respectively.

"An export recovery is buoying economic growth, while domestic demand remains resilient," said economist Dr Chua Hak Bin.

A firmer recovery in advanced economies and external demand next year will translate into stronger export performance and also benefit trade-related sectors, he added. 

Zeti said private investment also surged during the quarter, led by capital expenditure in the services and manufacturing sectors and the ongoing projects in the oil and gas sector.

This was in contrast with the public investment growth, which showed a weak improvement of 1.3 per cent. 

On the current account surplus, she said it had widened to RM9.8 billion from RM2.6 billion in the second quarter, while the overall balance of payments showed a higher surplus of RM11.8 billion during the quarter.

Chua said the export recovery has quelled fears of the current account slipping into a deficit.

"Export commodity prices are ticking back up, indicating improving terms of trade, and palm oil prices are up about 21.6 per cent from lows," he added.

On the impact of further subsidy rationalisation efforts and tariff rate hikes, Zeti said the price adjustments are done gradually to enable households and the private sector to adjust accordingly through energy-saving initiatives and spending behaviour.


Wednesday, October 30, 2013

Malaysia 6th Most Business-Friendly Country: World Bank

KUALA LUMPUR (Oct 30, 2013): Malaysia, which moved up six spots to be ranked No. 6 among 189 economies in the latest World Bank's Doing Business Report 2014, reported its weakest performance in dealing with construction permits and resolving insolvency.

The 11th edition of the Doing Business Report measures business regulations for local firms, with a focus on small and medium-size companies operating in the largest business city of an economy or in Malaysia's case, Kuala Lumpur.

The report based its quantitative indicators on 10 areas of business regulation – starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

The Special Task Force to Facilitate Business (Pemudah) said while the two areas remained the weakest link, they have made improvements since the last report.

Malaysia saw improvement in its global ranking for dealing with construction permits in the 2014 report, ranking 43rd from 96th in 2013, while its performance in resolving insolvency improved to 42nd position this year from 49th position in 2013.

Pemudah attributed the improvements to the strengthening of one-stop centres (OSC) and the streamlining of procedures to facilitate the construction process.

On resolving insolvency, a "focus group resolving insolvency team" is continuously holding industry surveys and mapping exercises to determine the preferred mode of resolving insolvency based on the hypothetical case given by the World Bank.

Pemudah also said a thorough review of the regulatory and non-regulatory procedures and processes had led to the introduction of OSC 1 Submission as a gateway for seeking approvals for construction of small-scale non-residential projects, leading to reduced number of procedures from 37 to 15 and time taken from 140 days to 130 days.

"The way forward is to roll out the "dealing with construction permits" framework to all localities, continuously monitor and evaluate its transformation and adapting best practices through international benchmarking," said Pemudah in a booklet entitled "Malaysia in Doing Business 2014" revealed at a press conference here yesterday.

Other improvements made were in the areas of starting a business, which went up 38 places to 16 for 2014, enforcing contracts, up 3 places to 30, and getting electricity, up 7 places to rank 21.

This year, the top three easiest places to do business are Singapore, Hong Kong and New Zealand.

"Overall, Malaysia is well-ahead of its target to be among the top 10 by 2015 by claiming its sixth position in 2014 compared with 12 last year," said International Trade and Industry Minister Datuk Seri Mustapa Mohamed in a statement.

"At sixth position, Malaysia has been placed in the same league as Singapore, Hong Kong, New Zealand, the US and Denmark. This ranking also places Malaysia ahead of economies such as South Korea, Norway, the UK, Australia and Finland," he added.

Malaysia and the UK continued to secure top ranking on ease of getting credit. Malaysia's ranking of first position in this area since 2007 is attributable to the country's strengths in reforms on legal rights of borrowers and lenders. The depth of Malaysia's credit information systems had resulted in enhanced effectiveness of collateral and bankruptcy laws in facilitating lending.

Malaysia has also been consistently ranked fourth in the world in the area of protecting investors since 2009 and in the area of trading across borders, Malaysia made a breakthrough to fifth position compared with 11th position a year ago.

The Doing Business 2014 report is the 11th in a series of annual reports published by the World Bank and the International Financial Corp investigating the regulations that enhance business activity and those that constrain it.


Monday, October 21, 2013

Real Impact Of GST On Cost Of Living

WHEN most people hear of a possible introduction of the goods and services tax (GST) at say 6%, they assume that their cost of living will increase by 6%. This is an understandable assumption, but how true is it?

GST is a broad based consumption tax which will generally be applicable on all goods and services.

This means that we pay tax only on what we consume. To ensure the tax is only imposed once, any registered business charging GST will be allowed to offset the GST it pays against the tax it collects before remitting the balance to the government. This is known as an “input tax credit mechanism” – it generally allows businesses to operate with no tax cost. The final 6% tax is borne by the end consumer.

Recognising that this increased cost may be  a  burden  to  the consumer, the Government  has proposed that certain essential goods such as unprocessed meat, cooking oil, and sugar will not be taxed. Also, education, healthcare, tolls, financial services and life insurance, will be exempt from GST.

So setting all this aside, will the cost of everything else rise by 6%?

Implementing GST

First, let’s consider how the current consumption tax regime works. Most will be familiar with service tax which is charged at 6% on selected services, for example those provided by hotels and restaurants.

A second consumption tax, possibly less familiar to many, is sales tax which is charged on certain manufactured or imported goods and is, in many instances paid before the goods reach the consumer. Sales tax is in some circumstances hidden from the consumer. For example a carbonated drink is subject to a sales tax of 10%, but the tax is not generally itemised to the end user. If the drink costs RM11, RM1 is tax. However, as far as the consumer is aware, he is buying a drink for RM11, not RM10 + tax.

The existence of two consumption tax systems can lead to a tax on tax. Consider for a moment the carbonated drink example. (see table 1)

Not only does the consumer pay an additional RM1.08 in tax under the current system, the hotel’s profit carries a 6% service tax on the sales tax charged by the manufacturer.

The problem of double taxation is addressed in GST through the input tax credit mechanism. The tax paid by the hotelier is recoverable as input tax credit and does not form part of the cost to him.

So did the carbonated drink become 6% more expensive? Under the current system, the drink costs the consumer RM14.58. Under GST, the drink will cost the consumer RM13.25, that is 9% (or RM1.33) less!

The example is a rather simplistic view and ignores the longer supply chain and the potential cascading effect of the embedded sales tax cost. Sales tax is paid once at the manufacturer/ import level, whereas GST will apply on the value added at each stage of the supply chain.

Another impact to be considered is that input tax credit will not be available for exempt supplies (like healthcare or education, in the table below). This means, while the consumer won’t have to pay a GST on these items, the final price they pay may still be higher than before. This is because the actual cost of making these exempt supplies may still increase due to the GST incurred on materials etc. The higher costs may be passed on to the consumer in the form of increased prices, albeit not by as much as 6%.

Therefore, we cannot expect to pay 9% less for drinks in fast food restaurants under GST. So what will we pay?

The Price Control and Anti-Profiteering Act 2010 makes it illegal for businesses to increase prices by 4% across the board with the introduction of GST (assuming GST is introduced at a rate of 4%) and any pricing decisions made by businesses must be justifiable otherwise stiff penalties may apply.

The Tax Review Panel in their presentation to the business community forecast that a 4% GST would potentially show a reduction of 0.10% in the consumer price index. They also provided an assessment of potential price changes on a range of goods and services based on an assumed GST rate of 4%. (see table 2)

As well as excluding specified basic necessities from the GST net, the Government has indicated that direct assistance will be given to lower income groups and changes to personal tax rates are also expected to reduce adverse price impact upon implementation of GST. The introduction of GST won’t automatically make everything more expensive. What it will do is change the way we pay tax and provide a more transparent, streamlined and fairer tax based on our consumption patterns.

Raja Kumaran and Tim Simpson are executive director and consultant of PwC Taxation Services, Malaysia respectively.


Wednesday, October 16, 2013


It has been almost 6 months since my last coverage. No doubt our mart still roller coaster than until now we are seeing more clear picture where we are heading after months of base building and consolidation. Yes, the Bull is here! Budget Rally! UMNO Election Rally! All will become headline and speculation among all the traders. 

This is good sign to me and an opportunity to earn extra! But also be caution on speculative play counters which I been interested recently, GPACKET and CENSOF. Well, I like speculative! Beside this I am also have interest with INSAS as well as my old time lover ALAM currently still holding which I bought it early May around 90 cents. I am planning to exit ALAM and enter GPACKET, CENSOF and INSAS. Hope it all go well for me. :-) How far our KLCI going north this time? I have been targeting 2000 pts since 3 years ago but yet to achieved until now. hahaha... Here is what I plan to do for my 3 new baby this few days.

GPACKET Catch the Knife! I will be buying between 43 and 46. 
Any failure within this point I will exit. 
This entry would be low risk with high return of above RM1. 

CENSOF Anytime now! Entry between 52 and 53 will be safe for upside of RM1. 
Exit if 50 cts support failure.

INSAS Safe buy! Entry between 60 and 62 will be good for RM1 target. 
Exit if 60 cts support failure.

Well, which counter you choose or prefer? This will depend on your risk and appetite level. My style is play safe. Hehehehe. Be patient and follow your instincts and make your own call! Do be cautions all the time and my this plan is merely my prediction. :-) It may and may not achieved but I hope it will fit to my own plan game for me so that I will not panic!!! That's all and hope the best for everyone. 

Cheers and Happy Trading!

Tuesday, May 07, 2013

Which Stocks Will Go Up Now?

Which stocks will go up now that the general election is over?

PETALING JAYA: The conclusion of the 13th general election (GE13) with Barisan Nasional returning to power has removed the political risk overhang that had been affecting market sentiment, said analysts.
The stock market rallied to reach a fresh record high of 1,826 points, as investors and traders returned to the market in full force.
Blue chips like CIMB Group Holdings BhdMalayan Banking Bhd,Tenaga Nasional Bhd and Genting Bhd shot up to multi-week highs, pushing the benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) to close at 1,752, up 3.38%.
Research analysts also singled out sectors such as banking, construction, oil and gas, and media as likely to do well, going forward. This was based not only on the removal of the election risk but also as a result of forecast stronger consumer confidence and discretionary spending.
Hwang Investment Management Bhd chief investment officer David Ngsaid Hwang, which had been gradually buying Malaysian equities since the end of February, would add on equity weight in sectors that would do well post-GE13 such as those involved in the continuation of nation building and economic development.
In the banking sector, for example, analysts noted that in recent months, investment spending decisions by businesses had been put on hold as shown by recent banking statistics. RHB Research in a report noted that in February, business loan growth had slowed down to 8.7% year-on-year (y-o-y) from the 14.4% growth y-o-y registered in July 2012. The research house, however, expects loan demand from the business segment to pick up, and this would be positive for the banks. It noted that banking stocks, which have lagged regional peers in terms of share price performance, up 3.7% year-to-date, are poised to play catch-up.
Alliance Research banking analyst Cheah King Yoong believes that post-GE13, CIMB serves as the best proxy to capitalise on the expected relief rally, as the external risks and domestic political uncertainties subside.
And with concerns of cancellations or delays in the rollout of some big-ticket projects under the Economic Transformation Programme (ETP) removed, analysts said the construction sector was poised for a re-rating. Gamuda Bhd stood out as one of the biggest beneficiaries, said analysts.
RHB Research has upgraded the property sector to “overweight”, saying that with the GE13 results, sentiment is likely to buoy the high-beta property sector.
“Our upgrade is also supported by solid sector fundamentals, which include an uptick in population growth cycle, an influx of liquidity and consistent gross domestic product growth. Other catalytic developments are also substantial enough to boost property demand and prices in the related areas,” said RHB Research.
Meanwhile, CIMB Group chief executive officer Datuk Seri Nazir Razaksaid in a statement: “We would like to congratulate Barisan Nasional on winning GE13. The financial markets equities, bonds and currency have reacted very positively to the results, reflecting international investor confidence in BN's economic management and relief, as the long period of political uncertainty for Malaysia comes to an end. We look forward to, among others, the continued progression of the ETP agenda, including the gradual introduction of the New Economic Model. The rakyat has delivered some very important messages at the polls, so we anticipate that the new BN Government would enhance its emphasis on areas such as combating corruption, domestic security, education and improving the quality of life of the urban poor.”
Alliance Research chief economist Manokaran Mottain said the BN win at the very least means policy continuity for the ETP and the Government Transformation Programme.
However, he said there were several urban issues which needed attention, including the rising cost of living, affordable housing, urban poverty and transparency in Government policy.
Manokaran also said that any subsidy rationalisation would be easier to implement should leakages be addressed.
Fitch Ratings' Andrew Colquhoun, head of Asia-Pacific sovereigns, said this on Malaysia's election result: “Fitch looks forward to greater clarity on the Government's fiscal and economic policy programme following Sunday's election. The agency had previously highlighted that rising public debt ratios particularly when off-budget borrowing is taken into account and delayed structural fiscal reform to subsidy programmes and to lessen revenue dependence on the oil sector may eventually exert negative pressure on the ratings.”


Monday, April 29, 2013

Escaping The Middle-Income Trap

OVERCOMING LIMITATIONS: Transformation plan created to help Malaysia reach high-income nation status.

THE Middle Income Trap Hypothesis (henceforth, the MITH) has been the core ideology behind the attempted transformation of Malaysia's economy in recent times, and is considered by some to be one of the biggest problems of global economic development. 
At its heart is the question of why some countries reach developed status while others do not. Malaysia's national transformation plan is aimed squarely at overcoming the limitations and constraints identified with the MITH paradigm.

Yet surprisingly, there is little convincing research support in the economics literature for the MITH. In theory, economic growth and development is initially driven by increasing population, capital accumulation and a rising technological level. 

When growth in these "factors of production" slow, as they inevitably do as incomes rise, the only way countries can continue to grow is through improving the way these factors are combined to produce goods and services, or what's called "total factor productivity", or TFP. When a middle income country is unable to overcome this dilemma, this is termed the middle income trap.

For Malaysia, the evidence that the country is in a MITH appears compelling - growth in the last decade has been slower than in the 1990s while investment and population growth have been sharply down as well.

Other factors, like a workforce skewed towards low wage labour intensive industries, low value-added in manufacturing and a purported "Brain Drain", are also suggestive of an economy that hasn't been able to make the leap forward needed. 

Hence, the importance of the economic transformation.

Yet, other evidence suggests that there is more to this story than that. On a per capita basis, growth hasn't slowed as much as suggested by overall growth, which means slowing population growth has been a bigger factor than productivity. 

Living standards have continued to converge towards high income status almost without pause since the the 1997-98 crisis. Productivity growth, whichever measure one cares to use, hasn't dropped significantly either. 

Taking a longer term view, the growth takeoff of the 1990s appears to have been the period outside the norm, and the period of slower growth that has followed is in reality a return to normalcy.

Recent research at the International Monetary Fund suggests that a MITH-driven growth stagnation in Malaysia really only occurred in two distinct periods - the early 1980s, and the late 1990s. Both these periods encompassed deep and damaging recessions that put back economic progress for six years to eight years. 

Otherwise, Malaysia's drive towards developed status has been unhindered. In other words, Malaysia is not in a middle income trap.

Be that as it may, the transformation plan remains relevant even as we make progress towards high income status. Improving the structure and efficiency of the economy is hardly harmful, and could help sustain growth even if we run into another crisis. The historical record is replete with cautionary tales of countries poised for prosperity but due to one circumstance or another, fail to advance or even fall back. 

Even if the MITH is truly a myth, taking national development seriously still requires constant vigilance and flexibility.

The writer is vice-president of Economic Research with the Malaysian Rating Corporation Berhad (MARC). The article represents the author’s personal views and opinions and do not necessarily represent those of MARC.


Saturday, April 27, 2013

KLCI: Post Election Rally

In my previous coverage: Nov 2012: Worse Yet To Come, I mention that index will have potential to hit 1500 points. But this was not materialized as the buying support looks strong at 1600! This points level was hitting 7 times from Sep/2012 - Mar/2013. Seem a good sign that market will be charging more upside for the rest of the year. My target of 2000 points mention in 2011: Marching Towards 2000 looks promising now. 

Well it was really a long long roller coaster ride since Oct/2010 from 1500 to reach 2000 target. I would say KLCI is non performing well during this period and our market is crawling and struggling! Can KLCI hit 2000 by Oct/2013 (3 years time) or by year end? Looking forward in post election, I foresee there will be more synergy for the market to run up as there should be more changes going to happen towards a better Malaysia. Let us see how is going to play up in coming months and this will be interesting!
Above is my optimistic view. How about some pessimistic side? Hmmm... There will not be that severe if I would say. The important now is look at support 1620 - 1650 possible can retest. If this level can hold up well there will not much to worry about. The time we need to cautions or ready to jump out is when 1600 support broken and violated. Than my 1500 target will eventually come true! But I still believe and hopefully this will not happen!

Lets looks at some of counters: TAKASO still in accumulating phase, as long as can break out from 25cts will be a good sign to hit my old target of 65cts ~ 80cts, do beware of possible dive to 15cts. PERDANA still doing well and already hitting my 1st target of RM1.50. Now looking for next target which is RM2.00, better to collect below 1.30 if possible. INCKEN look for major support at 0.88/0.90. Target 1.40-1.50 still looks promising. ALAM still prefer to goyang here and there, may correct to reach 0.85-0.90. Target 1.50 still looks promising. IRMGRP got potential to reach double top at 0.40 which was hit on Feb/2013. TEBRAU time to accumulate some as well look at important support RM1.00 with target of RM2.00 . ITRONIC be patient, time will come and target is RM1.35.

Happy Trading and Cheers!

Wednesday, April 24, 2013

Malaysia’s Developed Nation Target On Track

KUALA LUMPUR: Malaysia is on its way to achieving developed nation status by 2020, just like what Barisan Nasional chairman Datuk Seri Najib Razak had set out, said London School of Economics' professor of economics Danny Quah.

“I think provided Malaysia kept on the path of continued market liberalisation, engaged with the rest of the world in sensible guided streams of globalisation, and investments remained healthy, there would be no mechanical obstacle for Malaysia to achieve its aspirations,” he told StarBiz after delivering a lecture entitled, “Nobody's world, everybody's problem? Who's afraid of a little global hegemony?” organised by the University of London.

He said that people should be well taken care of and recognised, as well as being provided with continued opportunity to keep rising up the economic ladder.

On the upcoming general election, he said it would be a difficult question to answer, as both the ruling coalition and opposition had their own manifestos.

“Malaysians have to work through these and decide, but it's clear that the ruling coalition has a track record in economic management and expertise built up over the years,” Quah noted.

He said most people would be supportive of the transformation programmes, and Malaysia as a whole needed to keep a perspective of what it wanted to achieve, i.e, to be a developed nation by 2020, and economic prosperity for everyone, inclusive of the bottom 40% of society.

“The middle-income trap is being faced by many Asian economies, including Malaysia, and many other regional countries. The trap refers to the possibility that when a country reaches a certain level of income, it would be unable to keep growing after that,” he explained.

He said things looked pretty grim according to what the World Bank had documented.

“The World Bank has documented the growth of about 200 developing countries, and in the last 30 years only 13 of them have been able to evade the mechanics of the middle-income trap. That's bad news. The other piece of bad news is that one of them is actually Cyprus and other not-so-performing European countries at this point,” he said.

In his lecture, Quah projected the shift of the economic centre of gravity over the decades to the East by 2049.

“The axis is already near Kuwait and would move to the East soon enough. Malaysia would be near the centre of the world economy, and there would be greater attention paid to different economic opportunities.

“The country would see more inflow of capital and ideas, and much more entrepreneurial economic activities. Malaysia needs to stand ready to face East,” he said.

However, despite the economic centre of gravity moving over to the East, he said the centre of political power would still remain in the West, causing economic and political fractures in its course of shifting.

“This is not something we cannot fix, but is something we have to look at thoroughly in every system of decision-making, and re-examine affirmative actions and programmes.

“What matters more than just processes and mechanisms is the delivery of results, like China delivering its economic reforms, despite not having a political structure like the West,” Quah said.