Weekly Economic Analysis by Manokaran Mottain

MARKET 11-17 January 2022

We saw a two-tier performance within the equity markets last week. Although the KLCI staged a rebound following last week’s pullback, rising 12.22 points (0.80%) to 1,555.33 points, the majority of the indices in Bursa Malaysia – namely the FBM70, FBM100, FBM Emas Shariah and the FBM ACE all registered declines during the week.

The behavior of the market indicates market participants are taking a cautious approach towards investing and trading and primarily targeting big caps that are proxies to an economic recovery such as the banking and plantation stocks.

Senior Defence Minister Datuk Seri Hishammuddin said the federal government will not be reimposing the full scale movement control order but instead implement stricter control measures at all of the country’s entry and exit points in a bid to curb the spread of the COVID-19 Omicron variant as most of the cases are from people returning from overseas.

He added that following the successful roll out of the Malaysia-Singapore Vaccinated Travel Line (VTL) the government was also looking into possibilities to implement the VTL with other countries such as Indonesia and Thailand. However, the progress of future VTL will be dependent on the Covid-19 situation in both Malaysia and the designated country.   

It is also encouraging to note that India has increased its import of palm oil from Malaysia in December 2021 to 422,383 tons from 252,005 tons in November 2021.

The Solvent Extractors’ Association of India said the imports consists of 399,583 tons of crude palm oil, 10,000 tons of refined, bleached and deodorised palm-olein and 12,800 tons of crude palm kernel oil.

ECONOMY

The federal government has allocated RM50 million each to the Housing and Local Government Ministry (HLGM) and the Rural Development Ministry (RDM) to rebuild and repair houses damaged by the massive floods under the Rumah Kasih Keluarga Malaysia (RKKM) initiative.  Under the RKKM initiative, between RM5,000 to RM15,000 is allocated for repairs of each house while up to RM56,000 will be used to rebuild a new home.

HLGM will be responsible to repair and rebuild affected houses in the urban areas and those under local authorities purview while the RDM will be in charge of houses in the rural areas. According to the HLGM, it has identified 8,257 houses that had been affected by the floods of which 118 would require reconstruction while the remaining 8,139 units require repairs. Meanwhile RDM disclosed that it has received 165 and 1,879 applications respectively for reconstruction and repairs of houses. 

In addition, the Works Ministry has also allocated RM1.4 billion to repair critical infrastructure such as damaged or destroyed roads, collapsed bridges, sink holes and slope failures at 987 separate locations that were badly impacted by the floods. The immediate task is to repair critical roads to re-establish access and connectivity to inhabited areas that were previously cut off.   

Malaysia’s wholesale and retail trades sales in November 2021 jumped by 7.0% y-o-y to RM118.1 billion, driven by the reopening of various economic sectors and the resumption of inter-state travel in October 2021. The increase was primarily attributed to the growth in the wholesale trade and retail sub-sectors which registered positive gains of 6.8% and 6.7% to RM56.3 billion and RM47.8 billion respectively.  The index of retail sales over the internet saw a massive 21% y-o-y growth. The only sub-sector which continues to register negative growth was the retail sales in specialised stores as the segment posted its sixth consecutive contraction at -1.0% y-o-y.   

The government has also introduced two initiatives to spur the digital economy and attract investments in Malaysia. The first is the DE Rantau which is aimed to establish Malaysia as the preferred Digital Nomad Hub and to promote digital professional mobility as well as tourism across the country. The other is the Malaysia Digital Trade programme whose aim is to drive interoperability and greater harmonisation of standards and regulations to facilitate trade across countries in the region.

An interesting development during the week as the Civil Aviation Authority of Malaysia (CAAM) awarding the Certificate of Approval (COA) to AirAsia Group Berhad to conduct remote drone pilot training. Air Asia said the training would support the local drone industry by providing quality training to upskill its employees and support the company’s vision to launch an urban drone delivery service in the future for goods and retail items from its e-commerce platforms.  

Classroom training will be conducted at the AirAsia Academy in KL Sentral while the practical training will be held at the adjacent YMCA Kuala Lumpur field.

CURRENCY

Trading in Ringgit remained volatile after last week’s sharp drop. The Ringgit ended the week at RM4. 1765 / USD1.00 as compared to RM4.2080 last week on the back of weakness in the US Dollar as the Ringgit declined against Singapore Dollar, Japanese Yen, Euro and British Pound during the week.

I expect the Ringgit to be trading in a tight range of between RM4.15 to RM4.20 in the coming week as the first meeting of Bank Negara Malaysia’s Monetary Policy Committee would be held on 20 January 2022.

Everyone will be looking towards the subsequent Monetary Policy Statement on BNM’s views on the economy and monetary policy administration for 2022.     

POLITICS

Sarawak Chief Minister Tan Sri Abang Johari Openg announced that Parti Pesaka Bumiputera Bersatu (PBB) will establish a new wing for those aged 18 to 28 in order to fulfill their aspirations.

The other component parties of Gabungan Parti Sarawak have welcomed the move and will also deliberate amongst themselves on whether to follow PBB’s initiative to form a new wing in their parties specifically to cater for the 18 to 28 age group. - DagangNews.com 

Manokaran Mottain has been an economist with a number of financial institutions is now managing his own firm, Rising Success Consultancy Sdn Bhd