Trade Sale Board to Attract Investors?

The Securities Commission (SC) is considering the introduction of a trade sale board aimed at promoting private companies to investors. The proposed board will feature a listing and search functionality, enabling micro, small, and medium enterprises (MSMEs) and mid-tier companies (MTCs) to showcase their business details for trade matching.

This initiative, part of the “Catalysing MSME and MTC Access to the Capital Market: Five-Year Roadmap” report, is designed to facilitate connections between companies and potential investors.

Source: https://ms.wikipedia.org

This initiative is expected to enhance the infrastructure and mechanisms for fundraising and trade sales. Moreover, the SC plans to develop a factoring information platform for MSMEs and MTCs, promoting the use of factoring to expand their access to working capital. Factoring allows companies to meet short-term cash needs by selling their receivables for immediate cash injections from factoring companies. Furthermore, the SC’s initiative draws from the experience of the Mexican development bank, Nacional Financiera (NAFIN) which developed an online factoring platform called Cadenas Productivas.

This platform connects large buyers with small suppliers, enabling suppliers to access working capital financing through factoring transactions with participating financial institutions. The programme operates online, reducing costs and facilitating almost instantaneous transactions.

The above developments should be welcomed as it facilitates greater activity in M&A and working capital access. This is an admission that investment banks, commercial banks and others are not helpful to those in need of equity or working capital. I am for more competition, which will only benefit the SMEs and others in securing funding at reasonable costs as opposed to loan sharks!

Reference:

SC proposes trade sale board to attract investors to private companies, Eynez Syazmeena, Focus Malaysia, 23 May 2024

Is Osram’s Kedah Project Under a “Protected” Agreement?

The cancelled semiconductor project costing RM2 billion by ams Osram AG in Kedah is protected by a robust agreement with the Austrian-German technology giant.

Osram a few weeks ago pulled the plug on its recently-completed micro LED plant in Kulim Hi-tech Park with an estimated US$1 billion (RM4.75 billion) multiyear, multi stage investment. The current building represents the first phase of that investment. It is now seeking a buyer to take over the lease of its Kulim micro LED plant. 

Source: https://commons.wikimedia.org

That lease is held by PNB, EPF and KWAP who came together in 2023 through a €400 million (RM2.03 billion) sale and leaseback of the micro LED site with a commitment from Osram to buy it back from the funds after 10 years.

PNB, in a statement, said the three local funds and Osram are in regular contact to explore alternative solutions to ensure a mutually beneficial outcome for all involved. This includes looking for a different party to take over Osram's lease. 

Robust agreement or not, this is the problem of accepting investors who are “fickle”. We already have Citibank, Goodyear, Exxon Mobil, Shell who have exited or intend to exit Malaysia. Now we have a facility already completed for a German manufacturer costing RM2 billion. It could be its financial status or for some other reason that this venture is stalled. Whatever the case, this facility is now a monument to FDIs unless a replacement lessee is found soon!

Reference:

Malaysian funds say their RM2 bil investment in cancelled Osram’s Kedah project is “protected”, S Joan Santani, New Straits Times, 19 May 2024

Malaysia’s Economy Picked-up in Q1 2024!

Malaysia’s economy picked up by 3.9% in 1Q2024 (4Q2023: 3.0%) based on the advanced estimate. This is according to MARC. The manufacturing sector registered a 1.9% rebound after two quarters of contraction, while growth in the construction sector accelerated to 9.8% (4Q2023: 3.5%), while the services sector grew by 4.4% (4Q2023: 4.2%). Real impact on GDP is the services and manufacturing sectors which together make up over 80% of the economy. 

The upward trend in private consumption suggests an optimistic outlook. However, the outlook requires a sustained rebound in tourism. This requires continued coordination amid higher competition from ASEAN peers. While tourist arrivals are projected to normalise in 2024, the government reported over 0.53 million Chinese tourist arrivals in 2M2024, which if annualised is 3.18 million, 36.4% below the full year projection of 5 million.

The US’ GDP growth slowed to 1.6% in 1Q2024 compared to market consensus of 2.5% (4Q2023: 3.4%). However, the weaker growth does not boost expectation of rate cuts as the US Consumer Price Index remained at 3.5% in March (Feb: 3.2%), exceeding the market consensus of 3.4%. The Malaysian Government Securities and US Treasury markets continued to retreat due to higher-than-expected US inflation. The likelihood of the Federal Reserve (Fed) delaying rate cuts is now apparent. Local corporate bond yields increased across all categories.

Signs of interest rate outlook divergence, such as the German bund rally in March, have surfaced due to decelerating inflation and weak growth prospects in the eurozone. While German bund yields rose in April due to the recent higher US inflation and delay in US rate cuts, eurozone inflation, in contrast, eased to 2.4% in March (Feb: 2.6%). The sustained disinflationary trend is expected to increase the rate cut prospects in the eurozone. The improved levels of economic activity in the eurozone are expected to not limit prospects for rate cuts given its track record of bumpy growth.

Year-to-date inflation (for Malaysia) of 1.8% compared to 1.5% in 4Q2023 points to the end of the disinflationary trend. Going forward, inflation is expected to be between 2.5% and 3.0% in 2024 (2023: 2.5%) with a gradual uptick in the near future due to spill overs from new tax measures and the execution of targeted subsidies. In view of the present level of growth and inflation, Bank Negara Malaysia has maintained the policy rate at 3.00% in its May meeting, which is not good news for any possible appreciation of exchange rate.

Reference:

Monthly review: Early signs of interest rate outlook divergence, Press Announcement, MARC Ratings Berhad, 8 May 2024

Is There A Great Energy Deception?

Governments worldwide have spent over $5 trillion in the past two decades to subsidize wind, solar, and other so-called renewables. However, even with financial support, the world still depends on hydrocarbons for 84% of its energy needs—down only 2% since governments started binge spending on renewables 20 years ago. (That’s all according to Mark Mills in a report from the Manhattan Institute).

Wind and solar power might be useful in specific situations. It is a little far-fetched to think they can provide reliable baseload power for an advanced or developing economy. Nonetheless, governments, the media, academia, and celebrities flippantly push for an imminent energy “transition” as if it’s preordained.

Source: https://en.wikipedia.org

Reliable baseload power for most of humanity are probably only three:

1) hydrocarbons—coal, oil, and gas

2) nuclear power

3) abandon modern civilization for a pre-industrial standard of living.

Many Western governments are intent on going green, sanctioning large energy exporters (Russia, Iran, Venezuela), and shunning hydrocarbons in general (ESG, windfall profits taxes, limiting exploration, burdensome regulations).

The other choices of embracing nuclear energy—which has zero carbon emissions—or give up reliable electricity are not seriously entertained at the moment. But with rising hydrocarbon prices and concerns about energy security, the nuclear option could be promising.

When the average person hears “fossil fuels,” they think of a dirty technology that belongs in the 1800s. Many believe they are burning dead dinosaurs to power their cars. They also think fossil fuels will run out soon and destroy the planet within a decade. None of these things are true. Using misleading and vague language plays a large role. Modern civilization has only two choices for baseload power—hydrocarbons or nuclear.

Renewables have a whole set of problems – source material for solar or electric vehicles are mined from resource-rich states. And China has a great advantage. Japan halted nuclear power after Fukushima but now it is reactivating nuclear plants.

Going forward, we will need a mix of energy sources – hydrocarbons and renewable (including nuclear). To champion one over the other is merely accentuating energy security and increasing price of power!

Developing countries must be permitted to drive electricity generation with hydrocarbons for the next 50 years, at least. It is too simplistic to argue that hydrocarbons endanger the planet when the West has systematically destroyed the planet for 300 years!

Reference:

The great energy deception: The truth behind the $5 trillion renewable energy scam, Nick Giambruno, Doug Casey’s International Man

Is PMX on “Fake It Till You Make It”?

PMX and his followers may want everyone to believe that Malaysia is well on the way to “Nirvana” under his administration. The reality on the ground is very different.

On the first day that the Employees Provident Fund (EPF) Account 3 opened for registration, EPF offices across the country reported long queues as desperate B40 workers eagerly signed up for the opportunity to withdraw a modest RM50 or RM100 from their retirement savings. The reason is probably to do something simple like pay a sick child's medical bill or to return to their hometown for festivities.

A few days later, PMX confidently announced that the economy had grown faster than expected in the first quarter of 2024 and that it would meet or exceed growth (4-5%) for 2024. If the economy is doing well under Madani, why are so many of the B40 so eager to withdraw a modest RM50 or RM100 from their retirement savings? Why can’t the B40 just get the RM50 or RM100 they need from a growing economy?

Even when lawyers receive death threats for doing their jobs, footballers are attacked with acid, petrol bombs are thrown at public buildings, police stations are attacked, and even Istana Negara is threatened with violence, is that Madani? 

If PMX says that due process was strictly followed in the partial pardon of Najib Razak, there is no reason why we should not believe that, unless you lack faith. Same with Zahid Hamidi and his DNAA. If anti-graft officers knocked on Radzi Jidin’s door, it's just a coincidence.

If PMX says that he promised to lower petrol prices (15 years ago), you should accept his statement even if there is a video that clearly shows that he promised to do so only a little over a year ago. If you believe hard enough, it will one day come true!

PMX  believed that it was his destiny to become the prime minister of Malaysia. In the end, he did it, despite all the difficulties he had to face.

I want to believe PMX will solve all the country’s problems, even if my experience tells me  he will not do anything substantive. Isn’t PMX’s promises an optical illusion? The problem with fake it till you make it is that, even when you make it, it is still an illusion! 

For my “poor” PMX, best he list down what he can do or cannot do and face the music accordingly:

... and many more... or will he maintain his elegant silence as usual?

Reference:

Anwar’s “fake it till you make it”, Nehru Sathiamoorthy, Malaysia Now, 20 May 2024

Shell to Sell Fuel Stations in Malaysia?

It was reported by Reuters that energy giant Shell is in talks with Saudi Arabia's state-owned Saudi Aramco to sell its fuel station business in Malaysia. Shell has the second-largest such network in the country. The deal could be worth up to $1 billion.

Shell, however, said Malaysia is important to them. London-based Shell wholly owns around 950 fuel stations across the Malaysia, according to its website, with only Malaysia's state-owned Petronas operating a bigger network. Talks began in late 2023 and a deal may be finalised in the coming months. The potential deal size is at roughly 4 billion to 5 billion ringgit ($844 million to $1.06 billion).

Source: https://en.wikipedia.org

In addition to its fuel stations, Shell sells industrial lubricants, produces crude oil and natural gas offshore of Sarawak and Sabah states, and is a joint venture partner in two liquefied natural gas (LNG) ventures.

The sale is part of the CEO’s efforts to focus the company's operations on the most profitable businesses. Shell has said it would look to divest 500 fuel stations this year and next. It is in the process of selling its Singapore refinery and petrochemical complex. Shell's effort to sell its Malaysia fuel stations is consistent with its move to sell its refinery on Bukom Island in Singapore, which supplies the network.

Saudi Aramco does not have fuel stations in Malaysia, although it owns 50% of the 300,000-barrel per day (bpd) Pengerang refinery in Johor in a joint venture with Petronas, which sells fuel domestically and for export.

Aramco operates petrol stations in Saudi Arabia and also operates fuel stations elsewhere in joint ventures with French major TotalEnergies, and South Korea's S-Oil Corp.

In early 2024 Shell had said it plans to sell 1,000 fuel stations by 2025. Upgrading retail network, with expanded electric vehicle charging and convenience offers was in response to changing customer needs. In total, Shell had said it plans to divest around 500 Shell-owned sites (including joint ventures) a year in 2024 and 2025.

Exit of Shell, Exxon, Goodyear, Citibank and others does not speak well for Malaysia. Though we gain from other FDIs, it is necessary to understand the reasons for their exit, so that we could re-shape our incentives to retain FDIs in Malaysia.

References:

Exclusive: Shell in talks to sell Malaysia fuel stations to Saudi Aramco, sources say, Trixie Sher Li Yap, Yantoultra Ngui and Ron Bousso, Reuters, 7 May 2024

Shell says committed to Malaysian retail amid purported Aramco bid, Jov Onsat, www.rigzone.com, 9 May 2024

More Kids are Living in Poverty in KL!

More children from low-income families in Kuala Lumpur have fewer than three meals a day. Families have had to cut back on spending due to rising food costs and the escalating cost of living.

Financial constraints have forced nearly 40 per cent of breadwinners in households to work longer hours and cut back on food consumption and spending on non-food items. This is according to an UN-backed study involving 755 low-income households in Kuala Lumpur. About 52 per cent of the children surveyed ate fewer than three meals a day, compared with 45 per cent before the Covid-19 pandemic. This nutritional deficit extends to children in female-headed households and those in households led by people with disabilities, highlighting the universality of the challenge.

Source: https://simple.wikipedia.org

The UN study aimed to find out how families whose median incomes are near RM3,000 per month are coping with the rise in food prices and other living costs since the pandemic. The households have been part of a series of earlier studies in May 2020, September 2020, December 2020 and March 2021, which tracked the impact of the pandemic and its lockdowns on low-income families. Eight out of 10 households said they are struggling to earn enough to meet their daily needs, up from the pandemic era when seven out of 10 reported experiencing this hardship. 

Ninety per cent of households said they were affected by the rise in the cost of living, especially in food prices, with about 50 per cent saying that they are financially worse off than in 2022. Six in 10 households, including those headed by women and people with disabilities, cited high prices as a major obstacle hindering their ability to provide nutritious meals to their children. Two in 10 respondents cited time constraints and the affordability of fast food as further obstacles for families in giving nutritious meals to their children.

Approximately seven in 10 households now report spending more on eggs – the most affordable protein source – compared with 52 per cent during the pandemic. Seven in 10 households also indicated increased spending on rice, compared with the four in 10 during the same period. The consumption of unhealthy food options also rose, with 46 per cent turning to instant noodles, compared with 40 per cent during the pandemic.

The financial pinch has taken a toll on mental health, with three in four households admitting that the rising cost of living had affected them mentally. Depression rates have worsened. The proportion of households reporting feelings of depression increased from 21 per cent in September 2020 to 28 per cent in October 2023. This trend remains consistent for female-headed households, with rates hovering around 28 per cent to 29 per cent during this period, although there was a notable increase from 22 per cent in March 2021.

The report also provided six key suggestions for mitigation measures. These include care allowance for all children from before birth until the age of two, allowance for the disabled, more social aid and increasing awareness of sexual, reproductive and mental health.

PMX can focus on this rather than on his image internationally. The effect of poor nutrition in children will not only impact their physical and mental state but their future as well. The future is poor for them!

Reference:

More kids living in poverty go hungry in KL as food prices soar, The Straits Times, 9 May 2024