Friday, 26 February 2021

Bitcoin Soared to over $52,000, What’s Going On?

Bitcoin, the world’s largest digital currency, surged past $52,000 last week stunning finance professionals who had dismissed it as a fad. On Feb. 16, it was trading at just under $10,000. So, what’s driving the market?

What is bitcoin?

Bitcoin is a virtual currency, created 12 years ago, as an alternative to government-issued “medium of exchange”. It has a similar function as a “store of value” like gold. But unlike the precious metal, you can’t hold bitcoin or fashion it into jewellery. It exists only as an electronic file. Transactions are recorded on a distributed and decentralized ledger. So, if you lose your bitcoin’s web address, it’s gone for good. No government regulates it.


Bitcoin can be used to buy many things anonymously, from Tesla cars to illegal items on the Dark Web. And unlike the dollar, only a limited amount exists.


How do you buy bitcoin?

The easiest way to buy cryptocurrency is through a centralized exchange, such as Coinbase, Binance, or Cashapp. Each charges a small fee per transaction and usually will accept credit cards for payment.  Fundamentally, speculating on anything is a gamble.

Bitcoin is the darling of the crypto world now, but even if it gets more widespread adoption “it’s never been clear if bitcoin will remain the dominant player here,” said Michael Lowry, a Professor of Finance at Drexel University.


Why is the price of bitcoin rocketing?

Big companies increasingly see it as a legitimate store of value. Elon Musk, the mega-billionaire CEO of Tesla, earlier this month bought $1.5 billion of bitcoin and said his company will accept it as payment for its electric cars. Mastercard this month announced it would support selected crytocurrencies in its payment network. Apple Pay recently said it would allow bitcoin to be spent online, in retail stores and on apps.


Is there a precedent for bitcoin’s spike?

In 2017, the price of bitcoin saw a similar run-up when within the year speculators drove bitcoin from about $1,200 to its then-high of $19,783. The “great crypto crash’ followed with its value tumbling 80%. It languished under $10,000 until July 2020 when bitcoin began to regain strength, fuelled by concerns about the Federal stimulus program and fears of inflation.

This time is different. It is driven by institutions. Then again, in a low interest environment this asset class may look attractive. And as usual we have manipulation. An academic paper in the Journal of Finance attributed the rise in 2018 to manipulation that should make people pause!

So, do I invest? If you are prepared to lose then it is fine, for some do predict the price could go to US$100,000! But it can also go the other way, if interest rates move up in a year or two, other asset classes may provide less risk and a fair return. And it is also possible regulators may intervene in some manner, which will deflate this “irrational exuberance”.


Stay safe!



Bitcoin soars to over $52,000. What’s going on? We answer your questions, Sam Wood, The Inquirer, Feb 22, 2021 (



Thursday, 25 February 2021

Tiered Dividend to Help Low Income EPF Members?

Sometime back a newspaper report carried an interesting proposal on tiered dividends. It suggested that for EPF to help members with lower incomes and savings is to implement a tiered dividend payment scheme which, in short, pays a higher dividend rate to those with low savings, and a lower rate when the savings grows above a certain threshold. The rationale for this is like a progressive tax, where those with a higher taxable income fall under a higher tax bracket and hence, pay more tax (The Edge, 14 Dec 2020).

A 21-year-old with a basic salary of RM1,000 at the turn of the millennium (year 2000) who had enjoyed a 5% annual salary increment in the past 20 years, for example, would have saved RM95,230 (including employers’ contribution) with EPF and seen his savings grow to RM166,937 when he turned 40 by the end of 2019, helped by the generous dividends the provident fund had paid in the past two decades as well by the power of compounding.

If he continued not to withdraw any of the money, he would reach EPF’s basic recommended savings of RM240,000 by age 45, on a back-of-the-envelope calculation. That savings would grow to RM526,578 by the time he reaches age 55 — provided he continues to enjoy a 5% annual salary increment to reach a final basic salary of RM5,253 and assuming that EPF continues to pay a blanket dividend of 4% per year.

If a tiered dividend had been implemented from year 2000, that same 21-year-old would have reached EPF’s basic recommended savings earlier at age 43 and have about RM27,000 more savings at 55.

Some would argue that this tiered payment is “unfair”, saying that members who contributed the most funds to be invested by EPF should get higher returns and not less. Yet, as the challenge for EPF to pay every 1% of dividends grows, even as its total fund size approaches RM1 trillion, it may well be time for it to recalibrate its strategy to help members who need a leg-up to survive retirement. That’s what the proponents of the proposal say.

While a lower dividend rate for members with high savings could cause those with savings nearer or above RM1 million to withdraw their funds, they would be taking additional risks in doing so.

There are those who reckon that it may be easier for EPF to get a better return on investment without having to put as much money abroad if the pool of funds it needs to manage is smaller. They note that currently, it puts about 30% of its funds overseas because there is a lack of suitable investments in the country.

The proposal is expected to have real merits for social development of the country, given the low savings of the B40 and M40 income group. After all, those who are able to accumulate over RM1 million with the EPF alone are believed to be “ well educated” and "financially savvy” and may well have income from sources other than the EPF, an observer says, adding that “people should not be using the EPF’s investment capability as a free ride”.

However, even if the lower-income group does benefit from a slight leg-up from tiered dividends, the latter alone does not make the EPF’s job of protecting and growing its members’ retirement savings easier. There are still more that needs to be done by the government to better prepare people for retirement.

 On balance, this is a dumb idea—tiering dividends. The real issues are the low starting salaries for fresh graduates and others because we still want to project the idea that this is a low-cost economy; then our productivity levels are not improving as it should; in addition, inequalities are addressed on income earned and wealth rather than on savings. Ideas like these come up because the Government addresses low disposable income in a crisis with “raids” on hard earned savings, like the I-sinar account. Try and get real!



1.     The State of The Nation: Tiered dividend necessary to help low-income EPF members, 14 Dec 2020, The Edge

2.     Varied response to whether EPF should implement tiered dividends, 28 Dec 2020, The Edge

Wednesday, 24 February 2021

Stimulus = Inflation?

The massive stimulus to the U.S. economy in the face of the COVID-19 crisis brings a persistent worry among investors that these policies will lead to inflation. Once the crisis is over, how will all the excess money be absorbed? There is a concern that inflation will erode the value of bonds.

Deflation is actually the more likely threat in the near term, and the risk of inflation in the next few years is limited. A lot will of course, depends on how quickly the economy rebounds from its steep decline. A rapid rebound in the economy could potentially lead to inflation.

The late economist Milton Friedman’s thesis that inflation is “always and everywhere a monetary phenomenon” drove the Federal Reserve to target money supply growth in the 1980s, bringing inflation down. Therefore, whenever the money supply rises rapidly it seems reasonable to assume that inflation must be around the corner. However, in order to produce inflation, the money must be loaned and/or spent and must drive up the demand relative to supply. If it sits on the balance sheets of banks or is saved by consumers, then it doesn’t necessarily drive up prices for goods and services.

Currently, demand for many goods and services has dropped sharply as consumers remain at home. Business inventories are rising as consumer spending falls amid soaring unemployment. In the first half of the year, it’s likely that gross domestic product growth (GDP) will decline. In response, the Fed and Congress are providing relief to fill the gap that has been created by the downturn. This “output gap” is the difference between the economy’s potential growth rate and its actual growth rate. In order to generate inflation, the gap would need to close and growth would need to exceed its potential for an extended period of time.


Mind the gap: GDP growth is falling far below its potential growth rate

Source: U.S. Bureau of Economic Analysis, Gross Domestic Product (GDP) and U.S. Congressional Budget Office. Nominal Potential Gross Domestic Product (NGDPPOT), Gross Domestic Product, and the Gross Domestic Product Forecast. Quarterly data as of Q1-2020 with forecast through Q4-2020, provided by U.S. Congressional Budget Office.

The longer the current downturn lasts, the more risk of a delayed bounce back. Why?  Because recessions tend to destroy productive capacity. Some businesses will not reopen. Some people may not get back into the workforce. And unused resources, such as structures and equipment, as well as skills, become outdated.

It is also tough to generate inflation if people don’t believe in it. After all, why would anyone “chase” goods if prices stay the same or fall? Delaying consumption could mean getting a discount later. There may be some price increases for certain goods that are in short supply due to supply chain issues, but widespread generalized price increases appear unlikely.

Consumer inflation expectations have fallen

Source: Bloomberg.  University of Michigan Consumer Expectations Index.  Monthly data as of April 2020.


Market expectations for inflation are also low

Notes: The 5-year 5-year forward rate is a measure of the average expected inflation over the five-year period that begins five years from the date data are reported. The rates are composed of Generic United States Breakeven forward rates: nominal forward 5 years minus US inflation-linked bonds forward 5 years.

Source: Blomberg 5-year 5-year Forward Inflation Expectation Rate (USGG5Y5Y Index). Daily data as of 5/11/2020.

Once the economy “re-opens,” surely all that money printing will result in inflation down the road, won’t it? It’s possible, but recent history doesn’t support the idea that it will necessarily happen. There were similar worries during the 2008-2009 financial crisis. However, despite the rapid and huge expansion of the Fed’s balance sheet at the time, inflation stayed muted. Asset prices went up, but that was the extent of the inflation.

Today, we’re looking at a different backdrop. Not only is there a wide output gap, suggesting excess supplies of goods and labour, but wages for many workers haven’t kept up with inflation for many years, partly as a result of globalization and outsourcing production to countries with lower wage costs. Perhaps that’s why there has been so little “chasing” of goods. On top of that, commodity prices have fallen and the dollar has been strong, holding down prices of imported goods.


Falling oil prices have pulled overall commodity prices lower

Note: Chart shows the Commodity Research Bureau (CRB) Spot Index, which is an index that measures the overall direction of commodity sectors. The CRB was designed to isolate and reveal the directional movement of prices in overall commodity trades. The Spot Market Price Index is a measure of price movements of 22 sensitive basic commodities whose markets are presumed to be among the first to be influenced by changes in economic conditions. As such, it serves as one early indication of impending changes in business activity. The commodities used are in most cases either raw materials or products close to the initial production stage which, as a result of daily trading in fairly large volume of standardization qualities, are particularly sensitive to factors affecting current and future economic forces and conditions. The composition of the groups are as follows:  Metals, Textiles and Fibers, Fats and Oils, Raw Industrials, Foodstuffs.

Source: Bloomberg. Commodity Research Bureau BLS/US Spot All Commodities (CRB CMDT Index). Daily data as of 5/11/2020.

Investor Warren Buffett summed up the situation very concisely at his annual meeting: “You can finance a deficit as long as your currency holds up.” It’s about debt sustainability. With 10-year Treasury yields at about 0.68% and 30-year yields at 1.30%, the U.S. can sustain high debt for a long time—unless investors lose confidence in U.S. policy.

The world’s financial system is more dependent on the dollar than ever. The vast majority of global transactions take place in U.S. dollars. Central banks around the world hold U.S. dollars—and therefore Treasuries—for these transactions. Over time, the debt issued in U.S. dollars has grown sharply—especially debt issued by emerging-market countries and corporations. All of these factors keep the demand for dollars firm.

Over the next one to two years, deflation is probably more of a risk than inflation. The recovery from the COVID-19 downturn is likely to be slow, keeping inflation and interest rates low. As the economy mends, the Fed will gradually unwind some of its emergency lending. As loans get repaid, the Fed will let some of its holdings roll off its balance sheet and start lifting interest rates—perhaps two or three years from now. The Fed will keep the federal funds rate pegged near zero for at least two years, and ten-year Treasury yields to remain under 1% in 2020 and under 2% in 2021. That’s the view of some U.S. analysts including Kathy Jones who examined the above topic.


What about Malaysia?

The temptation to “print” is there. But we are not the U.S. Our Ringgit is not the currency for trade. Thai or other foreign traders don’t want our Ringgit. So it is best to keep the feet off the paddle and resuscitate the economy measuredly.

We need stable exchange rates of RM3.80 to RM4.00 to the U.S. dollar. That will cushion any imported inflation and allow for businesses to consider expansion. Meanwhile, fiscal policy must remain targeted and expansionary to generate growth in the services and manufacturing sectors. And hopefully the Government responds to the private sector.



1. Stimulus=Inflation? Why it may be different this time, Kathy Jones, (

2. Where is all the inflation? Tony Yiu (, 30 September 2020   

Tuesday, 23 February 2021

Why Are Indian Farmers Protesting?

Farmers have been on the boil in India for years. The agriculture sector contributes nearly 15% of India’s USD2.9 trillion economy but employs about half of the country’s 1.3 billion people.

For decades, farmers have been driven into debt by crop failures and inability to secure competitive prices for their output. Hence, many had resorted to taking their own lives.

Narinder Nanu/AFP

Protests are intense in Punjab and Haryana – India’s rice bowls. The BJP, the ruling party, introduced three market-friendly laws. The contentious reforms will loosen rules around sale, pricing and storage of farm produce. Currently, the Government provides subsidies, tax exemption and crop insurance. Farmers have guaranteed prices for 23 crops. Debts are waived when they are unable to pay off loans, especially when natural calamities strike. But the average annual income of a farming family is around 20,000 rupees (about RM1,000). How can they survive in a market-oriented, big corporation environment? They don’t have the “muscle” to fight the likes of Reliance. Without safeguards on price-setting, farmers are playing into the hands of big private players.

Agricultural market reform is political in any part of the world. And food on your plate is never a product of a total free market economy. That is true anywhere in the world. Reforms are needed but it also requires consultations with stakeholders, otherwise it becomes a violent outburst on the streets with no clear light in sight.



1.     Why Indian farmers are protesting against new farm bills, 25 Sep 2020

2.     Soutik Biswas, What has brought India's farmers to the streets? 3 Dec 2020

Monday, 22 February 2021

China’s Latest Five-Year Plan and Long-Range Objectives

Based on a PWC Report on the above, we highlight the key points for the blog today.

Early January 2021, the Communist Party of China Central Committee (“CPCCC”) published the CPCCC’s Proposals for the Formulation of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035 (“the Proposals”).

Containing more than 20,000 words, the Proposals offer 60 recommendations in 15 sections. It serves as a significant guideline for China’s social and economic development in the five to fifteen years to come.

The 14th Five-Year Plan states that we will “make new strides in economic development, take new steps in reform and opening up, further enhance social etiquette and civility, make new progress in building an ecological civilisation, further promote the well-being of people and further improve governance capacity”. China will therefore pay more attention to high-quality and coordinated development, instead of GDP growth as usual. However, it is generally viewed that the actual average annual growth rate in the next five years will be maintained at 5%-5.5%.

The innovation-driven development strategy was already proposed in the 13th Five-Year Plan, yet its significance has been highlighted in the 14th Five-Year Plan. Only booming technological innovation can assure sustainable economic development.

The innovation-driven strategy is followed by an initiative to build up a modern industrial system. The Proposals particularly highlights the significance of reinforcing the weak links of, diversifying and securing industrial and supply chains. The Proposals stresses that China will unswervingly build itself into a manufacturing power, put more emphasis on quality and enhance its strength in cyberspace and digital technology. In addition, it also underlines that China will foster strategic emerging industries, such as the new generation information technology, biotechnology, new energy, advanced materials, high-end devices, new energy vehicles, green environmental protection, aerospace and marine equipment, and accelerate the development of modern service industry, new infrastructure and digital economy.

The “dual circulation” strategy is undoubtedly one of the most significant highlights in the 14th Five-Year Plan. In May, the central government introduced this strategy, urging that domestic circulation must serve as the mainstay of the economic balance, with domestic and international circulations reinforcing each other. For this purpose, China must accelerate supply-side structural reforms to optimise its supply structure, improve supply quality and align supply with demand; remove the systemic and institutional barriers to market-based allocation of factors of production and circulation of commodities and services to reduce exchange costs; and improve the policies in support of kick-starting domestic demand, so as to strike an economic balance where demand drives supply and supply, in turn, creates demand.

Additionally, in order to propel domestic demands and support the domestic economic circulation, the Proposals illustrate measures to comprehensively promote consumption and expand room for investment respectively.

The Proposals indicate that China will stick to drive high-quality development and international cooperation under the Belt and Road Initiative while expanding high-level opening-up. And achievements in these fields would enable China to be less economically dependent on European and American countries to a certain extent.

Many other interesting ideas are said in the Proposals. And China has the political will to implement them. But innovation cannot be manufactured. So, people like Jack Ma have a better future in America than China. Here lies the problem-- more freedom and innovation or socialism with Chinese characteristics and “manufactured” solutions?  



Interpretations on the 14th Five-Year Plan and the Long-Range Objectives Through the Year 2035, PWC

Friday, 19 February 2021

BNM’s Take on the Economy!

We reproduce below the key slides on the review of the economy in 2020 and prospects for 2021 done by BNM.

Is BNM Right on Prospects?


·       BNM is still upbeat about 2021 as other economies (tentatively) are on a recovery path.

·       Expectation is for GDP growth of 5.5% in 2021 – that’s lower than 6.5% -7.5% projected by MOF. Other economists view a growth of 4.0% or thereabouts because of MCO 2.0.

·       It is still better than negative 5.6% for 2020

·       The game is to remain cautious. Why? There has been numerous business closures, rise in bankruptcies and severe job losses – only matched by the AFC of 1998. Private consumption and investment will be subdued.

·       Banks may consider moratoriums for selected cases but generally this is too little, too late for many.

·       BNM and others need to focus on services and manufacturing for enabling growth. And the private sector drives growth (see Tables below). So, more conversations on cashflow, jobs, taxes, incentives and others are required.

·       Meanwhile, the authorities could survey (especially after dark) on the streets of KL, Penang and JB to understand the poverty and impact of Covid-19! Why are there whole families sleeping on the streets?


1. Sidang Akhbar - Prestasi Ekonomi Suku Keempat Tahun 2020, Bank Negara Malaysia,
11 Feb 2021

2. Lending activities improving, Ganeshwaran Kana, The Star, 12 February 2021

Thursday, 18 February 2021

Fraudulent Journals: Malaysia Is Ranked No. 5 in the Worid!!


Malaysian academics form a large chunk of those whose works were published in more than 300 “fraudulent journals” found in a respectable global citation database used to gauge tertiary institutions worldwide in annual rankings (MalaysiaNow, 14 Feb 2021).

Fraudulent journals, also known as “predatory journals”, are publications lacking in research quality and with questionable content, which are often liberal in accepting articles without scrutiny, and in most cases, for a fee.

A total of 324 such journals published from across the world have been found to have infiltrated Scopus, a Netherlands-based global citation database made up of more than 30,000 journals covering life sciences, social sciences, physical sciences and health sciences. The revelation, besides renewing a debate on the quality of research work by Malaysian universities, could also call into question the annual global rankings of universities.

At least two major organisations, Times Higher Education and QS, rely heavily on data from Scopus in publishing their annual rankings of universities worldwide. With more citations of its academics’ works in Scopus, a university stands a greater chance of boosting its global rankings.

The revelation is based on the work of two economists from the Czech Republic, Vit Machacek and Martin Srholec, who provided a country analysis of authors in questionable journals found in Scopus covering the period between 2015 and 2017.

While many of these authors come from countries with large populations such as India, Indonesia, the Philippines and Egypt, Malaysia’s listing among the top countries of origin may reflect badly on the quality of local academic work.

Machacek and Srholec’s study ranks Malaysia fifth among 20 countries considered as the biggest offenders in terms of predatory journals. Malaysia also appears in the top 20 lists for fraudulent work in three fields: health sciences, physical sciences, and social sciences, occupying the second place in the latter two.

The authors believe that predatory publication practices have apparently become a systemic problem at the national level in these countries, not limited to particular clusters.

Apart from increasing university enrolment or enhancing graduates’ employability, authorities should also focus on quality of research and the journals where academic work is published. A stricter screening and evaluation program on research are a must, unless we want to be the butt of jokes. But with mediocre professors this is tough. For a university to progress it must be on merit not some affirmative action program that has assistance to pass an exam, assistance to become a professor and assistance to publish articles. If the Ministry of Higher Education is serious to put things right, then have a Higher Education Commission manned by respectable people from around the world. But are we willing or serious? Not likely under the present Government. So, why complain about standards declining? More likely it is just another halal wayang kulit!!



Malaysian academics among the top in ‘fraudulent’ publications found in global database, 14 Feb 2021, MalaysiaNow

Wednesday, 17 February 2021

Impaired Loans on an Uptrend?

Malaysia’s impaired loans have been creeping up every month in the fourth quarter of 2020 after the blanket loan moratorium ended on Sept 30. This was reported by The Edge Markets on 5 February 2021.

The amount of non-performing loans (NPLs) reached a nine-year high of RM28.7 billion at end-2020, according to the latest data from Bank Negara Malaysia (BNM). From RM24.9 billion in September, total impaired loans rose to RM25.7 billion in October and subsequently to RM27.8 billion and RM28.7 billion in November and December respectively. The last time impaired loans reached this level was in 2011.

The percentage ratio of net impaired loans to net total loans also rose in tandem during the period. From 0.84% in September, the ratio climbed to 0.87% in October, 0.95% in November and 0.99% in December.

Gross impaired loans ratio continued to inch upwards to 1.6% in December from 1.5% in November, returning to levels comparable to 2019, BNM noted in its monthly highlights report.



The breakdown of total impaired loans shows that both the household sector and sector of wholesale & retail trade, and restaurants & hotels saw noticeable upward trends from October to December after the blanket loan moratorium ended in September.

SERC executive director Lee Heng Guie explained that the rising NPLs were due to unemployment and loss of income for households, which have impaired their ability to service loan commitments, especially for those highly indebted individuals.

As for business borrowers, the loss in revenue and shutting down of businesses also contributed to the default of loan repayment. “Some have restructured their loan commitment, but the multiple loans commitment compelled the borrowers to reprioritize their debt service payments,” said Lee.

Even as the blanket moratorium ended and most borrowers resumed loan repayments, a target repayment assistance was offered to selected groups of people until June 30, 2021. Nevertheless, the moratorium in general delayed the recognition of impairments by banks and therefore the high impaired loans reported subsequently are possibly due to the lag.

UOB Malaysia economist Julia Goh acknowledged that NPLs have inched higher since loan repayments started in October last year. “I believe that uncertainty with regards to the economic recovery and tightening of containment measures as well as Movement Control Order (MCO) are also the added factors, particularly for the tourism-related, retail and recreational sectors,” said Lee.

As it is, BNM had earlier cautioned in its Financial Stability Review that overall impairments could rise to above 4% of loans by the end of 2021, mainly driven by the business segment, as a result of economic and financial shocks from the Covid-19 pandemic. BNM said this based on a conducted macro stress test which considered effects of the blanket moratorium implemented in April last year and subsequent targeted repayment assistance for individuals announced by banks in August.

Rising impaired loans may seem to paint a bleak picture of the economic recovery, however banks should be able to withstand the present shocks. The level of capitalisation and liquidity are more than the minimum prescribed level, according to Mohd Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia Bhd.

Still, a slower pace of recovery and ongoing labour market challenges could likely put more pressure on loan impairments, UOB’s Goh pointed out. BNM said banks continued to set aside additional provisions as a precaution against future credit losses with the total provisions to total loans ratio increasing to 1.7% in December from 1.6% in November.

Maybank’s economics team does not foresee any more rate cuts into 2021. ROEs are expected to improve to 8.6% in 2021 but will be below the average of over 10% in 2019.

Overall, caution is the word, which leaves domestic consumption and private investment rather subdued. Hence, GDP growth for 2021 is at best 5%, rather than 6.5-7.5% as imagined by MOF. Couldn’t BNM devise several strategies to assist those severely impacted? By letting market forces dictate will mean higher bankruptcies, rise in unemployment and more pain than gain. Every major developed economy is doing more to alleviate sufferings, why are we so complacent and laid back? It’s the weather is it?



1. Impaired loans creep up to nine-year high, Syahirah Syed Jaafar and Joyce Goh, The Edge Markets, 5 February 2021.

2. Moratoriums pose risks to banking systems in ASEAN, Leong Hung Yee, The Star, 4 February 2021



Tuesday, 16 February 2021

Has MCO 2.0 Affected the Construction Sector?


Since the beginning of 2021, the Bursa Malaysia Construction Index has experienced a steep decline of 12.5% from 186.67 to 163.42, underperforming the broader FBMKLCI index which fell 2.6% for the same period.

TA Securities Research has revealed that due to the slower-than-expected rollout of new mega infrastructure projects since the 14th General Election (GE14), majority of the infrastructure contractors under its radar saw a decline in their outstanding order book. This include major construction companies such as Gamuda Bhd, Sunway Construction Group Bhd and WCT Holdings Bhd, according to analyst Ooi Beng Hooi.

“Besides temporary suspension of works at sites due to presence of COVID-19, the compliance with standard operating procedures (SOPs) and test requirement has resulted in additional costs and a drop in operating efficiency at construction sites,” justified Ooi. “With escalated number of daily new COVID-19 cases in Malaysia, we expect the adverse operating environment to drag on till 2H 2021.”

Piling to the pressure is the cautious sentiment arising partly from the recent surge in steel bar price, according to TA Securities Research. Since late-2020, the price of steel reinforcement bars has begun to rise due to an increased demand from China as well as a surge in iron ore price. As of early-February 2021, the price of steel reinforcement bars was estimated at about RM2,650/metric tonne (MT)-RM2,750/MT. The construction margin is expected to be eroded by 1% to 2% if the price stays at such elevated levels throughout the year.

Will property prices fall?


On this, Rehda Malaysia president Datuk Soam Heng Choon said the current prices have “hit rock bottom”. He does not foresee prices dipping further. The selling price now is the result of the input cost made up of the spiking building material price and additional cost incurred due to the pandemic. All developers want a quick sale so that they can pay the contractors and move on.


Nevertheless, he also highlighted that developers have gone back to the drawing board as far as launching new projects and pricing are concerned as they want to minimise losses or additional holding cost at this point in time.

“With the Malaysia My Second Home (MM2H) programme put on hold and MCO reinstated, the developers have no other choice but to price the new projects at a very competitive price to survive the pandemic,” he noted.

Wee stressed that the property price may not reduce to the level which the market wishes for, as the indirect construction input cost has increased, such as temporary shutdown of construction sites, lack of skilled workers and higher standards of workers’ living and working facilities. Don’t expect it to be cheap during a downturn.

Who is to be blamed when the construction progress is impeded, and the sector performance is impacted? The MCO? Or all the SOPs?

The authorities will disavow all knowledge of large groups of foreign workers accommodated in small dormitories under shockingly poor conditions. They are also the ones who failed to follow the social distancing arrangements and caused the rise of more clusters at the sites. Enforcement is always an issue in Malaysia.

To be fair, MCO 2.0 allowed more businesses to operate including those in the construction sector, and hence it was expected to be less damaging compared to MCO 1.0. In 2020, construction sector contracted the most at 18.7%. That’s from MoF. The expectation for 2021 is double digit growth which suggests major projects are implemented, affordable housing takes off and health issues are overcome. Is that realistic now?



1.     Cheah Chor Sooi, Construction sector expected to remain in the doldrums a while longer, Focus Malaysia, 5 Feb 2021

2.     Rachel Chew & Chelsea J. Lim, Impact of MCO 2.0 on the property market, EdgeProp, 22 Jan 2021

Monday, 15 February 2021

Trump’s Acquittal: The Fragility of U.S. Democracy

The U.S. stands as a shining beacon of democracy. But with Trump’s actions and acquittal in two impeachment trials the bar is certainly low.

It (low bar) provides an avenue for future Presidents and other leaders in the world to follow – call an election rigged and ask a mob or military to take charge. That must have been Trump’s plan all along – for the mob to run riot and the U.S. army to intervene, stop the rioting, declare martial law and re-install Trump as President. The latter did not happen – thanks to the military.

The 57 votes against Trump fell short of the two-thirds needed to convict him. Trump can run for President again unless other legal suits put him in jail.




The GOP has stuck with Trump. Every misdemeanour, assault on democracy is brushed aside for political expediency. Do they hold their oath of office sacrosanct? No, it can be justified as partisan politics. But his followers or rioters won’t be so lucky – they will face charges and jail terms. And the boss, at least on incitement is acquitted.

It is like Adolf Hitler, deemed as not guilty of the Holocaust while his nincompoops are executed. I know that is extreme but for a shining beacon to fall, what hope is there for other fledgling democracies – especially in Myanmar or Malaysia? How could one “moralize” about China – in Tibet or Xinjiang? Or, India on Kashmir? America has lost its high moral ground – it is as good as a third world democracy. The standards now set could be followed by other U.S. Presidents, Senators or Congressperson when they do fail to get elected.

But how could America restore its light? There needs to be brave steps to be taken by the GOP, the election process and reforms to the constitution. No one should be allowed to say an election is “rigged” if it has certified validation. Such an allegation must be seen as “treachery” in the context of the U.S.. The “free” press in the U.S. cannot remain blind to an obvious incitement by an irrational, demented leader.

Racism and the religious right cannot “carry-on” as if nothing has happened. Corporations must stop donating to parties that promote bigotry and downright lies. Social media must stop giving a platform for bigots, autocrats and crazies!

The Republican Party must do its own “soul search” and re-model its future. If “Trumpism” remains its central core, then the future could be bleak for the GOP and America.

(This contribution is political in nature and we make no apologies – Washington has fallen, and we and the world are impacted by it!)



With Trump’s acquittal, the fragility of America’s democracy is even more clear, Perry Bacon Jr., Five ThirtyEight, Feb 13, 2021

Thursday, 11 February 2021

Tax the Wealthy to Pay for Coronavirus?

A one-off "wealth tax" is the best way to patch up UK public finances battered by the coronavirus crisis? Rather than increasing income tax or VAT, the government should instead look at a tax on millionaire couples, the Wealth Tax Commission said. Taxing those households an extra 1% above a £1m threshold could raise £260bn over five years, it said.

The coronavirus crisis has led to soaring public spending. In 2020, the government is spending £280bn on measures to fight Covid-19 and to support the UK economy, including £73bn on job support schemes. The Wealth Tax Commission, a body made up of academics, policymakers and tax practitioners in the U.K., said that the government should consider a tax on the wealthy if it decides to raise taxes to try to get back some of this outlay.

This would be fairer than raising tax on incomes, or goods people buy, or by increasing national insurance contributions, the Wealth Tax Commission said. Dr Arun Advani, an assistant professor at the University of Warwick, said: "We're often told that the only way to raise serious tax revenue is from income tax, national insurance contributions, or VAT.

"This simply isn't the case, so it is a political choice where to get the money from, if and when there are tax rises."

There are indications that the coronavirus crisis has already increased income inequality, with the Institute for Fiscal Studies reporting in June that the bottom 10% of earners were the most likely to have jobs in sectors that had shut down or could not be done from home.

A 1% per year tax rate could be imposed for five years on wealth of more than £1m per two-person household, the Wealth Commission said. That would be equivalent to raising VAT by 6p or the basic rate of income tax by 9p for the same period.

One-off taxes have been used after major crises before, including in France, Germany and Japan after the Second World War and in Ireland after the global financial crisis, it said. In December 2020,  Argentina passed a tax on the wealthiest to pay for medical supplies and relief measures amid the ongoing coronavirus pandemic.




The suggested tax would include all assets such as main homes and pension “pots”, as well as business and financial wealth, but not debts such as mortgages. It would be paid by any UK resident.

The commission also proposed an alternative where a threshold of £4m would be set per household, assuming it contained two people with £2m each, taxed at a rate of 1% per year on wealth above that threshold. It said that a one-off wealth tax in this scenario would raise £80bn over five years after admin costs.

Dr Andy Summers, associate professor at the London School of Economics said: "A one-off wealth tax would work, raise significant revenue, and be fairer and more efficient than the alternatives." Rebecca Gowland from Oxfam said: "It is morally repugnant to allow the poorest people to continue to pay the price for the crisis, when it is clear that a fair tax on the richest could make such a difference."

However, Madsen Pirie, president of the Adam Smith Institute free market think tank, said the tax proposal goes against "what most people see as a fair principle: that buyers, sellers and facilitators of transactions take a cut - including the state through tax." He said the proposals amount to "attempting petty theft by instalments, only the numbers they're proposing to rob from people's pockets are pretty substantial." "Your cash in the bank is not stacked in vaults gathering dust, it is invested," he said. "If we tax those investments we end up with less produced, less produced means lower wages and lost pensions, that means a worse life for all of us. "Money would move out of the country at a time we really need more of it flooding in to help us rebuild after the pandemic ends. A wealth tax would leave the country a poorer place and the fact it would be brought in over a five year period reveals the true intention of it being a tax for all time," he added.

We need new tax measures in Malaysia. Otherwise, the Government will talk about GST and other regressive tax methods. The gap between the T20 and B40 is widening especially with the pandemic. Can’t we be more courageous with a “super-profit” tax on the “Top Gloves” of the world,  banks and those who are reaping extraordinary gains from the pandemic? Why must the poor suffer a double whammy – the pandemic and job loss.

Hotels, travel, aviation, entertainment and many others are financially devastated. Businesses have folded-up and people are unemployed. It is time for the rich (with assets of RM5million or more) to bear part of the burden.



“Tax the wealthy to pay for coronavirus”, BBC, 9 December 2020 (