GDP Growth, But Do We Feel it?

 

Malaysia, according to the government, has shown strong gross domestic product (GDP) growth. But strangely, the people are not feeling it. This apparent disconnect between growth and sentiment on the ground is a common concern. This divergence, however, does not necessarily mean GDP growth is overstated or disconnected from economic fundamentals. Rather, it reflects a changing composition and distribution of growth.

 

From a broader perspective, this divergence is not unusual in a market economy. Economic growth and its benefits are not necessarily distributed uniformly. Differences in productivity, education, skills, capital ownership and individual choices can produce different outcomes.

This has led to concepts such as equity and welfare economics, including progressive taxation, targeted subsidies and affirmative action, alongside the pursuit of structural justice through access to basic services, competition policy and wider socio-economic opportunities. Strong aggregate growth, therefore, does not necessarily translate into an equally strong improvement in circumstances for every household, income group, generation or region.

 

Source: https://en.wikipedia.org

 

This distinction is particularly relevant to Malaysia’s current performance. The pre- and post-pandemic growth rates are telling, based on average sectoral GDP growth rates comparing the 2017-2019 and 2023-2025 periods. Growth in major consumer-facing sectors, including services and wholesale and retail trade, has decelerated. Importantly, these sectors continue to grow at healthy rates, generally above 5%. However, their slower growth relative to the pre-pandemic period is likely to influence sentiment disproportionately because they are encountered directly in everyday life.

 

As such, Malaysia’s growth engine has increasingly shifted towards the producer and investment side. As Malaysia strengthens its position as an export-oriented economy, relatively less visible sectors have taken on greater significance. As a mid-sized open economy, Malaysia is structurally positioned to benefit from the much larger global market for trade and investment, particularly compared with larger economies that can rely more heavily on domestic consumption. This shift is evident in the sectoral composition of growth.

 

Manufacturing and electronics, central to Malaysia’s export base, have accelerated across the pre- and post-pandemic periods, in line with policy initiatives and global technology trends. Construction has also recorded strong growth, reflecting elevated investment activity. At the same time, primary sectors such as mining, agriculture and hydrocarbons have experienced a revival. These sectors may be less visible than retail or consumer services, but their contribution to production, investment, exports and national income is substantial.

 

This helps explain why strong GDP growth may not always feel as strong as the headline number suggests. The issue is not necessarily that growth has weakened, but that its drivers have changed. During periods of elevated investment, the producer sector can play a stronger role than the consumer sector. The broadening of sectoral growth is also important for resilience.

 

Malaysia’s ability to attract investment into manufacturing and electronics strengthen its role in global supply chains, develop its primary industries and expand infrastructure shows an economy adapting to the changing external environment.

 

The geographical composition of growth is changing as well. Over time, Malaysia’s expansion is likely to become increasingly decentralised, with new engines emerging beyond the Klang Valley. Foreign direct investment, export-oriented industries and targeted public investment are contributing to new economic centres.

 

While private investors remain the principal drivers, the government’s enabling role through infrastructure, connectivity and a better investment climate can reduce barriers and expand opportunities in historically underdeveloped regions, including the east coast of Peninsular Malaysia and the states of Borneo. This broadening is evident in Johor through the Johor-Singapore Special Economic Zone (JS-SEZ), in the northern states through the expanding semiconductor ecosystem, and in Sabah and Sarawak through the development of natural and energy resources. Such developments can reduce longstanding regional disparities in income, wealth and economic opportunity.

 

Growth is, therefore, broadening not only across sectors, but also across geography. This perspective is important when assessing Malaysia’s strong GDP growth in the first half of 2026. Growth has increased alongside a healthy rebalancing, with investment, production, exports and a wider range of sectors contributing more significantly. The divergence between GDP growth and consumer sentiment likely reflects a changing economic structure.

 

The challenge is ultimately not simply to generate high GDP growth, but to ensure that its benefits become increasingly broad-based. A market economy can generate substantial increases in productivity, investment and national income while producing uneven outcomes across households, regions and generations. Continued improvements in connectivity, institutions, human capital, competition and the investment climate can help emerging growth centres realise their potential and ensure that economic transformation is more widely shared.

Malaysia’s recent growth experience should therefore not be judged solely by whether households “feel” the headline GDP number. Sentiment remains an important measure of economic wellbeing, but it captures only one dimension of economic performance. The more fundamental question is whether the economy is expanding productive capacity, diversifying its sources of growth and creating new opportunities across sectors and regions.

 

The engines of Malaysian growth are changing and diversifying, important for longer-term resilience and development.

 

Reference:

Changing face of growth, Dr Ray Choy, The Star, 22 August 2026

Distorted Valuation Methods

 

Analysts usually use two distinct methods in valuing companies, and they are the discounted cash flow method as well as the traditional price-to-earnings ratio (PER) method. The P/B method is well-known. The (P/B) method is an appropriate valuation method for companies in the financial industry such as banks or insurance companies. Balance sheet represents assets that are significantly liquid and are valued based on mark-to-market valuations, so it is deemed appropriate. 

Typically, banks or insurance companies are valued at a premium, as observed recently in the sale of a 30.95% stake in Maybank Ageas Holdings Bhd by Ageas Insurance International NV to Maybank at 1.98 times. The P/B method is also an appropriate method to use during times of distress or when a company is loss-making.

 

Source: https://www.investopedia.com

 

However, the P/B method has a fallacy, as the net asset value of a company is dependent on its dividend policy. Assuming two companies have a similar net asset value of RM500mil each and both companies can generate a net profit of RM70mil a year. A company’s dividend policy will have a significant impact on how the net asset value grows in the future. 

Literature has also shown that there is a positive correlation between P/B and return on equity (RoE). Hence, companies like Public Bank and Maybank do trade at a premium to the overall sector averages due to higher RoEs. A company that pays out much of its earnings as dividends tends to have better RoEs. 

There are no right or wrong answers when it comes to valuing a company based on a certain discount to its “fair value”, especially when it comes to the P/B method or, in the case of property companies, using the realisable net asset value (RNAV) method. The best approach to the appropriate discount is to use the historical trend in terms of the observable market price and the P/B or RNAV value. The difficulty lies when an analyst changes this discount and applies the discount arbitrarily. How does one justify changing a 30% discount to 20% or to 40% or 50% without quantifying why the change necessitates the different discounts? 

In the era of tech, artificial intelligence (AI) and semiconductor booms, revenue, cashflows or even earnings multiplier has taken a quantum leap. Valuing some of these companies north of 30 times or 40 times PER is getting too common. A word of caution is in order, as any multiples beyond a certain threshold will be tough to justify if the earnings growth does not match. As a rule of thumb, a stock is only cheap if its future growth is at a higher rate than the PER multiple used to justify its valuation. 

Based on the above examples, while one understands that valuation itself is an art and no two analysts will be valuing the same company based on the same valuation matrix, there must be justification as to why a valuation method is used and how the change in the company’s and industry’s fundamentals impact the valuation itself. In the case of high-growth companies, the PER multiple must be justified with the expected growth, as a company cannot be valued at a PER-to-growth multiple beyond 1.0 times as it is unrealistic. Distorted market valuation methods can hide a true fair value of a company, and analysts should not be chasing stocks, as markets and investors can be irrational. 

It is more difficult if it’s a start-up and you rely on projections. It requires more work on assumptions and the DCF method may be more appropriate. Valuation, as said earlier, is an art, although many try to make it into a science. Ultimately, it is a willing-buyer-willing-seller basis. And the valuation report is a starting point for the final, negotiated price for an investment or divestment. 

Reference:

Distorted valuation methods hide true value, Pankaj C. Kumar, The Star,
15 August 2026

Harapan’s Kamikaze Mission!

The drama over DAP leaving or staying with the government (DAPexit or DAPstay) doesn’t really matter, because the BN-PAS Malay tsunami may sweep the next elections. That’s why Pakatan Harapan should go all out on a final kamikaze mission to deliver reforms. 

PMX’s biggest promise was to crack down on corruption. Yet a Malaysian pilot could carry 26kg of drugs through KLIA and somehow the security people “didn’t see” it. The drug case proves Tourism Minister was right. He did a spot check at KLIA after tourists complained they were being extorted by rogue immigration officials in June 2023. He said there was a chronic “culture of corruption” there. Ten tourism and retail associations lauded the Minister for going on the ground to obtain first-hand information on the problems facing tourists at KLIA.

 

Source: https://en.wikipedia.org 

But a rabble-rouser slammed the Minister, saying he had no right to enter KLIA and reveal alleged wrongdoings.  

Some sign of a spine growing was the release of the Tabung Haji royal commission report after being backstabbed in two recent state elections. So, what are the reforms for Harapan’s final kamikaze mission? 

1) Local council elections

This is what affects urban dwellers’ everyday lives - be it garbage collection, potholes, the butchering of trees, or the killing of stray dogs. 

But some politicians have been screaming that this will give power to non-Malays, even though many cities now have Malay majorities. Not just Alor Setar, Kuantan, Shah Alam, and Kota Bharu, but also Kuala Lumpur. 

The truth is, all politicians want to keep control over rich cities, with lucrative planning permissions and contracts. But now that Harapan looks set to lose, please forget about such narrow interests. 

2) Reduce soaring medical insurance costs

This is the biggest concern of middle-class urban Harapan supporters. Control the profits of private hospitals and insurance companies, or create a good, affordable Madani health insurance. 

3) Allow refugees to work

Imagine hiring a maid without having to pay RM20,000 to crony agents to import them from overseas. Apart from families, small businesses will also rejoice. Refugees are already in this country, so why not allow them to work? The current system forces them into semi-legal sources of income and creates social backlash. 

4) Reform elections

Redraw boundaries to create more mixed-race seats to reduce toxic racial politics. Politicians must then appeal to all races. 

This can be done with a simple majority in Parliament if the number of seats is not increased. Johor Amanah deputy chief had also pointed out that it’s unfair that urban votes are much less valuable compared to votes in smaller rural seats. To further reduce racial politicking, state seats can also be added in Penang and Selangor.  

5) Fight corruption quickly

One of our open secrets is that some officials are clearly living beyond their means. If PMX is sincere about cracking down on corruption, he must pass a UWL or “Unexplained Wealth Law”. So, if a civil servant earning RM7,000 monthly has three bungalows and five luxury cars, they can be quickly seized if he can’t explain how he could afford them. There’s no need for court cases dragging on for years. 

Other reforms to consider

- Pass a Racial Harmony law to stop the endless poisonous politicking.

- Set up a National Ombudsman to resolve complaints against civil servants.

- Recognise the Unified Examination Certificate as Penang, Selangor, Sabah, and Sarawak already do.

- Free the MACC and public prosecutor from political control.

- Ensure fair, equal funding even for opposition MPs. 

Even if Harapan loses power in Putrajaya, it’s time to throw away narrow political calculations and do what’s right! Who knows, if PH can show voters what a great job they have done, PH may even score a last-minute goal and pull off an injury-time victory! 

Reference:

Comment: Harapan’s final kamikaze mission before losing, Andrew Sia, Malaysiakini,
17 August 2026

Government Debt in 2026

 

Comparing global debt burdens depends heavily on the lens used: overall dollar amount versus economic proportion. Based on 2026 IMF projections for the world's top 30 indebted governments, the contrast is stark.

While the U.S. holds the largest total debt footprint globally at $40.7 trillion, Japan faces the highest relative strain, with debt exceeding 204% of its economy. Meanwhile, multiple European nations rank near the top in debt relative to GDP, even though their total debt figures are modest compared to economic powerhouses like the U.S. and China.

 

 

Malaysia is not in the above chart because our debt to GDP is approximately 63.1% (and statutory debt ratio is at 62% of GDP, below the limit of 65%)

 

Reference: Post by Stanley Epstein on LinkedIn

EPF Posts 44% Jump in 2Q Investment Income!

 

The Employees Provident Fund (EPF) announced recently a 44% year-on-year surge in second-quarter investment income to RM29.77 billion from RM20.61 billion a year earlier. This was driven by a rally in global equities. However, it cautioned members to temper return expectations for the second half of the year.

 

It recorded total investment income of RM57.5 billion for the first six months ended June 30, 2026, up 48% from RM38.92 billion in the corresponding period a year earlier. This includes unrealised mark-to-market gains and losses on securities that arise mainly from foreign exchange rate fluctuations.

 

 

For the latest quarter, equities were the largest contributor to the fund’s investment income, generating RM20.94 billion, up 52% from RM13.77 billion a year earlier. 

Fixed-income instruments, comprising Malaysian Government Securities and equivalents, as well as loans and bonds, contributed RM6.91 billion, or 23% of total investment income (for Q2). 

Meanwhile, real estate and infrastructure generated RM1.3 billion, while money market instruments contributed RM620 million during the quarter.

The EPF’s total investment assets stood at RM1.54 trillion as at end-June, with 39% invested globally. International investments generated RM19.29 billion, accounting for 65% of total investment income in the second quarter of 2026. 

On membership, the EPF registered nearly 441,850 new members during the first half of 2026, bringing total membership to nearly 18.5 million. 

Active members rose to 10.9 million, improving the active-to-inactive member ratio to 59:41. The number of active employers also increased to more than 645,200 as at June, following 37,265 new employer registrations during the quarter. 

Total contributions rose 8.5% year-on-year to RM33.87 billion in the second quarter from RM31.21 billion. 

Voluntary contributions reached RM14.15 billion in the first half of 2026. Contributions through i-Saraan grew 15.7% to RM1.33 billion, while the number of Malaysian formal-sector members contributing above statutory rates through i-Topup increased 13.9% year-on-year to nearly 204,450 in the first half of the year. 

Impressive results and hope that this continues for second half of 2026 with contributors hopefully able to enjoy higher dividend payout in 2027. 

Reference:

EPF posts 44% jump in 2Q investment income to RM29.77 bil but tempers 2H expectations, Choy Nyen Yiau, theedgemalaysia.com, 18 August 2026

Only 4.2% of Malaysia’s Exports Face New US Tariffs

 

Phillip Capital estimates the total value of exports subject to the 10% tariff imposed by the US to be RM63.3 billion, equivalent to 4.2% of Malaysia’s total exports. On the national level, the total exports value subject to the 10% tariff is around RM63.3 billion or 4.2% of the Malaysia’s total exports. Strong global demand for semiconductor, which is exempted from the tariff, will continue to play a key role in boosting Malaysia’s exports.

 

Under the new tariff policy, countries will be subject to either a 10% or 12.5% tariff rate, depending on the strength of their labour safeguard policies and the extent to which they prohibit the importation of goods produced using forced labour.

 

Phillip Capital expects the impact of the new tariffs on Malaysia’s external demand to remain relatively limited due to key drivers of the country's export performance, namely within the semiconductor and electrical and electronics (E&E) sector.

 

Approximately 68.0% of Malaysia’s exports to the US will be exempted from the tariff.

 

By product category, semiconductors recorded the highest exemption rate at 99.9%, while the exemption rates for E&E products stood at 67.1% and non-E&E exports at 45.4%. The US remains an important export destination for Malaysia’s E&E sector. Between 2023 and 2025, Malaysia’s exports to the US accounted for about 13.1% of Malaysia’s total exports, while E&E products alone accounted for 34.0% of Malaysia’s exports to the US.

 

Overall, Malaysia will continue to have a robust export pipeline to the US, thanks to undisrupted global semiconductor supply chains.

 

Beyond semiconductors or E&E, we need to actively diversify our exports and secure non-USD payments for those exports. The US under Trump has no clue short-term or long-term. It is based on “gut” economics of one, clueless man!

 

Reference:

Only 4.2% of Malaysia’s exports face new US tariffs as key tech sector spared — Phillip Capital, Nikail Rezza, theedgemalaysia.com, 7 August 2026

 

Ancient Kedah’s Iron Ore Abundance Due to Meteoric Shower?

 

Arabic linguistic specialist-turned-historian without credentials, Prof Dr Solehah Yaacob is back! She has another mind-boggling archaeological revelation –iron ore found in Kedah is related to meteors! Gunung Jerai is among the areas that received meteoric impacts in the past. Her latest findings also debate the relatively sloping terrain of Kedah.

 

This could well be the latest of eight if not more controversial claims by the former International Islamic University Malaysia’s (IIUM) senior academician. It defies modern day historical, archaeological, anthropological and sociological knowledge realms.

 

Source: https://en.wikipedia.org

The inaugural director of the Asia Institute at the University of Tasmania Prof James Chin in a recent assessment of his IIUM academic peer following the list-down of her so-called “8 controversial claims” by the SEA History and Heritage site passed this remark: 

I’ve nothing meaningful to add, I’m simply not operating at her level. All I can share is that this poster has already been viewed 800K times as of this morning. 

She’s clearly gaining significant traction among the Malay community and is now running paid boat-cruise tours that she personally leads. 

These cruises are specifically designed to demonstrate and validate her research findings by taking passengers to the very locations that support her claims. I’m not joking. 

For context, Kedah is historically and naturally rich in iron ore with the state having emerged as a major iron mining and smelting centre in Southeast Asia more than 2,000 years ago. Excavations at the Sungai Batu Archaeological Complex revealed old smelting workshops, furnaces and raw iron ore dating back as early as the sixth century BCE. Researchers also found large ancient smelting furnaces and processing sites in inland areas like Jeneri (in the Sik district) and Jeniang (in the Kuala Muda district). 

Not everyone takes Prof Solehah’s words at par value despite her clip-on Facebook having amassed 5.8K likes, 829 comments, 772 shares and viewed 179K times at the time of writing. One pious Indonesian commenter even chided the academician. A seemingly archaeological nerd disputed Prof Solehan’s “meteoric shower” notion by justifying that “the Sungai Batu iron ore is local hematite and magnetite from around Bukit Tupah, the result of weathering of the Jerai formation, which is hundreds of millions of years old, not meteoritic material”. 

She needs attention. And Arabic studies do not give her that. She has no background or clue of history but propagates messages that may be helpful to insecure people. 

Reference:

Prof Solehah: Ancient Kedah’s iron ore abundance due to meteoric shower, not natural formation, Focus Malaysia, 20 August 2026