AmBank: Malaysia May Slide Into Recession in Q1

By Zaidi Isham Ismail
Published: 2009/03/10

Malaysia may slide into an economic recession in the current quarter, as falling global demand for manufactured goods continue to hit already slumping exports.

AmBank Group chairman Tan Sri Azman Hashim said many are optimistic of a recovery but things can also get worse and the global downturn may last until 2011."The whole world is affected by slowing export demand.

To recover a lot depends on the US economy ... when it recovers, then the rest of the world will follow suit," Azman told Business Times at AmBank's headquarters in Kuala Lumpur recently.

Azman said the export trend has already declined 20-30 per cent, with car companies reporting up to 40 per cent sales fall and steelmakers revenue dipping as much as 60 per cent."Companies stockpile of finished goods are full at the godowns ... but it's not just confined to Malaysia but also the rest of the world," he added.

It was reported recently that the economy registered a growth of 0.1 per cent for the last quarter of 2008, fuelling worries of a recession.Malaysian Institute of Economic Research said on Tuesday that Malaysia stands on the brink of recession as falling demand hits exports and manufacturing with growth expected to reach just 0.5 per cent for the year.

Second Finance Minister Tan Sri Nor Mohamed Yakcop, however, said Malaysia is not facing any technical recession or two consecutive quarters of negative.Azman said it would be good for the economy to prepare for the longer period than the short term in case the downturn lengthens.

He added that when the US and China slows down more compared with other economic giants, the rest of the world such as Asia and other regions will start to lose momentum."China, however, has got more chance to recover than the US because its style of government is of a single structure and quick to announce, implement and spend.

Azman said some Malaysian companies are fortunate because cost areas such as raw material and oil and gas prices have softened, easing their burden.

Size Does Not Always Matter

Published: 2009/03/07

This preoccupation with size (of the stimulus package) is worrying because, at the end of the day, it should not be about how small or big it is, but how we use it.

THE government's second stimulus package, or mini-budget, tabled for first reading in Parliament yesterday, has drawn mixed response from various quarters.Some economists, members of the public and soothsayers were disappointed that the amount, RM10 billion, fell short of their expectations.

Many had forecast a range of RM15 billion to RM20 billion.One recent research note even suggested that the stimulus package could be as large as RM30 billion, spread out over two to three years.

They argued that Malaysia's stimulus package, now a combined RM17 billion if November's RM7 billion is included, was smaller compared with that in other countries. The amount represents about 2.6 per cent of Malaysia's gross domestic product. In Singapore, it is 8 per cent; the US, 6 per cent; and China, 16 per cent.

These economists could still be right, though, as Deputy Finance Minister Datuk Kong Cho Ha has said that "there could be more" when Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak tables the Bill for a second reading on Tuesday.

But "more" does not necessarily mean more money. It could include tax cuts and incentives, waivers and other benefits that help reduce costs for both businesses and individuals, or encourage them to spend more and support the economy.

Let's assume that, come Tuesday, the second stimulus package is really RM10 billion, full stop. Is that really a bad number? How much is truly enough?The funny thing about some economists and analysts is that they can support an idea one day and easily turn around and argue the opposite case a few days later, or vice versa, without batting an eyelid.

For example, the same people who say the government's stimulus package is not enough will, when the amount is increased, turn around and highlight the risk of such huge spending to the country's deficit, which could then trigger a downgrade of Malaysia's credit rating.

When our ratings drop, it will affect investor confidence and make it more expensive to borrow money, both for the government and the private sector. Without adequate funds to support growth and expansion, the economists will argue, the government should step in and give a helping held with ... (wait for it) ... another stimulus package!

We can see where this is going, can't we?Like it or not, governments and investors everywhere depend on the opinions of these experts.

Some give a fair and balanced view, taking into consideration local factors unique to the markets they cover, providing proper context. Others tend to stick with only the numbers.This preoccupation with size (of the stimulus package) is worrying because, at the end of the day, it should not be about how small or big it is, but how we use it.

Any amount, if properly managed and directed towards the right sectors, will have the desired spillover effects and benefit those who really need it. Sometimes, it does not even need to involve pumping in money.

But to get this message across to critics, supporters and observers alike will require greater transparency. People need to know what is being done, how much is being spent, who gets what, and whether or not it is working.

KL Shares Ease At Mid-Afternoon

Published: 2009/03/10


MALAYSIAN shares closed down 0.4 per cent today as stocks narrowed losses after the government unveiled a RM60 billion (US$16.2 billion) stimulus package, dealers said.The Kuala Lumpur Composite Index lost 2.97 points to 855.25.Dealers said continued concerns over the economy have affected market sentiments, especially in the crucial financial sector, adding that the downtrend was in line with the regional sentiment after the overnight fall on Wall Street.

However, the second stimulus package presented by Deputy Prime Minister and Finance Minister Datuk Seri Najib Tun Razak late this afternoon is expected to help the market perform better.

Losers led gainers by 319 to 171 while 183 counters were unchanged, 572 untraded and 31 others suspended. Volume rose to 372.025 million shares worth RM785.163 million compared with last Friday''s 282.249 million shares worth RM469.576 million.

Finance stock Public Bank lost 50 sen to RM7.50 after CLSA Asia-Pacific Markets downgraded the bank citing weak capital position and unattractive valuations.Hong Leong went down 14 sen to RM4.42, BIMB Holdings declined 1.5 sen to 80.5 and AMMB Holdings decreased two sen to RM2.43.Among the actives, MRCB rose 1.5 sen to 83 sen while KNM and Telekom were flat at 36.5 sen and RM3.50 respectively.

Among the heavyweights, Sime Darby increased five sen to RM5.55, Tenaga rose 10 sen to RM6.20, TMI went down five sen to RM5.50, and YTL Corp edged up five sen to RM6.95. - AFP, Bernama

General Insurance Business Volume Still Highh

Published: 2009/03/10


THE insurance industry has maintained an overall high volume of business despite facing a challenging year in 2008, Bank Negara Malaysia's director of insurance and takaful supervision department, Yap Lai Kuen, said today.

Gross direct premium in the general insurance sector amounted to RM10.5 billion in 2008, an increase of 3.2 per cent from RM10.2 billion in 2007, Yap said. "This was due to the strong performance of the non-motor sector, in particular classes such as medical and health, liabilities and personal accident, which grew at 16.7 per cent, 10.5 per cent and 9.2 per cent respectively," she said when opening the first Insurance Society of Sarawak insurance agency seminar here.

Yap said for the life insurance sector, total new business annual premium equivalent was RM7.2 billion last year, a slight decrease from RM7.6 billion in 2007.

This, she said, was largely due to a drop in sales of investment-linked business. However, Yap said the ordinary life segment recorded a strong growth of 18.6 per cent, demonstrating the industry's ability to adapt to a changing business environment.

"I would like to emphasise the need for agents to keep up-to-date in terms of technical competency," she said. This, she added, was vital given the increasing level of complexity of products offered as industry players proactively meet the challenge of slower growth markets by offering new and innovative products. -- BERNAMA

Highlights of RM60b Stimulus Plan

Published: 2009/03/10


# RM15 billion fiscal injection;

# RM25 billion guarantee funds;

# RM10 billion equity investments;

# RM7 billion private finance initiative and off-budget projects;

# RM3 billion tax incentives;

# unemployment rate in 2009 to jump to 4.5 per cent from 3.7 per cent in 2008;

# RM700 million allocated to create 163,000 new jobs;

# Housebuyers given tax relief on interest paid on housing loans up to RM10,000 a year for three years;

# Additional RM200 million for public low-cost housing scheme for low-income earners;

# RM1.6 billion fund to promote investments;

# RM200 million to repair and maintain roads and drains;

# RM150 million for renovation, maintenance and repairs to welfare homes, fire and rescue stations, firemen living quarters and public toilets in mosques,suraus and tourist spots;

# Government to issue syariah-compliant Savings Bonds amounting to RM5 billion this year;

# RM1.95 billion to build and upgrade facilities in 752 schools, particularly in rural areas, Sabah and Sarawak of which RM300 million will be used to improve facilities in government-aided religious schools, Chinese and Tamil schools and mission schools;

# RM230 million allocated to increase electricity supply coverage and water supply in rural areas particularly in Sabah and Sarawak.

# RM350 million allocated for rural road construction.

# Retrenched workers’ tax-exempt compensation raised to RM10,000 for each year of service from RM6,000 previously;

# To raise windfall profit levy on oil palm to RM2,500 per tonne for Peninsular Malaysia and to RM3,000 per tonne for Sabah and Sarawak;

# All government procurements will be made through open tenders or restricted tenders except for specific cases.

# To raise state investment firm Khazanah Nasional’s investment funds by RM10 billion.

# Effective April 1, levy payment rate to be reduced to 0.5 per cent from one per cent for all employees for a two-year period;

# Additional RM200 million for the Automotive Development Fund;

# Government to assist in the auto scrapping scheme for Proton and Perodua-- a discount of RM5,000 will be given to car owners who trade in their cars which are at least 10 years old to buy new Proton and Perodua cars;

# Malaysia Airports Holdings Bhd to build and operate a new low-cost airport at the Kuala Lumpur International Airport estimated to cost RM2 billion;

# RM250 million to expand Penang International Airport;

# A 50 per cent rebate on landing charges will be given for two years effective April 1 to all airlines that operate from Malaysia;

* To improve companies' cashflow, the government proposes that their current year losses be allowed to be carried back to the immediate preceding year. The total losses allowed to be carried back is RM100,000;

# The services sector will be further liberalised to woo more investments, bring in more professionals and technology and strengthen competitiveness;

# Foreign Investment Committee to adopt a more liberal approach to bringpositive changes and nurture a more investor-friendly environment to attractmore investments including foreign direct investment. - Reuters, Bernama

Malaysia Unveils RM60b Budget Boost

Published: 2009/03/10

MALAYSIA'S government will add RM60 billion (US$16.27 billion) in new spending over 2009 and 2010, Deputy Prime Minister Datuk Seri Najib Tun Razak said in Parliament today.This is much more than the RM30 billion many economists expected.

Najib said he is confident the deficit can be financed from domestic sources The government slashed 2009 GDP forecast, projecting a range between a contraction of 1 per cent and a 1 per cent expansion, down from forecast growth of 3.5 per cent

Even with the new measures, Malaysia’s unemployment will rise to 4.5 per cent from 3.7 per cent, the deputy premier said, and he promised that Malaysia’s government sector, often criticised for being inefficient and overstaffed, would create 63,000 jobs.

Bajet Mini: Pelepasan Cukai Pinjaman Perumahan

Terkini: Metro Online

KUALA LUMPUR: Bajet Mini yang dibentangkan hari ini oleh Timbalan Perdana Menteri yang juga Menteri Kewangan I, Datuk Seri Najib Tun Abdul Razak, memperuntukkan pelepasan cukai bagi faedah yang dibayar untuk pinjaman perumahan sehingga RM10,000 setahun selama 3 tahun; dan tambahan RM200 juta lagi untuk membina Rumah Mesra Rakyat bagi golongan berpendapatan rendah.