Malaysia Industry Development – Week 30th March 2008
Malaysia Financial Industry Development The Privatization & M&As Trend In Bursa Malaysia 3.2 Prime Minister Datuk Seri Abdullah Ahmad Badawi announced that the three boards on Bursa Malaysia would be streamlined. The Main and Second Boards would be combined to set up one board for more established companies with strong financial records. The Mesdaq market would also be revamped under the proposed streamlining process. The government would allow a third credit rating agency to be set up and foreign strategic partners could hold 49% equity interest. It also include measures to liberalise approvals for bond markets and also a review of the implementation of economic plans. Thematic Play *** UNCERTAINTIES *** *** UNCERTAINTIES *** The Eastern Corridor Development Programme (Petronas-Led) 4.0 The recent report that the proposed oil pipeline from Yan in Kedah to Bachok in Kelantan is to be scrapped is unlikely to significantly affect the oil and gas companies linked to the project The cancellation "did not come as a surprise" given the costly price tag for the development. Public listed Ranhill Bhd, Muhibbah Engineering Bhd, Nam Fatt Corp Bhd and Kencana Petroleum Bhd were previously said to be involved in the project. Ranhill's involvement was at a preliminary stage as it had only signed an alliance agreement with Trans-Peninsular Pipeline Sdn Bhd. Malaysia Non-Financial Industry Development The Palm Oil/Biodiesel Industry Outlook 7.5 The oil palm industry is pushing hard to abolish the special cess on oil palm plantation estate owners to subsidise the price of cooking oil imposed in June 2007 and also the cess on crude palm oil (CPO) price stabilisation fund imposed in 2001. The cooking oil price stabilisation scheme, introduced in May 2007, is due for revision by the end of May 2008. The Government imposed a special cess on owners of palm oil estates covering more than 40.46ha in June 2007 to help subsidise the price of cooking oil due to the high CPO price, which was then trading at RM2,750 a tonne. The MPOB collects a special cess of RM2 per tonne of fresh fruit bunches for every RM100 per tonne increase in the CPO price – as long as the price stays above RM1,500 a tonne. From June 1, 2007 till May 31, 2008, palm oil estate owners are expected to contribute some RM661.2mil in taxes to compensate for the losses of refiners and packers. About 55% of the palm oil industry fraternity, or 4,100 oil palm estates nationwide, were involved in funding 90% of the subsidy promised to the cooking oil refining industry from the imposition of the special cess. Apart from the special cess, oil palm planters are required to pay cess of about RM4 per tonne of CPO to MPOB for the CPO price stabilisation fund imposed in 2001 when the commodity fell below RM600 per tonne. There is no justification for paying this cess (CPO price stabilisation fund) especially when the CPO price is trading above RM3,300 per tonne. For the past 20 years, oil palm industry players have been paying cess of about RM11 per tonne of CPO to MPOB for its research works. The Housing And Properties Industry 6.0 The Malaysian property market is expected to lose significant momentum in 2009 as various factors including the changing political landscape, higher construction costs, intense competition and sustainability of demand all coming together and making the operating environment a difficult one for players. The onslaught of negative sentiments of late has, to a certain extent, negated the positive impact of catalytic initiatives introduced by the government since late 2006. Sharp correction of the stock market has caused enormous wealth evaporating into thin air. This will put a dent on consumer sentiment. Huge capital investment such as the purchase of new homes may be put off for the time being. Demand for properties by foreigners may also wane in the coming months due to the uncertain political landscape as well as the debilitating global financial market. Rising building material prices had been driving up construction costs, increasing by 11.7% in 2007 and are expected to climb to 17.3% in 2008. Profit margins of developers may decline if they could not pass on the extra costs to property buyers. Developers of mass housing will be at most risk due to thinner margin, higher competition and oversupply. Developers in Selangor, Penang, Perak and Kedah may face potential delay in obtaining planning approval for new projects post general election due to teething problems arising from the change in the states' administration. Premium valuation was no longer justified due to uncertain growth prospect of the property sector. The current "super cycle" of the Malaysian property market would peak towards late 2008 and lose significant steam by year 2009. The broad macro environment should still be supportive of strong property buying sentiment especially for those in the mid-to-high end segment. Even without addressing the potential risk on the demand side, the supply side suggests that the impending 'supply cycle' will hit the market harder especially in the residential sub-segment by late-2008 and should intensify into year 2009/10. While the diversified structure of the economy continued to mitigate the impact of the uncertainty in the external environment, the surprise election results could delay the implementation of certain projects. With the opposition taking control of Kedah, Penang, Perak and Selangor in addition to Kelantan, there may be inclination for certain unimplemented projects to be reviewed which would add to more doubts amid the transition. The near-term uncertainty in the political landscape, if prolonged, might also affect consumer sentiment, resulting in a slower-than-expected growth in consumer spending. In addition to speculative demand, the demand for residential properties was also largely due to real demand arising from population growth. On the assumption that the Malaysian population will grow at an average of 2.6% per annum and based on conservative assumption, it is estimated that the real demand for residential properties will average at about 210,314 units per annum holding demographic landscape and other variables constant. Assuming a supply of 1,232,153 units to come on stream within the next four years (2008-2011), and an estimated real demand of about 830,343 units over the same period of time, it was clear that prospective real demand was insufficient to absorb total delivery of residential properties. Klang Valley would continue to be the top pick for regional property play in the residential, office space and retail sub-segments.
Even based on the "best-case scenario assumption", prospective real demand of 942,233 units over the next four years (2008-2011) will still be unable to absorb that massive incoming supply.
No comments:
Post a Comment