Investment & Market Trends

KUALA LUMPUR: Finance Minister II Datuk Seri Amir Hamzah Azizan expects the Malaysian economy is projected to grow between 4-5% in 2024, supported by export recovery and resilient domestic demand. He mentioned that trade recovery will be underpinned by the global technology upcycle and further recovery in tourism activity. “Household spending would be underpinned by improving income and employment. “Investment activities will be driven by further progress of multi-year investment projects by both the public and private sectors,” he said in his keynote address at Bank Negara Malaysia’s Sasana Symposium 2024. He also said that the implementation of catalytic initiatives under various master plans, such as the National Energy Transition Roadmap (NETR), New Industrial Master Plan 2030 (NIMP 2030) and the 12th Malaysia Plan, would further boost investment. Amir Hamzah also said that the government is committed to delivering meaningful structural reform as it is necessary to build a more prosperous and inclusive Malaysia. In this regard, he noted that parallel multi-pronged strategic reforms are being pursued to support this endeavour. “First, to raise the floor by creating more fiscal space and making the economic pie bigger for more participation. Second, to raise the ceiling by enhancing social protection and third, to put in place good governance,” he said. He also said that the Public Finance and Fiscal Responsibility Act (FRA) and the Medium-Term Fiscal Framework (MTFF) are crucial measures to broaden and diversify the revenue base. “To make the most of this opportunity, we prioritise policies to attract high-quality investments that boost our economic competitiveness and create high-value jobs,” he added. Hence, by advancing these structural reforms, Malaysia will enhance its global competitiveness relative to other nations that are also rapidly working to bolster their growth potential, address fiscal deficits and improve resource efficiencies. — BERNAMA

JAKARTA: In a significant move signalling a new phase of growth and expansion, PT Gunung Raja Paksi Tbk (GRP) and its affiliated company, PT Gunung Garuda (GRD), announced the completion of the sale process involving a combined 95% stake in its subsidiary, PT Nusantara Baja Profil (NBP), to Yamato Kogyo Corporation (YKC), Siam Yamato Steel (SYS), and Hanwa Indonesia (HWI), a subsidiary of Hanwa Co Ltd, as agreed upon in definitive agreements executed on 8 August 2023. This strategic alignment of vision and goals among all parties involved signals a new phase of growth and expansion for the companies. Alongside the successful acquisition, NBP also changes its name and identity to Garuda Yamato Steel (GYS). Before the sale, GRP and GRD held 81.07% and 18.93% respectively. Following the sale, GRP will retain a 5% stake with YKC holding 45%, SYS holding 35% and HWI holding a 15% stake in GYS respectively. The investment in GYS represents a strategic move by YKC, SYS and HWI to expand their business in Southeast Asia. The transaction, valuing GYS at US$450 million, underscores the immense potential and attractiveness of the Indonesian steel market. This investment by a diverse and strategic group of investors is a testament to the successful transformation of the company. “With the collective financial strength and operational expertise of our investment partners, GYS is well-positioned to be the leading structural steel company in the region. “We have exciting plans ahead to launch new steel products that will capture the immense market opportunities in Indonesia and will continue extracting further margin expansion through our production efficiency initiatives,” said Garuda Yamato Steel President Director, Tony Taniwan. The acquisition of GYS by YKC, SYS, and HWI emphasises their strategic vision to expand their presence in the domestic market, reflecting a shared vision for growth and prosperity in the region. The companies’ collaborative effort aligns with the projected growth in national steel consumption, estimated to reach 18.3 million tonnes in 2024 with a 5.2% increase. Collectively, the strategic investors will focus on growing their presence in SEA and be able to bring synergies through their expertise in the structural steel business, global procurement and marketing networks and financial strength. “This strategic realignment not only creates tangible value for shareholders but also reinforces GRP’s financial position, empowering management to focus on further enhancing the company’s competitiveness and sustainability efforts,” said GRP Finance Director, Roymond Wong. With the conclusion of the transaction, GRP will focus on its existing flat business and has big and exciting plans to transform into the lowest carbon-emitting steel producer in the region. “Our vision for the future of GRP lies in green steel and signals our strong commitment and support to Indonesia’s government initiative to achieve net zero emissions by 2060. There is going to be massive market disruption as carbon policies around the world put pressure on supply chains to deliver low-carbon solutions and players that are not able to adapt will not survive,” said GRP Chairman of the Executive Committee, Kimin Tanoto. Meanwhile, GRP Strategic Advisor, Kelvin Fu said, “Through this transaction, we have achieved significant value creation for shareholders, bolstered GRP’s financial strength and empowered management to focus on developing the flats business. “We deeply appreciate the unwavering support, dedication, and confidence demonstrated by our Japanese and Thai investment partners, and we are committed to maintaining and enhancing our partnership.”

KUALA LUMPUR: The Malaysian corporate sector holds US$190 billion in foreign currency liquid assets located abroad, which is indicative of the country’s robust international investment position, said Bank Negara Malaysia (BNM) Deputy Governor Datuk Marzunisham Omar. He said the corporate sector is compromised of financial institutions, government-linked investment companies and government-linked companies that have investments abroad and generate income from their foreign investments. “We are not asking them to liquidate their assets, but BNM is encouraging them to bring back the realised profits and covert them into ringgit,” he said. According to Marzunisham, Malaysia has maintained a current account surplus for the past five years, which includes the holding of foreign assets by corporate and financial institutions. “They can use this (foreign holding) to meet their financial obligations and this will significantly reduce the need to come to the central bank for foreign currency,” he added. The session was timely with Malaysia’s international reserves adequacy, which has gained increasing attention in the media and among analysts in recent periods, particularly against the backdrop of the strengthening US dollar. Focusing on the international reserves of BNM, the deputy governor said that the country’s reserves remained resilient due to the level of external debt to the gross domestic product being manageable. “One-third of the external debt is in the form of ringgit and we are not exposed to foreign currency fluctuation, with less than 3% of government debt in foreign currencies and almost 96% of government debt is in ringgit,” Marzunisham noted. Meanwhile, ASEAN+3 Macroeconomic Research Office (AMRO) Group Head and Principal Economist Dr Ruchana Ponsaparn said ASEAN economies are well prepared financially, particularly in terms of international reserves. “We have a low public debt and at the same time, our banking system has already built a significant buffer in terms of capital and liquidity,” she said. — BERNAMA

KUALA LUMPUR: The Malaysia-Singapore Special Economic Zone and the proposed Johor-Singapore Rapid Transit System (RTS) that will be finalised by both countries can have a positive impact on the relationship between the two brother-like neighbours. Economic analyst Dr Oh Ei Sun said Malaysia and Singapore are able to attract investments in the computer and chip industry in addition to having a mature workforce. “Singapore needs to find a bigger location to invest and build its factories while Malaysia can take advantage of the technology transfer. So, there is potential for the two countries to cooperate in a very broad field. “If Malaysia and Singapore could cooperate in advanced fields like AI, it would make both countries a centre of high technology development in Southeast Asia,” he said on a live broadcast of ‘Malaysia Petang Ini’. Oh said this in reference to the strengthening of Malaysia-Singapore bilateral relations in conjunction with Singapore Prime Minister Lawrence Wong’s maiden visit after being appointed as premier of the republic on 15 May. According to Oh, detailed information about the special economic zone needs to be clarified such as whether there will be tax exemptions and so on to encourage investment. He hoped that the details of the Malaysia-Singapore special economic zone would be one of the focuses at the 11th Malaysia-Singapore Leaders’ Retreat at the end of the year. Oh said another issue between Malaysia and Singapore that needs to be resolved is the congestion at the Johor Causeway due to the high number of Malaysians working in Singapore and commuting daily. “This problem may be resolved by extending the MRT from Singapore to Johor Bahru. But all this needs coordination,” he added. On global issues such as climate change, he said the problem affects Malaysia’s agricultural sector and Singapore’s position as an island city. Therefore, cooperation in dealing with climate change can benefit both parties. As for issues at the ASEAN level, Oh said the cooperation between Malaysia, Singapore and possibly involving Indonesia in dealing with the crisis in Myanmar could increase the spirit of togetherness in the bloc. — BERNAMA

KUALA LUMPUR: Malaysia has approved RM114.7 billion worth of investments in data centres and cloud services between 2021 and 2023, said Prime Minister Datuk Seri Anwar Ibrahim. In a post on X, he said the investments have created 2,325 high-value new jobs in specialised fields such as data scientists, data analysts, data engineers, cybersecurity analysts and network engineers. He said that the MADANI Government is committed to positioning Malaysia as a sustainable artificial intelligence (AI data centre destination in Southeast Asia, as part of its effort to strengthen the country’s position as a leading global investment destination. Earlier, Anwar chaired the 4th National Investment Council (NIC) meeting for the year, where he mentioned that the council had agreed for the Ministry of Investment, Trade and Industry (MITI) to enhance the current incentive framework for AI data centres via the Malaysian Investment Development Authority (MIDA). This includes the mechanism for the usage of energy and water-efficient equipment, as well as collaboration with the Ministry of Energy Transition and Natural Resources to provide sufficient renewable energy for AI data centres. “During the meeting, I emphasised a whole-of-government approach in the ongoing efforts to encourage investment in AI-based data centre sectors, particularly in boosting economic benefits through digitalisation and increasing the economic complexity of various sectors in Malaysia. “The framework will also include matching data centre players with local companies for the development of local vendors, especially small and medium enterprises, as well as fostering industry-academia collaborations to drive innovation in the development of energy-efficient equipment and software,” he added.

JAKARTA: Bank Rakyat Indonesia (BRI) remains Indonesia’s leading micro, small and medium enterprise (MSME) financier, with its credit portfolio growing to Rp1,308.65 trillion by March 2024, up 10.89% year-on-year. Over 83% of this, or Rp1,089.41 trillion, was allocated to MSMEs. Supported by an extensive branch network and empowerment initiatives, BRI has achieved an impressive return on equity (ROE) and maintained a net interest margin (NIM) consistently above 7%, exceeding the industry average of around 6%. “Therefore, we expect the ROE to be maintained above 20%, relatively in line with the average of other major banks,” said Edward Lowis from Sucor Securities’ research. BRI’s ultra-micro portfolio through Pengadaian and PNM is on a growth trajectory, with this segment achieving higher margins and outpacing typical bank credit growth. “The total asset contribution of these subsidiaries has reached almost 10% of the total in the first quarter of 2024 (compared to 6% in 2020), while the contribution to net income has also grown to 14% of the total (compared to 10% in 2022),” he wrote. Lowis acknowledges challenges in managing BRI’s asset quality but expects moderate revenue growth of 5% to 10% YoY in 2024 and 2025. He expects BRI to maintain above-average NIM and growth due to its dominance in microloans. “Adequate loan loss coverage and a strong capital position will help the bank weather near-term challenges,” he added. Therefore, Sucor Securities recommends buying BRI shares with a target price of Rp6,400, reflecting a 2.8x PBV for 2024, based on a sustainable ROE of 23% and a cost of equity of 12%. Similarly, Jayden Vantarakis of Macquarie has a target price of Rp7,100 for BRI shares, while Victoria Venny of MNC Securities has a ‘buy’ rating with a target price of Rp6,300. A Bloomberg consensus of 35 analysts sets a 12-month price target of Rp6,175, with 33 analysts unanimously recommending a buy on a bullish outlook. BRI’s Finance Director Viviana Dyah Ayu RK said management’s focus is to ensure the company can grow better and healthier in the long run, even if it requires small corrections in the short run. “For long-term shareholders, the refinements and improvements we are making now should provide greater benefits,” she said.