Investment & Market Trends

KUALA LUMPUR: Eduspec Holdings Bhd (EHB), a leading provider of integrated educational technology solutions, has appointed Datuk Alex Kang Pang Kiang as deputy chairman, effective April 15, 2024. This appointment follows Alex’s emergence as a substantial shareholder of EHB, acquiring 24,000,000 shares on April 8, holding a total of 142,261,000 shares or 12.1 per cent combined direct and indirect interests in the company. The appointment of Alex marks a pivotal moment for EHB, which is embarking on a significant expansion into the 5G testing equipment market. Recently, EHB secured contracts totalling RM40 million from EG Industries Bhd (EIB) to provide testing services for 5G optical modules and related components. These contracts underscore the company’s commitment to innovation and its capability to deliver solutions in the technology sector. EHB chief executive officer Datuk Sri Gan Chow Tee said Alex’s appointment as the deputy chairman is a testament to the confidence in the company’s potential and shared vision for the future. “His proven track record and deep industry knowledge will be invaluable as we navigate the opportunities and challenges in the evolving technology landscape,” he said in a statement. The collaboration between EHB and EIB is focused on business growth and addressing the shortage of skilled engineers in Malaysia, particularly in 5G technology. Plans are underway to establish a training centre with support from prominent high-tech companies, aiming to enhance educational offerings and position EHB as a professional testing house for 5G optical modules. Alex, who is also the EIB group chief executive officer, brings a wealth of experience in financial management and corporate restructuring, which is expected to drive strategic growth and enhance shareholder value at EHB. His leadership will be crucial in steering EHB towards achieving its goals in the technology sector. EHB remains committed to delivering high-quality educational technology solutions and services that meet the evolving needs of clients and stakeholders. This expansion into the 5G technology market and strategic collaboration with EG Industries signifies a new chapter for EHB, underlining its dedication to innovation and excellence in the educational technology industry.

KUALA LUMPUR: G Capital Bhd’s (GCAP) wholly-owned subsidiary, Northern Star Hydropower Sdn Bhd (NSH), signed a memorandum of understanding (MoU) with CCIAM Logistic Company Ltd (CCIAM Logistic) to develop clean energy solutions. Under this agreement, CCIAM Logistics will be the principal arranger for NSH to raise RM325 million (approximately US$65 million) for its 26 MWac small hydropower project development in Pahang within 60 days before a full-term agreement. This collaboration extends beyond financing, encompassing comprehensive services to implement robust environmental, social and governance (ESG) strategies. G Capital executive chairman General (Rt) Tan Sri Affendi Buang expressed optimism about the partnership as he sees it as unlocking a gateway to abundant global green capital and is eager to invest in GCAP’s small hydropower portfolio. “CCIAM Future Energy aligns perfectly with our vision for a sustainable future. Their expertise and presence at HKEX bridge the gap between China and international markets. This partnership will deliver significant benefits for all,” Affendi said in a statement. CCIAM Logistic is a subsidiary of the Hong Kong Stock Exchange (HKEX) main board-listed CCIAM Future Energy Ltd (CCIAM Future Energy). CCIAM Future provides energy-saving solutions, including heating, ventilation and air conditioning (HVAC) systems for commercial, retail and industrial buildings, and the provision of financial investment and loan financing businesses. “This strategic partnership is poised to accelerate Malaysia’s transition to clean energy by attracting foreign direct investment (FDI), fueling economic growth, and propelling the nation towards carbon neutrality,” Affendi said.

LONDON: European shares look set to track Asia’s negative lead on Monday after a weekend dominated by news of escalating tensions in the Middle East and fears of a wider regional conflict. The flight to safety began with talk last week of an Iranian strike on Israel and, after a raid with some 300 drones and missiles, the focus now turns to Israel’s reply. Gold XAU and the US dollar were firm, though the erstwhile safe-haven yen JPY EBS sank to a three-decade low – a reminder that market participants are still treating the Middle East primarily as a risk, albeit a growing one, while interest rates remain the main theme. Going some way to keeping that risk capped, US president Joe Biden told Israeli prime minister Benjamin Netanyahu the US will not take part in a counter-offensive against Iran. Still, the Cboe Volatility Index, or VIX – known as Wall Street’s fear gauge – is hovering near five-month highs. Oil prices were trading lower in Asia, though some analysts said that was because the risk of what Iran called retaliation had already been priced in last week and as traders wait to see if worries of a wider war actually precipitate. Brent futures LCOc1 hovered around US$90 a barrel, after touching a roughly six-month high on Friday. It has risen 17 per cent for the year, while US crude futures CLc1 have gained 19 per cent year-to-date. Any further increase in oil prices towards US$100 a barrel is going to be unwelcome news for central bankers battling rising consumer prices, with last week’s hotter-than-expected US consumer price report continuing to reverberate through markets. Later in the day, traders will get a sense of the strength of the US consumer with retail sales data for last month due. A slew of Federal Reserve speakers are also on the docket this week, with comments from Chair Jerome Powell on Tuesday coming under the spotlight. With US inflation having topped forecasts for three successive months, it’s hard to imagine the world’s most powerful central banker sticking to his same, somewhat-dovish tone from last month. While the geopolitical backdrop is likely to set the tone for the week, there are also plenty of economic events for traders to take cues from, from China’s first-quarter economic growth figures to British consumer prices. The US earnings season is also underway, though that got off to a lacklustre start after reports from the three big banks – JPMorgan Chase & Co, Wells Fargo and Citigroup – disappointed investors and sent Wall Street lower.

KUALA LUMPUR: The net selling trend by foreign investors has extended into its seventh consecutive week, amounting to RM373.5 million during the shortened trading week due to the Hari Raya Aidilfitri holidays. In its latest weekly fund flow report, MIDF Research said this is about 11 per cent wider than the net selling amount of RM336 million in the prior week. It said the sectors with the highest net foreign inflows last week include property (RM75.3 million), transportation and logistics (RM26.8 million) and construction (RM16.5 million). “Sectors they were net selling were financial services (-RM285.9 million), utilities (-RM85.4 million), and consumer products and services (-RM52.7 million),” it added. Meanwhile, it said local institutions remained as net buyers of Bursa for the seventh consecutive week, snapping up RM430.7 million worth of domestic equities. “Conversely, local retailers remained as net sellers for the fifth consecutive week, with net sales amounting to RM57.1 million. “They ended their 22-day streak of net selling by making purchases of RM9.5 million on Tuesday but engaged in net selling on Monday and Friday last week,” said MIDF Research. In terms of participation, the average daily trading volume (ADTV) decreased among local retailers (-3.1 per cent) and local institutions (-15.2 per cent), but increased among foreign investors (3.1 per cent).

KUALA LUMPUR: The ringgit is expected to remain soft and trade around RM4.76 against the American dollar next week ahead of talks by US Federal Reserve (Fed) officials on inflation and the US retail sales data. Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said a slew of Fed officials are scheduled for talks next week, which he thinks will offer the same messages – that US inflation is still a concern and that they need to be convinced whether it can reach the American central bank’s 2 per cent goal. The US retail sales figure will be announced on Monday, with consensus estimates projecting it will grow 0.3 per cent month-on-month in March from 0.6 per cent previously. “Perhaps the first quarter of 2024 (1Q2024) gross domestic product results for China could be a market-moving data point as investors would want to gauge whether the second largest global economy could grow at around 5 per cent in 2024. Consensus estimates showed China’s economy grew 5.0 per cent year-on-year in 1Q2024,” he told Bernama. Meanwhile, he said the European Union consumer price index would also be interesting to examine. Street estimates show that the inflation rate will moderate further to 2.4 per cent in March, a sign that the European Central Bank could be on the right track to cut interest rates this year. On a Friday-to-Friday basis, the ringgit weakened to 4.7680/7730 versus the greenback compared with 4.7460/7490 a week earlier. The local note traded higher against most other major currencies. Meanwhile, he said the European Union consumer price index would also be interesting to examine. Street estimates show that the inflation rate will moderate further to 2.4 per cent in March, a sign that the European Central Bank could be on the right track to cut interest rates this year.

KUALA LUMPUR: Pulp and paper manufacturer Nextgreen Global Bhd (NGB), via its subsidiary Nextgreen IOI Pulp Sdn Bhd (NIP), signed a memorandum of understanding (MoU) with Xiamen C&D Paper & Pulp Group Co Ltd (Xiamen C&D). This is a strategic collaboration for developing and operating a green and sustainable paper pulp production facility. NGB managing director Datuk Lim Thiam Huat said this strategic collaboration marks a shared commitment to innovation, sustainability, and economic development that is a win-win for both parties. “By scaling up the utilisation of the innovative preconditioning refiner chemical-recycle bleached mechanised pulp (PRC-RBMP) technology with its China-based partner, we aim to pioneer a new era of eco-friendly industrial practices, driving progress and accelerate prosperity for the region and beyond,” he said in a statement. Xiamen C&D is a wholly-owned subsidiary of Xiamen C&D Inc under Xiamen C&D Corp Ltd, a global Fortune 500 company. Under the MoU, NIP and Xiamen C&D will establish a joint venture company with equity interests of 75 per cent and 25 per cent, respectively. The paper pulp production facility is set to be developed across 43 acres of land within the 410-acre Green Technology Park (GTP) in Pekan, Pahang, part of the Eastern Corridor Economic Region (ECER). The initial production capacity is expected to be 100,000 metric tonnes of paper pulp per annum, made from oil palm empty fruit bunches, using NGB’s patented  (PRC-RBMP) technology. NIP will lead feasibility studies, project preparation, procurement, and business development while also engaging with stakeholders and external financiers. Xiamen C&D will lend support in business development, assist with securing external financing, and manage the off-take of the facility’s output. “This MoU comes on the back of our recent announcement that we have entered into a shareholders’ agreement with IOI Paper Pulp Sdn Bhd, an indirect wholly-owned subsidiary of IOI Corporation Bhd, which paves the way for the development of the first large-scale zero-waste paper pulp plant at GTP. “The swift progress highlights our dedication and nimbleness in completing our master plan,” Lim said.

KUALA LUMPUR: The Monetary Authority of Singapore (MAS) has maintained the prevailing rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) and kept the width and the level of the band was unchanged at the April policy meeting. Maybank Investment Bank Bhd (Maybank IB), in a report, said this was the fourth hold following five consecutive tightening moves since October 2021, in line with the research firm’s and consensus expectations. “We think MAS will ease policy only in October at the earliest via a gentler S$NEER slope,” Maybank IB noted. The bank-backed research firm said MAS has reiterated that current monetary settings remain appropriate and sufficient to ensure medium-term price stability. It said the current rate of appreciation is necessary to restrain imported inflation and domestic cost pressures. MAS remains vigilant on inflation, maintaining its view that core inflation should remain elevated earlier in the year. “The central bank mentioned that inflation should stay on ‘its broadly moderating path’ and step down in the fourth quarter (Q4) before falling further in 2025,” Maybank IB noted. The research firm also noted that MAS maintained its forecast range for core and headline inflation at 2.5-3.5 per cent in 2024. It mentioned that the uptick in January-February core inflation, at 3.4 per cent, was lower than expected due to a decline in food and travel-related services inflation. Underlying inflation, excluding the impact of the goods and services tax (GST) hike, was estimated to be unchanged from Q4. “Similar to our expectations, MAS thinks core inflation will stay around current levels in the near term. Water prices were hiked in April to 7.3 per cent, while prices of certain services, such as education and healthcare, will continue catching up with higher business costs. “Nonetheless, MAS expects a sustained moderation in imported and domestic cost pressures. “Global prices of most food commodities and intermediate and final goods remain subdued, although crude oil prices have risen over the past three months,” Maybank IB noted. Further, Maybank IB noted that MAS expects unit labour costs to rise significantly slower in 2024 as wage growth eases and labour productivity picks up. On Singapore’s gross domestic product (GDP) growth, MAS expects the outlook to brighten throughout 2024. Manufacturing and financial sectors should resume their recovery, supported by the electronics cycle upturn and easing global interest rates. Growth in the domestic-oriented sectors is expected to normalise and slow towards pre-pandemic rates, Maybank IB noted. “Given the stronger-than-expected first quarter (Q1) flash estimates, we raise our 2024 GDP growth forecast to 2.4 per cent from 2.2 per cent. “Our GDP forecast stands at the upper end of Singapore’s Ministry of Trade and Industry’s (MTI) 1-3 per cent forecast range,” Maybank IB noted. The research firm said the outlook is predicated on a recovery in manufacturing and trade-related sectors as exports rebound from their deep slump in 2023. The firm noted that the Red Sea tensions have acted as a speedbump to the manufacturing recovery but should not be a roadblock without a broader Middle East conflict. Global container freight rates have been cooling from their late-January peak while manufacturers and shippers are adapting to the disruptions in their supply chain. Consumer and tourism-sensitive services were buoyed by the strong comeback in revenge travel in the first quarter. “That said, momentum may lose some steam for the rest of the year with the near-complete normalisation in tourist arrivals to pre-pandemic levels and the fading of the ‘Taylor Swift’ boost. “Moreover, elevated inflation has prompted some households to tighten their belts, while the strong Singdollar is encouraging locals to divert their spending budgets abroad,” Maybank IB noted.

KUALA LUMPUR: China’s attractive valuations and low exposures among investors make it a compelling long-term investment, especially compared to expensive markets, which have outperformed in the last 12 months. Eastspring Investments research lead for equities, China Jingjing Weng said there have been some bright spots in China’s recent economic indicators. “The worst for the economy appears behind us, although the road ahead remains bumpy. “A sustainable market rally in China would require implementation details of the government’s equipment upgrade and consumer trade-in programme, as well as further fiscal and monetary easing. Signs that policymakers are moving ahead of the curve would also be a key catalyst,” she said. Sharing more on China’s economic indicators and opportunities for investors, Weng said China’s infrastructure spending is expected to moderate this year as the central government focuses on containing the local governments’ already elevated debt-servicing burdens. The government’s urban renewal projects can help to stabilise the property sector further but not cause a strong rebound. Nevertheless, the property sector should continue to exert less drag on the broader economy going forward, she noted. Further, China’s exports and consumption will be key to helping the country achieve its 5 per cent gross domestic product (GDP) growth target for 2024. Weng noted that amid geopolitical and trade tensions, China has been diversifying its export destinations from the United States (US) and Europe to developing countries. In line with the key goal of developing ‘new quality productive forces’ highlighted in the 2024 Government Work Report, the government has indicated that it will encourage large equipment upgrades and consumer goods trade-ins. Weng noted that this will help boost consumption. Compared to China’s economic and market downturn in 2015/16, Weng also noted that the picture on the company front appears to be more encouraging. “Overseas revenues account for 15 per cent of total revenues, up from 12.5 per cent in 2015,” she said. While China’s growth is not as strong as before, Weng said it does not mean the market lacks opportunities. “The capital goods, consumer durables, energy, banks, and utility sectors have delivered high single-digit to mid-double-digit returns year to date. “For now, we are adopting a barbell investment strategy. We like companies with low valuations, stable dividend yields, and stable fundamentals. “This is balanced against exposure to companies gaining market share from global peers or well positioned to benefit from the future technology boom in promising growth sectors,” Weng said. She said China’s attractive valuations and low exposures among investors make it a compelling long-term investment, especially when compared against expensive markets, which had outperformed in the last 12 months. “In our view, a sustainable market rally would require implementation details of the equipment upgrade and consumer trade-in programme, as well as further fiscal and monetary easing, such as cuts to interest rates and the reserve requirement ratio,” Weng said.

Malaysia’s investment landscape is burgeoning with opportunities, offering a plethora of options for savvy sophisticated investors seeking to diversify their portfolios. Among these opportunities, Redeemable Preference Shares (RPS) and its Islamic counterpart, RPS-i, have emerged as significant focal points. Positioned as a unique hybrid between equity and debt instruments, these offerings promise a blend of stability and returns, ideal for investors aiming to fortify their investment strategies. Boasting preferential treatment in dividend payouts and capital distribution during liquidation, RPS provides a sense of security amidst market volatility. Its redeemable feature, a departure from the perpetual nature of traditional preference shares, offers investors a clear exit strategy, perfectly aligning with long-term investment goals. Furthermore, the allure of higher dividend yields appeals to income-oriented investors, providing a stable income stream in uncertain financial environments.   Understanding the Appeal of Preference Shares for Investors Investors opt for preference shares for various reasons, often driven by their unique characteristics and benefits. Firstly, preference shareholders typically do not seek voting rights or involvement in the company’s management. Instead, they prioritize financial returns over corporate governance participation. These investors rely on their independent assessment of the company’s performance, trusting that they will benefit from predetermined dividend payments or attractive returns on investment according to subscription terms. Moreover, preference shareholders enjoy priority over a company’s income distribution. This means they are often entitled to receive dividends before ordinary shareholders. Additionally, in the event of a company winding up, preference shareholders benefit from stronger bankruptcy protection, leveraging the concept of preferential payments. These factors contribute to the appeal of preference shares among investors seeking stable returns and protection of their investment interests.   Types of Preference Shares Various types of preference shares cater to diverse investment preferences and risk profiles. Commonly known terms include redeemable convertible preference shares, redeemable cumulative preference shares (RPS), or redeemable convertible cumulative preference shares (RCCPS), each serving specific investor needs. Cumulative preference shares guarantee preferential dividends from the date of issuance, accumulating unpaid dividends for future settlement, ensuring stability and consistent income streams. In contrast, non-cumulative preference shares do not accrue dividends from previous periods if not declared, posing higher risks regarding dividend reliability compared to cumulative shares. Redeemable preference shares, or callable shares, allow the issuer to repurchase them at a predetermined price after a specified period, offering flexibility for companies to manage their capital structure. Conversely, non-redeemable shares, or irredeemable shares, represent permanent equity ownership without the option for repurchase, providing long-term investment opportunities with potential for higher returns but subject to market fluctuations. Participating preference shares entitle holders to additional dividends based on the company’s financial performance, offering potential for higher returns during prosperous periods. Convertible preference shares offer the option to convert into common shares, providing opportunities for capital appreciation and participation in the company’s growth, albeit subject to specified conditions. Conversely, non-convertible shares lack conversion features, remaining as permanent equity stakes in the company.   Why Companies Issue Preference Shares? Many companies opt to issue preference shares as a structured method for raising funds to bolster guaranteed projects and to rebalance their share portfolios. This strategic approach allows corporations to secure financing for specific ventures while maintaining flexibility in their capital structure. Additionally, issuing preference shares provides companies with an alternative avenue for capital infusion, enabling them to diversify their funding sources and mitigate risks associated with overreliance on debt financing or common equity issuance. Notable Malaysian companies who have issued this instrument include G Captial Berhad, SP Setia Bhd, Telekom Malaysia Berhad, FGV Holdings Berhad, Qew Group Berhad and many more. Beyond individual investor benefits, RPS and RPS-i play a pivotal role in driving economic growth and development in Malaysia. By offering companies an alternative avenue for raising capital, these investment instruments fuel innovation, drive entrepreneurial endeavors, and contribute to job creation. The injection of funds into promising ventures not only benefits shareholders but also enhances the vibrancy of the economy, fostering productivity and competitiveness on regional and global scales. In essence, RPS and RPS-i serve as catalysts for progress, propelling Malaysia towards greater economic prosperity. The introduction of RPS-i, adhering to Islamic principles, adds another layer of consideration. While catering to Shariah-compliant investors, RPS-i introduces a distinct set of considerations, including compliance with Islamic financing principles. As investors weigh the pros and cons of these investment instruments, due diligence emerges as the guiding principle, empowering individuals to make informed decisions amidst the complexities of financial markets. While RPS and RPS-i offer the potential for lucrative investment opportunities and economic progress, understanding these vehicles remains crucial for safeguarding investors’ interests in an evolving economic milieu. While there are several advantages of preference shares, it’s important to be aware of the associated risks: Interest rate risk: The fixed dividends on preference stocks can become less attractive in a rising interest rate environment, as other investments may offer higher yields. Lack of voting rights: Preference shareholders do not have a say in the company’s decisions, which can be a disadvantage if the company’s management makes unfavourable choices. Market performance: The performance of preference stocks can be influenced by market conditions, and their value may fluctuate accordingly. Call risk: If you hold redeemable preference stocks, there’s a risk that the company may choose to redeem them, potentially leaving you with fewer investment opportunities.