New year, old issues

Chief executive and founder of fund management firm Tradeview Capital Sdn Bhd Ng Zhu Hann said Malaysia would not slip into a recession despite the widespread expectation of recessionary pressure.

PETALING JAYA: As 2023 begins, industry players still see speed bumps ahead, albeit with varying degrees of optimism.

Industry leaders are still concerned about what the US Federal Reserve’s policies would be in terms of rate hikes to rein in inflation, which would affect economic sentiment, along with how quickly China could bounce back from its “zero-Covid” policy.

However, chief executive and founder of fund management firm Tradeview Capital Sdn Bhd Ng Zhu Hann said Malaysia would not slip into a recession despite the widespread expectation of recessionary pressure.

“While we do not think recession would be our foremost concern, we agree that there could be a demand or consumption slowdown in 2023 as we come off a bumper 2022, which itself benefited from a low-base effect,” he told StarBiz.

Therefore, Ng said the market should not be overly optimistic that 2023 would be as good or better than last year with the anticipated tapering off of consumer spending.

Having said that, he viewed the ending of China’s “zero-Covid” initiative – which has been dampening demand for the past 18 months – as the proverbial light at the end of the tunnel.

“The global market needs some catalysts to perform well, and with the United States still on a rate hike mission, funds are flowing back there unlike before when it is exporting capital. “In fact, there does not seem to be any major exporter of capital in 2023, and hence, China’s return would be heavily expected, assuming there are no further outbreaks,” said Ng, pointing out that the anticipated re-emergence of the Middle Kingdom should cushion any consumption downturn in Malaysia as well as Asia.

For Tradeview, its chief executive said the company had garnered a 5% effective return on its assets under management over eight months, and it would be maintaining a strategy of prudence, and would only pursue a more aggressive investment stance in the second half of the year.

Malayan United Industries Bhd concurred that 2023 would present similar macro challenges namely rate hikes and inflation levels which could reduce consumer confidence.

Chief executive and chairman Andrew Khoo said the two metrics have to be closely watched as their effects could spill over into the hospitality and property sectors, which are two of the major business segments of the group.

“Higher interest rates can also cause a further dislocation in property yields and values. Over and above that, the labour and talent shortage in not only Malaysia, but also in the region, is something all businesses will have to look to address,” Khoo said.

With equities likely to see a correction in 2023, which will further exacerbate recession risks, Khoo said the group would embark on a rationalisation strategy that would involve a balanced approach between divesting its non core assets while reinventing and disrupting its own businesses.

“We need to challenge the norms and our traditional business models. We will do that by looking at implementing a digital transformation roadmap and also to continue investing in new related businesses,” he explained,

Moving forward, Khoo said the MUI group would continue to double down on areas where it holds an edge and can add value to, which includes the rapid rollout of A&W outlets – which it owns 51% of through subsidiary Pan Malaysia Corp Bhd.

It would also be rethinking its retail footprint for both Benjamin Barker and Metrojaya, launch a new hospitality concept, strengthen the pipeline of projects under its property division, and go more into the venture capital space in the region.

Meanwhile, Bermaz Auto Bhd group chief executive Datuk Francis Lee said the supply chain constraints due to geopolitical tensions could be a threat both to the group as well as to the local automotive industry.

He said the strengthening of the Japanese yen could also pose a challenge to the company, although this is mitigated by Bermaz making a bulk of its purchases in the ringgit for its completely-knocked-down (CKD) products under its main volume driver, Mazda.

Lee added that the cessation of the sales and services tax (SST) exemption for the automotive industry - which allows for 100% sales tax exemption on (CKD) vehicles and 50% sales tax exemption on completely built-up vehicles, coupled with higher hire-purchase rates if Bank Negara continues its tightening policy, would also put the brakes on demand in 2023.

Lee said Bermaz had put in place several measures to cushion the adverse effects.

For example, the group has kept up its 50% subsidiary of the SST until Dec 31 last year for all three of its brands – namely Mazda, Peugeot and Kia – lending to a commendable order book volume for at least the next six to seven months.

He pointed out that Bermaz had registered about 1,900 vehicle bookings last month, compared to the average of 1,100 to 1,200 bookings per month before the lockdowns and other restrictions.

Additionally, the group is also targeting more CKD launches this year, and will capture a “decent market share” despite not looking at sizeable volumes for 2023, as well as looking into the possibility of opening more new showcase branches in major cities.

Group chief executive of gloves manufacturer Careplus Group Bhd Lim Kwee Shyan said the company is expecting a tough first half of the year on the back of higher expenses and demand below installed capacity.

Lim projected little restocking from customers until at least the second quarter of the year, as average selling prices of gloves continue to face downward pressure, and it would be looking to reorganise all resources to match lower capacity utilisation.

“However, we do anticipate gradual recovery. As a long term player, we will continue to focus on research and development, automation as well as quality, so moving forward we will be preparing ourselves for the upswing in orders,” he said.

Lim remained upbeat, and while conceding that gloves manufacturing is a “tough industry”, he said there would not be many players which are in it for the long haul.

“There is always a big volume of orders for essential personal protective equipment for healthcare industries, and as such there will always be room for all committed players,” he said.

Malaysian Palm Oil Association chief executive Joseph Tek Choon Yee is cautiously optimistic, keeping a medium and long-term bullish outlook for palm oil, on the back of sustained global demand with intertwining of other bullish and bearish factors.

However, he said the sectorial barometer ahead might still be jittery for palm oil amid policy matters including the European Union’s discriminatory ban on palm oil products, biofuel rollouts, competing edible oils and weather uncertainties that could render potential pullback in crude palm oil price determination.

“Of importance, the industry relevant stakeholders are looking forward to concrete plans to engage with the government and authorities for the sustainable benefit of the industry and nation, especially on the issues towards normalcy in the return of foreign workers, cost pressure, taxation, market access and other policy imperatives,” Tek said.

He pointed out that overall, the Malaysian plantation business sector has been able to hold up against the broader market trend, underpinned by strong food and fuel demand as well as asset-rich book valuations, amid global post-lockdown economic uncertainties.

“However, margins are facing pressures from easing in palm product prices compounded by unabated rising cost including labour and fertilisers.

“The key focus remains – for all stakeholders – to be galvanised to safeguard the palm oil sector’s resilience, competitiveness, sustainability and market accessibility for its palm products to the world,” he added.

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