Bursa Malaysia Daily Market Report - 6 October

Transcription

1. Friday , 06 October, 2017 TA RESEARCH’S ‘DAILY COMPILED REPORTS’ For Internal Circulation Only N ew s 1. D ai l y M arke t C om men t a ry 2. D ai l y B ri ef Fu nd a me n tal Rep o r ts 1. 2. 3. 4. Bu d g e t 2 0 1 8 P re v ie w : Po t e n t ia l R a k y a t- C e n tr ic a n d Pro - Bu s in e ss Bu dg e t S e rb a D in a m ik H o l d in g s Be r h a d : V i s i t to T e re n g g a n u S u n w a y C o n s t r u c t io n G ro u p Be rh a d : A L u m p y J o b Win W C T H o l d i n g s Be r h a d : Sc o r e a H a t- T r ic k in L R T 3 Te ch n ic al R ep o rt s 1. D ai l y Te ch n ic a l St o ck Pi cks 2. D ai l y St o ck S cr een 3. Fore i gn Te ch n i ca l St o c k W at ch ( A US , H K & F SS TI) Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2031 6608 www.ta.com.my
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Daily Market Commentary Friday , 06 October 2017 For Internal Circulation Only TA Research, e-mail : taresearch@ta.com.my KLSE Market Statistics (05.10.2017) (mil) Main Market 2,237.1 Warrants 125.6 ACE Market 777.6 Bond 9.5 ETF 0.0 LEAP 0.2 Total 3,150.0 Off Market 27.6 Volume +/-chg (RMmn) 1018.3 1,876.3 -49.4 11.4 -76.6 174.0 5.2 1.0 0.01 0.1 0.08 0.0 2,062.8 -138.1 50.6 Major Indices Index +/- chg Malaysia FBMKLCI FBMEMAS FBMSCAP October Futures Other Markets DOW JONES NASDAQ (US) FTSE (UK) NIKKEI (JAPAN) KOSPI (KOREA) HANG SENG (HK) FSSTI (S'PORE) SET (BANGKOK) JCI (JAKARTA) SHANGHAI SHENZHEN AUSTRALIA % chg % YTD chg 1,759.09 12,556.17 17,065.76 1,759.00 -2.75 -0.48 82.00 2.50 -0.16 0.00 0.48 0.14 7.15 9.50 15.97 7.55 22,775.39 6,585.36 7,507.99 20,628.56 2,394.47 28,379.18 3,261.84 1,690.87 5,901.91 3,348.94 1,988.49 5,651.77 113.75 50.73 40.41 1.90 0.00 0.00 25.19 3.10 -49.57 0.00 0.00 -0.29 0.50 0.78 0.54 0.01 0.00 0.00 0.78 0.18 -0.83 0.00 0.00 -0.01 15.24 22.33 5.11 7.92 18.16 28.99 13.23 9.59 11.43 7.90 0.98 -0.25 (mn) (RM) @ @ @ @ @ @ @ @ 0.01 0.30 2.06 8.20 0.61 0.22 1.26 3.39 Exchange Rate USD/MYR 4.2277 0.0017 USD/JPY 112.57 0.1800 EUR/USD 1.175 -0.0028 Counter Mkt Cap. Chg (RM’mn) (RM) MAYBANK 100,949 TENAGA 80,584 PBBANK 79,392 SIME 61,480 IHH 57,933 PCHEM 46,881 DIGI 38,175 PETGAS 35,815 IOICORP 32,441 GENM 30,553 -0.01 -0.04 -0.02 -0.01 -0.01 -0.03 -0.04 -0.14 -0.02 -0.11 While blue chips eased into profit-taking consolidation Thursday, small cap oil & gas related stocks attracted strong rotational buying interest which revived retail participation.The KLCI slid 2.75 points to settle at 1,759.09, after oscillating between tight range bordering 1,757.61 and 1,761.16, as gainers led losers 487 to 360 on robust turnover of 3.15bn shares worth RM2.06bn. Blue chips should slip back into sideways consolidation ahead of the weekend, while active rotational plays into small caps, especially oil & gas related stocks, highlight trading interest. Immediate resistance for the index is seen at 1,771, matching the 50 and 100-day moving averages, followed by the 8 Aug peak of 1,782, and then the double-top peak of 13 Sept high of 1,793 and 16 June peak of 1,796. Immediate support comes from the recent low of 1,750, while the crucial 200-day ma uptrend support is at 1,738. The fresh daily stochastics and DMI buy signals on Bumi Armada suggests a test of the 38.2%FR (74sen), with a breakout to aim for the 50%FR (81sen) and 61.8%FR (88sen) ahead. Immediate chart supports are from 68sen and the 23.6%FR (65sen). Sapura Energy is ready for an oversold rebound after the recent steep selloff, with a break above the 23.6%FR (RM1.48) to target the 38.2%FR (RM1.60) and 50%FR (RM1.70), while crucial supports are at recent low of RM1.38 and the 27/6/17 pivot low (RM1.29). News Bites Top 10 KLCI Movers Based on Mkt Cap. Off Market LAYHONG-WA 5.5 ECOFIRS 5.2 MYEG 5.0 AIRPORT 3.3 SGB 2.5 STERPRO 2.0 JAKS 1.8 PMETAL-WC 1.0 Review & Outlook Value Value/ +/-chg Volume Up Down 263.8 0.84 339 244 -13.6 0.09 84 68 -19.6 0.22 60 44 -0.4 0.10 3 1 0.02 1.67 0 3 0.02 0.18 1 0 0.65 487 360 -841.9 1.83 Vol. (mn) 8.16 3.31 3.84 5.40 11.57 1.69 4.78 0.42 1.28 6.39 Commodities Futures Palm Oil (RM/mt) 2,718.00 1.00 Crude Oil ($/Barrel) 50.75 0.85 Gold ($/tr.oz.) 1,270.60 -6.90 Important Dates MTOUCHE - 6:2 Rights Issue - RI of up to 557.5m shares together with up to 278.8m free detachable warrants. 6 rights shares together with 3 free warrants for every 2 existing shares held, at an issue price of RM0.20 per rights share. Trading of Rights: 04/10 - 18/10/2017. Application Closed: 26/10/2017. LISTING ON: 09/11/2017. • Prasarana Malaysia Berhad had awarded Sunway Construction Group Bhd a contract worth RM2.18bn for LRT 3 project from Bandar Utama to Johan Setia. • Gabungan AQRS Bhd clinched RM1.21bn worth of LRT3 construction contract from Prasarana Malaysia Berhad for the construction and completion of guideway, stations, park and ride, ancillary buildings and other associated works from Bandar Utama to Johan Setia. • Another LRT3 contract, worth RM640mn, was won by WCT Holdings Bhd to build the guideway and other associated works from Merchant Square to Suria Damansara, stretching 2.9km long with 2 stations. • Favelle Favco Bhd has entered into a Heads of Agreement with a group of individual vendors to buy 70% equity interests in each of the 4 engineering and automation-related companies, for over RM87.4mn. • Bison Consolidated Bhd has entered into 2 separate Joint Venture Agreements with Japanese firms for its food preparation and packaging facility in Rawang, Selangor to develop, produce and sell ready to eat food and bakery products. • UMW Holdings Bhd has entered into a Share Sale Agreement with DKLS Luxuria Sdn Bhd for the proposed disposal of 70% stake in Fabritech Sdn Bhd for a total cash consideration of RM18mn. • Affin Holdings Bhd is set to reduce the group's workforce by about 6% or 300 staff by year end as part of its strategy to be an effective financial entity while improving the productivity. • Mercedes-Benz Malaysia Sdn Bhd, 49% owned by Cycle & Carriage Bintang Bhd, sold slightly less cars in the first 9 months of this year but remain optimistic about delivering another record-breaking performance in this year. • Dagang NeXchange Bhd has signed MoU with e-commerce service providers from 6 countries to work together towards a more efficient cross-border trade within these countries. • Yi-Lai Bhd has received a conditional mandatory takeover offer at 78.5sen per share from Boundless Vigour Sdn Bhd, which is owned by 2 directors of Yi Lai. • Maxis Bhd aims to attract 2.8mn households to its newly launched MaxisONE Prime, an all-in-one plan with endless high-speed data for home and mobile, as well as, zero downtime high-speed fibre for the entire family. • REDtone International Bhd is optimistic about a turnaround in the current financial year after reporting losses in the previous 2 years, mainly on the back of growth in its telecommunications services and managed telecommunication network services segments. • Real economic growth in the OECD area accelerated by 0.7% in the 2Q17, faster than the 0.5% growth seen in the previous quarter, driven by private consumption and investment. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. Kaladher Govindan, Head of Research MENARA TA ONE, 22 JALAN for TA SECURITIES HOLDINGS BERHAD (14948-M) A PARTICIPATING ORGANISATION OF BURSA MALAYSIA SECURITIES BHD P RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL : 603 - 2072 1277. FAX : 603 - 2032 5048 www.ta.com.my
3. Friday , October 06, 2017 FBMKLCI: 1,759.09 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Daily Brief Market View, News In Brief: Corporate, Economy, and Share Buybacks Chartist: Stephen Soo Tel: +603-2167-9607 stsoo@ta.com.my www.taonline.com.my M a r k e t V i e w Oil & Gas Stocks to Highlight Rotational Plays While blue chips eased into profit-taking consolidation Thursday, small cap oil & gas related stocks attracted strong rotational buying interest which revived retail participation. The KLCI slid 2.75 points to settle at 1,759.09, after oscillating between tight range bordering 1,757.61 and 1,761.16, as gainers led losers 487 to 360 on robust turnover of 3.15bn shares worth RM2.06bn. Resistance at 1,782, Support From 1,750 Blue chips should slip back into sideways consolidation ahead of the weekend, while active rotational plays into small caps, especially oil & gas related stocks, highlight trading interest. Immediate resistance for the index is seen at 1,771, matching the 50 and 100-day moving averages, followed by the 8 Aug peak of 1,782, and then the double-top peak of 13 Sept high of 1,793 and 16 June peak of 1,796. Immediate support comes from the recent low of 1,750, while the crucial 200-day ma uptrend support is at 1,738. Buy Bumi Armada & Sapura Energy The fresh daily stochastics and DMI buy signals on Bumi Armada suggests a test of the 38.2%FR (74sen), with a breakout to aim for the 50%FR (81sen) and 61.8%FR (88sen) ahead. Immediate chart supports are from 68sen and the 23.6%FR (65sen). Sapura Energy is ready for an oversold rebound after the recent steep selloff, with a break above the 23.6%FR (RM1.48) to target the 38.2%FR (RM1.60) and 50%FR (RM1.70), while crucial supports are at recent low of RM1.38 and the 27/6/17 pivot low (RM1.29). Singapore’s Strait Times Index Outperform Regional Peers Asian markets traded mixed on Thursday, with some Australian retailers faltering after lowerthan-expected sales data showed consumers Down Under were cutting back. Australian retail sales fell in August, continuing a spell of unexpected weakness that could weigh on economic growth in the third quarter. Retail sales fell 0.6 percent in August from July, the Australian Bureau of Statistics said, compared with a 0.3 percent rise expected by economists. Nonetheless, trading in the region was muted as several key markets were shut for holidays. Markets in South Korea and China are closed for the entire week, while Hong Kong was shut on Thursday. Australian retail stocks were mixed following the data, the broader benchmark ASX 200 finished flat at 5,651.77. The heavily-weighted financial sector slipped fractionally, down 0.1 percent. Japan’s Nikkei share average ended little changed after hitting a two-year high in the previous session, as investors grew cautious ahead of major economic data such as the U.S. jobs report later this week. The Nikkei ended up 1.9 points, or 0.01 percent, at 20,628.56. In Singapore, the local index outperformed Asian peers after two straight sessions of declines, with the real-estate and banking sectors leading a recovery. The FTSE Straits Times Index was up 0.78 percent, at 3,261.84. Page 1 of 7
4. 6-Oct-17 S &P 500 Extend Record Run on Tax Overhaul Optimism The S&P 500 closed at another fresh high Thursday, its longest streak of record closes in 20 years, as investors cheered increased prospects for a tax overhaul with Congress moving closer to agreement on a budget resolution. The U.S. House of Representatives voted to adopt a fiscal 2018 spending blueprint containing a legislative tool that would let Republicans bypass Democrats and pass a tax bill by a simple majority vote in the Senate, where they hold 52 of 100 seats. Also helping stocks, more data pointed to underlying strength in the U.S. economy despite weather-related disruptions, with the trade deficit narrowing in August and jobless claims falling more than expected last week. New orders for goods made in the United States rose in August and orders for core capital goods were stronger than previously reported. Financials and information technology led advancers in the S&P 500. The Dow Jones Industrial Average rose 113.75 points, or 0.5 percent, to close at 22,775.39, the S&P 500 gained 14.33 points, or 0.56 percent, to 2,552.07 and the Nasdaq Composite added 50.73 points, or 0.78 percent, to 6,585.36. Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. As of Friday, October 06, 2017, the chartist, Stephen Soo, who prepared this report, has interest in the following securities covered in this report: (a) nil Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2031 6608 www.ta.com.my Page 2 of 7
5. 6-Oct-17 N e w s I n B r i e f Corporate Prasarana Malaysia Berhad had awarded Sunway Construction Group Bhd a contract worth RM2 .18bn for LRT 3 project from Bandar Utama to Johan Setia. The scope of work includes 9.2km of viaduct work, construction of 6 stations, and the design and building of an iconic cable-stayed bridge over the Klang River. In addition, the group will construct 2 park and rides at Pasar Besar Klang and Sri Andalas as well as a Centralised Labour Quarter at Johan Setia. The Project is expected to be completed by 4Q2020. (Bursa Malaysia/The Edge) Meanwhile, Gabungan AQRS Bhd had also clinched RM1.21bn worth of LRT3 construction contract from Prasarana Malaysia Berhad. The project is involved in construction and completion of guideway, stations, park and ride, ancillary buildings and other associated works for LRT3 from Bandar Utama to Johan Setia. The project is expected to take 38 months to complete. (Bursa Malaysia/The Edge) Another LRT3 contract, worth RM640mn, was won by WCT Holdings Bhd to build the guideway and other associated works from Merchant Square to Suria Damansara, stretching 2.9km long with 2 stations. (Bursa Malaysia/The Edge) Favelle Favco Bhd has entered into a Heads of Agreement with a group of individual vendors to buy 70% equity interests in each of the 4 engineering and automation-related companies, for over RM87.4mn to enhance its earnings base. (Bursa Malaysia/The Edge) Bison Consolidated Bhd (BISON) has entered into 2 separate Joint Venture Agreements with Japanese firms for its food preparation and packaging facility in Rawang, Selangor to develop, produce and sell ready to eat food and bakery products. BISON will have 51% equity interest in both the joint venture companies with investment costs totaling RM35.7mn will be funded via internally-generated funds and private placement. (Bursa Malaysia) UMW Holdings Bhd (UMW) has entered into a Share Sale Agreement with DKLS Luxuria Sdn Bhd for the proposed disposal of 70% stake in Fabritech Sdn Bhd, a subsidiary of UMW with principal activities of providing sandblasting, priming, coating, inspection, maintenance and repair services to the oil and gas industry, for a total cash consideration of RM18mn. (Bursa Malaysia) Pos Malaysia Bhd is expanding its presence in the e-commerce space with the signing of an exclusive logistics partnership between its courier arm, Pos Laju, and online shopping platform operator, PG Mall Sdn Bhd. The partnership will enable the company to serve more than 5.3k PG Mall's active merchants daily, and is likely to contribute about RM500k to the group's bottom line for FY18. (Bernama/The Edge) Affin Holdings Bhd is set to reduce the group’s workforce by about 6% or 300 staff by year end as part of its strategy to be an effective financial entity while improving the productivity. (The Edge) Progress Energy, the Canadian unit of Malaysian state energy firm Petronas Nasional Bhd, confirmed on yesterday it was looking to sell its Deep Basin oil and gas asset in the Canadian province of Alberta in order for the company to focus on future investments in its North Montney assets in Canada which represents significant growth opportunity. (The Edge) Mercedes-Benz Malaysia Sdn Bhd, 49% owned by Cycle & Carriage Bintang Bhd, sold slightly less cars in the first 9 months of this year in comparison with the year-ago period, but remain optimistic about delivering another record-breaking performance in this year. (The Edge) Page 3 of 7
6. 6-Oct-17 th Kuala Lumpur Kepong Bhd has launched its 4 Reactor Specialty Ester Plant , and R&D centre in Klang to increase capacity and efficiency. The R&D centre was set up in Malaysia as international research, development and technology hub to service and support its global oleochemical business. (The Edge) Dagang NeXchange Bhd has signed MoU with e-commerce service providers from 6 countries to work together towards a more efficient cross-border trade within these countries. The parties involved in the MoU will work together to develop plans, business case, and ideas to kick off cross-border services for supply chain and logistic services. (Bernama) Yi-Lai Bhd (YLB) has received a conditional mandatory takeover offer from Boundless Vigour Sdn Bhd, which is owned by 2 directors in YLB. The mandatory takeover offer at 78.5sen per share was triggered after the directors raised their stake in the ceramic and tile manufacturer to 33.01%. (Bursa Malaysia/The Edge) Maxis Bhd aims to attract 2.8mn households to its newly launched MaxisONE Prime, an allin-one plan with endless high-speed data for home and mobile, as well as, zero downtime highspeed fibre for the entire family. (Bernama) REDtone International Bhd is optimistic about a turnaround in the current financial year after reporting losses in the previous 2 years, mainly on the back of growth in its telecommunications services and managed telecommunication network services segments. (The Edge) Aeon Credit Service Bhd registered a 29.3% jump in net profit to RM71.39mn for 2QFY18 from RM55.19mn a year earlier, thanks to increase of transaction and financing volume. The quarterly revenue grew 15.7% YoY to RM311.32mn from RM269.13mn. For 1HFY18, net profit came in at RM147.2mn, up 24.8% from RM117.92mn a year ago, while revenue grew 15.6% to RM613.6mn from RM530.77mn recorded previously. The board has recommended an interim dividend of RM21.13sen. (Bursa Malaysia/The Edge) Page 4 of 7
7. 6-Oct-17 N e w s I n B r i e f Economy Global OECD Area GDP Growth Accelerates on Spending , Investment Real economic growth in the Organization for Economic Co-operation and Development area accelerated in the second quarter driven by private consumption and investment. Real GDP climbed 0.7% in the second quarter, faster than the 0.5% growth seen in the previous quarter. Contributions from private consumption and investment increased to 0.5 and 0.3 percentage point (ppts), respectively. Meanwhile, the contraction in net exports pulled real growth down by 0.1ppts. At the same time, contributions from government consumption and stock-building remained negligible. In the United States, GDP growth picked up to 0.8% mainly reflecting a stronger contribution from private consumption and stock-building. Japan's real growth doubled to 0.6% on private spending and investment. Meanwhile, growth in Germany slowed slightly, to 0.6%. The higher contribution from private spending and stock-building were counterbalanced by a negative contribution from net exports and investment. In the U.K., GDP growth was unchanged at 0.3% in the second quarter, as the strong rebound in net exports was partially offset by destocking. (RTT News) Asia Malaysia: Support for Move to Tax Digital Economy The government’s proposal to tax the digital economy is a step in the right direction, says World Bank Group representative and country manager for Malaysia Faris Hadad-Zervos. Tax imposition on the digital economy will allow diversification of the government’s revenue sources, aside from creating more buffers for an improved fiscal management. “For Malaysia to sustain its economic momentum, it is important to have broad-based growth, buttressed by diversified sources of income for the government. “The World Bank is positive on the proposal to tax the digital economy as it would create an additional revenue stream for the government. This is important because the digital economy will continue to have a growing role in the overall economy and it is only right to tax the digital players similar to other regular businesses,” said Hadad-Zervos at an economic update briefing. (The Star) Australian Retailers Hit by Worst Sales Decline in 4-1/2 Years Australian retailers suffered their worst decline in sales since early 2013 as debt-laden consumers tightened their purse strings, slashing spending on food, furniture and clothing, an outcome that bodes poorly for third-quarter economic growth. Data from the Australian Bureau of Statistics (ABS) showed retail sales dropped 0.6% in August, confounding expectations for a 0.3% increase. July was also revised down to show a 0.2% fall. The 0.8% slump in July and August is the biggest back-to-back fall since October 2010. Australia’s retail sector had shown some signs of life earlier in the year, but that recovery was short-lived as sluggish wages and household incomes sapped spending power. (The Star) India Maintains Interest Rates; Cuts Growth Outlook India's central bank left its key interest rates unchanged at the lowest level since 2010 as it expects upside risks to inflation to prevail, and downgraded the growth forecast. In its fourth bi-monthly monetary policy session, the Monetary Policy Committee of the Reserve Bank of India decided to maintain the repo rate at 6.00% and the reverse repo rate at 5.75%. The bank had lowered the rate by 25 basis points at the previous meeting in August. Five MPC members including Governor Urjit Patel voted in favor of the decision, while Ravindra Dholakia sought a policy rate reduction of at least 25 basis points. The bank reduced the statutory liquidity ratio by 50 basis points to 19.50%. The RBI downgraded the projection for real GVA growth for 2017-18 to 6.7% from 7.3%, with risks evenly balanced. In August, headline inflation was projected at 3% in the second quarter and 4.0-4.5% in the second half of 2017-18. Actual inflation outcomes so far have been broadly in line with projections, the bank said. (RTT News) Page 5 of 7
8. 6-Oct-17 United States U .S. Trade Gap Narrowed in August The U.S. trade deficit narrowed in August, reflecting an increase in exports and a downtick in imports as Hurricane Harvey disrupted shipping along the Gulf Coast. The foreign-trade gap in goods and services narrowed 2.7% from the prior month to a seasonally adjusted $42.395 billion in August, the Commerce Department said. Economists surveyed by The Wall Street Journal had expected a trade deficit of $42.7 billion. Imports decreased 0.1% in August, and exports increased 0.4% from July. August exports of goods and services reached the highest level since December 2014, and exports of services were the highest on record, not adjusted for inflation. The Commerce Department said the effects of Hurricanes Harvey, Irma and Maria couldn’t be isolated in Thursday’s trade report, but “will likely be reflected in subsequent reports until normal trade activities resume in affected areas.” Figures on international trade can be volatile from month to month. In the first eight months of 2017, the value of U.S. imports rose 6.4% and U.S. exports increased 5.8% compared with the same period a year earlier. The overall trade deficit was up 8.8% compared with the first eight months of 2016. (The Wall Street Journal) U.S. Jobless Claims Fell Last Week The number of Americans filing applications for new unemployment benefits fell in late September, though recent hurricanes continued to disrupt economic activity in several regions. Initial jobless claims, a proxy for layoffs across the U.S., declined by 12,000 to a seasonally adjusted 260,000 in the week ended Sept. 30, the Labor Department said. Economists surveyed by The Wall Street Journal had expected 270,000 new claims last week. Claims surged in recent weeks due to job losses from Hurricanes Harvey, Irma and Maria. The Labor Department said claims data last week for Florida, Georgia, Puerto Rico, Texas and the U.S. Virgin Islands were affected by the storms, and officials had to estimate a figure for Puerto Rico. More broadly, claims have remained at historically low levels for several years, a sign of health in the U.S. labor market. Even with the recent storm-fueled jump, jobless claims have remained below 300,000 a week for 135 straight weeks, the longest such streak since 1970—when the U.S. population and workforce were far smaller than they are today. Data on jobless claims can be volatile from week to week. The four-week moving average for initial claims fell by 9,500 last week to 268,250. (The Wall Street Journal) US Factory Orders Rise; Core Capital Goods Orders Revised Higher New orders for U.S.-made goods rose in August and orders for core capital goods were stronger than previously reported, suggesting robust business spending could help offset some of the economic drag of Hurricanes Harvey and Irma. Factory goods orders increased 1.2% as demand for a range of goods rose, the Commerce Department said on. Orders fell by an unrevised 3.3% in July. Economists had forecast factory orders increasing 1.0% in August. The Commerce Department said it was unable to isolate the impact of Harvey and Irma on the data as the survey is "designed to estimate the month-to-month change in manufacturing activity at the national level and not at specific geographic areas." Orders for non-defense capital goods excluding aircraft - seen as a measure of business spending plans jumped 1.1% in August instead of the 0.9% increase reported last month. Orders for these so-called core capital goods advanced 1.3% in July. Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, shot up 1.1% instead of the previously reported 0.7% rise. (CNBC) Europe and Uni ted Kingdom ECB Officials Discussed Options for Recalibrating QE at Last Meeting European Central Bank officials discussed options for scaling down their giant bond-buying program at their September policy meeting, but worried that the strengthening euro might upset the region’s economy, according to minutes published. The minutes of the Sept. 6-7 meeting confirm the ECB is preparing to reduce its historic monetary stimulus early in 2018 as the Eurozone economy picks up. They show policy makers weighed options including extending QE for longer, but with a greater reduction in pace, versus continuing it for a shorter period with larger monthly purchase volumes. At least one official argued that the ECB’s stimulus would remain powerful in either scenario. The minutes provided little clarity Page 6 of 7
9. 6-Oct-17 on how exactly the reduction will occur —which is perhaps the biggest issue facing global investors. The ECB’s €60 billion ($70.6 billion) a month bond-purchase program, known as quantitative easing, has underpinned the region’s financial markets since its launch in early 2015 and boosted economic growth and inflation by propping up asset prices and supporting bank lending. As the region’s economy strengthens and the unemployment rate falls, officials have started to think about reducing the program, which has proven controversial in countries such as Germany. (The Wall Street Journal) ECB Lowers Emergency Funding Cap for Greek Banks to 32.6b Euros The European Central Bank (ECB) lowered the cap on emergency liquidity assistance (ELA) Greek banks draw from the domestic central bank by one billion euros (S$1.6 billion) to 32.6 billion euros, the Bank of Greece said. The move reflected improved liquidity conditions, taking into account private sector deposit flows, it said. The ELA ceiling is valid up to Oct 26. Greek banks have relied on emergency liquidity assistance (ELA) since February 2015 after being cut off from the ECB's funding window. Emergency funding is more costly than borrowing directly from the ECB. In June last year the ECB reinstated Greek banks' access to its cheap funding operations, allowing lenders to reduce their dependence on the emergency liquidity lifeline. ELA funding to Greek lenders dropped by 3.7 billion euros, or 11%, to 30.9 billion euros in August compared to the previous month. (The Business Times) Share Buy-Back: 05 October 2017 Company AMPROP BKAWAN BORNOIL DAIBOCI E&O EKSONS FFHB FITTERS GRANFLO KOMARK SUPERMX TNLOGIS TOMYPAK TROP UNIMECH Bought Back 32,600 13,000 4,000,000 2,000 46,000 11,000 27,000 500,000 10,000 120,000 337,800 1,000 30,000 50,000 10,300 Price (RM) 0.765/0.76 19.16/19.14 0.10 2.19 1.57/1.56 0.88 0.655/0.65 0.375/0.37 0.25 0.25 1.76 1.60 0.95 0.94/0.935 1.07/1.05 Total Treasury Shares 0.775/0.76 14,946,200 19.16/19.12 33,091,231 0.10/0.95 4,800,000 2.19/2.18 537,600 1.57/1.55 6,697,247 0.89/0.88 3,578,000 0.655/0.64 428,800 0.375/0.37 23,702,500 0.245/0.24 7,414,000 0.25/0.245 5,049,700 1.77/1.76 17,581,000 1.60/1.54 4,581,795 0.955/0.945 66,000 0.94/0.935 6,052,142 1.07/1.05 5,745,310 Hi/Lo (RM) Disclaimer The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. Kaladher Govindan – Head of Research TA SECURITIES HOLDINGS BERHAD (14948-M) A Participating Organisation of Bursa Malaysia Securities Berhad Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2031 6608 www.ta.com.my Page 7 of 7
10. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price Target Price (RM) (RM) BETA EPS (sen) PER (X) Div Yield (%) FY17 FY18 FY17 FY18 FY17 FY18 52weeks 52weeks % Chg High Price % Chg Low Price % Chg YTD 05-Oct-17 AUTOMOBILE BAUTO 2.10 2.40 0.99 10.3 16.1 20.3 13.1 5.5 7.6 2.32 -9.5 1.84 14.1 -1.4 MBMR 2.04 2.09 0.94 20.7 23.2 9.9 8.8 2.0 2.3 2.67 -23.6 2.02 1.0 -4.7 PECCA 1.53 1.69 na 7.8 11.1 19.6 13.8 3.3 3.6 2.00 -23.5 1.45 5.5 -3.8 UMW 5.47 5.04 1.32 19.7 30.6 27.7 17.9 2.4 3.7 6.08 -10.0 4.09 33.6 29.5 BANKS & FINANCIAL SERVICES ABMB 3.82 4.80 1.31 33.1 30.6 11.5 12.5 4.2 4.2 4.49 -14.9 3.60 6.1 2.7 AFFIN 2.58 3.70 0.90 29.4 33.6 8.8 7.7 3.1 3.1 3.00 -14.0 2.14 20.6 7.9 AMBANK 4.47 5.70 1.19 43.9 48.6 10.2 9.2 3.9 4.0 5.70 -21.6 3.90 14.6 3.7 CIMB 6.40 8.00 1.50 49.6 55.2 12.9 11.6 3.9 4.3 7.08 -9.6 4.49 42.5 41.9 HLBANK 15.86 17.50 0.63 104.9 114.2 15.1 13.9 2.8 2.8 16.30 -2.7 12.80 23.9 17.5 MAYBANK 9.54 10.20 0.98 69.6 75.9 13.7 12.6 5.2 5.2 9.86 -3.2 7.59 25.7 16.3 PBBANK 20.56 23.60 0.65 137.2 142.4 15.0 14.4 2.7 2.8 20.90 -1.6 19.40 6.0 4.3 RHBBANK 5.15 5.80 1.36 50.6 55.0 10.2 9.4 2.9 2.9 5.59 -7.9 4.53 13.7 9.3 BURSA 10.02 11.10 0.72 40.2 39.0 24.9 25.7 3.4 3.4 10.98 -8.7 8.08 24.0 14.9 CONSTRUCTION BPURI 0.35 0.38 0.65 4.7 4.6 7.5 7.6 0.0 0.0 0.51 -31.4 0.33 7.7 -19.5 GADANG 1.24 1.75 0.25 15.3 14.3 8.1 8.7 2.4 2.4 1.37 -9.5 0.89 40.1 18.1 GAMUDA 5.25 6.00 0.98 28.5 34.5 18.4 15.2 2.3 2.3 5.52 -4.9 4.65 12.9 9.8 IJM 3.24 3.50 0.86 15.3 20.2 21.2 16.0 2.3 2.9 3.61 -10.2 3.07 5.5 1.2 PESONA 0.52 0.78 0.91 4.9 5.7 10.4 9.0 4.9 4.9 0.74 -29.9 0.41 27.2 -14.9 SENDAI 0.89 0.58 1.31 8.2 9.6 10.8 9.3 1.1 1.1 1.39 -36.0 0.46 95.6 54.8 SUNCON 2.30 2.55 na 12.7 14.2 18.2 16.2 2.4 2.4 2.41 -4.6 1.56 47.4 35.3 WCT 1.75 1.61 0.86 11.5 12.5 15.2 14.1 1.7 1.7 2.48 -29.3 1.65 6.1 1.8 LITRAK 5.73 6.26 0.37 41.9 45.7 13.7 12.6 4.4 4.4 6.15 -6.8 5.57 2.9 -2.6 Building Materials CHINHIN 1.30 1.58 na 8.3 11.3 15.7 11.5 3.1 4.6 1.49 -12.8 0.85 53.8 49.4 WTHORSE 1.96 1.67 0.38 6.7 10.0 29.2 19.7 5.1 5.1 2.19 -10.5 1.92 2.1 -2.5 CARLSBG 14.88 18.06 0.55 79.3 86.2 18.8 17.3 5.3 5.8 15.30 -2.7 13.72 8.5 6.9 HEIM 18.60 19.14 0.45 79.6 84.0 23.4 22.1 3.9 4.1 19.58 -5.0 15.56 19.5 13.6 AEON 2.02 2.23 0.44 6.5 7.5 31.0 26.9 2.0 2.4 2.91 -30.6 1.98 2.0 -21.4 AMWAY 7.27 8.62 0.33 30.6 38.7 23.7 18.8 4.5 4.8 8.49 -14.3 7.05 3.1 -0.8 F&N 24.84 27.41 0.20 121.1 150.9 20.5 16.5 2.8 3.0 26.00 -4.5 22.44 10.7 5.8 HUPSENG 1.15 1.50 0.36 6.5 6.6 17.7 17.4 5.2 5.2 1.28 -10.2 1.13 1.7 -0.1 NESTLE 84.98 92.76 0.41 292.7 325.4 29.0 26.1 3.2 3.3 85.98 -1.2 74.12 14.7 8.7 PADINI 4.58 4.67 0.48 23.5 27.0 19.5 17.0 2.5 2.7 4.65 -1.5 2.26 102.6 80.4 CONSUMER Brewery Retail POHUAT 1.91 2.46 0.69 27.4 27.4 7.0 7.0 4.2 4.2 2.06 -7.3 1.52 25.7 10.4 QL 3.93 3.26 0.39 12.1 12.8 32.5 30.6 1.1 1.1 4.03 -2.5 3.26 20.7 18.0 SIGN 0.84 1.23 0.85 8.9 12.1 9.4 6.9 3.0 4.2 1.07 -22.0 0.78 7.1 5.0 42.70 52.08 1.22 198.6 187.4 21.5 22.8 4.7 4.7 51.04 -16.3 40.61 5.2 -3.3 GENTING 9.61 11.51 1.43 44.7 53.3 21.5 18.0 1.5 1.7 10.00 -3.9 7.50 28.2 21.0 GENM 5.39 6.53 1.47 22.0 28.4 24.5 19.0 1.5 1.7 6.38 -15.5 4.42 21.9 19.3 BJTOTO 2.41 3.34 0.83 18.4 23.3 13.1 10.4 5.8 6.6 3.30 -27.0 2.25 7.1 -18.6 LUSTER 0.13 0.15 2.12 0.4 0.3 37.0 37.3 0.0 0.0 0.16 -18.8 0.05 160.0 160.0 IHH 5.69 6.41 0.77 7.9 13.1 71.7 43.5 0.6 0.6 6.60 -13.8 5.54 2.7 -10.4 KPJ 1.04 1.17 0.40 3.3 4.1 31.4 25.6 5.9 7.2 1.14 -8.8 0.96 8.1 -0.5 HARTA 6.88 6.87 0.60 17.1 24.6 40.1 28.0 1.2 1.6 7.40 -7.0 4.53 51.9 42.4 KOSSAN 6.92 7.35 0.14 31.6 38.7 21.9 17.9 2.3 2.8 7.36 -6.0 5.62 23.1 5.0 SUPERMX 1.76 1.80 0.31 10.6 15.2 16.6 11.6 1.9 2.6 2.38 -26.1 1.69 4.1 -16.6 TOPGLOV 5.67 6.05 -0.26 26.4 29.8 21.4 19.0 2.3 2.6 5.94 -4.5 4.56 24.3 6.0 KAREX 1.50 1.60 0.23 2.8 4.6 53.8 32.3 1.3 0.8 2.62 -42.7 1.37 9.5 -36.4 SCIENTX 8.63 9.38 0.41 52.3 64.9 16.5 13.3 1.9 2.1 9.85 -12.4 6.50 32.8 28.8 SKPRES 1.50 1.75 0.56 8.4 10.4 17.9 14.5 2.8 3.4 1.55 -3.2 1.24 21.0 16.3 ASTRO 2.83 3.40 1.21 13.2 14.6 21.4 19.4 4.4 4.6 2.94 -3.7 2.47 14.6 8.8 MEDIA PRIMA 0.79 0.60 0.32 0.9 2.8 92.1 27.8 0.9 2.9 1.34 -41.4 0.66 19.8 -31.7 STAR 1.75 1.00 0.60 3.3 4.0 52.8 43.3 24.0 10.3 2.22 -21.1 1.63 7.4 -10.2 Tobacco BAT GAMING Casino NFO HEALTHCARE Hospitals Rubber Gloves INDUSTRIAL MEDIA OIL & GAS DNEX 0.48 0.75 1.22 3.6 4.5 13.3 10.6 2.1 2.1 0.69 -30.4 0.23 113.3 88.2 LCTITAN 5.10 6.88 na 44.1 65.0 11.6 7.8 3.5 6.3 6.53 -21.9 4.14 23.2 -21.5 MHB 0.74 0.78 1.64 -2.0 -0.5 na na 0.0 0.0 1.16 -36.2 0.63 18.4 -19.1 MISC 7.26 6.56 1.03 56.3 46.9 12.9 15.5 4.1 4.1 7.90 -8.1 7.03 3.3 -1.2 PANTECH 0.70 0.69 1.10 4.0 6.1 17.5 11.3 2.6 4.0 0.71 -2.1 0.44 59.8 56.2 PCHEM 7.32 7.62 1.00 44.3 44.7 16.5 16.4 2.6 2.7 7.80 -6.2 6.54 11.9 4.9 SENERGY 1.46 1.66 2.68 6.6 -0.4 22.1 na 0.7 0.0 2.10 -30.5 1.33 9.8 -9.9 SERBADK 2.26 2.77 na 22.1 25.2 10.2 9.0 2.9 3.3 2.34 -3.4 1.51 49.7 50.7 UMWOG 0.30 0.80 1.63 -12.0 -3.5 na na 0.0 0.0 0.92 -67.5 0.27 9.8 -64.9 0.0 0.0 1.98 -26.8 1.28 13.3 -14.7 Note: UMWOG proposed rights issue of shares. Ex-Target price RM0.43. For more details please refer to 08.05.17 report. UZMA 1.45 1.55 1.22 11.3 12.3 12.8 11.8
11. For Internal Circulation Only SNAPSHOT OF STOCKS UNDER COVERAGE Company Share Price Target Price (RM) (RM) FGV 1.71 1.52 1.91 IJMPLNT 2.86 3.58 0.40 IOICORP 4.53 4.14 1.27 KFIMA 1.69 1.89 0.50 KLK 24.78 26.18 SIME 9.04 9.80 UMCCA 6.55 7.52 0.40 GLOMAC 0.68 0.60 0.49 HUAYANG 0.83 0.96 0.56 IBRACO 0.92 0.94 na 3.3 10.5 28.1 8.8 2.2 4.4 1.05 IOIPG 2.00 2.23 1.01 18.9 16.9 10.6 11.9 3.0 3.0 2.38 MAHSING 1.50 1.76 0.95 14.3 13.5 10.5 11.1 4.3 4.3 1.69 SNTORIA 0.79 0.98 0.28 6.2 10.3 12.8 7.7 1.3 1.3 1.00 BETA EPS (sen) FY17 PER (X) Div Yield (%) 52weeks 52weeks % Chg FY18 FY17 FY18 FY17 FY18 High Price % Chg Low Price % Chg YTD 1.0 2.5 172.9 67.1 2.9 2.9 2.45 -30.2 1.42 20.4 10.3 12.3 14.1 23.3 20.3 2.4 2.8 3.70 -22.7 2.86 0.0 -15.9 17.3 21.0 26.1 21.5 2.1 3.5 4.81 -5.8 4.30 5.3 3.0 19.9 13.3 8.5 12.7 5.3 5.3 1.96 -13.8 1.65 2.4 -0.6 0.79 103.4 120.4 24.0 20.6 2.1 2.4 25.50 -2.8 23.00 7.7 3.3 1.48 34.2 37.3 26.4 24.2 2.5 2.5 9.70 -6.8 7.66 18.0 11.6 37.5 31.8 17.5 20.6 3.5 2.6 6.83 -4.1 5.50 19.0 9.7 1.4 5.0 46.6 13.4 4.0 4.0 0.80 -15.6 0.61 10.7 -2.9 17.3 10.2 4.8 8.1 4.8 2.4 1.38 -39.9 0.80 3.7 -26.5 -12.9 0.76 21.2 -8.5 -15.8 1.85 8.3 2.6 -11.2 1.34 11.9 4.9 -21.0 0.69 14.5 -1.3 PLANTATIONS PROPERTY Note: SNTORIA proposed bonus issue of warrants & right issue of shares. For more details please refer to 25.09.17 report. SPB 4.85 5.98 0.56 25.6 22.8 13.5 15.1 2.5 2.5 5.19 -6.6 4.32 12.2 9.7 SPSETIA 3.45 4.10 0.93 11.6 12.5 15.4 14.4 4.1 4.1 4.50 -23.3 3.10 11.3 10.2 SUNWAY 1.79 1.78 0.62 15.8 15.3 12.8 13.2 2.8 2.8 1.96 -8.6 1.24 44.5 39.2 SUNREIT 1.73 1.86 0.69 8.9 10.1 19.5 17.1 5.3 5.8 1.84 -6.0 1.63 6.1 0.6 CMMT 1.41 1.72 0.42 8.1 8.6 17.4 16.3 6.0 6.3 1.72 -18.0 1.40 0.7 -7.8 -24.1 REIT POWER & UTILITIES MALAKOF 1.04 1.22 0.66 6.8 6.9 15.2 15.2 6.7 6.7 1.67 -37.7 1.00 4.5 PETDAG 24.26 21.47 0.71 98.2 102.3 24.7 23.7 3.0 3.1 25.70 -5.6 23.00 5.5 1.9 PETGAS 18.10 19.37 0.86 87.6 100.1 20.7 18.1 3.5 3.9 22.50 -19.6 17.80 1.7 -15.0 TENAGA 14.24 17.38 0.78 131.8 130.4 10.8 10.9 3.1 3.2 14.80 -3.8 13.00 9.5 2.4 YTLPOWR 1.38 1.40 0.76 8.4 11.4 16.4 12.1 3.6 3.6 1.64 -15.9 1.36 1.5 -7.4 12.3 TELECOMMUNICATIONS AXIATA 5.30 5.40 1.28 15.7 16.9 33.9 31.3 1.5 1.6 5.40 -1.9 4.11 29.0 DIGI 4.91 4.90 0.83 20.0 20.4 24.5 24.1 4.1 4.2 5.19 -5.4 4.63 6.0 1.7 MAXIS 5.85 5.85 0.72 24.5 24.7 23.9 23.7 3.4 3.4 6.60 -11.4 5.48 6.8 -2.2 TM 6.30 7.40 0.64 22.7 23.4 27.8 26.9 3.2 3.3 6.79 -7.2 5.81 8.4 5.9 ELSOFT 2.54 3.00 0.56 11.3 14.1 22.5 18.0 3.1 3.9 2.95 -13.9 1.24 105.0 80.9 IRIS 0.18 0.25 1.68 -1.3 0.6 na 31.6 0.0 0.0 0.22 -20.5 0.10 75.0 59.1 INARI 2.60 2.75 0.85 11.3 13.0 23.1 20.0 3.8 3.5 2.65 -1.7 1.59 63.2 56.9 MPI 14.06 15.40 0.11 89.5 110.2 15.7 12.8 1.9 1.9 14.30 -1.7 7.20 95.3 89.7 UNISEM 3.92 4.30 0.65 26.9 32.1 14.6 12.2 3.1 3.1 4.25 -7.8 2.27 72.7 66.1 TECHNOLOGY Semiconductor & Electronics TRANSPORTATION Airlines AIRASIA 3.41 3.76 1.00 44.0 37.6 7.7 9.1 1.2 1.5 3.59 -5.0 2.16 57.9 48.9 AIRPORT 8.35 8.10 1.22 17.3 17.7 48.2 47.2 1.2 1.2 9.45 -11.6 5.91 41.3 37.8 TNLOGIS 1.57 1.80 0.90 12.8 15.9 12.2 9.9 2.7 3.2 1.83 -14.4 1.48 6.1 0.7 WPRTS 3.74 4.05 0.79 17.1 15.1 21.8 24.7 3.4 3.0 4.45 -16.0 3.58 4.5 -13.0 Freight & Tankers SNAPSHOT OF FOREIGN STOCKS UNDER COVERAGE Company Share Price Target Price (S$) (S$) Beta EPS (cent) FY17 FY18 PER (X) FY17 FY18 Div Yield (%) FY17 FY18 52week 52week % Chg High Price % Chg Low Price % Chg YTD BANKS & FINANCIAL SERVICES DBS 21.33 23.30 1.23 172.9 189.2 12.3 11.3 2.8 2.8 22.3 -4.1 14.80 44.1 23.0 OCBC 11.25 12.00 1.20 87.7 92.4 12.8 12.2 5.7 6.7 11.5 -2.1 8.84 35.1 26.1 UOB 24.01 25.40 1.05 192.9 206.5 12.4 11.6 2.9 2.9 24.6 -2.4 17.98 33.5 17.7 PLANTATIONS WILMAR 3.29 3.72 0.87 28.9 31.1 11.4 10.6 2.4 2.7 4.0 -17.8 3.08 6.8 -8.4 IFAR 0.45 0.53 1.08 4.9 5.2 9.2 8.6 2.7 2.9 0.6 -25.2 0.44 2.3 -15.2 BUY : Total return within the next 12 months exceeds required rate of return by 5%-point. HOLD : Total return within the next 12 months exceeds required rate of return by between 0-5%-point. SELL : Total return is lower than the required rate of return. Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return if dividend discount model valuation is used to avoid double counting. Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium.
12. BUDGET PREVIEW Friday , October 06, 2017 FBMKLCI: 1,759.09 THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY* Budget 2018 Preview Potential Rakyat-Centric and Pro-Business Budget Kaladher Govindan Tel: +603-2167 9609 kaladher@ta.com.my www.taonline.com.my Overview Prospering the Rakyat and empowering the private sector to play a major role in nation development will remain the key focus of Budget 2018. As the theme “Shaping the Future” suggests, Budget 2018 should also lay the foundation for sustaining competitiveness and economic prosperity in the distant future by addressing some of the aspirations set forth under “Transformasi Nasional 2050”. Nonetheless, as this is an annual budget, the focus should be on optimal allocation of resources for economic sectors to generate the highest possible return over the 12-month period. Considering that operating expenditure averaged about 83% of total budget allocation in the last five years and given that we are looking at a pre-election budget, the balancing act is not going to be easy. Thankfully, higher collections from GST, a rebound in crude oil prices, efficient tax collection and new sources of tax can provide some breathing space to still pursue a friendly budget. Naturally, with a general election around the corner, this budget is widely expected to empathise and appeal to a wider group of the population. While goodies and incentives, especially for civil servants, households and businesses could be on the cards, it should remain as a pragmatic budget that balances fiscal discipline and future growth aspiration with the well-being of Malaysians. Budget 2018 will be an expansionary budget with an expected allocation of RM269.6bn, including a gross development expenditure of RM46bn. Although the allocation is higher than this year’s RM260.8bn, the budget deficit is expected to be slightly lower at 2.8% in 2018 as opposed to the government forecast of 3.0% in 2017. Lower deficit is aided by 4% growth to RM228.5bn in revenue collections. Higher direct taxes driven by better economic growth and improved tax collection methods, especially on professionals, will be supplemented by higher GST collection (from official target of RM42bn in 2017 to RM46bn in 2018) and higher crude oil prices (2017 budget forecast was USD45/bbl versus current Brent crude oil price of around USD57/bbl and year-to-date average of USD53/bbl). Greater scrutiny and tax collections from ecommerce transactions and e-hailing services are additional revenue sources. Besides measures to enhance Malaysia’s intellectual capital and transform it into a knowledge-based economy that focuses on information, technology and learning, stimulating domestic demand, minimizing the impact of high cost of living on the B40 and M40 segments and assisting the SMEs are likely to remain as the key focus of Budget 2018. It is expected to be positive for Construction, Building Materials and Consumer sectors. Multibillion projects in the pipeline will ensure long-term earnings visibility for the first two sectors while the Consumer related sector will reap the benefit from potential higher cash handouts and measures implemented to enhance the disposable income of the B40 and M40. While property players may not see any relaxation in cooling measures, the brewers and tobacco companies may be spared from higher sin taxes next year. Among the biggest direct and indirect beneficiaries of Budget 2018 among our coverage could be Gamuda (Buy, TP: RM6.00), Gadang ( Buy, TP:RM1.75) , Chin Hin (Buy, TP:RM1.58) F&N (Hold, TP: RM27.41), Carlsberg (Buy, TP:RM18.06), Hup Seng Industries (Buy, TP: RM1.50), QL Resources (Sell, TP: RM3.26), Nestle (Hold, TP: RM92.76), BAT (Buy, TP:RM52.08) and Padini (Buy, TP: RM4.67). Page 1 of 24
13. 6-Oct-17 Budget 2018 – Tailor Made to Fulfil Everyone’s Aspirations The term “prospering the rakyat” need not necessarily mean greater handouts as it should be mainly related to activities that will greatly enhance the quality of life. The government has been aggressively promulgating such vision by increasing allocations into transportation, housing, healthcare and education sectors. These initiatives are expected to continue in Budget 2018 with various long-term rail and road projects, enhancement of ports and airports, government aided housing schemes, construction of new hospitals and increase in provision of specialist care units, and more education facilities at rural areas. Allocations to improve facilities and infrastructure at rural areas, especially in Sabah and Sarawak, could receive a boost in this budget, in view of the impending election. These projects will be pivotal in driving domestic activities and private investment for the next few years - judging from their sheer scale. Much of the news about big ticket items like the East Coast Railway, MRT 2 and 3, LRT Line 3, Pan Borneo Highway, Gemas-Johor Double Track and KLSingapore High Speed Rail have been known for some time but we expect greater progress and awards involving these contracts to materialise in 2018. While it will largely benefit the construction and building material sectors, property players with land banks around these areas will gain from their transit-oriented- developments. Besides, cash incentives and tax relieves may not disappoint in this pre-election budget to boost private consumption, which has shown improvement since the second quarter of last year after reeling under the GST pressure. Its pro-business measures should remain rooted in stimulating private investment, accommodating export driven industries, boosting tourism activities to increase foreign receipts and providing incentives for innovations and application of new technologies that value add to products and services. This may include extension of the 100% investment tax allowance for capital intensive projects, waiver on export duties, bigger grants for business with high exports content, incentives and funding for Small and Medium Enterprises, etc. Nevertheless, the budget will not lose sight on the services sector like wholesale and retail trade, banking, telecommunications, education, healthcare and tourism - as the nation thrives to achieve 58% contribution from the services sector to the GDP by 2020. These efforts are consistent with the measures promulgated under “Transformasi Nasional 2050”, a 30-year blue print that will ensure continuity upon the conclusion of “Vision 2020”. It contains measures to lift Malaysia to the top 20 in economic development, social advancement and innovation. Specific Measures in Budget 2018 That aside, truth to be told, Budget 2018 is widely expected to be a populist budget ahead of the 14th General election, potentially in March or April next year although technically, there is another maximum 60-day window after the parliament dissolves automatically on 24 June 2018. There is no surprise in such anticipation given that the current ruling coalition has to defend its vote bank, especially the civil servants and rural folks, from splinter groups that have broken away from the main component party of the ruling coalition to form their own parties. Thus, this budget may not disappoint in terms of goodies and incentives for the “rakyat”, in particular the civil servants, and businesses. Among the expectations are, 1. An increase in 2018 crude oil price assumption to USD50/bbl in revenue computation from USD45/bbl in 2017. 2. 1Malaysia People’s Aid (BR1M) programme for various categories to be raised between RM100 and RM300, which will increase the allocation for 7mn recipients by RM1bn to about RM7.8bn. 3. Half month bonus for civil servants. 4. Increase in civil servants’ permanent housing allowance to RM450 from current RM300 per month and/or 5 to 10% increase in salary. Page 2 of 24
14. 6-Oct-17 5 . One off special financial assistance payment of RM1000 for civil servants with Grade 54 and below, and RM500 for pensioners. 6. Increase in lifestyle tax relief to RM3,000 from RM2,500. 7. Increase in tax rebates to RM500 from RM400 for individuals with less than RM35,000 chargeable income and an increase in this chargeable income threshold to less than RM50,000. 8. Schooling assistance program allocation to increase to RM150 from RM100 for each student from poor families. 9. Continuation in 15% discount given for full settlement of PTPTN loans and 10% discount for minimum 50% settlement of the outstanding loans. 10. Comeback of MyDeposit programme and 100% stamp duty exemption for house price not exceeding RM500k for first-time house buyers with a gross household income of below RM10,000 a month. 11. Special funding and incentives for involvement in high-tech businesses. 12. Special allocation and tax incentives for small and medium enterprises. Pre-budget Market Reaction FBMKLCI usually rallied prior to annual budgets but the momentum did not last post-budget as most measures generally came within expectations and did not contain significantly positive surprises to sustain the rally. In the last 20 years, the benchmark index showed strong tendency to rally in the two-week period prior to budget with a probability of 80%, an average positive return of 2.6% and an average total return of 1.8%. Chances for post- budget corrections for the same duration are 60% with an average total return of -1.3% and greater average losses of 3.4%. From a total average return perspective, the FBM KLCI tends to underperform during the first two months of post-budget announcement before bouncing back for a year-end or New Year rally. Figure 1 : FBMKLCI Historical Performance - Pre and Post Budget FBMKLCI Historical Performance - Pre and Post Budget Before 1 Month 2 Weeks 0.0% 0.3% BUDGET After 3 Month 0.8% 2 Month -1.2% 2 Weeks 1 Month 2 Month 3 Month -1.3% -2.8% -2.1% -0.3% 2017 21-Oct-16 -0.6% 11.7% 6.1% 0.3% 2016 23-Oct-15 -1.5% -2.9% -4.0% -3.9% -2.2% -3.1% -1.7% 2015 10-Oct-14 0.6% 0.8% -3.9% -4.2% 1.7% 5.5% 2.4% 2.3% 2014 25-Oct-13 -0.7% -1.3% 1.0% -0.8% -5.0% 2.3% 0.7% -0.5% 1.4% 2013 28-Sep-12 1.5% 2.2% -2.4% 2.3% -12.2% -6.5% -4.7% 2.5% 2012 07-Oct-11 2.8% 5.5% 5.8% 8.1% 11.5% 8.7% 1.1% 1.6% 2011 15-Oct-10 1.1% 0.7% 1.4% 5.4% 9.6% 7.9% 4.0% 2.7% 2010 23-Oct-09 -0.5% 0.6% -0.5% 2.6% -21.3% -13.8% -7.3% -5.1% 0.5% 2009 29-Aug-08 -5.1% -7.3% -24.4% -3.5% -5.0% -0.2% 2.5% 2008 07-Sep-07 0.1% 5.2% 6.5% 10.4% 3.2% 5.0% 2.8% 2.0% 2007 01-Sep-06 -0.2% 0.7% 2.9% 12.5% 3.7% -1.1% 1.5% 0.6% 2006 30-Sep-05 -0.2% -2.3% -3.1% -2.9% 3.2% -0.4% 3.5% 3.5% 2005 10-Sep-04 0.6% 1.3% 3.1% 5.3% 7.4% 2.4% 2.3% -0.3% 2004 12-Sep-03 0.2% 6.7% 7.3% 7.1% -9.5% -7.4% -8.0% -3.1% 2003 20-Sep-02 -4.2% -3.0% -5.2% -5.3% -5.2% -6.0% -2.3% 1.0% 2002 19-Oct-01 -3.0% 3.3% 8.0% 13.6% -1.0% -0.7% 9.7% 5.5% 2001 27-Oct-00 -4.9% -9.8% -14.1% -9.6% -3.4% -3.2% 10.0% 3.0% 2000 29-Oct-99 -2.9% 0.4% 7.4% 25.9% 0.3% 32.3% 8.3% 12.8% 1999 23-Oct-98 8.0% 10.0% 28.0% 47.4% -20.6% -9.7% 1.0% -0.3% 1998 17-Oct-97 -16.4% -16.0% -31.5% -32.1% 50.0% 40.0% 65.0% 80.0% Gain Frequency 40.0% 60.0% 50.0% 55.0% 50.0% 60.0% 35.0% 20.0% Loss Frequency 60.0% 40.0% 50.0% 45.0% 4.4% 9.3% 4.1% 2.6% Average Gain 1.8% 3.1% 7.1% 12.8% -7.4% -1.5% -4.2% 1.2% -3.4% 1.5% -1.4% 1.8% Average Loss Total Average Return -3.4% -1.3% -5.7% -0.4% -9.1% -1.0% -9.1% 2.9% Source: TA Securities Page 3 of 24
15. 6-Oct-17 However , in the run-up to recent general elections, the benchmark index showed strong tendency to sustain gains as the equity market is seen as an important yardstick to gauge economic prosperity and influence investors’ acceptance of the ruling parties’ economic policy measures. The benchmark index rose by 4.3% and 4.9% from post-budget to prior-to-dissolution of parliament for the 13th and 12th GE respectively. As macroeconomic variables such as GDP, unemployment rate, inflation, interest rate, etc. also played a crucial role in affecting investment sentiment and remained favourable, there are no major destabilising factors locally at this point in time to prevent a similar recurrence prior to the dissolution of the parliament, which we believe will only happen next year to pave way for an election in March or April. That aside, we acknowledge that geopolitical tension between the US and North Korea will remain as a wild card that could destabilise the market in the immediate term. Continued rate hikes in the US is also another dampener that could expedite foreign net outflows from Malaysia’s capital market, but we do not foresee any exodus of funds until the spread between the US Treasury and Malaysian Government Securities narrows significantly. Figure 2 : FBMKLCI Performance Pre and Post Budget in General Election Years (Index) 13th. GE 2000 1800 12th. GE 1600 1400 11th. GE 10th. GE 1200 2013, Budget 1000 800 2008, Budget 600 400 2000, Budget 2004, Budget 200 Budget Year 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 0 General Election FBMKLCI No. Dissolution of Parliament FBMKLCI change (%) FBMKLCI between Budget & FBMKLCI change (%) Polling Date FBMKLCI Dissolution of Parliament between Budget & Polling date 2000 29-Oct-99 742.87 10th 11-Nov-99 721.52 -2.9% 29-Nov-99 745.91 0.4% 2004 12-Sep-03 740.94 11th 04-Mar-04 886.15 19.6% 21-Mar-04 904.45 22.1% 2008 7-Sep-07 1,304.90 12th 13-Feb-08 1,369.48 4.9% 08-Mar-08 1,296.33 -0.7% 2013 28-Sep-12 1,636.66 13th 03-Apr-13 1,706.28 4.3% 05-May-13 1,694.77 3.6% 2018 27-Oct-17 ?? 14th ?? ?? Source: TA Securities A tabulation of performance of various indices since 2012, as shown below, revealed that there were no specific pre-budget patterns in market behaviour as the pricing behaviour was mixed. The table below illustrates that a pre-budget rally was much broad based in 2016 compared to 2017. In 2017, Construction and Industrial Products are among the very few sectors that witnessed minor upticks just weeks before the budget and experienced the least post-budget correction due to continuity in terms of project flows. Page 4 of 24
16. 6-Oct-17 Figure 3 : Historical Performance of Bursa Malaysia Indices by Sector - Pre and Post Budget % Change Sector Period FBMKLCI Finance Plantation Industrial Properties Consumer Mining Construction Trad/Serv Industrial Prod Technology 2012 8/9/2011 1M Before -4.7% -6.9% -4.2% -6.6% -8.8% -4.7% -7.5% -9.3% -5.6% -8.5% -6.5% 7/10/2011 Budget Date 1,400.05 12,770.83 7,087.01 2,530.92 868.56 430.47 348.55 221.74 176.73 100.31 12.31 6/11/2011 1M After 5.5% 4.0% 6.5% 6.7% 9.7% 5.4% 6.4% 11.0% 6.8% 8.2% 9.3% 6/1/2012 3M After 8.1% 4.8% 19.0% 8.9% 14.2% 12.6% 0.6% 9.1% 9.2% 12.2% 32.3% 6/4/2012 6M After 14.2% 12.6% 23.8% 13.5% 18.5% 18.2% 7.0% 13.9% 14.0% 20.2% 43.5% 6/10/2012 12M After 18.6% 15.0% 15.3% 12.0% 20.6% 21.3% 12.2% 6.4% 17.3% 21.9% 9.8% 2013 28/8/2012 1M Before -0.6% -1.6% -4.2% -2.8% -3.4% -5.3% 2.2% -3.5% 0.0% -2.7% -12.2% 28/9/2012 Budget Date 1,636.66 14,539.05 8,278.08 2,803.62 1,023.42 516.76 376.92 231.66 204.22 120.02 13.59 27/10/2012 1M After 2.2% 2.9% -0.9% 3.7% 5.8% 5.8% 7.5% 3.5% 1.3% 3.1% -0.7% 27/12/2012 3M After 2.3% 5.0% -2.9% -1.9% 2.3% 2.0% 7.5% 1.4% 0.5% 0.2% -10.4% 27/3/2013 6M After 1.9% 8.1% -5.1% 2.3% 14.8% 6.6% 21.5% 6.9% 1.6% 1.1% -14.4% 27/10/2013 12M After 11.1% 15.9% 3.2% 11.6% 32.4% 13.2% 32.3% 24.5% 14.6% 17.6% 7.3% 2014 26/9/2013 1M Before 2.4% 2.2% 2.3% 2.9% 0.8% 0.9% -8.9% 3.0% 2.6% 4.2% 1.6% 25/10/2013 Budget Date 1,817.57 16,854.80 8,541.76 3,127.91 1,355.21 585.06 498.50 288.53 233.96 141.12 14.58 2.1% 24/11/2013 1M After -1.3% -2.4% 3.1% 0.0% -5.6% 0.0% -0.8% -1.5% -0.3% -1.7% 24/1/2014 3M After -0.8% -2.6% -0.5% -2.2% -6.4% -2.1% -4.1% -6.2% 1.0% -2.5% 7.1% 24/4/2014 6M After 2.6% 1.4% 5.4% 1.4% 7.4% 0.7% 5.7% 2.3% 3.1% 3.0% 19.4% 24/10/2014 12M After 0.1% -1.1% -4.7% 2.5% 5.1% -2.0% 13.8% 3.5% 2.3% -2.5% 23.9% 2015 11/9/2014 1M Before -3.1% -4.1% -4.0% -3.4% -5.7% -4.4% 0.7% -3.5% -3.1% -4.6% -9.9% 10/10/2014 Budget Date 1,808.88 16,759.57 8,175.25 3,129.38 1,417.19 577.29 587.66 293.27 235.91 138.73 17.97 9/11/2014 1M After 0.8% -1.0% 3.7% 5.2% 1.8% 1.3% -2.8% 5.1% 1.6% -0.7% 4.2% 9/1/2015 3M After -4.2% -9.4% -4.6% 1.0% -10.5% -3.8% -10.3% -4.9% -2.8% -10.0% -2.9% 9/4/2015 6M After 2.2% -2.0% -4.4% 8.3% -6.8% 4.7% -3.4% 3.3% 3.8% -1.5% 23.7% 9/10/2015 12M After -5.7% -13.5% -8.7% 6.1% -17.0% 0.5% -11.7% -5.9% -3.0% 2.5% 21.6% 2016 24/9/2015 1M Before 6.1% 4.3% 9.7% 8.7% 4.5% 3.2% 0.8% 5.7% 6.6% 7.8% 10.1% 23/10/2015 Budget Date 1,710.93 14,613.38 7,607.48 3,368.50 1,209.98 584.45 502.55 278.09 229.75 145.84 23.09 22/11/2015 1M After -2.9% -3.7% -1.4% -2.2% -1.0% 1.1% 2.4% -1.7% -1.1% 1.7% 7.6% 22/1/2016 3M After -5.0% -6.7% -2.0% -6.6% -7.7% -0.5% -1.6% -3.6% -4.3% 2.2% 3.5% 22/4/2016 6M After 0.4% 2.0% 1.9% -2.9% -1.9% 2.2% 0.0% 4.5% 1.1% -0.5% -3.2% 21/10/2016 12M After -2.4% -1.3% 4.7% -6.7% 0.0% 3.7% -4.0% 4.7% -1.7% 1.1% -0.2% 2017 22/9/2016 1M Before 0.0% 0.9% 0.2% 0.3% -0.1% 0.5% 0.0% 0.8% -0.8% 2.3% 1.4% 21/10/2016 Budget Date 1,669.98 14,429.34 7,961.36 3,142.80 1,209.86 605.86 482.29 291.20 225.95 147.45 23.04 -3.3% 20/11/2016 1M After -2.8% -2.2% -2.4% -2.5% -3.5% -3.3% -0.8% -0.7% -3.1% -2.1% 20/1/2017 3M After -0.3% 1.9% -0.6% -0.5% -4.5% -4.7% -0.8% 1.3% -2.0% -1.2% 1.4% 20/4/2017 6M After 4.3% 9.3% 0.5% 2.2% 7.3% 2.1% 4.2% 12.6% 3.7% 3.0% 36.5% 20/10/2017 12M After na na na na na na na na na na na Source: Bloomberg, TA Securities Conclusion Budget 2018 is expected to include wholesome measures to propel growth, and please the rakyat and businesses without swaying away from a tight fiscal discipline. It should highlight sufficient measures to sustain long-term competitiveness by empowering the private sector and developing the human capital. However, more needs to be done to improve on business and industrial clusters to create entire value chains that will be productive, cost effective and technologically more superior to other regional economies. To do that, we need to revamp the education system, hone our skills, honour talent, foster creativity and research, and develop viable long-term strategies that best fit our resources and needs. (Specific measures and the impact on the economy and sectors are discussed in the following pages.) Page 5 of 24
17. 6-Oct-17 Malaysian Economy 2018 Budget Review – Looking Beyond Ahead Shazma Juliana Abu Bakar shazma@ta.com.my farid@ta.com.my Tel: +603-2167 9608 www.taonline.com.my This Year’s Theme is “Shaping the Future” Eyes will be on the upcoming Budget 2018, scheduled to be on 27 October 2017. Themed “Shaping the Future”, we believe it will outline and emphasis the path for the country’s aspirations for the next 30 years under “Transformasi Nasional 2050” (TN50). A pragmatic plan is expected, which contain growth accelerators without compromising on fiscal prudence and the wellbeing of Malaysians. In fact, the government has started preparing groundworks for the environment, education, housing and social aspects areas, aiming to put Malaysia as the top 20-nations by 2050. Resilient Growth Prospect 2018 is the midpoint of the 11th Malaysia Plan (2016 – 2020). Despite numerous government initiatives to ensure that the country stands on strong economic fundamentals, which in turn would benefit the people, we are still wrestling with the Middle Income Trap status. As the average growth so far has been at the lower end of the 5.0% - 6.0% target (Average 2016 – 1H17: 5.0% YoY), we expect more macro-economic measures and socio-economic targets to be announced in the next three years in order to tackle the slacks and shortfalls. The government is expected to table the Mid-Term Review of 11MP in the middle of next year. Figure: Malaysia’s Real GDP Growth Performance and Comparison (2016 – 2018F) 11MP Target TA Forecast TA Forecast 2016 - 2020 2017e 2018f 5.3% 3.7% 3.6% 6.4% Demand Side 2016 1H17 Government Consumption 1.0% Private Consumption 6.0% 6.9% 6.4% 6.3% 6.1% Gross Fixed capital formation (GFCF) 2.6% 6.9% - 5.5% 4.9% Public Investment -0.6% -0.9% 2.7% 1.3% 4.3% Private Investment 4.3% 10.0% 9.4% 5.0% 5.2% Net Exports 1.5% -6.7% - 2.4% 2.7% Exports 1.1% 9.7% 2.1% 8.8% 4.0% Imports 1.1% 11.8% 2.3% 9.7% 4.1% Real GDP 4.2% 5.7% 5% - 6% 5.5% 5.4% 2016 1H17 11MP Target TA Forecast TA Forecast 2016 - 2020 2017e 2018f Agriculture -5.1% 7.1% 3.5% 4.4% 3.4% Mining 2.2% 0.9% 1.3% 0.9% 2.0% Supply Side Manufacturing 4.4% 5.8% 5.1% 5.9% 5.4% Construction 7.5% 7.4% 10.3% 8.3% 8.9% Services 5.6% 6.1% 6.9% 5.9% 5.8% Real GDP 4.2% 5.7% 5% - 6% 5.5% 5.4% Source: BNM, MOF, TA Securities So far, the Malaysian economy is progressing well to a position of strength. Favourable economic indicators to date on top of sturdy first and second quarter GDP growth suggested that the economy could expand by more than 5.0% in 2017. Furthermore, the Malaysian economy is well diversified in terms of sources of growth owing to the economic, financial and fiscal reforms undertaken thus far by the government. We also noted positive news flows of foreign policy initiatives, which suggest higher foreign direct investment this year and the years to come. Page 6 of 24
18. 6-Oct-17 Maintain our 2017 real GDP forecast at 5 .5% YoY supported by higher exports and continued strength in private domestic demand. Our projection is stronger than Bank Negara’s official projection of 4.3% to 4.8% as well as the Ministry of Finance’s forecast of 4.0% to 5.0% (as per the Economic Report 2016/17). Indeed, most of the multi-lateral agencies are upgrading Malaysia’s GDP growth, with the latest from World Bank which expecting 5.2% GDP growth this year and 5.0% for next year. ADB also tweaked its Malaysia's growth forecast for this year and next year to 5.4% from 4.4% and 4.6% previously in July forecast. Figure: Malaysia’s Real GDP Growth (2012 – 2018F) % YoY 6.5 6.0 6.0 5.5 5.5 5.5 5.3 5.4 5.0 5.0 4.7 4.5 4.2 4.0 3.5 3.0 2011 2012 2013 2014 2015 2016 2017e 2018f Source: BNM, MOF, TA Securities Subsequently, the Malaysian economy is expected to sustain its current growth momentum into 2018, albeit, at a moderate pace (TA forecast: 5.4% YoY), amid expectation of slower exports and domestic demand. We predict a slower trade performance next year influenced by rising external uncertainties including continued slowdown in China and the lingering impact of US economic policy and its tightening monetary policy. Besides BR1M, we hope for more measures from the government to sustain private consumption next year. This is in view of rising cost of living and lacking of catalysts. In fact, the EPF voluntary employees’ contribution reduction from 11% to 8% is set to expire in December 2017 and we don’t foresee any review in minimum wage soon. On the supply side, a broad-based forecast is expected led by the manufacturing and services sectors. That 3.0% Deficit is Achievable This Year We remain confident that the government would achieve its fiscal deficit target of 3.0% this year, partly aided by higher revenue collection amid prudent spending. Indeed, other fiscal reform measures such as the GST and subsidy rationalisation has also helped to cap the fiscal deficit. We expect total revenue collection in 2017 would be slightly higher than the RM219.8bn target (as per Economic Report 2016/2017) boosted higher by both oil- and nonoil revenue. At the point of writing, crude oil price has averaged USD52.57 per barrel so far in 2017, way above than the government’s conservative target of USD45 per barrel. Indeed, Petronas has raised its dividend payment to RM16bn this year, up from RM13bn previously mentioned amid higher oil prices and higher margins. Despite that, the percentage of oil revenue share to total revenue still remains low following the diversification of sources of income. Higher non-revenue collection is also expected, contributed by an increase in income taxes (both personal and corporate), in line with stronger economic growth. In addition, the GST collection is also expected to be higher than RM42bn target set this year, according to the Royal Malaysian Customs Department. Total GST collection was RM19.3bn in 1H17. Page 7 of 24
19. 6-Oct-17 Not much changes is expected for total expenditure . On the operating expenditure, the government is expected to manage the ballooning share of emoluments (more than 34% in 1H17) while development expenditure so far remained manageable at RM20.2bn – still below than 50% of RM46bn allocated this year. To recap, total expenditure for 2017 is estimated to increase by 3.4% to RM260.8bn, with 82.4% allocated for Operating Expenditure (OE), or RM214.8bn, and the remaining RM46bn for Development Expenditure (DE). Figure: Key Statistics of Malaysia’s Total Revenue, in RMmn Federal Government Revenue 2016 1Q17 2Q17 1H17 2017e** 109,608 24,194 24,887 49,081 120,739 Companies income tax 58,216 13,045 13,367 26,412 69,193 Petroleum income tax 8,422 758 1,696 2,454 10,637 Individuals income tax 33,017 8,114 7,259 15,373 29,853 Others 9,953 2,277 2,564 4,842 11,056 59,841 Direct Tax Indirect Tax 59,736 13,428 14,654 28,082 Export duties 980 352 321 673 731 Import duties 2,905 607 693 1,300 3,008 Excise duties 11,705 2,451 2,810 5,261 13,111 Goods & services tax 41,206 9,200 10,111 19,310 40,000 Sales tax 103 9 13 22 0 Service tax 103 3 4 6 0 2,733 807 702 1,510 2,991 Others Non-Tax Revenue Tax Revenue 40,006 8,040 10,122 18,162 39,146 212,421 46,645 50,431 97,076 219,726 ** Projection from Economic Reports 2016/2017 Source: BNM, MOF, TA Securities Figure: Key Statistics of Malaysia’s Total Operating Expenditure, in RMmn Operating Expenditure Emoluments 2016 1Q17 2Q17 1H17 2017e* 73,108 18,976 19,714 38,691 77,422 Pension and gratuities 21,029 5,934 5,638 11,572 21,763 Debt service charges 26,479 7,199 6,262 13,461 28,866 Domestic 25,732 7,091 6,010 13,101 28,150 External 748 108 252 359 716 Supplies and services 30,070 6,539 9,053 15,592 32,020 Subsidies 24,564 7,916 5,426 13,342 22,431 Asset acquisition 676 20 51 71 691 Grants and transfers & Others 34,246 10,975 7,391 18,366 31,607 Total Operating Expenditure ** Projection from Economic Reports 2016/2017 Source: BNM, MOF, TA Securities 210,173 57,559 53,536 111,094 214,800 Page 8 of 24
20. 6-Oct-17 Figure : Key Statistics of Malaysia’s Total Development Expenditure, in RMmn Development Expenditure by Sector 2016 1Q17 2Q17 1H17 2017e* 25,113 5,666 6,101 11,767 25,862 Transport 7,827 2,120 3,535 5,655 10,599 Trade and Industry 4,841 1,375 634 2,009 4,927 Public Utlities and energy 2,927 435 599 1,033 2,582 Agriculture and rural development 2,902 554 260 814 2,416 Economic Others 6,616 1,183 1,073 2,256 5,339 10,429 3,145 3,882 7,027 12,180 Education and Training 3,727 1,293 1,457 2,750 5,904 Housing 2,238 191 211 403 1,532 Health 1,495 236 369 605 870 Social and community services 2,968 605 639 1,245 3,875 Social Defence and security 4,832 819 1,205 2,025 5,286 General Administration 1,621 638 788 1,426 2,671 Total Development Expenditure 41,995 10,269 11,975 22,244 46,000 ** Projection from Economic Reports 2016/2017 Source: BNM, MOF, TA Securities Further Fiscal Consolidation Ahead For 2018, we predict that the fiscal balance will consolidate further to 2.8% of GDP on assumption of higher revenue collection especially from the non-oil sources. This is despite higher allocation for operating expenditure following bigger spending for emoluments and continued BR1M cash assistance. A balanced budget by 2020 (as targeted in 11th Malaysia Plan) may not achieved based on the current economic prospect and commodities outlook. Figure : Malaysia’s Fiscal Balance (2010 – 2018F) RMbn 0.0 % of GDP 0.0 -1.0 -10.0 -2.0 -20.0 -3.0 -30.0 -4.0 2018F 2017E 2016 2015 2014 2013 -6.0 2012 -50.0 2011 -5.0 2010 -40.0 Source: Department of Statistics, TA Securities Figure: Summary of Malaysia’s Fiscal Position (2014 – 2018F) 2014 2015 2016 2017e* 2018f** Total Revenue 220,626 219,089 212,421 219,726 228,465 Total Expenditure 259,093 257,765 252,168 259,800 268,649 Operating 219,589 216,998 210,173 214,800 223,649 Development 39,503 40,768 41,995 45,000 45,000 -37,414 -37,194 -38,400 -40,313 -40,184 -3.4 -3.2 -3.1 -3.0 -2.8 Overall Surplus Budget % of GDP All figures are in RMmn * Projection from Economic Reports 2016/2017 **Projection by TA Research Source: Economic Report 2016/2017, TA Securities Page 9 of 24