☕️ 1MDB debt: RM32.08 bil outstanding, RM10.8 bil repaid

1. MARKET SUMMARY

The European Central Bank hiked interest to cool inflation by 0.5% to 0% — yes, zero per cent. Interest rates can be negative - learn more here.

2. NUMBERS AT A GLANCE

According to the Department of Statistics Malaysia (DOSM), Malaysia has a skewed gender ratio with males outnumbering females over the decades. There are 110 males to every 100 females in Malaysia in 2020. One key fact — the figure includes foreigners. For Malaysian citizens, the ratio is 103 males to every 100 females. Another contributing factor is higher male birth rates.

In another research by DOSM in 2019, it found that only 22.1% of students furthered their studies after SPM. The 2019 cohort sample showed that of 560,000 students that sat for SPM, about 170,000 further their studies. This is a very worrisome finding — Malaysia’s global competitiveness and productivity will decline over the long-term and by the time we take action, it has probably fallen off the cliff. 

1 in 10 of all crash-related deaths on the road globally is from India despite contributing to just 1% (3 mil) of cars sold globally, according to the World Bank. The primary reason is due to the lack of enforcement of 6 airbags in the car, as adding the additional four beyond the mandatory 2 in the front will inflate car prices by at least 5.5% — not ideal in a price-sensitive market in India.

3. IN MALAYSIA 🇲🇾

1. Kulai MP Teo Nie Ching has slammed the government for resorting to discussing the Sulu arbitration matters behind closed doors at a 5-star hotel, saying that it is a waste of money to rent a ballroom while there are readily available facilities such as the Dewan Rakyat.Once again, matters of national interest will be discussed in a ballroom hotel (read- Sheraton Move).

2. In today’s edition of Najib Razak & Co.’s adventure at the courthouse -

   1. In Najib Razak’s SRC International trial, the high court rejected the application to have the Queen’s Counsel (Jonathan Laidlaw) represent him for the case. The verdict was given by Justice Ahmad Kamal as he viewed that Laidlaw possesses no special qualifications or skills compared to the available pool of lawyers in the country.

   2. In the income tax case, the federal court has set Sept 21 as the date to hear the application of Najib Razak and his son to stay the judgement awarded by the High Court in 2020, which requires them to pay a hefty sum of RM1.72 bil to the Inland Revenue Board.

3. All things hutang (debt):

   1. Malaysia and Thailand have among the highest household debt-to-GDP ratio in 2021 and are at risk of non-performance as interest rate normalises. Apart from that, many countries in Southeast Asia are facing house affordability issues, driven by an inflow of hot money and speculation.Hot money signifies currency that quickly and regularly moves between financial markets to capitalise on available short-term interest rate opportunities.

   2. Finance Minister Tengku Zafrul told the Parliament that the federal debt level stands at 63.8% of the GDP or RM1.045 tril (well below the 65% threshold). However, he does not clarify whether government guarantee (GG) is included in the debt calculation. GG, given in mega projects, is like a personal guarantee — if the guaranteed party fails to fulfil their financial obligation, the government is then obliged to repay it.

4. 1MDB’s debt stands at RM32.08 bil as at Jun 30, 2022, according to the FInance Minister, with RM10.84 bil repaid. That’s a total of RM42.9 bil debt obligation that could have gone to better use (i.e. increasing salaries of top government officials by 40%, especially during an inflationary environment).

5. According to CGS-CIMB Research, Malaysia Airports Holdings (MAHB) may need to raise borrowings as MAHB does not have enough cash balance to pay their debt, amounting to RM1.5 bil due at the end of the year. Although air passengers traffic will increase soon, increasing depreciation expenses will constrain MAHB earnings growth.Taking on new debt to repay old debt is called debt refinancing. 

Shorts:

1. Minister in the PM’s Department (Economy), Mustapa Mohamed, said that the implementation of 30 new projects under various ministries worth RM100 mil will be shelved. More projects will be identified soon to be shelved.

2. Samsung SDI breaks ground for the RM5.8 bil battery factory in Negeri Sembilan. This will be the second battery factory producing cylindrical batteries that will be used in various applications such as electric tools and electric vehicles.

3. German manufacturer Leuze Electronic plans to expand its optical sensor manufacturing plant in Melaka, doubling its investment to RM200 mil. The company had invested RM100 mil earlier. German companies have invested RM15 bil in Melaka so far.

4. Prasarana will receive 27 new trains worth RM1.72 bil for its Kelana Jaya Line in stages by December 2024 (RM63.7 mil per train). The train will be supplied by a consortium consisting of Hartasuma and Alstom and 45% of the project is locally sourced (local expertise and resources).

5. Sex and greed — are the two deadly ingredients to pull off a successful scam. A group of five men used the women’s allure and fast return to run a bitcoin investment scam. The suspects aged between 23 and 32 years old would pose as women on social media to hook male victims into falling for their scheme.

4. AROUND THE WORLD 🌎

1. Head of government changes:

   1. Italian PM Mario Draghi has resigned after losing in a confidence vote. Dubbed Super for his handling of the eurozone crisis when he was the head of the European Central Bank, he was the popular choice to be the PM as he was appointed as the nation’s unelected head of unity government 1.5 years ago.

   2. 6-time PM of Sri Lanka Ranil Wickremesinghe has been sworn in as Sri Lanka’s eighth president after receiving an overwhelming 134 parliamentary votes out of 224. Many protesters wanted him out as he was seen as an ally of the Rajapaksa family.

   3. Former UK finance minister Rishi Sunak and Foreign Secretary Liz Truss are the final two candidates from the Conservative party to be elected as the party’s new leader and UK’s new PM, which will be decided latest by Sep 5, 2022.

2. Money Heist: China - China deployed tanks to scare street protesters demanding the release of their funds from banks in Henan province. On a serious note, this is a grim reminder of the Tiananmen Square Massacre in 1989 that saw about 200 people die in the protest. Clashes between police and protesters have been ongoing for weeks after the banks froze withdrawals. Chinese banking regulators are taking fresh measures to cool the situation down by making repayment effective Jul 25 to individual depositors with deposits of up to RMB100,000 (USD14,787).

3. An eventful day for the crypto industry:

   1. Crypto contagion continues — Zipmex, a cryptocurrency exchange operator in Singapore and Thailand, halted withdrawals as it has exposure to troubled crypto lenders Babel Finance and Celsius Network.

   2. One of the world’s largest cryptocurrency exchanges, Coinbase escaped the contagion, at least that’s what it claimed. Its stock jumped 20% after it announced that it has no exposure to Celsius, Three Arrows or Voyager Digital.

   3. Elon Musk’s Tesla sold 75% of its Bitcoin holdings for USD963 mil, with a balance of USD218 mil left. Its CFO Zachary Kirkhorn said that the reason for sale is to maximise its cash positions given the uncertainty in China’s Covid lockdowns, and they are open to increasing its Bitcoin holdings in the future and that its current sale should not be taken as “some verdict on Bitcoin”.

   4. South Korean prosecutors raided seven crypto exchanges’ offices, seeking evidence of illegal practice involved in the collapse of the Luna cryptocurrency in May that wiped out USD60 bil in value. The government also postponed the 20% tax on crypto gains by two years to 2025.

   5. Finland sold 1,889.1 bitcoin, raising EUR46.5 mil (USD47.5 mil). The stash was seized before 2018 from drug busts and, at its peak last year was worth USD130 mil. The government still holds 90 bitcoin.

4. Tech giants TikTok and Stripe losing ‘paper wealth’:

   1. TikTok’s valuation drops below USD300 bil, down by at least 25% in private market transactions. Its valuation even went above USD460 bil last year.

   2. Last valued at USD95 bil, fintech payment giant Stripe’s internal valuation dropped by 28% based to USD 74 bil, based on a 409A price change. Not a good day for its employees who hold stock options and venture backers who hold preferred shares. What is a 409A? Read more about it here.

Shorts:

1. Ecommerce giant Amazon spreading its wings into healthcare - it acquired One Medical, a primary health care provider (clinics to us), in an all-cash deal worth USD3.9 bil. One Medical is present in 25 markets with 188 medical offices and counts 767,000 members.

2. Russia resumes pumping gas to Europe as the Nord Stream 1 pipeline is back online after a 10-day maintenance break, allaying fears that Russia will completely cut off its supplies to Europe.

3. An An, the world’s oldest male panda at the age of 35 (the human equivalent of 105) in captivity, has died in Ocean Park, an amusement park in Hong Kong, after park officials decided to euthanise it to “alleviate the geriatric panda’s discomfort”.

5. FOR YOUR EYES 👁👁

1. The video shows Russian forces downing a jet last month. Turns out, an inspection of its wreckage showed that it’s their own brand new jet they took delivery in June.

2. A hidden self-portrait of Dutch painter Vincent Van Gogh has been discovered through an X-ray of Van Gogh’s 1885 “Head of a Peasant Woman”. 

3. Enrich your understanding of vocabulary - the different meanings of animal sh*t