☕️ Clearing the air on TNB's electricity tariff hike

1. MARKET SUMMARY 📈

2. NUMBERS AT A GLANCE 🔢

29 members now make up the Schengen zone, which includes 25 EU member states along with Switzerland, Norway, Iceland, and Liechtenstein. This zone, created in 1985, is the world’s largest area without internal border controls, allowing over 400 million people to travel freely. Bulgaria and Romania have been cleared to become full members of the Schengen zone starting next year, following a 13-year journey to accession.

108,000 Americans died from overdoses of opioids in 2022 alone, contributing to over 1 mil overdose deaths since the turn of the century. The opioid crisis, which began with the overprescription of pain pills and escalated through heroin and fentanyl, continues to claim lives. Fentanyl, a synthetic opioid so potent that 0.2% of a gram can be fatal, has been at the heart of the crisis. However, there is reason for cautious optimism. Data from the Centres for Disease Control and Prevention (CDC) suggests that overdose deaths peaked around August last year, with 90,000 deaths recorded in the 12 months leading to July this year—a reduction of around one-sixth compared to previous years.

Diamond giant De Beers are now facing sinking demand and tough competition, causing them to accumulate the biggest stockpile of diamonds since 2008. The firm's diamond trove has stood at around USD 2 bil for most of this year. They began stockpiling unsold inventory post-COVID, with hopes that over time, the diamond price will increase and they will be able to sell that supply into the growing demand that would come. Alas, it never arrived. A slowdown of demand in China has contributed to the slump of 28% in the first half of 2024, while growing popularity of lab-grown diamonds that look the same at a fraction of the naturally mined diamonds are adding pressure to the company. A diamond is forever - no more?

3. IN MALAYSIA 🇲🇾

Kelantan in the Focus
After announcing that all eateries will require halal certifications before their operating licenses can be renewed, the Kelantan State Government is changing its tune after rows of criticism from the public. Let’s hear some of the outcries: 

• The Kelantan Malay Restaurant Owners Association (Permeka)
  Permeka chairman Nik Hassan Zain is appealing to the state government to postpone the ‘wajib sijil Halal’ policy as the group was not consulted in the decision. Nik Hassan added that obtaining a halal certification requires a substantial financial investment, and most eateries cannot afford it as they are small and medium-sized enterprises. Nik Hassan suggested that the implementation should kick start in January 2026 as restaurant operators need to also ensure their supply chains are halal certified in order to have their own eateries halal-stamped.

• Department of Islamic Development Malaysia (JAKIM)
  JAKIM director-general Dr Sirajuddin Suhaimee stated that having halal certification remains voluntary in Malaysia and Kelantan is alone in mandating eateries to be halal certified. Nonetheless, Dr Sirajuddin lauded Kelantan’s move to mandate halal certification for their food and beverages establishment, citing it is an initiative to increase the number of halal certification holders.

After rounds of feedback from the public, the Kelantan State Government via its exco member Hilmi Abdullah clarified that the halal mandate only applied to F&B eateries that serve Muslim customers and non-Muslim-only establishments are exempt. Hilmi also stated that this policy is not rushed as it was mooted and approved in 2016 at the Kelantan executive council level before being refined by the Local Government, Housing, and Health Committee in 2020.

Apart from the halal mandate, Kelantan is also looking to follow in the footsteps of its neighbour Terengganu to adopt the sentencing of whipping in public. Kelantan state councillor Asri Mat Daud said that the state’s shariah criminal law has been amended in 2017 to allow public whipping for certain offences. Recently, Affendi Awang, 42, was the first person in Terengganu to be whipped in public (six strokes of rotan) for repeated khalwat offences. Khalwat is a criminal offence in Malaysia and is defined as being caught alone in private with a member of the opposite sex who is not an immediate family member.

Unfriendly weather coming into 2025
Banjir Besar 2.0 could be coming as the Department of Irrigation and Drainage (DID) predicted that some areas in three districts in Pahang — Kuantan, Pekan and Rompin — will experience flooding due to continuous raining until Dec 30, 2024 (today). DID assured the public that monitoring efforts will continue, and updated information will be provided should significant rainfall persist. The public can access real-time updates and warnings via the website publicinfobanjir.water.gov.my or the Facebook page PublicInfoBanjir.

What is happening with the electricity tariffs?
After public ran amok when TNB announced electricity tariff hikes of about 14%, scheduled by mid-2025, PM Anwar Ibrahim told the media at an event in Langkawi that Putrajaya will not allow any increase in electricity tariff that will burden the majority of the public. PM Anwar stated that any electricity tariff hike will only affect the ultra-rich (mahakaya) or profitable industries. However, TNB CFO Nazmi Othman reassured that 85% of domestic users will not see any tariff increase until June 30, 2025, in line with the government’s resolution on Dec 20, 2024. Previously, TNB announced that the base electricity tariff will increase by 14.2% to 45.62 sen/kWh in 2025-2027. The new tariff will only be enforced by 2H2025. In the meantime, there will be no changes to the current tariff.

While we are at this topic, let’s understand more about the tariff hike. TNB stated that the electricity tariff will be increased soon due to higher fuel cost assumptions to generate power. So, is TNB struggling financially to generate power for Malaysians at the moment? In FY2023, TNB generated RM53.07 bil (FY2022: RM48.46 bil) in revenue and RM2.77 bil (FY2022: RM2.96 bil) in net profit. Their EBITDA margin is quite healthy at 35.1%.  During the same period, TNB CEO at that time, Ir. Bahrain Din also pocketed RM3.95 mil that year, including salary, emoluments and other benefits. So, TNB is obviously not struggling but why they are making the average people struggle even more. Understandably, TNB is a business that has to prioritise profits, but it also has a larger public goal to optimise for. Tough spot to be in.

Khazanah doesn’t want to fall behind in the AI world
Khazanah Nasional Bhd has announced that the sovereign wealth fund has invested an undisclosed amount towards private equity Cambrian Fund and California-based artificial intelligence (AI) firm Syntiant Corp. The investment was done via Khazanah’s RM1 bil Dana Impak fund. More info on the investments:

1. Cambrian Fund is founded by the founders of Penang-based automated test equipment manufacturer ViTrox Corp Bhd (Bursa-listed with market cap of RM7.72 bil) and the fund is dedicated to supporting entrepreneurs and SMEs focusing on IR4 technologies, such as machine vision, AI and robotics.

2. Syntiant Corp is a AI software and hardware provider that was founded in 2017. As part of the terms of Khazanah’s investment, Syntiant will commit to set up an AI R&D centre in Malaysia and to acquire Knowles Corp's consumer MEMS microphones (CMM) division, which has significant assembly and testing operations in Malaysia.

Malaysia secured 12 golds and emerged as the overall champion at the Asian Open Silambam Championship in Qatar
Malaysia Silambam Association president Dr M. Suraess stated that most athletes that won participated at the Sarawak Malaysia Games (Sukma), thus highlighting the importance of Sukma in developing local athletes. But before that, what is silambam? Silambam is an old Indian martial art originating in the southern Indian state of Tamil Nadu.

4. AROUND THE WORLD 🌎

A weekend of horror for the airline industry

• 177 killed in South Korean plane crash
  177 people on board South Korea’s Jeju Air 7C2216 have died after the airplane skidded off a runway and collided with a barrier at an airport in Muan County, South Korea. The flight had departed from Bangkok with 175 passengers and 6 crew members aboard. Watch the moment the plane crashed here.

  Amazingly, 2 people had been rescued from the crash, while Choi Sang-mok, South Korea’s acting president, declared the region a special disaster zone, which allows those affected to receive support funds from the state. The aircraft involved in the crash was a Boeing 737-800, a narrow-body jet, according to Flightradar24. It has a strong safety record and is a workhorse of commercial air travel. The 737-800 is a predecessor to the 737 MAX, which was involved in two separate fatal crashes and was grounded worldwide in 2019 for nearly two years.

  A bird strike and adverse weather conditions were cited by fire authorities as likely causes of the crash that flung passengers out of the plane and left it almost completely destroyed.

• Netherland’s KLM made emergency landing in Norway
  Meanwhile in Norway, KLM flight KL1204 en route from Oslo to Amsterdam made an emergency landing on Dec 28 night, with all 176 passengers and 6 crew safe. The pilot diverted the plane to Torp Sandefjord Airport, approximately 150 km south of Oslo, as a precaution after a "loud noise" was heard in the cabin of the plane shortly after takeoff. The aircraft landed safely but veered off the runway at low speed, coming to a stop on the grass beside the runway. Watch the incident here.

• Air Canada caught fire during landing
  Across the globe, an Air Canada plane caught fire after skidding down the runway at the Halifax Stanfield International Airport hours after South Korea crash, causing the airport to briefly shut down. Air Canada Flight 2259, operated by PAL Airlines, has just arrived from St John’s Newfoundland, when a malfunction in the landing gear triggered a fire that spread across part of the aircraft. Initial reports said that it began when one of the tires failed to deploy correctly, resulting in an imbalance that caused the aircraft to scrape along the tarmac. All passengers and crews were safe, albeit with some minor injuries. Watch the incident here.

Two brothers turn USD15,000 loan into empire of cheap toys
Brothers Nick and Mat Mowbray from New Zealand once ventured into Guangzhou, China with only NZD 20,000 loan from their parents. They began a business of cheap toys that churned out toys that rivalled big brands, such as plastic dart blasters, blind box collectibles, plastic brick toys and water balloon kits. It eventually turned Mowbray brothers into billionaires, according to the Bloomberg Billionaires Index.

Under the name Zuru, their revenue is projected to hit NZD3 bil in 2024, and the company expects annual growth of as much as 30%. Toys account for two-thirds of sales, with the rest coming from emerging bets on other consumer goods. It now employs more than 5,000 people in over 30 global locations.

The company expanded beyond toys six years ago and made products like shampoo and dog food and diapers. The company is eyeing an expansion into home production, with plans to pursue an IPO in the near future.

Nasa probe gets really close to the Sun, a historical record for mankind
Nasa’s Parker Solar Probe had made history as it plunged into the sun’s outer atmosphere on Christmas Eve, enduring brutal temperatures and extreme radiation in a quest to better understand how the Sun works. The probe sent a signal back to Earth after going out of contact for several days during its burning-hot fly-by, coming back safe and sound after being 61 mil km from the solar surface. It moved at a speed of 692,000 km/h, and endured temperatures up to 980c. The probe was protected with an 11.5cm thick carbon-composite shield, but the spacecraft's tactic was to get in and out fast.

The close-up enabled Nasa to take measurements that help scientists better understand how material in this region gets heated to millions of degrees, trace the origin of the solar wind, and discover how energetic particles are accelerated to near light speed. The solar wind that bursts out of the sun’s corona creates dazzling auroras and knocks out power grids, electronics and communication systems on Earth, hence the importance of understanding the phenomena better.

Since its launch in 2018, the probe had already swept past the Sun 21 times, getting nearer everytime.

Shorts

1. US may hit new debt limit as early as Jan 14

   The US risks defaulting on its debt by Jan 14, prompting the Treasury to start taking extraordinary measures by then. Under a 2023 budget deal, Congress suspended the debt ceiling until Jan 1, 2025. The US Treasury will be able to pay its bills for several more months, but Congress will have to address the issue at some point next year, lest the default would likely have severe economic consequences.

2. Berkshire Hathaway is buying up shares of internet domain provider VeriSign

   Warren Buffet’s Berkshire Hathaway has bought shares of the internet domain services provider VeriSign, making it the largest shareholder of the internet company, which was founded in 1995. Altogether, Berkshire Hathaway now owns 13.2 million shares of the company, worth about USD2.7 billion. According to financial data as of the 3Q, the company is ranked fifth in the S&P 500 for the highest profit margin, at about 56%, tied with Nvidia. For operating margin, VeriSign is ranked third, and for gross margin, it's ranked 13th.

3. Thailand to impose 15% corporate tax for MNCs effective Jan 1

   As part of its efforts to update its tax system and meet the requirements to join the Organisation for Economic Cooperation and Development (OECD), Thailand will introduce a global minimum corporate tax rate of 15% for large MNCs starting Jan 1, 2025. The tax, aka “top-up tax” , will apply to MNCs with an annual global turnover exceeding EUR 750 mil euros. The Thai government has pledged to offer compensation to ease the impact on foreign companies, on condition they meet specific criteria like relocating research to Thailand or adopting environmentally friendly practices.

5. FOR YOUR EYES 📺

1. Malls in the United States are being turned into residential units — would this idea fly in Malaysia? Could some of the dying malls in Malaysia be turned into retirement homes?

2. 2024, in 4 minutes by Vox

That’s it from us at The Coffee Break for 2024! For all that had happened, we are grateful for the food we have on the table and the relative peace we have in Malaysia. Thanks for the sapot towards our newsletter too! Have a Happy New Year and see you folks in 2025!