☕️ Monopolism well and alive in Malaysia

Hello,

Thought of getting started today with a very powerful economic insight by legendary investor Howard Marks shared on his firm’s podcast:

For the benefit of our new subscribers, Marks is a debt investor and is highly praised by Warren Buffett:

You can read all of Marks’s past memos here.

1. MARKET SUMMARY 📈

2. NUMBERS AT A GLANCE 🔢

The poverty eradication program seems to be bearing fruits, with some participants achieving an average monthly sales of up to RM14,000, revealed Minister of Economy Rafizi Ramli. The program, known as the People’s Income Initiative (IPR), involves a fund of RM750 mil and consists of the Farmer Entrepreneur Initiative (Intan), Service Operator Initiative (Ikhsan), and Food Entrepreneur Initiative (Insan). It encourages the sale of ready-to-eat food through self-service machines. The government aims to place 4,900 additional machines in the next 12 months.

209 — the number of initial public offerings (IPOs) in Mumbai in 2023 as the city is poised to emerge as the global leader in new stock market listings for the year, surpassing any financial centre in China. The National Stock Exchange and the Bombay Stock Exchange, both located in Mumbai, are projected to witness a 45% YoY increase in IPOs, as reported by global consultancy EY. One man’s meat is another man’s poison — India is greatly benefiting from the slowdown in China. India’s benchmark Sensex stock index has gained 10.3% this year through Dec. 1, while China’s benchmark CSI300 has fallen 10.4% and Hong Kong’s Hang Seng has lost 16.5%. 

India’s stock market is also huge — not surprising given that it ranked 5th in the world’s gross domestic product (GDP) rankings in 2023, with a projected GDP of USD3.73 trillion. The market capitalisation of securities listed on the nation's exchanges has tripled since the March 2020 pandemic low, reaching USD3.93 trillion as of last Friday. This surge is accompanied by India's NSE Nifty 50 Index reaching a new record on the same day, according to data compiled by Bloomberg.

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3. IN MALAYSIA 🇲🇾

32 highway firms challenge Malaysia's RM3.46 bil barrier-free toll systemMalaysia plans to introduce a Multi-Lane Free Flow (MLFF) barrier-free toll system by 2025, using RFID and automated number plate recognition (ANPR) to eliminate queues and stops for toll payments. According to a report from Free Malaysia Today citing its sources, this plan faces backlash as 32 highway concessionaires oppose the government's alleged direct award of the RM3.46 bil project to YTL Corporation Berhad-linked company. The Association of Highway Concessionaires Malaysia objects (PSKLM), citing violations of existing agreements and proposing a 30% cost reduction if individual companies implement MLFF.Fun fact: PSKLM also mentioned that total toll revenue annually is about RM6 bil. 

FMT has reached out to YTL Corp and PSKLM for their comments.

Concerns include potential monopolies, lack of industry experience, and integrity issues with a single entity managing toll operations. MLFF aims for seamless tolling, but challenges include non-standardized plates and revenue leakages.

Remember the RM663 mil 1BestariNet e-learning project by the Education Ministry, which was undertaken by a unit of YTL Corp Bhd, YTL Communications Sdn Bhd?

EPF: 54% increase in savings with Progressive Wage PolicyPM Anwar Ibrahim has announced plans to boost salaries for technical workers in Malaysia, emphasising the necessity to align wages with the changing economic landscape. He urged government-linked companies to contribute to skill development through Technical and Vocational Education and Training (TVET) programs, aiming to enhance the marketability of technical graduates.

This initiative is expected to significantly impact retirement savings, with the Employees Provident Fund (EPF) projecting a remarkable 54% increase when the Progressive Wage Policy takes effect in June 2024. The policy, led by Economy Minister Rafizi Ramli, will primarily target Malaysian companies, especially micro, small, and medium enterprises (MSMEs), addressing wage challenges and focusing on employees earning less than RM5,000 monthly. This approach aims to avoid disparities witnessed in previous minimum wage implementations, fostering competitiveness among employers and securing financial allocations for incentives.

Business

1. Proton Holdings aims to boost production to 500,000 units by 2035, with half targeted for the export market. November registrations reached 12,296 units, securing Proton's No. 2 position in Malaysia. Success is attributed to diverse models, including the new Proton S70 and the strong performance of SUVs and PIES (Persona, Iriz, Exora and Saga) models. Year-to-date sales surpassed 141,900 units, with a 12% YoY growth, achieving a 19.7% market share.

2. Malaysian public-listed companies (PLCs) are required to utilise the Bursa Malaysia ESG Reporting Platform for mandatory sustainability disclosures, as per regulations by Bursa Malaysia Securities Bhd. Launched recently, the platform, accessible via the Bursa LINK system, will serve as a repository for disclosures in a prescribed format. It facilitates standardised reporting and communication of sustainability information, addressing enhanced reporting requirements introduced last year for Main Market and ACE Market PLCs. Main Market issuers must disclose by Dec 31, 2023, while ACE Market issuers follow by Dec 31, 2025, with specific disclosure timelines for various sustainability indicators.

3. Fitch Ratings has affirmed Malaysia's long-term sovereign credit rating at “BBB+ with a stable outlook.” Fitch’s decision was based on Malaysia's diversified economy with strong growth prospects against factors like high public debt, a low revenue base, and potential political considerations affecting long-term policymaking. Malaysia's current account surplus, ongoing fiscal consolidation efforts, and initiatives outlined in economic frameworks are cited as positive factors by Fitch.Read: Fitch Affirms Singapore at 'AAA'; Fitch Affirms Thailand at 'BBB+'

Shorts

1. PM Anwar Ibrahim: Cabinet re-shuffle after one year too earlyThe Prime Minister said the Cabinet, including himself, needs to be allowed to improve and increase their performance, quelling rumours of a cabinet re-shuffle. Anwar mentioned that a reshuffle might become necessary if the ministers' performance falls short or due to other circumstances.

2. Malaysian hotels want more concertsMalaysian hotel operators are urging the government to assure the stability of international concerts, citing the significant boost in tourism and hotel occupancy. Notably, major concerts like Coldplay's have shown a 188% higher monthly year-on-year growth in hotel occupancy. To enhance Malaysia's appeal as a concert destination, experts recommend streamlining regulations, providing incentives, and ensuring long-term stability. More boycotts incoming from a certain party. 

3. High-speed car chase from Petaling Jaya to Cyberjaya ends in arrestsA man and his female passenger were arrested after a 50km high-speed car chase from Petaling Jaya to Cyberjaya. The chase involved the suspects ramming into a motorcycle patrol unit, injuring a police officer. Additional patrol cars were deployed involving 28 patrol cars, leading to the apprehension of the suspects near Taman Tasik Cyberjaya. Weapons and personal items were recovered from the car. The male suspect, with a criminal history, is wanted for an armed gang robbery. Both suspects are remanded for four days, and investigations are ongoing.

4. Illegal tiny rooms spark outrage: 3.25 Sq M units renting from RM300The National House Buyers Association (HBA) strongly opposes the emergence of illegal, coffin-like rooms measuring a mere 3.25 square metres, rented out at a starting rate of RM300. These micro-living spaces defy building regulations, with a particular focus on the Uniform Building By-Laws 1984 (UBBL). Mental health concerns also arise as these minuscule rooms lack living spaces, potentially exacerbating stress and anxiety for tenants. Read: The Health Risks of Small Apartments.

4. AROUND THE WORLD 🌎

The worsening situation in GazaIsraeli forces intensified their attacks on areas around Khan Younis, the main city in Gaza’s south, on Tuesday. The United Nations (UN) has issued a warning of a “hellish scenario” as Palestinians in Gaza have been left with nowhere safe to escape the ongoing conflict. Following Israel's orders to flee the north of the narrow coastal strip, much of Gaza's 2.2 mil civilian population is now confined to the south, including UN shelters where overcrowding raises concerns about the spread of disease.

Richard Peeperkorn, the World Health Organisation (WHO) representative in Gaza, said the WHO had complied with an Israeli order to remove supplies from warehouses in Khan Younis before the areas became subject to active combat. Israel denied issuing such an order.

ByteDance to dance with GoTo in IndonesiaFollowing the Indonesian government’s move to split social media and transactions in Oct 2023, TikTok Shop (owned by ByteDance) had to halt its operations in the country. TikTok Shop, said to be a threat to the country’s 64 mil micro, small and medium enterprises, amassed 6 mil sellers in Indonesia within a year of its launch in 2021 and last year captured about 5% of Indonesia’s booming USD52 bil e-commerce.

To quickly salvage its progress, ByteDance has struck an agreement to invest in a unit of Indonesia’s GoTo Group (merger of Gojek and Tokopedia) and cooperate on an online shopping service. The pair aim to announce details of that tie-up as soon as next week. However, the pact is subject to regulatory approval and may still fall through. Why are they partnering?

• ByteDance may test this model (partnership) as a way to expand in other markets in the region.

• GoTo may benefit from ByteDance’s strong global presence in an arrangement that could boost shopping, logistics and payment volumes for both companies.

China’s credit outlook downgraded to negative by Moody’sRatings agency Moody’s has downgraded its outlook on China’s government credit ratings from stable to negative. The downgrade is attributed to expectations of Beijing’s support and potential bailouts for distressed local governments and state-owned enterprises. Bailouts and fiscal stimulus could indicate the country’s growth engine (economy) is grinding to a halt. Despite retaining China’s “A1” long-term rating on sovereign bonds, the agency anticipates a slowdown in annual GDP growth to 4% in 2024 and 2025, averaging 3.8% from 2026 to 2030.

China’s Finance Ministry responded to the downgrade, saying Moody’s concerns are unnecessary.

The OECD has expressed concerns about “structural stresses” in China, citing them as a downside risk to global growth. The organisation forecasts a slowdown in China's growth, expecting it to decrease to 4.7% in 2024 from 5.2% in the current year. The reasons include sluggish consumption growth and weakening activity in the property sector.

Shorts Watch

1. Youtuber that crashed plane for views jailedHow far would one go to get attention? In this case, intentionally crashing a plane and recording it live. A Youtuber by the name of Trevor Jacob, 30, has been jailed for six months for deliberately crashing his plane. Trevor posted the video of the plane crash in December 2021, implying it was an accident. He ejected from the plane — selfie stick in hand — and parachuted down to land. The former Olympic snowboarder said he filmed the video as part of a product sponsorship deal (for a wallet company) as part of a plea agreement. Watch his stunt here.

2. At least 85 civilians were killed in Nigeria due to military errorThe ‘accidental’ killing, one of many that happened in recent years, occurred in the north of Nigeria, where armed groups are rampant. According to Kaduna Governor Uba Sani, civilians were “mistakenly killed and many others were wounded” by a drone that was targeting terrorists and bandits. The attack on Sunday night in Tudun Biri village in Kaduna state’s Igabi council area occurred as Muslims gathered to observe the holiday celebrating the birthday of the Prophet Muhammad.

3. Meta 🤝 IBM to lead a coalition of AI companiesMeta Platforms and International Business Machines (IBM) brought together more than 50 artificial intelligence (AI) companies and research institutions to stand behind “open innovation and open science”. The AI Alliance is supportive of open source, an approach in which technology is shared freely, and draws on a history of collaboration among Big Tech, academics, and a fervent movement of independent programmers.

5. FOR YOUR EYES 📺

1. Our analysis on IPOs raised in 2023 on Bursa Malaysia so far (a couple more soon, not accounted for in this analysis). Total proceeds of RM3.57 bil were raised — guess how many percent went into early shareholders’ pockets? If you would like access to the working file, just reply to this email and we will send it over to you.

2. The long-awaited trailer of Grand Theft Auto VI. The game will be released in 2025. The previous instalment, dubbed GTA: V, was released a decade ago in 2013 and has grossed USD7.7 bil for its creator Rockstar Games, shattering all records in the global gaming collection, with no other game coming this close. It took only 3 days for the GTA V to gross USD1 bil.