☕️ RM1.58 tril - total government debt and liabilities exposure, RM51.6k per citizen

1. MARKET SUMMARY 📈

2. NUMBERS AT A GLANCE 🔢

Just how dominant is China in the Olympic badminton? The country has won 47 medals or more than double the combined tally of Indonesia and South Korea, the second and third-most successful teams. China suffered its first badminton defeat of the Paris Olympics yesterday when mixed doubles favourites Feng Yanzhe and Huang Dongping were defeated by Malaysian duo Chen Tang Jie and Toh Ee Wei in the opening session of the group play.

Japan’s tourism sector has boomed by five times to become its second-largest export, contributing an annualised JPY7.2 tril (USD45.1 bil) in nominal terms for Q1 2024 by nonresident households. This underscores a shift from goods to services for the Japanese economy. These figures is less than half of the JPY17.3 tril (USD108.4 bil) in autos that Japan sent abroad in 2023, it is solidly ahead of electronic components including semiconductors, and steel, that year’s No.2 and No.3 exports. The weak yen is a major factor as the currency is nearly 30% weaker in 2023 as compared to 2019.

Malaysia’s total debt and liability exposure stood at RM1.58 tril as of the first quarter of 2024, according to the Ministry of Finance (MOF). This includes RM1.21 tril in debt, RM225.9 bil in guarantee commitments and RM140.8 bil in other liabilities. The ministry pointed out that the annual increase in debt has been declining, with the growth rate in debt decreasing to 8.6% in 2023 from 10.2% in 2022 and is anticipated to further decrease to 7% in 2024. The Malaysian population is estimated to be around 34 mil in Q1 2024, of which 90% or 30.6 mil are citizens. This works out to an average of RM51.6k of debt and liabilities per citizen. On another note, Malaysia’s 2023 Gross Domestic Product (GDP) hit RM1.8 tril, growing by 1.6% year-on-year.

3. IN MALAYSIA 🇲🇾

Rape case: Oops, “tidak sengaja”
A rubber tapper in Kelantan was charged with two counts of raping and grooming his 14-year-old daughter. The man told the Kota Bahru Sessions Court, “saya tidak sengaja rogol anak”. The accused claimed trial to both charges and requested bail, but was denied by the court. The case will be mentioned on Aug 28. We’ve heard many excuses or defences for rape cases, but this is by far the worst. 

Meanwhile, Zulfahimin Mahdzir, former aide to a Bersatu assemblyman, was found guilty of rape– sentenced to 13 years in prison and two rotan whippings. The former aide of Gombak Setia assemblyman Hilman Idham was charged with raping the victim on Dec 5, 2020 at the Dorsett Hotel. The court says that Zulfahimin’s defence was nothing more than a mere denial (I didn’t do it!), but the chemical report found sperm traces and matched the accused. In short, the victim was drunk and he took advantage.

Malaysia’s space ambitions

• ⁠Sarawak to be our aerospace hub

  MITI Minister Tengku Zafrul says the government is proposing for Sarawak to become Malaysia’s hub for the aerospace industry. They reason that Sarawak’s location is prime, close to Nusantara and nearer to Korea, Japan, and even Australia. The proposal also included plans to develop a new international airport in Kuching and establishing a Sarawak-owned airline. Sarawak Premier Abang Johari Openg has previously mentioned that the state will open an aerospace training centre to prep the aviation industry, showing keen commitment to produce skilled workers for the sector. Lots of development coming out from Sarawak lately!

• Malaysia to lead Asean space agency

  At least five countries want Malaysia to take charge in establishing the Asean space agency. Foreign Minister Mohamad Hasan mentioned that Malaysia is asked to be the satellite launch centre, and the government is discussing the logistics before it can be brought to Cabinet. Malaysia is to take over the Asean chairmanship in 2025, btw. Five years ago, Nakamura Yuya, President and CEO of Axelspace Japan had suggested Asean join forces to create a space agency to cut costs and overcome resource challenges typically faced in space projects. SpaceX regional HQ in Malaysia? It’s also most optimal to launch rockets near the equator - NASA explains here.

Imagine your medical bill determined by outcome, instead of service
IHH Healthcare, Malaysia’s biggest hospital operator, is ready to explore the feasibility of charging patients through “outcome-based payment models”. What is it? Instead of charging patients for every service provided, healthcare providers will charge based on the results of the treatments. For example, IHH has been tracking colonoscopy procedures and knee replacements– and found that their colonoscopies are catching more potential cancer-causing polyps than usual and patients of knee replacements report less pain and better physical function.

IHH’s value-driven outcomes (VDO) initiatives, part of this new model, cover about 15% of their procedures, such as colonoscopies and hysterectomies. They plan to expand to 50% soon, across their hospitals, Gleneagles, Pantai and Prince Court. This was all after Health Minister Dr. Dzulkefly Ahmad suggested private hospitals start charging based on treatment outcomes to help control rising medical costs and improve the quality of healthcare.

The Cambrian Fund: RM150 mil for our tech ecosystem
Co-founders of Bursa-listed ViTrox Corp Bhd are teaming up with private equity firm Southern Capital Group to create a venture capital (VC) fund, the Cambrian Fund. The VC fund is to support local tech startups and nurture our tech ecosystem, focusing on IR 4.0 themes like vision AI and robotics. Launching in October, the target is to raise RM150 mil, with RM60 mil to be secured from Vitrox and Southern Capital. Chu Jenn Weng, one of ViTrox’s founders thinks Malaysia could be the Silicon Valley of the East. Penang-based ViTrox produces machinery and equipment designed to automate the rigorous testing of semiconductor devices. They spent RM44.6 mil in R&D expenditure in 2023. Read their 2023 annual report here.

Shorts

1. LRT3 delayed to operate in Q3 2025

   Construction for LRT3 has reached 95.6% and is expected to be operational in Q3 2025. The original target was set for March 2025, but the slight delay is partly due to the pandemic halting works. The project includes building 20 stations (from Bandar Utama to Johan Setia). They’ve also reinstated 5 stations in the original plan, which involves an additional cost of RM3.8 bil, bringing the project to a total of RM16 bil.

2. PAS says Gerakan is welcome to leave PN

   Squabbling over the vernacular school’s beer sponsorship issue, PAS’s Sanusi Md Nor says that no tears will be shed if Gerakan leaves PN. Sanusi tells Gerakan that they should respect Malays and Islam, “you don’t just expect the Malays to respect you”. PAS VP Nik Abdullah has also expressed Gerakan is free to leave PN if they’re unhappy. Gerakan deputy president Oh Tong Keong responds that the party will not hesitate to leave if it is forced to accept extremely conservative and unreasonable demands. Btw, why is this is an issue now as alcohol companies have been involved in fundraisers for Chinese schools for decades?

4. AROUND THE WORLD 🌎

Escalating Middle East tension
Israel’s security cabinet authorised Israeli PM Benjamin Netanyahu and his defence minister to decide when and how to retaliate to a rocket attack that Israel and the US claim was performed by the Lebanese militant group Hezbollah. Despite Hezbollah denying responsibility, Netanyahu decided on drone strikes targeted at what Israel calls “Hezbollah operatives and infrastructure”. Lebanese state media reported that the two drone strikes killed two motorcycle riders and injured three others, including a child. The retaliatory strikes were also prefaced by a statement from Israeli officials that the country wants to hurt Hezbollah, but does not want to drag the Middle East into all-out war.

Meanwhile, Turkey and Israel’s leaders have resorted to calling each other names, with Turkish President Recep Tayyip Erdogan likening Netanyahu to Adolf Hitler, with Israeli Foreign Minister Israel Katz making a social media post saying that Erdogan was “following in the footsteps” of Saddam Hussein. However, this name-calling is happening at a time of escalating tensions in the region, along with Turkey threatening for the first time to make military interventions to end the conflict in Gaza. Here’s hoping the situation does not devolve into total war.

Olympic woes pile on
Paris is currently apologising profusely for several complaints made against the Olympics’ opening ceremony. The first is the portrayal of a banquet sequence featuring drag artists, with Christian groups crying foul over the “mockery” of a key biblical scene. The scene has also led to US telecommunications company C Spire pulling its advertising around the Olympic Games. Still, the organisers defended the scene, stating it was a depiction of “Greek pagan gods”. Proper apologies were offered to the South Korean delegation, however, as the announcer made the mistake of saying they were representing the Democratic People’s Republic of Korea – AKA North Korea.

The Paris Olympics have been plagued with infrastructural issues as well, with the latest case being several fibre optic cables carrying broadband service across southern and eastern France getting cut overnight. The internet outage was resolved when traffic successfully moved to backup networks early on Monday, and organisers stated the lines servicing Paris and the Olympics were not affected. This follows a series of arson attacks on railway lines leading to Paris ahead of the Olympics’ opening ceremony, disrupting the train schedules, though a man has been arrested on suspicion of being linked to the fires. The man is said to be an “ultra-left militant”.

Meanwhile, the Olympic athletes visiting Paris have made infrastructure complaints of their own, with scathing reviews about the accommodations and food provided. Complaints ranged from how there were insufficient bathrooms, to beds being “extremely uncomfortable”, to unfulfilled promises by the organisers that the accommodations would be close to competition venues, leading to many athletes opting for hotels closer to event venues instead.

Business Highlights

• McD reports first decline in 13 quarters as consumers tighten belts

  The fast food giant missed analysts’ expectations for the quarter, with a revenue of USD6.61 bil and an adjusted profit of USD2.97 per share compared to an expected USD3.07 per share. This marks the firm’s first revenue decline in 13 quarters, with McDonald’s citing lower spending by consumers, who no longer see fast food as “a good deal”. The company, alongside other fast food giants like Burger King and Wendy’s, will be launching or extending value bundles and limited offers, looking to draw consumers back.
  View report: 2024 Q2 Earnings Release

• AI, where is the ROI? 
  Microsoft’s investors will be watching keenly at the tech giant’s cloud-computing business Azure, more specifically at how it has contributed to the bottom line after Microsoft spent billions of dollars investing in AI infrastructure to grow the business. Investors are fearful that the trend of high spending among tech giants on AI infrastructure will not yield much of a payoff in the short term, which has dragged down tech stocks on the US market over the past month.
  
  Meanwhile, Apple has reported it will be delaying the launch of its Apple Intelligence AI features to October, stating it wants to “fix bugs and ensure the stability” of the features. This will cause Apple Intelligence to miss the initial launch of the iOS 18 and iPadOS 18 releases in September.

Shorts

1. Maduro declared winner in Venezuelan election
   Incumbent president Nicolás Maduro has won the Venezuelan presidential election, but the win is being contested by the opposition, who claims its candidate has won with 70% of the votes. The head of the electoral council was the one who made the declaration, stating that Maduro had 51% of the vote compared to the opposition candidate’s 44% after 80% of the votes were counted. Of course, this has nothing to do with how the electoral council head is a close ally of Maduro, right? The math did not math out well.

2. El Mayo, last of OG drug cartel leaders, arrested
   Ismael “El Mayo” Zambada, last of the original generation of drug cartel leaders, has finally been apprehended by US federal agents following a sting operation (read what went down here). Zambada co-founded the Sinaloa cartel with Joaquin “El Chapo” Guzman, currently jailed in the US. Arrested along with Zambada was Guzman’s son, Joaquin Guzman Lopez, who was the lure in the sting operation.

5. FOR YOUR EYES 📺

1. An interesting collection of ads of brands mocking their rivals

2. Hedge fund managed over USD4 tril in assets in 2023, hitting record high. What’s hot amongst them moves the market. Here are the most popular stocks held by hedge funds as of Q2 2024 based on regulatory filings.