AmWatch - Economic Update : Government injects RM20bil into state equity investment firm ValueCap, 15 Sep 2015

FOCUS OF THE DAY

Economic Update : Government injects RM20bil into state equity investment firm ValueCap

Prime Minister Datuk Seri Najib Razak announced yesterday that Putrajaya will inject RM20bil into state equity investment firm ValueCap to shore up the stock market. The RM20bil injection is just short of the RM23bil net outflow of foreign funds since the beginning of 2014. The bulk of it, which amounted to RM16bil, exited Malaysia during the first eight months of this year. Other than that, the factory sector would be exempted from import duties until the economy recovers from a slowdown, but it was not revealed which specific sectors will be affected. Najib reiterated there are no plans to introduce capital controls, adding that the government is on track to achieve its fiscal consolidation target for 2015.

Also, the Ringgit's decline is not expected to have an adverse impact on government debt as 97% of the debt is denominated in Ringgit and mostly funded by domestic sources. In 2014, government debt accounted for 52.7% of GDP, which amounted to RM582.8bil (vs. 53.0% in 2013). The government will strive to achieve it fiscal deficit target of 3.2% of GDP for 2015 as the government stays committed in its fiscal consolidation efforts (2014: 3.5%).

To recap, the government introduced two stimulus packages of RM7bil on 4 November 2009 and RM60bil on 10 March 2010. In 2009, GDP contracted by 1.5% and budget deficit stood at 6.7% of GDP. As for 2010, GDP rebounded to 7.4% while the level of shortfall slipped to 5.3% of GDP. As at YTD 1H15, total government revenue had advanced by 4.9% YoY (or +RM5.0bil) to RM106.8bil. In part, the boost in government revenue in 1H15 was attributable to the income receipts from GST. Revenue collection from GST alone amounted to RM7.6bil during 2Q15 (which contributed 7.1% of total YTD revenue or 13.7% of total revenue in 2Q15).

Others :

Mah Sing Group : Six month extension to KGSSAAS land deal      BUY

Hong Leong Bank : Minor changes to rights issue details from circular      HOLD

QUICK TAKE

Puncak Niaga : Extension until 15 Oct      HOLD

NEWS HIGHLIGHTS

Puncak Niaga Holdings : Stop date of SPA with Air Selangor on October 15 instead of September 14

Felda Global Ventures Holding : Shares hit limit up on government measures

Airline Sector : MAB leasing more planes

DISCLAIMER:

The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice.