There are signs of recovery in the Malaysian property sector. And the fact that the Overnight Policy Rate (OPR) is set to increase again later this year to the same level as pre-Covid, we should see a sense of normalcy returning soon.
Smart Investor got in touch with Joanna Ling, CEO of PE Holdings, to find out more about the property industry.
Joanna Ling, CEO of PE HoldingsSmart Investor: Post-Covid, what are the challenges being faced by property developers?
Joanna Ling: Covid changed the industry significantly. Due to the low-interest rate environment and the work-from-home phenomenon, it created an unprecedented need for people to have their own property.
Post-covid, we have seen enthusiasm dampen and return to normal pre-covid levels. The rising inflation environment has affected spending power, and buyers are more price sensitive.
SI: What are the different approaches to selling property as compared to previously?
JL: Social media has become an indispensable tool in selling property since Covid when show units were rendered useless. Therefore, technology that helps developers showcase their products online became valuable. There are even developers selling property on Tik Tok!
SI: How does the increase in OPR affect the property market?
JL: Every time Bank Negara Malaysia announces an increase in interest rates, sales would temporarily halt for a while but inevitably increase again. The truth is that interest rates are right back where they were before Covid, and Malaysia is very fortunate that interest rates have not increased at a crazy rate like some other countries.
SI: What is the market outlook for property in the short-term (6 months), medium-term (1-3 years) and long-term (5-10 years)?
JL: In the short term, property prices in Malaysia will likely remain the same but you will see more affordable products coming into the market such as smaller units and affordable housing schemes. In the medium term, should interest rates continue to rise, property prices would likely adjust slightly lower in areas of lower demand.
However, Malaysia is a place which has shown continuous growth thus over the long term capital appreciation should steadily increase.
SI: What do you mean by sustainable development?
JL: Sustainable developments in my definition means properties that minimises negative environmental impacts and enhances the way one lives.
SI: What initiatives have you implemented or will be implemented in future projects?
JL: All our developments are designed with sustainability in mind. Our shopping mall Design Village Outlet Mall, is designed to embrace shopping within a park. Extensive landscaping has been utilised to lower ambient temperature, even the air-conditioning is a more environmentally friendly VRV system, and we are in the process of installing solar panels in the car park.
Our latest residential development Anggun in Batu Kawan Penang, is built to Green Building Index standards. We have installed a smart rubbish disposal system. This vacuum system transports the rubbish to a central depository that removes all water and compacts the rubbish into easily disposable blocks that will eliminate smells and wastewater and ultimately result in a cleaner, healthier, more pleasant living environment.
SI: What are some of the benefits/impacts of sustainable development?
JL: When done right, the benefits of a sustainable development should ripple and positively affect the developer, the buyer, the community, and the environment. It is an investment into the right way to live while thinking of one’s surroundings and other stakeholders.
Ultimately the most immediate effect to the buyer is that the development will be a more comfortable environment to live in the long term.
SI: Does embracing ESG will cause a hike in the price of the property?
JL: It will in the short term because the elements that go into sustainable development are, for now, much more expensive than conventional construction methods. For example, the smart rubbish system costs millions more than conventional disposal methods. But it results in a way of living that is cleaner, healthier, and ultimately more cost-effective as it will be energy efficient.
Eventually when the markets come to expect to live better and nouveau construction elements such as double glazed glass and sustainable construction and materials, the price of these elements will come down or all developments will embrace these methods and prices will balance out.
SI: Is the co-living concept accepted by Malaysians? What are the benefits?
JL: Co-living has been around in rural Malaysia for a long time. In Sabah and Sarawak, the indigenous tribes live in long houses, a perfect example of successful co-living. Each family has their own private quarters, but all other activities, such as eating, cooking and socialises, are all done in communal areas within longhouses.
The co-living concept in this day and age refers to urban dwelling to save space and cost in high density areas. The benefits are that it is more affordable and provides a social community that looks out for each other, much like the rural concept of ‘kampung’ community.
SI: Who is the target audience for co-living? And why do they choose co-living?
JL: In this modern format, the target audience for co-living is very much young millennials early in their careers who want to live near where they work in urban high-density areas. As young people starting out in anew city, co-living is a good way to meet new people and have a community while saving money on rent by sacrificing space.
SI: Do you think the market for co-living concepts will increase in the near future? Why is that so?
JL: Co-living will become more common as land becomes scarce and it gets more and more expensive in city centres. In high-density cities such as Hong Kong and Singapore, where rents for apartments have soared, more and more apartment blocks have been converted to co-living spaces. This satisfies the tenant by offering smaller space at a lower rent and generating a higher yield for the landlord.
In the UK, where rents are expensive, houses are converted into HMOs (houses of multiple occupancy), a version of co-living. However, rents in Malaysia remain low and thus reasonably affordable, so it may be a while before the co-living concept catches on. We will just see smaller studio or one-bedroom units in the immediate term.
The “equity risk premium” could stake a claim to being the most important number in investment. There are different ways to measure it but conceptually they all come down to the same thing: assessing the return pickup from investing in equities compared with bonds.
In general terms a risk premium can be thought of as a measure of the additional return that investors demand or expect for taking on a particular kind of risk, relative to some alternative. Other examples include a credit risk premium, for corporate bonds compared with government bonds, or an illiquidity premium, for illiquid private assets compared with more easily tradable public assets.
These assets are the core building blocks for the vast majority of portfolios, most famously in the classical 60% equity/40% bond portfolio. Their valuations and outlooks also have a bearing on most other asset classes, including private assets. That’s why it matters so much.
The Rationale
Buy a bond and hold it until it matures, and you know what you will get back. Invest in equities and the range of outcomes is wide. You could make a lot of money, but you could lose a lot. Equities have to have a higher expected return to compensate investors for taking on this risk. Otherwise, why bother? And the “equity risk premium “is one way to assess this extra payback.
If it’s high, and you have conviction, it can be an argument for allocating more to equities and less to bonds, and vice-versa.
Importantly, this is all about expectations. There is no way of knowing how equities or bonds will perform until it happens. You can balance the probabilities in your favour but just because you expect equities to do better doesn’t mean they will. Risk means more things can happen than will. That risk is the price of the entry ticket to the equity market.
In this article we look at three of the most popular ways of assessing the equity risk premium and what they say about the prospects for equities compared with bonds today:
The historical approach
The simple approach
The “what’s priced in” approach
We focus on the US for reasons of data availability but also provide some comparisons with Europe and the UK.
The Historical Approach
This looks at the past performance of equities compared with bonds over a long-time horizon. And, with disregard for compliance disclaimers, uses this as an estimate of what they might be expected to earn in in future.
For example, US equities have outperformed long-term US government bonds by 4.5% since the year 1871 (to March 2023), a 152-year period covering wars, depressions, booms, busts, and everything in between.
Adherents to this approach would plug a figure of 4.5% into their asset allocation models, for the assumed outperformance of equities over.
Two challenges with this approach are (1) the answer you get depends on the length of history you are able to analyse and (2) by being backward looking, it is insensitive to whether equities or bonds have better prospects at this point in time.
On the first of these, Figure 2 highlights the significant variability in the historical estimate of the ERP, depending on how far back you look. It could be as low as 2.3% (over the last 23 years) or as high as 6.7% (over the past 91 years). Even a difference of a few years could make a big impact if those years cover big market moves.
Plugging 2.3% or 6.7% into an asset allocation model would result in a very different equity/bond split than if 4.5% was used. The length of history available to analyse isn’t always within your control. Not all markets have such a long time series as the US, especially emerging markets. This makes any historical estimate of the ERP hostage to data availability. And, as shown above, that roll of the dice can yield very different results.
The issue about ignoring relative valuations is potentially even bigger. Under this approach, periods of very strong outperformance leads to a higher estimate of the ERP. In the 50 years to 31 December 1999, US equities had outperformed bonds by 7.6% a year. In the 100 years to that date outperformance was 5.8% a year. Both were close to their all-time highs (Figure 3) and would have resulted in elevated equity allocations if used as an input to asset allocation modelling.
This was just before the Dotcom crash, when equity valuations were at record levels of expensiveness and 10-year Treasuries yielded more than 6%. Equities went on to underperform bonds by 7.4% a year in the 10 years which followed (a period made to look worse by the Global Financial Crisis but, even prior to that, equities were underperforming bonds by more than 3% a year)
Using the historical average may seem like the easy way out but it is not necessarily helpful for deciding on asset allocation. The next two approaches attempt to overcome this shortcoming.
The Simple Approach: The Yield-Gap
An easy to calculate, and hence popular, approach to assessing the relative prospects for equities and bonds is to compare the earnings yield on the equity market (the inverse of the price/earnings multiple) with the yield on the 10-year Treasury. When the earnings yield is high relative to bond yields, this approach argues that equities are cheap relative to bonds, and hence more appealing. The opposite is also true.
This is sometimes referred to as “the Fed model” even though it has never been officially endorsed by the Federal Reserve. A variant compares the earnings yield with the real yield on 10-year Treasury inflation-protected securities (TIPS). Another compares it with Treasury bills/cash. The current conclusions (discussed later) are the same whichever approach you take.
The yield-gap’s historical track record of providing insight on the future difference in equity and bond returns is mixed (Figure 4). Over the very long-term, there has been a positive relationship between the yield-gap and subsequent returns on a 10-year horizon. Periods when it has been high have been more likely to be followed by periods of stronger long-term outperformance from equities over bonds.
The relationship is much weaker when the yield-gap has been closer to zero or negative. There are lots of instances when a low or negative yield-gap has preceded a period of very strong performance from equities, most obviously the 1980s and 1990s (Figure 6).
There are two main reasons why this indicator can underestimate equity prospects. First, it ignores the earnings growth and dividend income components of equity returns. Second, and harder to estimate, even if equity valuations are expensive, that doesn’t mean they can’t become even more so, boosting returns in the process.
When we look back over historical periods when equities have done well from the starting point of a low yield-gap, a near-condition has been real earnings growth. In many such cases, valuations have fallen but equities have still done much better than bonds – because of strong real earnings growth. It has been more of a rarity for real earnings growth to be negative but valuations ride to the rescue.
The strength of this relationship also weakens as the investment horizon shortens (Figure 5). It has not been helpful in giving a steer on short-term market movements.
How Should We Interpret The Current Reading?
The yield gap approach can add some value to setting strategic asset allocation, but almost none for tactical.
It has fallen to a depressed level of only 0.6%. This has been driven by bond markets repricing much faster and further than equities. Since December 2021, the 10-year Treasury yield has risen by 2.2%, from around 1.5% to 3.7%. The equity earnings yield has only risen by 0.1%, from 4.2% to 4.3%.
Real yields on 10-year TIPS have risen by slightly more, and cash rates have risen by more than 5%, so the broad conclusions are similar if we calculate the yield-gap using real yields or cash rates.
The TINA trade – There Is No Alternative – was a popular rationale for strong equity performance in the low-interest rate environment. But now there is an alternative. Bond yields are dramatically higher. Cash has also become a more viable alternative, with US cash rates now exceeding bond and equity yields – albeit bonds deliver a yield over a longer time horizon whereas cash rates are unlikely to stay at current levels for such a prolonged period.
This doesn’t have to mean that US equities will struggle versus bonds. Earnings could grow strongly, or valuations rise further. But, with corporate profit margins and equity valuations both still elevated, both face headwinds.
Although US equities cannot be written off, our analysis suggests the outlook for equities is gloomier versus bonds than many investors will have had to contend with for a long time. With the yield gap around 1%, the reward for taking US equity risk has diminished.
The same is not true of other markets though. The yield-gap has also come down for Europe ex UK equities compared with German bund yields, and UK equities compared with UK gilt yields, but not by as much (Figure 7). The yield-gaps for Europe ex-UK equities and UK equities were both 4.3% at the end of May.
European and UK yield-gaps are also within their ranges of the past 15 years (Figure 7), rather than having dropped well below them, as has happened in the US. Relative to their own histories, European and UK equities continues to offer reasonable value compared with bonds.
Both yield-gaps are a lot higher than the US in absolute terms, although this does not capture their relative growth outlooks (see next section). It could also be flipped around and interpreted to mean that investors are demanding a higher risk premium for investing in European and UK equities compared with the US. It should not be interpreted as a “free lunch”.
The “What’s Priced In” Approach
This approach looks at equity prices and consensus expectations for earnings growth and “backs out” the return assumption that is priced into the equity market. In simple terms, the equity market price equals the sum of discounted future cashflows from the market. That discount rate can be thought of as the return demanded by investors (it is the internal rate of return).
If the equity price falls, you need a higher discount rate to set the present value of cashflows equal to that new lower price, all else being equal (which it rarely is but that’s not important for this framing). In other words, a lower price leads to a higher equity return, all else equal. That is why this can be thought of as looking at the return assumption that is priced in to equity markets.
It is possible to get more granular by coming up with a set of assumptions based on one’s own view of the outlook. But the aim here is not to work out what is “most likely” in one’s own opinion, but what the market is expecting/ what is priced in.
The ERP can then be calculated as the difference between this forward-looking equity assumption and the risk-free rate, such as the yield on 10-year government bonds.
We take a multi-stage approach to assessing the ERP on this basis. For the current and next two calendar years we use consensus analyst earnings growth forecasts from I/B/E/S, the Institutional Brokers’ Estimate System. For subsequent years we assume that earnings grow in line with consensus expectations for 10-year real GDP growth and inflation, sourced from the Survey of Professional Forecasters. This is a simplification as earnings growth and domestic GDP growth do not move in tandem e.g. some earnings are earned overseas so depend on international growth. However, adding such additional complexity only has a small impact on the equity return outlook and hence would not materially impact any of our conclusions. A normalised payout ratio of 50% is assumed. This is higher than the dividend payout ratio to reflect the popularity of share buybacks.
Figure 8 shows the evolution of the equity return priced into the US market since 1992 (the date when I/B/E/S consensus earnings forecasts first became available) alongside bond yields. This shows the nominal equity return outlook. The real equity return outlook has not risen by as much in recent years, as part of that move has been down to higher inflation expectations.
The drop for the recent equity returns figures is primarily because consensus expectations for long-term US real GDP growth have recently been cut from 2.3% to 2.0%, and inflation from 3.0% to 2.4%. As with the yield-gap approach, Figure 8 highlights that the bond market has repriced a lot more than the equity market. This would have been true even without the latest cuts to the US growth and inflation outlook.
Figure 9 shows how the ERP has varied over time using this approach. It has collapsed to its lowest level for twenty years.
How Reliable Is This Measure As An Indicator?
As with the yield-gap approach, this indicator has a reasonable, if slightly mixed, track record of success. A high ERP has been associated with better future 10-year equity performance vs bonds, but the relationship is weaker at low levels (mainly from the 1990s).
As with our other estimates of the ERP, there has been very little relationship between the ERP that is priced in and subsequent returns over shorter time horizons (Figure 11 shows this on a five-year horizon).
How Should We Interpret The Current Reading?
This is a slightly more damning assessment than the yield-gap approach because this takes account of consensus expectations for earnings growth. The ERP was lower in the 1990s, yet equities performed very well compared with bonds, but that was helped by soaring valuations. Given the starting point and outlook today, that seems a less likely outcome, relying on hope rather than expectation.
As with the yield-gap, the ERP priced into European markets should not be as worrying for European equity investors (Figure 12). It has also fallen sharply, pointing to reduced reward for bearing equity risk, but remains above pre-GFC levels.
Conclusions
There are different ways to assess the outlook for equities compared with bonds. None is perfect but all can be useful. Historical estimates may seem like the easy option, but they take no account of current market valuations and are sensitive to the time period assessed, which depends on availability of data. For non-US markets this can be particularly problematic and lead to potentially misleading conclusions.
Our more forward-looking measures tell a consistent story. Bond yields have re-priced more than equities. US equity investors today are being rewarded with a smaller return premium for bearing equity risk than at any time in recent memory, at a time when macroeconomic risks are high and central banks are in less supportive mood. More risk, less reward.
The US looks particularly bad on this basis with things not as worrying in Europe and the UK. The US may have been the strongest performing market for much of the past 15 years, but our analysis of the ERP suggests that it will struggle to repeat that feat. And, with the US having risen to now make up 68% of the global developed stock market, global equity investors are highly exposed to US performance. Long-term investors may be better served by allocating more to non-US markets in the decade to come.
Importantly, our analysis demonstrates that these frameworks are only useful when setting strategic asset allocation on a long-time horizon, such as 10 years. In the shorter term, other factors can be more in the driving seat. There will be shorter term periods when equities (US or elsewhere) could do much better, or much worse, than bonds. But identifying those requires a different toolkit.
By Duncan Lamont, CFA, Head of Strategic Research, Schroders
The Securities Commission Malaysia (SC) and Bursa Malaysia Berhad (Bursa Malaysia) today welcome the announcements by the Honourable Prime Minister and Minister of Finance, Dato’ Seri Anwar bin Ibrahim, aimed at driving Malaysia’s economic growth and capital market competitiveness.
The short-term and medium-term measures address three key pillars essential to the growth and development of the capital market in Malaysia:
Pillar 1: Creating market vibrancy with greater participation opportunities for the rakyat;
Pillar 2: Attracting larger pool of investors to support financing for small, medium enterprises and new economy companies; and
Pillar 3: Enhancing Malaysia’s competitiveness to strengthen market confidence.
Measures announced:
1. A reduction of the stamp duty rate for the trading of listed shares on Bursa Malaysia from 0.15% to 0.10%, while the stamp duty cap is maintained at RM1,000 for each contract. This change, which take effect in July, will directly lower the cost of transactions, especially for retail investors, who are particularly sensitive to costs.
2. To widen the pool of investors, the Ministry of Finance and Securities Commission Malaysia will look at policies to achieve the following:- a. to facilitate and attract the setting up of family offices in Malaysia; b. to promote corporate venturing to drive greater domestic direct investment through more facilitative tax and incentive policies; and c. to widen the definition of sophisticated investors to include angel investors.
3. The capital market regulators also commit to explore ways to reduce market friction and shorten time-to-market for initial public offerings.
Quotes by SC Chairman Dato’ Seri Dr. Awang Adek Hussin:
“The SC’s commitment to maintain the capital market’s resilience and competitiveness is of the utmost priority. The capital market initiatives announced will boost greater trading participation and access to financing in the market, encouraging the growth of innovative companies and fostering greater diversity and inclusivity in the industry. We aim to empower issuers and investors by creating a business-friendly environment through relevant support and incentives. The SC is optimistic that these efforts will create a more vibrant capital market to drive economic growth in the country.”
Quote by Bursa Malaysia Chief Executive Officer, Datuk Muhamad Umar Swift:
“We are confident that the proposed measures, along with the existing development initiatives, will stimulate market activity and create a more dynamic and liquid market environment. A liquid and strong performing capital market has tremendous benefits to numerous stakeholders, and the economy as a whole. More importantly, the measures will widen affordable investment choices for the rakyat, and deepen investor interest in our market, leading to Bursa Malaysia being a destination of choice for fundraising.”
The multi-pronged measures by the Government and market regulators reflect the intent to create a conducive environment for a thriving capital market, recognising the pivotal role played by a well-functioning capital market in fostering robust economic growth.
The capital market regulators reinforced their commitment to ensure that the capital market is competitive and vibrant, while supporting the economic needs of Malaysia.
The SC and Bursa Malaysia will continue to work closely with the Ministry of Finance (MOF), industry partners and other relevant bodies to explore further holistic measures towards ensuring an inclusive and sustainable capital market.
About Securities Commission Malaysia
The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Act 1993. It is the sole regulatory agency for the regulation and development of capital markets. The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007. More information about the SC is available on its website at www.sc.com.my. Follow the SC on twitter at @SecComMy for more updates.
About Bursa Malaysia
Bursa Malaysia is an approved Exchange holding company under Section 15 of the Capital Markets and Services Act 2007. A public company limited by shares under the Companies Act 2016, Bursa Malaysia operates a fully-integrated exchange, offering equities, derivatives, offshore, bonds as well as Islamic products, and provides a diverse range of investment choices globally.
Economic factors, such as inflation, rising rates and supply chain disruptions have been top of many investors’ minds in 2022. You may ask, in such a volatile economic environment, if it is worth it for investors to think about sustainability and ESG at all.
I would say yes, in fact it is crucial for investors to think about how these economic factors will affect longer-term structural trends, such as the low carbon transition.
Changing Energy Economics
With rising energy prices, political momentum for decarbonisation has slowed. But importantly the private sector continues to push ahead, helping close some of the gaps between the ambitions of global leaders and corporate readiness for transition.
Changing energy economics also affects how companies will look to decarbonise, with higher energy prices incentivising improvements in energy efficiency. Technologies like heat pumps are becoming more viable compared to alternatives. The adoption of technologies will not just affect the companies developing or producing them, but across the value chain.
Rising Demand For Sustainable Food And Water
The global population is expected to increase 40% from now to 10bn in 2050, while getting richer as living standards grow. This will drive the demand for food, while the physical effects of climate change, such as rising temperatures and changes to weather patterns, puts pressure on supply.
Huge amounts of investment will be needed for the world to have sustainable food and water. With these needs come opportunities, for companies who can come up with the technologies and innovations to meet it. Recent food price inflation has accelerated these structural trends, driving a focus on food security.
The Importance Of Human Capital Management
It is not all about the environment. The cost of living crisis has intensified social stresses. Few governments have the fiscal capacity to absorb shortfalls in household budgets. Companies are coming under pressure to ensure vulnerable workers are protected – whether through increasing wages and benefits for their own employees or their responsibility to workers in supply chains.
Companies that are better at managing human capital may be well-placed to navigate the challenges posed by the complicated macro environment. I hope I have showed you that ESG factors are not things to think about in isolation – they are core to informing our view of the world and how to invest.
By Mervyn Tang, Head of Sustainability Strategy, APAC, Schroders
In our previous article, we explored how poor investment and savings behaviours could lead to higher vulnerability among Malaysian investors – leaving them at risk of suffering fraud, financial exploitation, or the effects of unsuitable investments. Nonetheless, we also highlighted that vulnerability is a multifaceted phenomenon with frequently overlapping and closely interconnected drivers.
Beyond financial behaviour and accessibility, the Institute for Capital Market Research Malaysia (ICMR) also identified situational and industry-related drivers of investor vulnerability. Based on findings from our nationwide survey, this article will delve deeper into both these categories to further understand how Malaysians experience vulnerability during their investment journeys.
Navigating Unexpected Life Changes
Situational drivers refer to experiences of specific life events or temporary difficulties such as bereavement, job loss, income shock, death within close relatives, or changes in expenses and savings behaviours. Understanding these drivers is especially significant considering how our lives have been impacted by greater uncertainty since the COVID-19 pandemic.
Throughout the pandemic, many Malaysians lost their jobs, income, or faced income cuts. The impact of this lasted even after lockdown measures were lifted and has been exacerbated by the rising cost of living. ICMR’s survey conducted in early 2022 found that 60% of Malaysians felt that their expenses had outpaced their monthly income in the last 12 months, hence affecting how they made ends meet.
Figure 1: How Changes in Living Expenses Affected Financial Behaviour (Data Source: ICMR)
Despite Malaysia’s economy opening up in the post-pandemic phase, many Malaysians are still struggling to sustain themselves financially. This was evident even before the real knock-on effects of inflation had been felt, which rose from 2.3% in January 2022 to 3.8% in December 2022 on the back of higher food and transportation prices.
To curb inflationary pressures, the Central Bank of Malaysia (BNM) increased the Overnight Policy Rate (OPR) by 100 basis points to 2.75% as of the end of 2022. Now, sandwiched between higher borrowing costs and higher inflation of food and oil prices, households will have even less discretionary income – which could increase their level of vulnerability.
It gets more concerning when the issues of expenses and inflation are coupled with complex life events, which appears to be the case for 61% of respondents to ICMR’s survey. Within this group, most respondents experienced ‘death of close relatives’ or ‘changes in employment and financial status’, potentially most of these losses being due to COVID-19.
Figure 2: Impact of Difficult Events on Financial Well-Being and Type of Negative Impacts Experienced (Data Source: ICMR)
Despite the widespread belief that vulnerable individuals comprise the older generation, our study emphasises that notwithstanding age, changing life situations caused by the pandemic or changes in employment can cause individuals to feel more financially vulnerable. This, coupled with the current state of the economy, further contributes to poor financial decision-making.
Challenges Dealing With Financial Service Providers
The final category of vulnerability driver we identified is ‘industry-related drivers’. The variables measured in this category include experiences surrounding the actions of market or individual financial providers; firms that do not act with appropriate levels of care; products that are inappropriate for a particular client; and inadequate/complex or misleading documentation/information.
ICMR found that 47% of surveyed respondents rely on financial consultants, agents, or brokers as sources of financial information. However, we also found that investors only referred to financial consultants who happened to be their friend or who were introduced by their family or friends. This correlates with our findings of 44% preferring to listen to friends and family for financial information.
Moreover, 83% of those who do seek professional financial advice claim to experience some difficulties, especially due to insufficient information or knowledge. At the same time, 70% of those who engaged with financial service providers faced some misconduct, including unsuitable prices or terms, being pressured into making an investment, high fees, technical issues, and language barriers.
This was further confirmed in our qualitative interviews, where interviewees felt that all the documents and information given were too complicated and difficult to understand. Elderly folk and youths were among the most affected. This, coupled with low financial knowledge, will make understanding important disclosure documents even more difficult for these groups.
Many investors feel that financial services and products have been streamlined and designed based on the idea of a perfectly rational investor. Because of that, financial consultants and agents struggle to meet the needs of investors who do not fit into the idea of a perfectly rational investor, which has the potential to lead to negative experiences and consumer detriment.
“The documents and disclosure are too complex and hard to understand. Only those with financial background could understand. I feel that the sales agent does not know the details of the product so the agent will just work to promote”
– Emma, 34, real estate consultant
Vulnerable Investors More Susceptible To Financial Scams
Although not all vulnerable individuals face the same challenges, most tend to feel overwhelmed and unable to cope during certain vulnerable moments. When faced with these feelings, individuals find it difficult to prioritise, which leads to sub-optimal decision-making. This results in them making decisions that further worsens their situations, particularly when dealing with financial services firms.
Findings from the three vulnerability drivers we’ve explored highlight that individuals may experience overlapping vulnerable characteristics, leaving more investors susceptible to the allure of making fast money. Stay tuned for our next article, as we will look closely at the factors that cause investors to fall prey to investment or financial scams.
This article is part of a content series by the Institute for Capital Market Research (ICMR). Follow ICMR’s Facebook page to stay updated on behavioural tips and insights for better investing habits. To learn more about ICMR’s research on new age vulnerabilities, visit www.icmr.my or download the full report.
About the Authors
Datin Aida Jaslina Jalaludin, Head of Research, ICMRNadhirah Ibrahim, Research Analyst, ICMR
Bursa Malaysia Berhad (“Bursa Malaysia” or the “Exchange”) has expanded its criteria for Approved Securities by reducing the daily market capitalisation requirement from RM500 million to RM200 million, effective today.
The revision is part of Bursa Malaysia’s ongoing commitment to fostering a dynamic and vibrant market, by offering market participants a broader selection of Approved Securities aimed at meeting investors’ evolving needs. Approved Securities are securities that have met the criteria prescribed by the Exchange and may be utilised for purposes of Securities Borrowing and Lending, and short selling.
The expansion of Approved Securities will provide greater ability for investors to manage their portfolios and boost vibrancy in Securities Borrowing and Lending activities, an important component of a well-functioning capital market.
“By broadening access and choice for investors, we are solidifying our commitment to improving market efficiency,” said Datuk Muhamad Umar Swift, Chief Executive Officer of Bursa Malaysia. “As a maturing market, it is vital that we offer a marketplace with robust facilities to cater to the differing needs of investors, while remaining focused on ensuring a vibrant, fair and orderly market.”
When updating the list of Approved Securities, careful selection is made based on both quantitative and qualitative criteria to ensure there is sufficient liquidity, and the integrity of the market is maintained. The List of Approved Securities is available on the Bursa Malaysia website. The list is reviewed approximately every 6 months.
Bursa Malaysia remains committed to working closely with all stakeholders to ensure the Malaysian capital market remains competitive, attractive, and well-regulated.
About Bursa Malaysia
Bursa Malaysia is an exchange holding company incorporated in 1976 and listed in 2005, and has grown to be one of the largest bourses in ASEAN today. Bursa Malaysia operates and regulates a fully-integrated exchange offering a comprehensive range of exchange-related facilities, and is committed to Creating Opportunities, Growing Value. Learn more at www.bursamalaysia.com.
The Malaysia Co-Investment Fund (MyCIF), set up by the Ministry of Finance, has continued to support of micro, small and medium enterprises (MSMEs) in its efforts to promote greater capital market access and inclusivity among the under-served segments.
In its Annual Report 2022 released today, MyCIF noted that the total funds raised by equity crowd funding (ECF) and peer-to-peer (P2P) platforms rose by RM300 million to RM1.7 billion in 2022 from 2021.
It said the 26% year-on-year growth in the overall ECF and P2P markets reflected the growing investor and business interest in alternative financing options. Of the total, MyCIF invested RM282 million compared to RM193 million in 2021, reflecting strong growth in the overall ECF and P2P lending spaces.
MyCIF’s public-private co-investment model via alternative financing platforms is the first-of-its-kind in Southeast Asia. It was set up by the MoF as part of Budget 2019.
MyCIF also reached a higher proportion of under-served segments in 2022. During the year, it implemented a special 1:2 co-investment ratio for agricultural businesses.
As a result, almost four times more agricultural issuers fund-raised on ECF and P2P platforms. Similarly, 28% of MyCIF funds were channelled to non-Klang Valley campaigns, up from 21% in 2021.
“MyCIF has proven to play a key role in supporting the growth of the ECF and P2P lending spaces,” SC Chairman Dato’ Seri Dr. Awang Adek Hussin said. “Approximately 10 times more firms have raised funds via ECF and P2P platforms since the inception of MyCIF.”
By 2022, a total of RM638 million* have been co-invested in almost 35,000 ECF and P2P financing campaigns, benefitting some 3,635 Malaysian MSMEs. Since its inception, MyCIF has generated a positive net return on capital of RM16.5 million. Until the end of 2022, it has received a total allocation of RM230 million, with an additional RM40 million allocated in Budget 2023.
Moving forward in 2023, MyCIF will encourage more innovation in areas that have been identified as strategic to the Malaysian economy.
It will do this by continuing its existing initiatives for agricultural businesses, as well as, extending the similar special 1:2 co-investment ratio to the environmental, social, and governance (ESG) sector.
This is also in line with the national sustainable development agenda, which aims to support the agriculture sector’s transition into a dynamic and progressive sector, and innovation in ESG and sustainability sectors.
MyCIF’s Annual Report also outlined its commitment to good governance while also promoting transparency in the deployment of public funds and the identities of those who have benefitted from them.
*Amount is larger than given allocation of RM230 million due to continuous re-investment of P2P notes, FD interest and ECF dividend
About the Securities Commission Malaysia
The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Act 1993. It is the sole regulatory agency for the regulation and development of capital markets. The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007. More information about the SC is available on its website at www.sc.com.my. Follow the SC on twitter at @SecComMy for more updates.
SIBS, one of the world’s leading in modular construction technology, is proud to announce that it has successfully secured a multi-billion-ringgit contract to deliver 2174 apartments to Neom, one of the largest urbanization projects located in northwest Saudi Arabia. The project will be delivered in the form of turn-key buildings from a finalized bottom slab upwards. The entire project will be delivered and commissioned by Q3 2024. This significant achievement marks a breakthrough for the company’s continued growth and success in the industry.
The project, known as NEOM will be a ground-breaking development in the heart of NEOM city intended for those working on the planning, engineering, and construction of the project. With 2174 apartments distributed among 35 buildings, the development offers luxurious living spaces and an array of amenities tailored to meet the needs of modern urban dwellers.
The buildings consist of one- and two-bedroom apartments fully fitted with quality designed built in furniture’s, exclusive bathrooms, and balconies for each apartment. Sustainability has always been at the very sole of our design philosophy and together with our efficient building systems, we are able to achieve a high level of energy efficiency. Our flexible yet robust building design makes relocation of these buildings to other regions of Neom a breeze as this mega project progresses.
Erik Thomaeus, CEO of SIBS Group
“We are thrilled to have secured this monumental project. This development represents a major milestone for our company and reflects our commitment to creating exceptional living experiences for tenants. The fact that SIBS has been selected as a supplier to NEOM is a clear confirmation that we have the competence and delivery strength that few in the world can match. We look forward to contributing to the development of NEOM as an international hub for, among other things, innovation, business, and sustainable development. We are excited to contribute to the growth and development of NEOM while providing a vibrant and sustainable community.” says Erik Thomaeus, CEO of SIBS Group.
When SIBS started in 2016, the team had only one mission in mind and that was to revolutionize how homes are built. Its substantial scalable capacity and ability to adapt to different requirements from all regions of the world is further validated with the securing of the NEOM project.
Last year, the finest modular construction company invested in its new plant in mainland Penang, Malaysia. It has ever since boosted its productivity four folds, making SIBS one of the largest producers of apartment modules in the world. The state-of-the-art factory which spans across a 550,000 sq ft footprint on a 28-acre site is also almost entirely operated through solar energy to reduce its carbon footprint. The new plant is designed to meet the world’s growing needs for a more intelligent, efficient, and effective construction method.
CEO of SIBS Malaysia, SP Ong, said “Securing this project enables our company to strengthen its position as an industry leader in modular construction. We have a product that is unique and in high demand and I am confident that with a team of professionals whom we have assembled we will continue to improve to strengthen our position in this industry as the leader in construction tech. Everything in our factory is custom designed and built, from its production system to the machines used for production – something that no other competitor has. Not forgetting that we are one of the first to be able to complete 90% of an apartment building off-site leaving only 10% on-site work. We are also proud to be a company that prioritizes on using local suppliers and local professional talents. To further increase efficiency, we have also strategically placed our main suppliers within close proximities of our plant to avoid disruptions to our production. Doing so reduces our dependence on distant sources which are susceptible to disruptions and volatility. This mitigates risks and enhances our ability to respond quickly to demands and changing circumstances.
When we prioritize our borders, we directly boost our domestic economy. The ripple effects of this decision are profound, touching every corner of our society. Aside from delivering the best products, we have a serious commitment to contribute to local economic growth, job creations, and community development as an organization.” He concluded.
The success of SIBS in securing this multi-billion-ringgit apartment building project can be attributed to its experienced team of professionals who bring the substance of expertise and a passion for innovation to every project they undertake. Their dedication and commitment to excellence have earned the reputation for reliability in delivering high-quality products and ultimately positioning the company as the preferred choice in the construction technology industry.
SIBS is grateful for the support and trust of its partners, investors, suppliers, and the local
community. The company remains committed to delivering this ambitious project on time, within budget, and to the highest quality standards.
NEOM is an accelerator of human progress and a vision of what a New Future might look like. It is a region in northwest Saudi Arabia on the Red Sea being built from the ground up as a living laboratory – a place where entrepreneurship will chart the course for this New Future. It will be a destination and a home for people who dream big and want to be part of building a new model for exceptional livability, creating thriving businesses and reinventing environmental conservation.
NEOM will include hyperconnected, cognitive cities, ports and enterprise zones, research centers, sports and entertainment venues and tourist destinations. As a hub for innovation, entrepreneurs, business leaders and companies will come to research, incubate and commercialize new technologies and enterprises in groundbreaking ways. Residents of NEOM will embody an international ethos and embrace a culture of exploration, risk-taking and diversity.
SIBS Group was founded in 2016 and is today one of the world’s leading modular home manufacturers. With a scalable capacity of around 6,000 homes per year, we deliver sustainable, high-quality homes adapted to local conditions. SIBS has the entire integrated value chain for industrial construction within the group – from design and configuration in its building system, industrial production in its own factories and on-site assembly/finalization. With the help of digitalization and technology, we set a new standard in the construction industry.
KL Wellness City (KLWC), the first purpose-built township project in Southeast Asia to cultivate a lifestyle fully integrated with healthcare and wellness, marked its official launch today at the KL Wellness City Gallery in Bukit Jalil. The ceremony welcomed the Minister of Health, YB Dr Zaliha Mustafa as its Guest of Honour to officiate the momentous occasion.
With a gross development value (GDV) of RM11 billion and spanning over 26.49 acres, the development is a world-class medical and wellness living at its core. The project features a well-rounded ecosystem primed for wellbeing and health – The Nobel Healthcare Park, the KL International Hospital (KLIH), innovation laboratories, clinical R&D facilities, healthcare company office towers, a retirement resort, a Healthcare Hub, wellness-centric serviced apartments, a fitness-based Central Park, and more.
For the past few years, during the pandemic, Malaysia has been fighting hurdles in keeping up infrastructure development with patient load, retaining our medical talents, maintaining continuance of care in preparation for an ageing nation and a continuous war against Non-Communicable Diseases (NCD).
Positioning Malaysia As A Hub For Medical Tourism
From Left: Pn Norhaslina Othman, Malaysia Healthcare Travel Council Vice President (Facilitation), Dato’ Sri Vincent Tiew, Executive Director (Branding, Sales, And Marketing), YB Dr. Zaliha Mustafa, Minister of Health, Dato’ Dr. Colin Lee, KL Wellness City Managing Director, Wan Zamri Wan Hassan, Director (Project Development), Ms. Lim Bee Vian, Malaysian Investment Development Authority (MIDA), Deputy Chief Executive Officer, Datuk Seri Garry Chua, Non-Executive Director (Retail, Consumerism & Construction)
“In full support of Malaysia’s national plan to be recognised as one of the best places for medical tourism, KL Wellness City is designed to provide and prioritise health and wellbeing as the heart of its development, through its vision of a 360-degree wellness hub centred around its township which encompasses all aspects of medical care, health, wellness, fitness, and business, complete with residential, retail, and commercial offerings,” said KL Wellness City Managing Director, Dato’ Dr Colin Lee.
In line with the national vision of solidifying Malaysia’s position and track record as the top destination for medical tourism in mind, KL Wellness City will serve as the ultimate one-stop oasis for the body and mind for both domestic and international travellers.
Preparing For An Ageing Nation
YB Dr. Zaliha Mustafa, Minister of Health, adds her signature to the plaque following the successful official launch ceremony of KL Wellness City
Other than being a cornerstone for healthcare travel, according to Dato’ Dr Colin, the KLWC project is also an initiative that is built with an ageing nation in mind. Malaysia, having attained its status as an ageing nation, has an ageing population growing at a faster-than-expected rate where more than 15% of its population will be above the age of 65 by 2050.
In response to this shift in population demographics, Malaysia is currently in pursuit of WHO’s Universal Health Coverage and Sustainable Development Goals, that is to provide equitable healthcare and wellness for all. “The KL Wellness City master plan incorporates thousands of facilities and residences. This township is a significant step towards embracing an ageing nation, with facilities for comprehensive healthcare dedicated to wellbeing through elderly care, retirement resorts, as well as independent and assisted living.” Dato’ Dr Lee added.
Retaining And Cultivating Local Medical Talents
Dato’ Dr. Colin Lee, Managing Director of KL Wellness City, expresses gratitude by presenting a token of appreciation to YB Dr. Zaliha Mustafa, Minister of Health
The flagship KL International Hospital (KLIH), approved as a tertiary hospital with 624 beds and scalable to 1,000-bed capacity, will be on the same ranks as renowned institutions like Thailand’s Bumrungrad International Hospital, as well as Mount Elizabeth Novena, Singapore.
Some of the of medical equipment and facilities to be equipped in the KL International Hospital will be amongst the first in the Southeast Asia region, offering a fully comprehensive and integrated ecosystem of healthcare services including wellness and fitness facilities across diverse areas, including cardiology, spine health, neuro health, sports medicine, cosmetic surgery, and fertility, with R&D laboratories and facilities for clinical studies.
With the support of the Malaysian Investment Development Authority (MIDA) towards the KLIH, the new private hospital will be built within the mixed development of KL Wellness City in Kuala Lumpur with proposed investment of RM860 million. The project, set to be in operation in the first half of 2026, will create over 3,000 job opportunities for medical professionals, including medical specialists, doctors, nurses, pharmacists, technicians, and others.
“The commitment of KLWC to raising the bar for healthy living and wellbeing resonates with the Ministry of Health’s whole-of-system approach. It aligns perfectly with our national vision and the direction set forth in the 12th Malaysia Plan.
Undoubtedly, I have faith that KLIH will attract multidisciplinary leading specialists to practice in a single hospital location, shortening turnaround time for both local and foreign patients, optimising patient care and experience.
We foresee KLIH filling in that gap for Malaysians, and we stand in support of KLWC resonating with their purpose. The Ministry applauds the efforts of the tertiary hospital to maintain our leading position in this region and globally. We will continue to endorse KL International Hospital’s commitment,” said YB Dr Zaliha Mustafa, Minister of Health Malaysia.
Dato’ Dr Colin also expressed his gratitude for the support of the Malaysian Government for the groundbreaking project. “We are honoured by the presence of the esteemed Minister of Health, YB Dr Zaliha Mustafa, which further exemplifies our shared commitment to make Malaysia stand among the best in the SEA region.”
VIPs pose for the photo album to commemorate the successful official launch ceremony of KL Wellness City
About KL Wellness City
KL Wellness City Sdn Bhd is the master township developer. At the forefront of wellness and healthcare, KL Wellness City is the first in Southeast Asia to cultivate a lifestyle fully integrated with healthcare. Pioneering a comprehensive ecosystem embodying healthcare and wellness living, KL Wellness City’s concept is uniquely modelled by its declaration to redefining, strengthening, and broadening our experience of health and quality of life. Sharing in this vision of building a 360-degree wellness hub, the KL Wellness City community boasts The International Tertiary Hospital, Medical Suites, innovation laboratories, clinical R&D facilities, healthcare company office towers, a retirement resort, a Healthcare Hub, wellness-centric serviced apartments, a fitness-based Central Park, and more.
Serving as a healthcare nexus, these pivotal elements collectively render KL Wellness City the ultimate one-stop oasis for the body and the mind. Each component of this township is carefully conceptualised to excel both independently and collectively as a part of the community’s integrated ecosystem encompassing medical care, healthcare, wellness and fitness.
Pursuant to the earlier media release “Bursa Malaysia And RAM Collaborate On A New Debt Fundraising Platform,” issued on 22 December 2022,” Bursa Malaysia Berhad (“Bursa Malaysia” or the “Exchange”) and RAM Holdings Berhad (“RAM”) are pleased to announce that our joint venture entity, Bursa Malaysia RAM Capital Sdn Bhd (formerly known as BM RAM Capital Sdn Bhd) (“BR Capital” or “Company”) had on 2 June 2023 received approval-in-principle from the Securities Commission Malaysia (“SC”) in relation to BR Capital’s application to be registered as a Recognized Market Operator under the SC’s Guidelines on Recognized Markets, to manage and operate a new debt fundraising platform.
“We are appreciative of the SC’s support and are excited to be making good progress towards offering this new solution – investment notes as an alternative option for fundraising by small to mid-sized companies, while providing more investment opportunities to investors,” said Datuk Muhamad Umar Swift, Chief Executive Officer of Bursa Malaysia. “This upcoming fixed income solution is part of our aspiration towards truly being a multi-asset exchange.”
Chris Lee, Group CEO and Executive Director of RAM, echoed the sentiment, stating, “The approval-in-principle from the SC is a significant milestone for both RAM and Bursa Malaysia. The platform shall broaden fund raising avenues for both listed and unlisted entities whilst providing new fixed income investment opportunities to all investors. This collaborative achievement positions us to drive sustainable growth in the Malaysian capital market.”
About Bursa Malaysia
Bursa Malaysia is an exchange holding company incorporated in 1976 and listed in 2005, and has grown to be one of the largest bourses in ASEAN today. Bursa Malaysia operates and regulates a fully-integrated exchange offering a comprehensive range of exchange-related facilities, and is committed to Creating Opportunities, Growing Value. Learn more at www.bursamalaysia.com.
About RAM Holdings Berhad
RAM Holdings Berhad (RAM Group) is a leading provider of independent credit ratings, research, training, risk analysis, ESG analytics and bond pricing. Formerly known as Rating Agency Malaysia Berhad, RAM Holdings was established in November 1990 as a catalyst for the domestic debt capital market and as the nation’s first credit rating agency. In 2007, our rating operations were novated to a newly formed subsidiary, RAM Rating Services Berhad. Apart from credit ratings, the RAM Group also offers myriad solutions ranging from economic and debt market research, data & analytics and sustainability services. In 2016, RAM Sustainability commenced offering Sustainability Ratings, a tool and framework that measure companies’ environmental, social and governance (ESG) performance. Bond Pricing Agency Malaysia Sdn Bhd (BPAM) became a wholly owned subsidiary of RAM Holdings Berhad on 30 June 2021. The company is the sole provider of bond-pricing and valuation data on the Malaysian bond market and is regulated by the Securities Commission Malaysia.
