China Policy shift designed to spur growth

 Beijing to tackle economic challenges head-on in 2025

Stable recovery: Li attends a conference in Beijing. The Premier chaired the meeting where it was approved to have localities use special purpose bonds for land reserves and the acquisition of commercial properties for government subsidised housing. — Reuters

BEIJING: China’s shift to a more proactive financial policy and a moderately loose monetary policy next year signals the nation’s resolve to tackle economic challenges head-on and take an active role in spurring growth, says a senior official.

In 2025, China will exercise a more proactive financial policy for the first time, and shift its monetary stance to a moderately loose approach, which marks an end to the 14-year run of a prudent monetary policy, said an official from the Office of the Central Committee for Financial and Economic Affairs.

The official’s comments, according to a report from Xinhua News Agency, came after the nation’s policymakers set the policy agenda for the world’s second-largest economy at the annual Central Economic Work Conference in Beijing last week.

The directional shift indicated the central authorities’ concern that the domestic economy continues to face substantial headwinds, both from evolving external conditions as well as lingering domestic challenges, the official said.

On Monday, the State Council, China’s Cabinet, urged relevant departments to translate the decisions adopted at the Central Economic Work Conference into detailed plans and deliver them on the ground as soon as possible.

In a move to improve the management of local government special purpose bonds, it was decided at Monday’s State Council meeting, chaired by Premier Li Qiang, that a negative list approach will be introduced to identify the areas where these bonds can be channelled.

The new policy will also allow localities to use special purpose bonds for land reserves and to support the acquisition of existing commercial housing units for use as government subsidised housing, the meeting said.

China is still well positioned to ramp up its counter-cyclical adjustments to provide robust support to achieve the nation’s full-year economic targets in 2025, said the official from the Office of the Central Committee for Financial and Economic Affairs.

“A higher deficit-to-gross domestic product ratio and cuts to the reserve requirement ratio and interest rates are in the pipeline,” said the official.

Expanding domestic demand will be a strategic priority next year, with a particular emphasis on boosting consumption, the official said, adding that dedicated efforts will be made to enhance consumption capacity and bolster consumers’ willingness to spend.

To this end, the central authorities will utilise various policy levers, including increased direct financial investments in end-consumer segments, as well as measures to improve the social security system, in order to drive steady growth in people’s incomes, the official said.

Moreover, after the effective implementation of consumer goods trade-in programs this year, China will expand the scope and funding for these initiatives next year, to include more consumer product categories and optimise the subsidy process, the official said.

As another crucial component of domestic demand, China still maintains significant investment potential, the official said.

He stressed that the nation will take steps to anchor the expectations of private enterprises and deepen institutional opening-up in key sectors for foreign businesses, with the aim of effectively boosting investment momentum.

At a time when the headwinds of economic globalisation and geopolitical risks are rising, it is all the more crucial for China to introduce more policies for voluntary and unilateral opening-up and bolster global trade and investment partnerships in the process, the official said.

China will subscribe to high-standard international economic and trade rules, and expand the globally oriented network of high-standard free-trade areas, in a bid to steadily enhance institutional opening-up, the official said.

The country will expand pilot programmes for foreign investors in sectors such as telecommunications and healthcare, and take well-paced steps to further open the Internet, education, culture and other sectors, the official added.

In a concerted push to shore up the resilience of its foreign trade, the official said that China will deploy a comprehensive set of tools to support enterprises in exploring diversified international markets, promote the development of cross-border eCommerce, and deepen cooperation under the Belt and Road Initiative.

As for the real estate sector, with clear indications of halting the decline and moving towards stabilisation after a range of pro-housing policies were introduced in September, it is imperative to exert sustained efforts to ensure a stable recovery next year, the official said. — China Daily/ANN

STRONG PUSH FACTOR FOR PROPERTY MARKET

 

Country’s higher economic growth a feel-good element that is spilling over to the sector

“Inflation levels are benign at about 2% and with the ringgit appreciating against currencies such as the Singapore and Australian dollar, it indicates increased confidence.” Datuk Ho Hon Sang

KUALA LUMPUR: The property market appears to have several strong push factors going for it in the bigger picture, although developers are by and large still cautious despite any broader positivity.

The Real Estate and Housing Developers’ Association of Malaysia’s (Rehda) Property Industry Survey reveals the market is stabilising, amid continued concerns on rising costs on key core cost components such as building materials.

Survey respondents said there was more than a 10% annual increase in the average price for sand, which is used mainly in infrastructure projects, glass and concrete; while costs for steel appear to have declined or tapered off as at June 30.

Unsold units are featured as among the key highlights in the results of this survey whereby half of its respondents reported having unsold completed residential units.

A third of these unsold completed residential units were more than three years old, while about half of them were less than a year old.

A majority or 46% of the survey’s respondents reported that their unsold completed units were priced at RM500,000 and below.

According to survey respondents, the main reasons for this situation were end-financing loan rejection, low demand or interest and bumiputra lots.

The survey, which was done for the first half of 2024 also includes forecasts based on the survey on the market outlook for the second half of this year and the first half of 2025.

It collated responses from 162 out of over 1,500 Rehda members.

According to Rehda president Datuk Ho Hon Sang, the survey only includes a small number of respondents among its larger count of members and does not reflect all launched projects or sales made within the period under review although it can indicate the sentiment on the ground.

“The higher than estimate economic growth thus far gives the country a feel-good factor which spills over to the property market as well.

“Inflation levels are benign at about 2% and with the ringgit appreciating against currencies such as the Singapore and Australian dollar, it indicates increased confidence.

“There are also huge infrastructure projects that are being announced such as the West Coast Expressway which will open up more economic areas,” Ho said at a media briefing yesterday.

“An example is data centres. From 2021 to 2023, there were more than RM76bil of investments into this area, which attracts the established multinational companies.

“This has a very feel-good factor for the property market – as data centres are not just a one-time capital expenditure but provides opportunities during the operations and maintenance period.

“For example, Microsoft has committed to training up to 200,000 talents to maintain DCs,” he added.

Apart from that, there is the stable government and the coming Urban Redevelopment Act that will be focused on the Kuala Lumpur area which will further spur economic activities.

“All these have a part to play in transforming and influencing the sentiment of the people,” said Ho.

Increased demand may also come from increased foreign participation in the property market, although Ho indicated the price threshold is different in the various states and may be too high in some to spur any meaningful foreign buying.

Commenting on the unsold residential units, Ho noted a third of unsold completed bumiputra lots have aged more than three years, which is an issue that the industry needs to address eventually.

“Developers are still treading carefully when it comes to their business operations, despite the improving industry conditions in terms of launches and sales,” he said.

Ho added that this is expected, given the increase in prices for some building materials, which have hit smaller developers harder than larger property development companies.

Rehda also notes that more environmental, social and governance-friendly construction practices such as pre-cast and industrial building systems will increase costs for smaller developers, although it would help to reduce costs for bigger developments.

“For pre-cast panels, the production is centralised and for developments such as high-rises which feature a standard design, it can help to reduce costs on higher volumes with a standard mould.

“For terrace houses with standardised designs, it would be okay but for customised designs it would be difficult for the pre-cast suppliers to do.

“So most developers would still prefer the conventional building style (traditional construction methods) for landed properties.

“But the bigger developers are proceeding with using pre-cast panels even for their landed developments,” Rehda’s deputy-president Datuk Zaini Yusoff told StarBiz.

Zaini said bigger developers usually have their own in house pre-cast manufacturing capabilities.

Commenting on this new construction technology, Ho said it can increase costs for some developers by up to 10% to 15% based on feedback from Rehda’s members.

“This includes transportation costs from the pre-cast plant to the construction site as these costs (diesel) have gone up now and the deployment of skilled labour, since one cannot use normal manual labour to put these together.

“These causes the cost increase,” Ho said.

The survey also indicated that for the next 12 months, respondents look forward to higher optimism for the first half of 2025 compared with the second half of this year.

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Property market and affordability

Property sales hit fresh record RM196.8 bil in 2023, Growth momentum set to continue

Growth momentum set to continue

Bright future ahead for Malaysian properties

Is real estate still a viable investment asset?RRe

Rating upgrade to spur fund inflows into Malaysia

PETALING JAYA: Analysts and fund managers are expecting further foreign fund inflows following a country upgrade by JPMorgan from “underweight” to “neutral.”

The rating upgrade could send further longer-term foreign interest into Malaysian stocks, they said.

The rerating had seen the FBM KLCI rising steadily.

The benchmark index is comfortably passing the 1,600 to 1,610 resistance and may reach 1,750 in the near-to-medium term, according to technical chartists.

Chief executive officer and founder of Tradeview Capital Ng Zhu Hann said the report by JPMorgan is a sign of confidence in the country’s economic outlook and could potentially increase fund inflows as it heads into the second half of the year.

“I’m not surprised by this rerating, but the timing to upgrade only now is a bit too slow.

“The FBM KLCI went up by some 230 points in a span of a year. The rerating can spur further inflows of foreign funds. In the past six months, the foreign funds returned, took profit and then they came in again,” Ng told StarBiz.

“For Bursa Malaysia, the second half will have more upside surprises as many things are going well for the country. Good policies are being formulated including structural reforms.

“The Malaysian stock market will continue to be the best performer this year.

“Some sectors that JPMorgan is ‘overweight’ on had seen their share prices go up such as Tenaga Nasional Bhd (TNB) and Westports Holdings Bhd.

“Focus will now be on the second and third liners including the small mid-cap stocks which have yet to run,” Ng added.

He noted further catalysts could come from a potential US Federal Reserve rate cut which would benefit emerging markets including Malaysia.

“Potentially, the ringgit weakness will diminish, inflation will go down and it will be good for the overall economic sentiment,” Ng said.

Former senior investment banker and seasoned investor Ian Yoong said the country is midway through the data centre investment theme, except for the power sector.

“The uptake of electricity from TNB and other power producers can only go up. Avoid the want-to-be data-centre plays. There is still a lot of value in non-data centre themed small mid-cap stocks,” Yoong said.

“The outperformance of the domestic mega-caps, namely TNB and Telekom Malaysia Bhd, which are the largest data centre owners and operators in Malaysia, will most likely lift the FBM KLCI from the current 1,623 to 2,000 by the end of 2025.

“The confidence and trust in the leadership of the country grows by the day,” Yoong added.

JPMorgan, in its upgrade report, noted that policy reforms, data centre investments and infrastructure buildout have become key tailwinds for Malaysia, in line with its outlook for this year, but they are progressing at a much stronger pace than it had anticipated.

In a TV interview with CNBC, JPMorgan head of Asia-Pacific (ex-Japan/China) Rajiv Batra said there were signs of this happening last year, adding that the quick pace of execution such as subsidy rationalisation is positively surprising.

“We need to give credit to the country’s administration and hence, we have upgraded Malaysia to ‘neutral’,” Rajiv said.

“Foreign investors’ positioning in Malaysia remains light, but there is greater upside once it inflects upwards. We are increasingly constructive on the Malaysian equities outlook, based on the tailwinds and raise our FBM KLCI target base case to 1,650 from 1,500 previously.

“Our preferred sectors and key picks include construction, utilities, technology, healthcare and ports,” JPMorgan said.

On the flip side, it also acknowledged the challenges of subsidy rationalisation, external volatilities and potential impact of the upcoming US presidential election, which could result in weaker consumption spending, a stronger US dollar and external demand.

Also, the impending civil servant pay hike in Malaysia is expected to have a positive impact on consumption spending patterns.It noted that the move would also help cushion the government’s measures on fuel subsidy rationalisation, which could initially dampen consumer spending and overall economic activity.

“The immediate economic adjustments may result in short-term volatility and uneven sector performance. The renewable energy and electric vehicle sectors could see accelerated growth from higher fuel prices,” JPMorgan said.

“The cuts in the subsidies will go towards key policies that would increase economic productivity – literacy, people reskilling or even the progressive wage policy, which Malaysia is taking inspiration from Singapore,” Rajiv said.

JPMorgan said attention would shift to the anticipated RON95 petrol subsidy rationalisation, noting it has a higher weightage to the consumer price index, at 5.5% compared with diesel at 0.2%.

It estimated that for every 10% increase in the RON95 retail price, it will add 0.5% points to the consumer price index compared with diesel at 0.02% points.

Meanwhile, the research house said political stability remained a key anchor that would continue to maintain investor confidence in the country.

“In our view, Malaysia’s current political stability is a cornerstone for sustained economic growth and investor confidence.

“The next general election is not until February 2028, which is in another 3½ years. That provides the government with a substantial window to implement and demonstrate the effectiveness of its policies,” the research house said.

“This stability ensures a more predictable and secure environment for businesses and investors, reducing the risk of sudden policy shifts and fostering long-term planning and investment, in our view,” it pointed out.

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Malaysia’s Q1 GDP grows 4.2% on-year

https://www.channelnewsasia.com/watch/malaysias-q1-gdp-grows-42-year-4344261

GDP up 4.2% in 1Q24

THE country’s gross domestic product (GDP) grew by 4.2% in the first quarter (1Q) of this year, exceeding initial estimates and signalling that the economy is coping well amid a still volatile external environment. The final 1Q24 GDP growth number is higher than the 3.9% advance estimate as well as the median forecast in a Bloomberg survey. Already a subscriber? Log in. Win a prize this Mother's Day by subscribing to our annual plan now! T&C applies.

   Read More  https://www.thestar.com.my/business/business-news/2024/05/18/gdp-up-42-in-1q24