Malaysia Top Glove Budgets MYR400 Million In Annual Capital Expenditure-Chairman

© Nikkei Markets

KUALA LUMPUR (Jan 08) — Malaysia’s Top Glove Corporation, the world’s largest rubber glove producer by capacity, has budgeted about 400 million ringgit ($97.3 million) in annual capital expenditure as it seeks to automate, digitize and modernize machineries among others, its chairman said Tuesday.

The planned expansion comes at a time when analysts have started flagging potential oversupply in the industry as companies such as Top Glove and close rival Hartalega Holdings rapidly ramped up capacity in the recent years.

“Industry demand for nitrile glove is growing at 10%-to-15% a year,” Lim Wee Chai told reporters after the company’s annual shareholders’ meeting. “We can meet customers’ demands.”

Malaysia is home to the world’s top four manufacturers that collectively account for an estimated 80% of the world’s supply of rubber gloves used in sectors ranging from healthcare to food preparations. As usage of the gloves gained pace, manufacturers steadily ramped up production and expanded capacity to cater to an increasing demand.

By December 2020, Malaysia’s largest manufacturers-which also include Kossan Rubber Industries and Supermax Corp-would have over 180 billion pieces in combined capacity. Top Glove alone expects to produce more than 70 billion gloves per annum by end of next year.

“We will continue to grow,” Lim said.

This year, total capacity at the top four glove-makers would increase by 15% compared to world demand growth of about 8%-10%, according to Hong Leong Investment Bank Analyst Sheikh Abdullah. “We do note that a short-term imbalance is expected to manifest in 2019,” he said.

“Our analysis suggests a potential oversupply is looming,” Kenanga Investment Bank’s Analyst Raymond Choo wrote in an investor note on Friday. An oversupply could weigh on average selling price, he cautioned.

Top Glove’s push for deeper automation at its factories to reduce reliance on manual work force also follows recent labor abuse allegations. The company has admitted breaching the legal working-hour limit in Malaysia but contests other allegations that included forced labor.

Profit margin at Top Glove could be under pressure this year in-part due to higher minimum wage in Malaysia, said JF Apex Securities analyst Siau Li Shen. That makes Top Glove’s push to increase efficiency crucial to cushion the margin erosion, he said.

Shares of Top Glove closed down 5.1% at 5.03 ringgit, meanwhile FBM KLCI ended down 0.4% lower at 1672.76.

– By Gan Pei Ling and Gho Chee Yuan; peiling.gan@nikkeinewsrise.com; +603-20267363
– Edited By Abhrajit Gangopadhyay

Malaysia Allotted Up To MYR20 Mln To Develop Vendors For National Car Project-Minister

© Nikkei Markets

KUALA LUMPUR (Jan 07) — Malaysia has set aside up to 20 million ringgit ($4.86 million) to develop vendors for the proposed third national car project, the federal minister for entrepreneur development said Monday.

“We have budgeted not more than 20 million ringgit. That has helped attract interest from vendors (supplying automotive parts),” Mohd Redzuan Yusof said at a news conference.

The ministry’s Secretary-General Wan Suraya Wan Mohd Radzi added that some 90 vendors have registered their interest with the ministry.

Since sweeping to power in a shock May 2018 election outcome, Prime Minister Mahathir Mohamad has announced plan for a fresh national car project with foreign partners. 

In May 2017, China’s Zhejiang Geely Holding Group acquired a 49.9% stake in Malaysian carmaker Proton Holdings, which was founded during Mahathir’s previous term as a premier. Proton developed Malaysia’s first car. 

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

Malaysia Renews Pact With MASwings For Rural Sabah, Sarawak Flights Until 2024

© Nikkei Markets

KUALA LUMPUR (Jan 04) — Malaysia’s federal government renewed a contract with MASwings, a regional airline operating rural air services, for six years to 2024, Transport Minister Anthony Loke, said Friday.

“The contract is renewed to provide rural flights in Sabah and Sarawak,” Loke said at a news conference in Putrajaya. “The government also budgeted 190 million ringgit ($45.88 million) a year to subsidize the flights.”

According to media reports, MASwings had earlier announced it will cease operations on eight domestic routes in Sabah and Sarawak, effective Jan. 1, 2019 following the finance ministry’s decision to cut funding under new Public Service Obligation agreement.

Now the number of subsidized routes has been cut to 39 from 49, Loke added.

Loke also said penalty will be imposed on MASwings if its services are not up to par.

Meanwhile, the ministry also inked a pact with AirAsia to operate two exclusive routes in Sabah and Sarawak: Kota Kinabalu-Sibu and Kota Kinabalu-Bintulu.

Separately, Loke said the ministry paid 23 million ringgit as compensation to 961 former staff of the disbanded Land Public Transport Commission and has helped 70%-to-80% of those to secure job offers from government agencies and state-linked companies.

– By Gan Pei Ling
– Edited by Sayantika Bhowal

Malaysia Airports Holdings To Spend MYR150 Mln On Infrastructure Development In 2018-2020-Official

© Nikkei Markets

KUALA LUMPUR (Dec 20) — Malaysia Airports Holdings plans to spend 150 million ringgit ($35.8 million) in infrastructure development between 2018 and 2020, a senior company official said Thursday.

While the state-backed airport operator will spend about 39 million ringgit-to- 40 million ringgit for Subang Aerotech Park in Selangor, the remainder will be used to develop KLIA Aeropolis including the Digital Free Trade Zone, General Manager Randhill Singh told reporters. 

The company, which has already spent 60 million ringgit, is funding the expenditure through own cash, he added. 

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

Malaysia Chuan Huat To Supply MYR200 Mln Worth Of Materials To Akisama’s Project

© Nikkei Markets

KUALA LUMPUR (Dec 19) — Malaysian steel company Chuan Huat Resources inked a pact with property developer Akisama Group on Wednesday to supply up to 200 million ringgit ($47.7 million) worth of building materials for a mixed development project in Kuala Lumpur.

Chuan Huat will be the principal supplier to the 12 blocks of 48-storied condominium project, its Chief Executive and Group Managing Director Patrick Lim said in a news conference.

The mixed development project known as RC Residences consists of 5,784 units of condominiums and 121 units of shop offices and has a gross development value of over 2.5 billion ringgit. It is scheduled to be completed in four phases over four years. 

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay

World Bank Cuts Malaysia 2018 Economic Growth Aim On External Risks

© Nikkei Markets

KUALA LUMPUR (Dec 18) — The World Bank Tuesday trimmed its 2018 economic growth forecast for Malaysia to 4.7% from 4.9% citing external headwinds arising from the U.S.-China trade tension and volatile commodity prices.

The multilateral agency, which forecasts the economy to expand at the same pace next year in its Malaysia Economic Monitor report, expects private consumption to drive growth through 2019, while exports growth rate is expected to stay modest at 3.0% next year compared with an estimated 2.8% in 2018.

“We revised down (the economic growth forecast) due to two developments: lower government spending and investments,” World Bank’s Malaysia Economist Shakira Teh Sharifyddin said at a news conference.

Since sweeping to power in a shock May 9 election, the new Alliance of Hope coalition government has scrapped several costly infrastructure projects and put others on review as Prime Minister Mahathir Mohamad seeks to mend Malaysia’s finances amid mounting government debt.

Gross fixed capital formation – a proxy for investment – is expected to expand “modestly” with lower-than-expected public spending dampening growth prospects, the World Bank said in East Asia and Pacific Economic Update report. It projects gross fixed capital growth to decelerate sharply to 2.1% this year from 6.2% in 2017.

The World Bank is the latest to downgrade its economic growth projections for the trade-dependent Southeast Asian nation. In September, the Asian Development Bank lowered its Malaysian economic growth forecast to 5.0% for this year and 4.8% in 2019 citing risks of sluggish exports growth and subdued domestic investment.

The recent downgrades mark a sharp turnaround from April when the World Bank had raised its forecast for Malaysia’s economic growth to 5.4% this year from a previous projection of 5.0% but had cautioned risks from shifts in external demand and financial market conditions.

Malaysia’s economic growth rate has decelerated for four straight quarters and expanded 4.4% in July-to-September. The central bank has said it is confident that the economy will likely grow 4.8% this year.

“With Malaysia’s economy tightly integrated with the global economy through financial and trade linkages, increased uncertainty in the external environment poses downside risks in the near term future,” the multilateral agency said. The country’s heavy reliance on oil-related revenue also pose challenge to the fiscal space in cases of price or supply shocks, it added.

The crude exporting Southeast Asian country counts hefty dividend from state-run oil explorer Petroliam Nasional, or Petronas to boost its non-tax revenue that is crucial for meeting budget deficit targets.

Still, the World Bank is “encouraged to see the Malaysian government taking measures to both preserve growth, restore fiscal buffers, and improve governance,” said Mara Warwick, World Bank’s Country Director for Brunei, Malaysia, Philippines and Thailand. “Such reforms will pay dividends over time, with efforts to improve not just the quantity of economic growth, but also of the quality of economic growth.”

The government has scrapped an unpopular but remunerative goods-and-services tax that netted some $10 billion in revenue last year and re-introduced a single-tier sales and services tax. It also plans to tax foreign service providers and adopt a more targeted fuel subsidy scheme to fix its strained finances. Still a narrower revenue base and dependence on fickle oil-related income could limit its flexibility to make fiscal adjustments against future macroeconomic shocks, the World Bank said.

– By Gan Pei Ling
– Edited By Abhrajit Gangopadhyay