1 corporate MALAYSIA SEPTEMBER 12, 2022

2 TONG’S PORTFOLIO

There’s no free lunch in economics — it’s who

receives and who pays
BY TONG KOOI ONG + ASIA ANALYTICA
Malaysian Portfolio

M
alaysians just celebrated
Merdeka Day,marking our 65
years of inde- pendence,last
week.And Malaysia Day is just
around the corner, on Sept
16.This should be the time to
rejoice,to inspire,to be proud of the
nation’s success. Hence,we understand
that this ar- ticle may upset some people,
perhaps even
raise questions about our agenda.Do we have
one? You bet we do. Pretending to be an
os- trich, burying your head in the sand, -
serves absolutely no purpose. Not
acknowledging the underlying issues
does not mean they do not exist.
Problems will not be magically
resolved.On the contrary,they create
uncer- tainties and cautious expectations
and, as we know, investors work on
expectations. Indeed, to understand the
enormity of the challenges the country is
now facing — as we do — and to not
speak up is the least pa- triotic thing any
Malaysian can do.
We do not know if you have noticed,
but many of our recent articles have
focused on one key issue —
investments. Investment is the single
most important driver of eco- nomic
growth in a nation.Investments cre- ate
employment and raise the income level
and well-being of the people.The role of
the government is to facilitate a business
envi- ronment that is most conducive to
attract investments, be it by the domestic
private sector or foreign investors.
The fact is Malaysia is falling behind
in terms of attracting foreign direct
invest- ments (FDI) in the region. Our
share of FDI flowing into Asean has
fallen from 24% in 1977-1997 to just 8% in
2000-2020. And the fact is Malaysians
(corporates, institutions and individuals)
have been sending money out of the
country at an accelerated pace (af- ter
capital controls were lifted in December
2002 and the ringgit-US dollar peg
removed in July 2005) for more attractive
returns in- stead of investing
domestically.Investment as a percentage
of GDP has fallen sharply since the Asian
financial crisis (AFC).

We have written at length on why

this is so —

the failure to properly address underlying

structural weaknesses that have persisted
for years, all of which have made
Malaysia
increasingly less competitive as an inves
ment destination.
 As a result, the country suffered from premature deindustrialisation. As invest-

ments declined, successive governments

have sought to boost economic growth
with short-term fixes.These included
encouraging domestic consumption
without correspond- ing income
growth,which only led to falling savings
rates and rising household debts. Raising
government spending to stimulate
demand and growth,à la Keynesian
theory,is also largely a myth.Yes,it works
in the short term but it is not sustainable
and there are
costs.To a certain extent,this is a
weakness of all democratic governments.
Most are, in effect, practising BNPL
(buy now pay later) economic policies,
that is, win over voters now, pay later.
But snowballing debts must be repaid.

And this is where Malaysia now

stands
— on the edge of a precipice. There is no that the government uses cash The most ominous statistic,based on Bhd would be making net losses.
sugar-coating it.The table on Page 14 accounting instead of the accrual method the country’s current trajectory,is the While Malaysia has run fiscal deficits
shows a summary of the financial of accounting.) These are the actual expected current balance deficit in 2023 every year since the AFC, the
situation of the public sector — total historical figures for 2014 to 2021 plus the — and critical- ly, its widening trend in government has always only had to
government revenue, operating budgeted 2022 numbers as well as our 2024 and beyond.A current balance borrow to finance development
expenses,debt servicing costs and projections for 2023-2025 (based on the deficit means that revenue is insufficient expenditure (capex). But our projections
development expenditures. (This would average rates of change between 2014 and to cover operating and interest expenses. show that the country, by 2023, will have
be similar to the profit and loss statement 2019, before the distortions due to the If we were to look at Malaysia as a to borrow to service its debts! The
and capex of a company, but bearing in CoVID-19 pandemic). corporate body, then Federal CONTINUES ON PAGE 14
mind Government
 14 corporate MALAYSIA SEPTEMBER 12, 2022

TONG’S PORTFOLIO
MOF, BNM, ASIA ANALYTICA

Malaysia will soon have to

borrow to cover operating
expenses
FROM PAGE 12
thing is, once a company has to borrow
to make interest payments,debt servicing
costs will snowball — with more and
more bor-
rowings required to cover higher and
higher interest expenses. Lenders will
then surely demand higher interest rates
(to compen- sate for rising risks) and
finally,stop lending altogether. At that
point, the company will be insolvent.A
country will have more room to
manoeuvre but make no mistake, there
will be very serious fallouts.
How did we end up in this
looming debt spiral?
As we mentioned, Malaysia has always
had enough revenue to cover all
operating expenses, including interest,
save for two short years — 1986 and 1987.
Indeed, in the immediate years
following this shortfall, current balance
surplus increased strong- ly and
remained at healthy levels — until about
interest rates were in secular decline.In
other words, the cost of borrowing was
dropping, making debt cheaper. This
trend has now reversed and interest rates
are moving high-
er, at least for the foreseeable future.
Even after the current hot inflation has
peaked and price stability restored,
interest rates may not return to previous
lows for some time. In short, our
projections are based on the best-case
assumption — that the aver- age interest
cost remains unchanged from current
levels. The reality, therefore, will likely
be worse.
So, Federal Government Bhd was
barely eking out “profits” for years. No
thanks to years of profligate spending —
made worse by unchecked wastages and
theft — there was very little saved for a
rainy day.And that rainy day came — in
2020. When the pan- demic hit,much of
the additional spending to alleviate
economic hardship had to be funded
through borrowings. The statutory debt BANK NEGARA, MOF

2008.That was a major turning point
when expenses began growing faster
than revenue, resulting in significantly
smaller
surpluses (see Chart 1).
As a result of dwindling current
balance surpluses,Malaysia has had to rely
more and more on borrowings to finance
development expenditures. And as the
total amount of debts grew, so did debt
servicing expenses. In the five years
before the pandemic (2014- 2019), interest
expenses grew by 7.8% per annum on
average, the fastest clip among all other
major expense line items. And re-
member, this was the period when
globally,
ceiling was repeatedly raised, from 55% of
GDP to 60% in 2020 and then 65% in 2021.
There are now expectations that this will
imminently be lifted to 70%.
The spike in borrowings puts a huge
strain on the country’s financial position.
Debt servicing as a percentage of revenue
jumped from an average of 12% in 2014-
2019 to 16.7% in 2020-2022. In other words,
more government revenue now has to go
towards servicing debt.This percentage is
projected to keep rising in 2023 and
beyond. Clearly, the current course that
Malaysia is on is not sustainable.
What can (and cannot) be done? than GDP over the past six years (2014-2019)
Obviously, when expenses are greater — at 3.8% per annum on average,
than revenue, the answer would be (1) compared with 7% nominal GDP growth.
increase revenue and/or (2) reduce We attrib- ute this to the country’s
expenses.The lat- ter could be through a narrow tax base, low income levels and
combination of steep cost-cutting stagnating corporate earnings growth.
measures and debt restructur- ing — for
instance, lower the interest costs. How
probable is either action?
Government revenue, the biggest
chunk of which is derived from various
taxes (direct and indirect), has grown at a
far slower rate

We have written extensively on the

struc- tural problems leading to falling
earnings for Malaysia’s largest listed
companies — the earnings per share
(EPS) on the FBM KLCI
CONTINUES ON PAGE 16
 16 corporate
TONG’S PORTFOLIO
Most democratic governments practise BNPL economic policies
FROM PAGE 14
trended broadly lower between 2014 and
2019, which translated into flattish
corporate in- come tax (see Chart 2). Note
that the spike
in 2021 Was primarily due to RM5 billion in
additional taxes from glove makers (which,
as we know,have already fallen back
sharply) and to a lesser extent,plantation
companies, on the back of higher crude
palm oil prices. Tax contributions from
plantation should remain relatively high in
the short term but commodity prices are
volatile and,therefore, not reliable as a
steady source of revenue. Similarly,interest
and returns on investment
— primarily from Petronas — are closely
correlated to global oil prices.We discussed
some weeks back how Malaysia’s economy
remained overly reliant on primary com-
modities despite years of industrialisation.
Meanwhile, only 16.5% of the country’s
15 million-strong workforce pay income
tax, that is about 2.5 million (or less than
8%) out of Malaysia’s 32.7 million
population. This is a very small base.
Plus, there is a limit to how much
higher personal income tax
collection can go, especially if the country
is not creating enough high-paying jobs.
Last year, the government announced
a one-off prosperity tax in Budget 2022 to
help pay for pandemic expenses. And
there are calls to reintroduce the Goods
and Servic- es Tax (GST), which is a
broad-based con- sumption tax. GST was
hugely contentious and was a big issue
during the last general election, GE14. It
was eventually scrapped
in 2018, after the change in
government.We
87.4%
Portfolio returns
since inception
FBM KLCI total
returns over
same period
InsiderAsia Income Portfolio
Beat the market with credible analysis and information
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MALAYSIA SEPTEMBER 12, 2022
Chart 3
Government borrowings is be a double-edged sword.Elections,at regular
crowding out private sector intervals,can prevent unchecked
investments accumula- tion and abuse of power.But
few,if any,pop-
Holders of government bonds issued domestically ulist governments have the political will
35
(%) to make the hard decisions that inflict
pain on voters. Populist policies, on the
30 other hand, are often short-term solutions
that are not beneficial to the country in
25 the long run.As we mentioned above,
most democratic gov- ernments practise
20 BNPL economic policies. This is a
fundamental challenge for all democ-
15 racies — and quite possibly one of the
biggest weaknesses for this form of
10 government.
Malaysia has extensive subsidy pro-
5 grammes, including for petrol and
numer- ous food products. Petrol
0
subsidies, in par- ticular, have ballooned
2012201320142015201620172018 20192020 2021 with higher global oil prices. Total
EPF, KWAP
Foreign holders Financial sector Bank Negara
subsidies are now estimat- ed to reach
Others Insurance companies RM80 billion, nearly five times the RM17
BANK NEGARA, MOF billion budgeted for 2022 — the higher
subsidies will be partly offset by an
additional RM25 billion in dividends from
Petronas. There has been talk of replacing
(or reducing) the current blanket
subsidies
think it is highly unlikely to be environment. It does not promote with more targeted subsidies for the low-
reintroduced invest- er-income households. Again, is this
anytime soon, and especially not with ments or savings. polit- ically palatable?
the upcoming general election. For the same reasons,there is zero
Government must reduce operating chance of a smaller civil service or a
Raising taxes to pay for expenses cutback in sal- aries, emoluments and
higher expenses does not Therefore,the best solution is for the pension payments in the foreseeable
promote investments or govern- ment to reduce expenses.Cutting future. In fact, we are seeing more
savings expenses, especially on wastages, populist policies, such as di- rect cash
But even if it could be done,finding however,has proved to be equally transfers to the people, to boost popular
addition- al tax revenue to pay for higher daunting over the years. This is perhaps support.
operating expenses is a bad option. less surprising.
Higher taxes will
simply lead to an uncompetitive business The democratic form of government can CONTINUES ON PAGE 18
68.9%
8.8% 8.0% NOTE:
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MALAYSIA SEPTEMBER 12, 2022 corporate 17
TONG’S PORTFOLIO

Chart 1
Chart 3
Foreign demand for Japanese Comparatively lower interest rates but real yields are still attra
government bonds remains robust 5 10-year government bond yield (%)
(%) ¥
tril 4
100 1000

80 800 3

60 600
2

40 400
1

20 200

0
0 0
19
99

20
01

20
10
20
07
20
03

20
05
20
06

20
09
20
00

20
04

20
08
20
02

2
0
-1
Central bank Depository corporations Insurance and pension funds
Public pensions Households Overseas
Others Government bonds outstanding
(RHS)

April 2013

June
Sept
Oct 2009

2010

2014
May
Jan 2008

2008

Dec 2010
July 2011
Feb 2012

2012

Nov 2013

Aug 2015

2016
Oct 2016
May 2017
Dec 2017

Feb 2019
Aug

March
2009

Jan 2015

July 2018
March
BANK OF JAPAN/FLOW OF FUNDS ACCOUNTS

Chart 2
Debt servicing has fallen sharply on lower rates, even10-year
as government
debtsbond
rose
yield - inflation (%)
8
¥ tril
1000 12
6

900
4
10
800
2
700
8
0
600
-2
500 6

400 -4

4
300 -6

200 -8
2
100
-10
00
April 2013

June
Sept
Oct 2009

2010

2014
May
Jan 2008

2008

Dec 2010
July 2011
Feb 2012

2012

Nov 2013

Aug 2015

2016
Oct 2016
May 2017
Dec 2017

Feb 2019
Aug

March
2009

Jan 2015

July 2018
March
19

79
75

19

19
93
19
87
19
83
19
85

19
89
1
9
8
1

1
9
9
1
1
9
7
7

Government bonds outstanding Interest rates on government bonds (%) [RHS]

Interest payments (¥ tril) [RHS]

MINISTRY OF FINANCE JAPAN

EuropeJapanUS

BLOOMBERG

Japan reaps dividends Chart 4

from thrift and hard work Japan is a top creditor nation
Japan has the highest public debt-to-GDP
with substantial foreign
ratio in the world at over 262%. The Bank of
higher (see Chart 1). To be sure, the Japanese incomes
economy is beset with myriad long-term
Japan (BoJ) has been aggressively buying Japan current account (US$ bil)
structural issues. Yet, foreign investors are 300
government bonds, effectively monetising
confident in the country’s ability to repay.
massive government spending and deficits, 250 200
Japan’s credit rating remains relatively strong.
for more than a decade. And it has kept the
The yen is perceived as one of the few safe- 150
policy interest rates near zero for far longer,
haven currencies in the world. 100
since the Asian financial crisis (AFC). Yet,
In fact, not only is Japan able to raise its
inflation remained stubbornly below the 50
borrowings to record levels, it was able to do
central bank’s target and the value of the yen
so at low — and falling —interest rates. -
has held up well against global currencies, at
This, in turn, has kept a lid on debt
least until recent months. Clearly, Japan is no -50
servicing costs.
Argentina. But then few countries can
Total interest payments have reduced sharply -100
emulate Japan either.
since the AFC, even as the absolute amounts
For starters, almost all of its debts are
19
99

20
01

20
10
20
02

20
07
20
03

20
05
20
06

20
09
20
00

20
04

20
08

2
0

of borrowings continued to rise (see Chart 2).

denominated in yen, which means there is
Why?
no default risk as the government can (in
While the yields of Japanese sovereign
theory) just print more money to repay its
bonds were far lower than those of US Goods and Investment
borrowings.
and eurozone bonds, real yields are still INTERNATIONAL MONETARY FUND
There are only a handful of countries in
competitive given its very low inflation (see
the world that can issue huge amounts of
Chart 3). trade surpluses every year between 1981 and of those held by Germany, Hong Kong and
government debt in their own currencies.
As we explained in our previous article 2010. (Deficits in recent years were primarily China at end-2021. These assets generate
Japan is also a country with historically
(Issue 1434, Aug 22, 2022) the value of a free- due to oil price surges). As a result, it has substantial dividend and interest income and
high savings rates. Therefore, it has
floating currency is largely determined by accumulated massive foreign assets over strong current account surpluses (see Chart
accumulated a huge pool of money, mostly
aggregate demand and supply in the market, the years. Indeed, it has been the world’s 4). And this is the biggest difference between
kept in domestic insurance and pension
both domestic and foreign. The biggest top creditor nation for 31 straight years, with Japan and Malaysia. It goes to show that our
funds, to take up the government debt.
sources of demand are net capital inflows and external assets totalling more than US$3.2 future generations will either benefit from
And despite the rising debt-to-GDP ratio,
repatriated export earnings and investment trillion, according to its Ministry of Finance. thrift and hard work or pay for the indulgence
foreigner demand for its bonds too remains
incomes. As we have shown, there is growing Japan’s net external assets were well ahead of the present generation.
robust. In fact, the percentage of foreign
demand for Japanese bonds (capital inflows).
holdings has been trending consistently
More importantly, Japan recorded big
 18 corporate MALAYSIA SEPTEMBER 12, 2022

NEWSBREAK

KWAP CIO Hazman to head KPJ Healthcare, sources

say
BY INTAN FARHANA ZAINUL
position as KPJ Healthcare’s man- and chief corporate officer at the first half of FY2022 ended be offset by higher revenue con-

H
azman Hilmi Sallahuddin,
chief investment officer
(CIO) of Kumpulan
Wang Persaraan
Diperbadankan
(KWAP),could be
poached
to helm the country’s largest pri-
vate hospital operator,KPJ Health-
care Bhd, according to sources.
This follows the departure of
Datuk Mohd Shukrie Mohd
Salleh effective from Sept
7,after just five months as
managing director (MD) of KPJ
Healthcare, which is con-
trolled by Johor Corp (JCorp).
Syukrie,48,said he had
resigned “to pursue other
opportunities”.
Prior to
KWAP,Hazman,41,was MD of
Damansara Assets Sdn Bhd,
which is a subsidiary of JCorp.
He had a 12-year stint with
Khazanah Nasional Bhd, where
he served in various roles across
the organisa- tion,including as
senior vice-pres- ident of
Khazanah Europe Invest- ment
Ltd, based in London.
“Hazman has been offered
aging director. It is not a surprise
considering his past experience
with the JCorp group,” a source
says. He joined KWAP earlier
this year as CIO, a position that
had been vacant for more than a
year. JCorp owns a 45.2% stake in
KPJ Healthcare, followed by the
Em- ployees Provident Fund
(12.17%), Waqaf An-Nur Corp Bhd
(12.17%)
and KWAP (5.4%).
With Shukrie’s
departure,chief financial officer
Norhaizam Mo- hammad
assumed the role of of- ficer in
charge.
This changing of the guard
will be the third at KPJ Health-
care,which over the past two
years has seen two MDs come
and go
— Shukrie and Ahmad Shahizam
Mohd Shariff.
Ahmad Shahizam was
appoint- ed head honcho of the
group in June 2020, and
resigned less than nine months
later in March 2021. He was CEO
of Pantai Holdings
Bhd from July 2014 to June 2017
IHH Healthcare Bhd from July
to De- cember 2017.
KPJ Healthcare,which owns
28 hospitals throughout
Malaysia,has seen its share price
decline since the start of the
year, falling more than 22% to
84.5 sen at Friday’s close, giving
it a market capitali- sation of
RM3.67 billion.
In the past, the healthcare
group has been a privatisation
target, as reported by The
Edge. Quoting sources, it was
reported that JCorp and private
equity fund TPG were
submitting a proposal to the KPJ
Healthcare board to take the
healthcare group private in an
exercise that valued it at up to
RM5.4 billion.
JCorp had declined to
comment on the matter at the
time.The pri- vatisation did not
pan out,putting a dampener on
KPJ Healthcare’s share price.
It is worth nothing that the
healthcare group has seen its
earnings improve this year. For
June 30,KPJ Healthcare’s net
profit more than doubled to
RM49.29 million, from RM19.93
million a year ear- lier,on the
back of higher revenue of
RM1.36 billion compared with
RM1.24 billion previously.
Analysts appear to have
mixed views on the counter,
with seven research houses
having a “buy” call, and another
seven calling a “hold”.
Some expect KPJ
Healthcare to see better
earnings growth in the coming
quarters on the back of health
tourism, with the open- ing-up
of the borders,and recovery in
patient volume.
Some reckon that its new
hos- pitals, which are still in
gesta- tion, will have an impact
on its earnings.
KPJ Healthcare unveiled the
latest addition in its network of
hospitals,KPJ Damansara
Special- ist Hospital 2 (DSH 2),
on Sept 1.
CGS-CIMB Research estimates
“gestation losses” of RM70
million
from DSH 2 this year, which will
tribution.
“We see total revenue rising
further quarter on quarter in the
third and fourth quarters this
year, as KPJ Healthcare said the
group’s blended bed occupancy
rate (BOR) had continued to
improve and sur- passed 60% in
July to August,with some of its
hospitals currently hav- ing BOR
in excess of 70%.
“This should help improve
the profitability of its loss-
making hos- pitals over time; it
hopes to have three of them to
turn around to Ebitda [earnings
before interest, taxes,
depreciation and amorti-
sation] profitability by year-
end,” the research house says in
a recent note to clients.
KPJ Healthcare raised a RM3
bil- lion sukuk in June,which the
com- pany says is to “rebalance
its capi- tal and finance future
expansion”. As at June 30, the
group had RM1.92 billion in
debt, of which 44% is short
term, while its cash
stood at RM330 million. E

the

TONG’S PORTFOLIO

Too-low interest rates penalise responsible savers, discourage savings and

investments
leaves will be worth less than the value when
FROM PAGE 16 liquidity and keep interest costs low to
they were borrowed.
If the reality is limited options for in- mitigate shocks to the financial system.
creasing revenue and cutting expenses, A more protracted QE, though, will
then more government borrowings raise the perception that the central
appear inevitable. This is, in fact, what bank is monetising government fiscal
has been happening over the past few deficits. This will, without doubt,
years. But we are very close to, if not damage investor confidence in its
already at, the point where we can no independence and in the country. And
longer afford to kick the can down the by printing more money, it will also
road — without serious con- sequences. create inflationary pressures — and
asset bubbles. In the worst-case sce-
Crowding out private-sector nario, it could trigger runaway
investments inflation. Case in point is
One important fallout from rising Argentina,where inflation hit 71% in
public debt levels is the crowding out July this year.
effect on the private sector.This is Some may argue that Malaysia is not
clearly evident in Chart 3.It is worrying Ar- gentina and that Japan is the poster
that the percentage of government bonds child for unlimited QE,which the Bank of
bought by foreign inves- tors has Japan (BoJ) has undertaken for more
decreased over the past few years, and than a decade.The Japanese government
more government issuances are taken has consistently run huge deficits,
up by domestic institutions. increasingly financed by the BoJ — and
Obviously, lenders will always the yen has yet to suffer major
gravitate towards borrowers they repercussions, at least until recent
perceive to be least risky (government) months. But,in fact,the financial
and/or require relatively higher positions of Malay- sia and Japan are
premiums for riskier borrowers (pri- vate very different (see sidebar for a more in-
sector). In particular, the banking sec- depth discussion on this topic).
tor and, to a lesser extent, local
institutions (such as the Employees Keeping interest rates low has
Provident Fund and Kumpulan Wang serious long-term consequences
Persaraan Diperbadankan), are holding an Yes, keeping interest rates low will
increasingly large percentage of make it easier for the people and
government bonds. government to service their debt levels.
As the government absorbs more of And yes, inflation will reduce the real
the available domestic pool of savings, it value of debt, that is, fu- ture repayments
fiscally-disciplined, including government
spending.
Worse, low interest rates discourage
sav- ing — especially if the interest rate is
so low that it cannot even offset inflation
(in effect, savers would be earning
negative real returns) — and/or encourage
people to invest in higher return assets
abroad. This will result in even less money
available do- mestically for investments.
Inevitably, capping domestic interest
rates (relative to the rest of the world), and
adding to money supply that results in
high inflation will lead to capital flight
(foreign and domestic) — and rapid
depreciation of the ringgit. This would
diminish the pur- chasing power of the
ringgit and effectively destroy the savings
of the people.
The nation has made great progress in
less — and costlier — funding for the
private
sector.That means fewer
investments,which
as we have pointed out, repeatedly, is
THE most important driver of future
economic, productivity and income
growth.
Of note, Bank Negara Malaysia’s
hold- ings of government bonds have
risen sig- nificantly over the last two
years. In other words,the central bank is
financing some of the government debts,
whether directly or indirectly in the
secondary market — or as the world
calls it, quantitative easing (QE).
Limited QE during the pandemic crisis
is a defensible move, to ensure sufficient
raising the people’s standard of living in
the 65 years since achieving independence.
But the actions of past governments —
the years of profligate spending and
wastages — have led us to this critical
crossroad.Instead of al- ways going for
short-term fixes,is it not time for Malaysia
to finally acknowledge — and reform —
the underlying structural issues? Quite
honestly,we see no good (painless)
options. Short-term fixes will only exac-
erbate the challenges. And not acting
will mean watching the country descend
into a debt spiral — that will certainly
bring even more pain as well as risking
the well-being
This is the obvious solution for most
popu-
list regimes — do not make the difficult
(and
unpopular) decisions.It is more palatable
to keep interest rates low and allow the
ringgit to depreciate, which is then easily
blamed on global foreign exchange
movements that are beyond a
government’s control. But at what
consequences to the future generation?
Make no mistake,maintaining ultra-low
interest rates is a form of wealth transfer
— from lenders (savers) to the borrowers
(gov- ernment) and asset owners. If we go
down this road, responsible Malaysian
savers will be penalised and asked to
subsidise the less
Dream — have proved to be great
motiva- tors in attracting and fostering
talent, and removing rent-seeking
activities.Singapore is the preferred
hub for Asean because its public
service is perceived as transparent,
streamlined,efficient and absent of
systemic corruption. The country is
highly effective in planning and
driving long-term indus- trial-
investment strategies and has strong
private property rights. Both the US
and Singapore are among the top
destinations in the world for
investments. Investment is the answer
to sustainable long-term growth
— investments will spur innovations,
boost productivity and corporate
profits, create more and better-paying
of future generations of
Malaysians.
Over the past series of articles, we have
spelt out some of the most critical
structur- al issues that must be urgently
addressed. First and foremost, we must
reinvigorate investments by creating a
business-friend- ly environment that
promotes innovations. The education and
training system must be able to provide
the necessary talent pool to attract
investors. The brain drain must be
stopped and talents recruited from
abroad. We can learn from the successes
of others. Equality of opportunity and
high social mobility — the
quintessential American
jobs, and lift per capita income for all
Malaysians.
The Global Portfolio fell 2.5% for the
week ended Sept 7, underperforming the
MSCI World Net Return Index. The
biggest losers were Yihai International
Holding (-11.4%), Alibaba Group Holding (-
7.3%) and Chinasoft International (-
6.5%).There were only three gainers in the
portfolio last week — Airbnb (+2.6%), Bank
Rakyat Indonesia (+2.4%) and Guangzhou
Automobile Group Co (+0.1%). Total
portfolio returns since inception now
stand at 20.3%, trailing the benchmark in-
dex’s 34.7% returns.
Total returns for the all-cash
Malaysian Portfolio remained at 120.9%
since inception. This portfolio is
outperforming the bench- mark FBM
KLCI, which is down 18.5% over
the same period, by a long, long way. E
Disclaimer: This is a personal
portfolio for information purposes
only and does not constitute a
recommendation or solicitation or
expression of views to influence
readers to buy/sell stocks.
Our shareholders, directors and
employees may have positions in or
may be materially interested in any
of the stocks. We may also have or
have had dealings with or may
provide or have provided content
services to the companies mentioned
in the reports.