OREANDA-NEWS. The IMF recently reported Malaysia’s economy grew 5.8% in 2017 with a  projected economic growth rate of 5.3% for 2018. The growth forecast was aligned with that of CEIC and Consensus Economics, cited in the Recent Economic Developments in Singapore Report.

Recent Economic Highlights

Malaysia has a similar GDP to Singapore, with a significantly larger population of 31 million. Hence, Malaysia’s GDP per Capita is currently placed within the Developing Economy threshold. Malaysia’s 2017 growth was largely attributed to domestic demand, in particular spending by the private sector. While Malaysia had also benefitted from the cyclical upturn in exports in electronics and commodities, a key highlight of its economy is that household consumption accounts for more than half of Malaysia’s GDP.

In its most recent Monetary Policy Statement, Bank Negara Malaysia (“BNM”) maintained domestic demand will remain the key driver of Malaysia’s growth. BNM added this would be underpinned by favourable income and labour market conditions, spending on new and ongoing infrastructure projects and sustained capital investment by firms in the manufacturing and services sectors.

§  The BNM overnight policy rate currently stands at 3.25% and the USD/MYR is currently trading at 3.92, nestled between the January 2017 levels of 4.50 and May 2013 levels of 2.95. The MYR has gradually strengthened 13% to the USD since January 2017.

§  Government debt stands at 53% of GDP which is lower than a number of advanced economies in Europe.

§  Malaysia's Prime Minister Datuk Seri Najib Tun Razak is expected to call a general election by June.  

Largest SGX-Listed Malaysia Stocks Provide Exposure to Global Economy 

The largest capitalised and second largest capitalised Healthcare stocks listed on SGX, IHH Healthcare Bhd (“IHH”) and Top Glove Corporation Bhd (“Top Glove”) maintain their headquarters in Malaysia. The third largest capitalised stock of the Information Technology Sector, Silverlake Axis, also maintains it headquarters in Malaysia.

IHH operates in the home markets of Malaysia, Singapore, Turkey and India. The Group also has a growing presence in China and an expanding network across Asia and Central and Eastern Europe, the Middle East and North Africa. IHH Healthcare Bhd segmented 19% of its FY16 revenue to Malaysia.  

Top Glove exports to 195 countries worldwide. For management purposes, the Group is organised into business units based on their geographical areas, and has five reportable operating segments with the Malaysia unit reporting external sales of RM2.8 billion (83%) for FY17. However, Top Glove’s Management Discussion & Analysis in its Annual Report attributed 20% of FY17 Revenue to Asia.  

Silverlake Group Executive Chairman Goh Peng Ooi founded the Group in 1989, which now has over 300 customers located in about 50 countries across all continents. Silverlake Axis segmented 37% of its FY17 revenue to Malaysia. 

Likewise, Samurai 2K Aerosol with a Malaysia Headquarters, has a market capitalisation of S$134 million and  segmented 46% of its sales to external customers to Malaysia in FY17. The stock which listed on Catalist in early 2017 provides specialist aerosol coating services with a focus on high performance coating solutions for the automotive refinishing and refurbishing industry. 

Largest SGX Stocks with Majority of Reported Revenue Exposure to Malaysia

Singapore’s 10 largest capitalised stocks that report the majority of their revenue to Malaysia have averaged a 3.8% gain in the year-to-date. The 10 stocks span six Sectors, with 2018 YTD gains taking their average 12 month total return to 20.1%.  Excluding the four stocks of the Real Estate Sector, the remaining six stocks averaged a 38.4% total return over the past 12 months.

On average the 10 stocks reported 87% of their revenue in the last financial year to Malaysia. 

Singapore’s 10 largest capitalised stocks that report the majority of their revenue to Malaysia are tabled below. To see more details in SGX StockFacts click on the stock name.

Name

SGX Code

Market Cap S$M

20 March Closing Price

Total Return 2017 %

Total Return YTD %

12M Total Return %

Geo Seg Rev %

GICS Sector

GSH Corp

BDX

940

0.480

-0.1

-4.0

-14.2

72

Real Estate

Straits Trading Co

S20

918

2.250

23.1

-3.8

-0.1

99

Materials

United Overseas Australia

EH5

991

0.725

10.9

13.3

3.3

100

Real Estate

Riverstone Hldgs

AP4

756

1.020

25.6

-5.6

19.3

91

Industrials

Health Management Intl

588

536

0.640

4.1

-2.5

-4.9

97

Health Care

Hatten Land

PH0

237

0.172

8.5

-6.5

-39.1

100

Real Estate

Aspen Group Hldgs

1F3

199

0.230

N/A

15.0

N/A

100

Real Estate

ISEC Healthcare

40T

160

0.310

8.9

-1.6

7.1

76

Health Care

JB Foods

BEW

143

0.535

69.2

17.9

73.2

70

Consumer Staples

Sunright

S71

114

0.930

167.6

16.3

135.9

62

Information Technology

Average

      

35.3

3.8

20.1

    

Sunright

The best performer of the 10 stocks tabled above was Sunright. The company maintains its position as one of the world’s largest independent provider of burn-in and test services, and a leading manufacturer of parallel test and burn-in systems.

Sunright also distributes high technology semiconductor equipment and materials and engages in selective OEM assembly of electronic components. It has a total workforce of approximately 2,500 employees with annual revenue in excess of S$120 million. The company reported 1HFY18 (ending 31 Jan) Profit Before Tax (“PBT”)  growth of 25% YoY, building on the PBT YoY growth of 75% in FY17.

Sunright is headquartered in Singapore and has manufacturing facilities in Singapore, Malaysia, Taiwan, China and USA, and is supported by sales and service support centres in Singapore, Malaysia, the Philippines, Taiwan, China and USA. The company reported in its FY17 Annual Report 62% of its revenue to Malaysia, with 19% to China. 

ETFs & the Malaysia MSCI Index 

There are two Exchange Traded Funds (ETFs) that track the MSCI Malaysia Index that are listed for trading on SGX.

§  The MSCI Malaysia Index is a free float-adjusted market capitalisation index reflecting the performance of the Malaysian stock market by including common shares of all large- and mid-cap companies with a market capitalisation within the top 85% of the Malaysian market investable equity universe.

§  The Index is calculated on a total return basis with net dividends reinvested, and is based on the Global Investable Market Indices methodology developed by MSCI. The Index is reviewed and rebalanced on a quarterly and semi-annual basis and may also be rebalanced at other times in order to reflect corporate activity such as mergers and acquisitions.

§  The MSCI Malaysia Index has a market capitalization of US$136 billion as of 28 February 2018, and a P/E ratio of 17x.

ETF Name

Stock Code

Expense Ratio %

Fund Size (US$M)

Classification

Trading Currency

YTD Return %

12M Total Return %

Xtrackers MSCI Malaysia UCITS ETF

LG6

0.5

26

EIP

USD

5.1

14.2

Lyxor ETF MSCI Malaysia

G1M

0.7

43

SIP

USD

5.1

14.8