All eyes on financial markets

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Economists and industry leaders are mixed on government’s initiatives to stimulate economy

Najib speaking on the proactive economic measures to be taken by the government at the Prime Minister’s Department, Perdana Putra Building yesterday. On his right is Minister in the Prime Minister’s Department, Datuk Seri Abdul Wahid Omar who chaired the Special Economic Committee to formulate the action. — Bernama photo

Najib speaking on the proactive economic measures to be taken by the government at the Prime Minister’s Department, Perdana Putra Building yesterday. On his right is Minister in the Prime Minister’s Department, Datuk Seri Abdul Wahid Omar who chaired the Special Economic Committee to formulate the action. — Bernama photo

KUCHING: Mixed reactions were garnered from industry leaders on the government’s decision to introduce specific and proactive economic measures to deal with the country’s current economic development and financial situation yesterday.

Among the new measures are asking both international and local Malaysian companies to repatriate profits and reinvest in Malaysia and to reactivate ValueCap Sdn Bhd with a RM20 billion injection to boost underperforming shares.

Other steps are restructuring and rescheduling the loans of small and medium enterprises and to beef up the working capital guarantee scheme with an additional RM2 billion to other sectors besides the RM5 billion set aside for the services sector.

According to Bernama yesterday, Prime Minister Datuk Seri Najib Tun Razak also said import duty exemption would be given to 90 tariff lines covering consumable spare parts and research apparatus used in the manufacturing sector until the global economy recovers.

“This is in addition to the existing 319 tariff lines which have already been given an import duty exemption,” he said, adding that about 900 manufacturing companies would benefit in annual cost savings of between RM100,000 and RM500,000.

CIMB Group chief executive Tengku Datuk Zafrul Aziz lauded the economic stimulus to stabilise the financial markets and support business activities.

“The measures outlined are well-balanced between supporting the financial market with the RM20 billion capital injection into ValueCap to buy the undervalued shares and measures to support real economic activities, such as the incentives for manufacturers, the SMEs and tourism activities,” he said in a statement yesterday.

“We are confident that if all the measures announced are executed well, growth could actually be closer to the upper end of the official target of 5.5 per cent, although there may be some time lag before we can see the full positive effects working through the financial and capital markets and in turn, the real economy.”

On the other end, RHB Research Institute Sdn Bhd’s head of research Alexander Chia opined that the move “will not have a direct impact on the economy.”

“We are more interested in measures that can extract real value, synergies and elimination of inefficiencies that can benefit the real economy that should ultimately be reflected in the stock market which is supposed to be a barometer of the economy and not the other way around,” he told The Borneo Post yesterday.

“Indirectly, the real economy could be lifted if sentiment can be sustained by a stronger market,” he added.
Meanwhile, economist Patricia Oh from AmResearch Sdn Bhd saw the move as positive for market sentiment which could spur domestic investments and inflows of foreign funds.

“Overall, the inflows of capital will augur well for the ringgit going forth,” she said to The Borneo Post. “As for the domestic economy, recent indicators signal mixed economic performance during the start of 3Q15.

“Output levels remained healthy with persistent growth for the IPI, especially for manufacturing output which is a good proxy for quarterly GDP.”

Other measures announced by the Prime Minister to further stimulate domestic and foreign investments include an additional allocation of RM1 billion in the Domestic Investment Strategic Fund under the 11th Malaysia Plan period.

The Prime Minister also said the government was reactivating ValueCap, formed in 2002, as an entity to support underperforming shares and had proven to be effective in stabilising the equity market.

“ValueCap has given handsome returns to shareholders like Permodalan Nasional Bhd, Retirement Fund Incorporated and Khazanah Nasional Bhd,” said Najib.

He said SMEs could apply to restructure and reschedule their loans from financial institutions or Bank Negara Malaysia’s credit guarantee scheme if necessary.

Additional measures on the capital economy would be announced in the 2016 Budget on Oct 23, he added.