Money in housing, cautious optimism in industry

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PETALING JAYA: The property market is expected to remain cautiously optimistic in 2023, with the gradual increase in the Overnight Policy Rate (OPR) since last year likely to affect market activity, particularly on residential demand, says the Valuation and Property Services Department.

The outlook of the workforce in the construction sector and the increase in the price of building materials will also affect supply.

Department director-general Abdul Razak Yusak said internal and external factors, such as economic and financial developments both globally and in the country, would also have an impact on the real estate sector and the sentiment of industry players.

“Looking at the national economy which is projected to grow by 4% to 5% in 2023, supported by continued resilient domestic growth prospects, the property market is expected to remain cautiously optimistic in 2023,” he said.The first quarter of this year alone saw over 89,000 transactions worth RM42.31bil, which was higher than those recorded in pre-pandemic years, he said.

“The seasonal factor in house purchases, which is usually low at the beginning of the year, the increase in OPR and the decline in Consumer Sentiment Index (CSI) are among the factors that contributed to a decline in residential market activity in particular,” he said.

New residential launches, said Abdul Razak, were also indicating a cautious sentiment among developers, with the number recorded at nearly 4,700 units, which was less than those in previous years, while sales performance was moderate at 25.7%.

The decrease in new launches was in line with the decrease in the number of developers’ licences and advertising and sales permits of new housing sales and renewals approved by the Local Government Development Ministry from 5,641 in January and February last year to 2,911 during the same period this year, he added.

Johor recorded the highest number of new launches at 2,077 units or about 45% of the nationwide total with a sales performance of 24.9% while Selangor had the second highest at 791 units or 17% share with a sales performance of 37%.

Abdul Razak said in line with the cautious sentiment among developers, construction activity had slowed down in the first quarter of 2023.

“This is seen as a positive development to balance the unsold supply in the market,” he said, adding that the residential and serviced apartment overhang status continued to be positive.

“The number of overhang units has decreased to 26,872 units worth RM18.31bil in the first quarter of 2023 as a result of market absorption in all states, except Selangor. The volume and value of residential overhang decreased by 3.2% and 0.5% respectively compared with the fourth quarter of 2022,” he said.

Selangor recorded the highest number and value of overhang units, with 4,995 units worth RM4.47bil, followed by Johor at 4,759 units worth RM3.94bil, Kuala Lumpur with 3,423 units worth RM3.13bil, and Penang with 3,138 units worth RM2.48bil.

The purpose-built office (private) and shopping complex segment in Kuala Lumpur and Selangor, said Abdul Razak, should be given attention as there was a surplus of space, which was also expected to be severely affected by the inflow of new supply this year.This is as Kuala Lumpur recorded the highest available private purpose-built office space at 2.53 million square metres involving 290 buildings, followed by Selangor with 1.40 million square metres involving 192 buildings.

For the shopping complex segment, Selangor recorded the highest available retail space nationwide at 0.79 million square metres with 146 buildings followed by Kuala Lumpur at 0.56 million square metres with 97 buildings.

“Developers need to be more thorough and cautious before planning any new development and local authorities need to evaluate in detail before approving each new project,” said Abdul Razak.

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Young buyers flock to property market

Five challenges young Malaysians face with home ownership

For many young Malaysians, the road to owning a home is riddled with speed bumps. — Pexels

PETALING JAYA, Feb 26 — Most would agree that you truly reach adulthood the moment you own your own property.

Just like any other major milestone in life, getting there comes with its own set of challenges that many young Malaysians have to overcome before they can successfully purchase a home.

Here are five hurdles Malaysian millennials might encounter on the path towards home ownership:

1. Worrying about making the wrong choice, when is the ‘right’ time to buy?

 

Purchasing a home can be a major decision that many Malaysian youths feel overwhelmed by. — Pexels pic

Making the decision to buy a piece of property is a huge step that young locals aren’t quite brave enough to take yet.

Social news website SAYS’ 2019 Malaysian Home Survey among 8,568 Malaysians reports that one in five respondents had “(worries) about making the wrong decision”, especially since home ownership requires a hefty financial investment.

2. Unsure about loan application and loan rejections.

Pexels pic Do you have enough saved up for a home in the future? — Pexels pic

A difficult loan approval process is a huge factor that dampens many Malaysians’ prospects of owning a home.

PropertyGuru’s Consumer Sentiment Survey in 2017 states that 33 per cent of Malaysians reported a tough approval process for bank loan applications which presents a major roadblock on the path to home ownership.

3. Starter salaries, not enough money saved for a downpayment.

The average Malaysian needs to plan carefully if they want to own a house with their current salary. — Reuters pic

The thought of dealing with a mortgage on the salary of a fresh graduate is making many millenials think twice about owning a house.

The Employee's Provident Fund statement in 2016 had said that 89 per cent of the working population in Malaysia earn less than RM5,000 monthly, making home ownership especially challenging.

Most millenials wouldn’t believe that they could own a house with that salary.

4. Renting or owning?

  It’s not easy maintaining a modern lifestyle when you’ve got a mortgage weighing on your shoulders. — Unsplash pic

The hefty financial commitment to owning a home means young Malaysians will have to make some lifestyle changes if they want to stay afloat while having a house to their name.

This might mean foregoing luxuries such as weekend brunches and holidays overseas which have become staples for the modern generation.

Hence, a monthly instalment replacing these pleasures is the reason 33% of Malaysians in SAYS’ survey are saying ‘no’ to home ownership.  

5. Lack of awareness on housing deals and promotions.

Housing deals and offers don’t seem to be showing up on the radars of young Malaysians. — Unsplash pic

While initiatives are in place to help young potential homeowners, many do not even know about the resources available to them that can ease the burden of property ownership.

A shocking 65 per cent of Malaysians in SAYS’ survey said that they had no clue about current housing offers and promotions.

This means that many young adults are currently unequipped with knowledge about navigating the property market.

In light of this, property developers EcoWorld have launched HOPE (Home Ownership Programme with EcoWorld), a comprehensive solution that promises to aid young Malaysians in their journey towards owning their dream home.

HOPE aims to make the dream of home ownership a full-fledged reality for millennials with the STAY2OWN (S2O) and HELP2OWN (H2O) programmes.

S2O will allow those wanting to stay in an EcoWorld project to rent their ideal home first with the confidence that they can become homeowners in the future.

A low monthly payment similar to the market rental rate also makes it particularly attractive for first-time homebuyers.

The option to rent first before buying also gives customers ample time to get their finances in order before committing to a new mortgage.

To top it all off, the rental savings will be used to offset part of the purchase price of the home, making it even more affordable for young Malaysians.

The H2O had successfully helped approximately 1,800 young homeowners and upgraders own their choice EcoWorld home last year and you can be one of them too! For more information on owning your dream home, visit EcoWorld’s website (https://ecoworld.my/hope/) or Facebook (https://www.facebook.com/EcoWorldGroup/).

By Tan Mei Zi The Malay Mail

* This article is brought to you by EcoWorld. https://ecoworld.my/hope/

A NEW HOPE FOR YOUR DREAM HOME

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GEORGE TOWN: The state has been told to explain the financial status of Penang Development Corporation (PDC) over its alleged mounting debts.

Datuk Dr Muhamad Farid Saad (BN-Pulau Betong) said PDC received a RM600mil loan last year from Budget 2017, while in Budget 2018 the loan to PDC was approximately RM300mil.

Questioning if the debts indicate that PDC was not on stable financial ground, he asked if PDC would be able to pay back the huge sum to the state.

“Both loans are huge. How is PDC going to pay it all back?

“What has happened to the revenue of PDC in recent years? We would like some answers to the whereabouts of the expenditure on whether the sum was used for investment or loan to a third party.

“Is the PDC today not on stable financial ground until there were some who said that PDC has to take a bank loan to give out salaries,” he said when debating the Supply Bill and Budget 2018 at the state assembly sitting yesterday.

State Opposition Leader Datuk Jahara Hamid (BN-Telok Air Tawar) also raised her concern if PDC “was in the red”, considering that it was among the corporations in the past which had developed Bayan Baru and Seberang Jaya.

“PDC has also contributed to numerous state funds. But now, it is the opposite. PDC is borrowing money from the state government,” she said.

Source: by cavina lim, chong kah yuan,  and crystal chiam shiying at the penang state assembly

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How property prices are determined?

Factors affecting prices - It is not easy to predict trend as the property market involves all kinds of players

THE year 2015 will always be considered one of the more challenging years for the property sector, with several factors coming into play and leaving potential buyers and investors cautious.

Looking back, Jordan Lee & Jaafar executive director Yap Kian Ann says there were many factors – be it microeconomic or macroeconomic, political, social, among others, that affected the property market performance and its pricing either directly, indirectly and/or jointly.

Click for actual size: http://clips.thestar.com.my.s3.amazonaws.com/clips/business/property-prices-chart-1912.pdf

“These factors are inter-related and influence each other. Individually, they give direct and indirect impact to the property market, property transaction volume and property prices at a different direction and degree.

“As the property market involves players (buyers and sellers) with all kinds of behaviour and is subject to a combination of factors that affect its performance at a given point in time, it is not an easy task to predict its trend and degree accurately.”

Looking ahead, property consultancy VPC Alliance (KL) Sdn Bhd managing director James Wong expects 2016 to be more subdued than this year.

Wong says most developers have launched their products aggressively in 2014.

“They knew the market this year would be soft and this softening would be carried forward to 2016. The full impact of the expiry of the developers’ interest bearing schemes (DIBS) will be felt next year.

Under DIBS, property buyers need not service the loan until the property is completed. Introduced in 2009 as an incentive, speculators purchased multiple units under DIBS because of the initial low outlay.

He expects to see softening demand in the high-rise high-end residential sector in the central region of the Klang Valley in 2016. Landed residential property demand is still resilient, especially with the gated and guarded community concept. House prices are expected to “self-correct”, he says.

Wong says foreign investors are actively monitoring residential properties in Kuala Lumpur due to weak ringgit but they remain cautious.

The increase in interest rates by the Federal Reserve after nearly a decade is also keenly watched. Already, reports are filtering out that Federal Reserve’s sway on global interest rates is causing a sharp jump in Singapore’s benchmark borrowing cost, squeezing growth in the small Asian city-state.

On a state by state basis, MIDF Research said earlier this month that Johor’s house price index showed the slowest growth year-on-year at 3%, Penang (3.5%) while Selangor fared better at 6.2%, followed by Kuala Lumpur’s 5.3%.

“We believe that the outlook for property price is better in Greater KL (Selangor and KL) due to support from the urbanisation factor.”

Citing Bank Negara statistics, the research house also noted that demand for property loans declined 13% year-on-year in October 2015 to RM25.19bil.

“This was weaker than September 2015, which declined 9% year-on-year. On a monthly sequential basis, the data was 1% lower. We are negative on the data as the number was showing nine consecutive year-on-year declines since February 2015.

“Year-to-date October 2015, loans were lower by 7% year-on-year to RM253.88bil. In our view, consumer appetite for big ticket items such as property remains low due to the rising cost of living and the weakening ringgit.”

By Eugene Mahalingam The Star/Asia News Network

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Not all debts are bad

Rising household indebtedness could be a signal of robust consumption pattern that is the driver of domestic economic growth.

Construction workers at work in Kuala Lumpur. About 46 of household debt is for the purpose of financing purchase of residential properties.

Rising household indebtedness could be a signal of robust consumption pattern that is the driver of domestic economic growth.

FEDERAL government debt, external debt, household debt, non-financial corporate debt – these debts amount to billions of ringgit each and there should be proper context and understanding of the different classifications of debts to be fully informed of the economic issues at stake.

At face value, debt is money owed that has to be repaid in principal and interest. To look at debt from a more constructive point of view, debt is also future consumption brought forward. Furthermore, the benefit derived from consuming at the expense of expected future income should equal or even outweigh its associated costs of financing.

The point is, there are good debts and there are bad debts. Debts raking in billions or outstanding loans growing at an increasing rate could potentially be alarming. However, it would be misleading to label huge debts as unsustainable and destabilising before making sense of the origins and the purposes of the money borrowed.

Debts continue to pile up

A recent research on global debt and leverage by the McKinsey Global Institute in February highlighted that global debt continues to grow post-global financial crisis. These debts – the sum of money owed by governments, households, corporates and financial sectors in the 47 countries under the research – have grown to US$57 trillion since 2007 and a significant portion of the growth came from the public sector.

Overall, the research pointed out that only five developing economies showed signs of deleveraging while most of other countries saw increased debt to GDP ratio during the period.

With hindsight, global growth recovery post-global financial crisis has been rather slow and a handful of governments had pursued expansionary fiscal programmes funded through debts.

Unfortunately, as the global pace of growth is still relatively tentative, high level of government indebtedness would take longer time to deleverage.

Meanwhile, the increase in household and corporate sector debts could signal deeper financial system penetration and also recovery in household and corporate balance sheets for private sector expenditure to grow again.

As of end-2014, Malaysia’s federal government debt amounted to RM583bil (54.5% of GDP); external debt totalled RM744.7bil (69.6% of GDP); household debt increased to RM940.4bil (87.9 % of GDP).

In the past four years, the compounded annual growth rate for government debt was 9.4%; 14.4% for external debt and 12.2% for household debt.

While these numbers seem alarming, the major concern over debts arises when they are unsustainable.

While there are concerns over the sustainability of our fiscal deficit over the long term, the Government has embarked on a fiscal consolidation effort in recent years. Because of this, government debt should be under control in line with its commitment to achieve a balanced budget by 2020.

The Government operates on a few crucial self-imposed budgetary rules and it caps the maximum limit of government debt to GDP ratio at 55%.

On external debt, Bank Negara has adopted the new debt definition in early 2014, keeping in line with the International Monetary Fund’s (IMF) new guidelines of widening its definition to better reflect the depth in financial markets and the real economy.

In essence, external debt refers to the debts owed by residents to non-residents, be it denominated in ringgit or foreign currencies.

Therefore, the public and private sector’s offshore borrowings, Malaysian Government Securities held by foreigners are included in the classification of the external debt.

Since the last quarter of 2013, the external debt growth has been on a downward trend, easing to 6.9% in the last quarter of 2014, down from the peak of 15.7% growth recorded in the last quarter of 2013.

Besides, the bulk of the growth in external debt since 2013 was primarily from offshore borrowings as it made up almost half of the total external debt.

Bank Negara, in its recent annual report, guided that private sector offshore borrowings are sound and sustainable, given that 70% of the corporate sector’s offshore loans were sourced from associated companies, parent companies and shareholders.

High household debts a concern

However, Malaysian household sector indebtedness undoubtedly tops the chart in the region.

According to McKinsey’s study, Malaysia’s household debt to income ratio is highest at 146% in 2014, way above the level of the United States (99%) and Indonesia (32%).

When we break down the household debt, 45.7% of it is for the purpose of financing purchase of residential properties. Hire purchase financing (16.6% of total household debt) and personal financing (15.7%) made up the remaining major components.

Even though Malaysia’s household financial asset to total household debt ratio is relatively high at 214% in 2014, the associated risks of high household indebtedness cannot be taken lightly.

The IMF, in its financial sector assessment on Malaysia in April 2014, cautioned that in the event of a sharp fall in housing property prices coupled with a recession in the economy, the burst of the housing asset bubble would have dire consequences on the real economy.

The Government and Bank Negara have in recent years attempted to rein in the growth in housing loans and also put a check on the property market through various macro-prudential tools.

For instance, the last Overnight Policy Rate hike in July 2014 by 25 basis points was primarily to mitigate the financial imbalances within the economy.

In January 2015, the growth of household outstanding loans from the banking institutions has slowed to 9.7%, down from the peak of 13.9% in November 2010.

Although it is a sign of improvement in domestic financial stability, a continued assessment of household loans would be a prudent measure.

Responsible use of leverage

Bad indebtedness is often described as how an overleveraged economy collapses on its own pile of toxic debts when triggered by an overlooked external event – the subprime mortgage crisis in the United States is a classic example.

On the other hand, good debts are those that are used to finance productive and sustainable purposes.

A government manoeuvering an economy out of recession could issue bonds to fund its fiscal stimulus programme while a company could maximise its true potential through the proper use of leverage.

In fact, given a youthful population and a stable work force in Malaysia, rising household indebtedness could be a signal of robust consumption pattern that is the driver of domestic economic growth.

Therefore, regulators and policy makers should not, in their fear of “indebtedness”, stifle the credit lines and the channels to expand present consumption for future capacity of growth.

Unfortunately, with a lack of hindsight, it can be difficult at times to ascertain if a debt is good or bad, A-tier quality or just a default waiting to happen.

In the end, it is not only the viability in repaying the loans but also the realised output and gains from entering a debt contract that should be examined to determine the sustainability in taking up debts.

In short, indebtedness is not necessarily bad. A responsible debtor should have a clear and comprehensive business or personal financial planning and ultimately transparency in dealing with all parties. After all, a good debt is a good customer for the other end.

My point By Mandkaran Mottain

Manokaran Mottain is the chief economist at Alliance Bank Malaysia Bhd.

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Are you settling PTPTN student Loan? Over 45,000 defaulters settling out of records total of 412,245

OVER 45,000 National Higher Education Fund (PTPTN) loan defaulters have come forward to settle their unpaid loans totalling RM23.44mil.

Deputy Education Minister Datuk Mary Yap said these defaulters had come forward to settle their dues following legal action initiated against 132,801 defaulters which included blacklisting them with immigration authorities.

“Following this, some 45,550 loan defaulters came forward to negotiate loan repayment with the PTPTN administrator with the amount at RM23.44mil,” she said in reply to a question by Wan Hassan Mohd Ramli (PAS-Dungun).

Yap said graduates were given 16 months upon graduation to secure a job and start loan repayment, after which three-reminders would be issued to defaulters over a period of six months before legal action is initiated against them.

“However, legal action and blacklisting them with the immigration authorities would only be the last resort. What is important is for them (loan defaulters) to come forward to negotiate their repayments,” she added.

To a supplementary question by Datuk Nawawi Ahmad (BN-Langkawi), Yap said there was no “automatic mechanism” to deduct the salaries of defaulters.

However, Yap said defaulters employed by the Public Service Department would be easily identified and issued notices to repay their loans.- The Star Nov 26 2013

PTPTN records total of 412,245 loan defaulters, says Muhyiddin 

The deputy prime minister said, of the total, Malays formed the largest number of defaulters at 328,550, followed by the Chinese (55,445) and Indians (28,250).

He said there were currently 1.24 million PTPTN borrowers when replying to a written question by Lim Lip Eng (DAP-Segambut) at the Dewan Rakyat here today.

Muhyiddin said the enforcement implemented included blacklisting errant borrowers from going overseas, as well as summonses to raise defaulters' awareness, understanding and responsibility to repay their loans.

He clarified that such action was not made arbitrarily, without any room for borrowers.

“Based on its existing work procedure, PTPTN has been flexible in recovering loans from borrowers before they are blacklisted,” he said, adding that the move to blacklist, via immigration department, was a last resort to remind hardcore defaulters to repay their loans.

Muhyiddin said PTPTN had opened 12 state PTPTN offices, two one-stop centres and four branch offices at strategic locations to enable borrowers to negotiate loan settlement.

Apart from that, he said PTPTN had also given borrowers an incentive as announced by Prime Minister Datuk Seri Najib Tun Razak in the 2013 Budget last year.

It involved a 20 per cent discount for the settlement of the entire loan from October 1, 2012 to September 30, 2013 while PTPTN would continue to give a 10 per cent discount annually for those who made consistent repayment according to schedule from October 1, 2012.

Meanwhile, Muhyiddin said 1.36 of the 1.42 million or 88.9 per cent of the Muslim pupils from Year One to Year Six could master Jawi.

“There is no data on non-Muslim pupils who are literate in Jawi as Jawi is taught in Islamic Education,” he said. He was replying to a written question by Er Teck Hwa (DAP-Bakri) who wanted to know the number of trained teachers with qualification in written Jawi, as well as the number of Bumiputra and non-Bumiputra pupils who were literate in Jawi. — Bernama

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Big Malaysian banks with diversified defensive qualities seen upside

IN view of the weaker loan growth this year, which banking stocks will prove to be winners?

From the softer loan growth reported in December 2012, moderating at 10.4%, analysts expect loan growth will continue to weaken this year.

The 10.4% loan growth in December compares with a growth of 13.6% and 12.8% in 2011 and 2010 respectively.

Most analysts estimate loan growth this year to be within the 9%-11% range. “Together with the ongoing interest margins headwind, there are limited opportunities to drive earnings growth for banks materially beyond our current expectation of a high single-digit to low-teen growth,” says a Kenanga Research analyst.

However, Alliance Research banking analyst Cheah King Yoong sees loan growth falling within 7%-9%.

“I suppose our 7%-9% forecast is lower than other analysts’ 10%-11% forecasts due to our assumption that the Economic Transformation Programme (ETP) related loans may not be a key loan driver this year, given that significant amount being disbursed in 2012 could be repaid this year, which could drag the business loan growth momentum for 2013,” he says.

However, Cheah expects housing loans to resume its reign as key loan drivers this year, on the support of the continued robustness in property loans and recovery in hire-purchase loans.

Lending indicators turned negative in December with loan applications falling flat with a 14.6% year-on-year drop at RM53.6mil while approvals and disbursement activities dropped by 21.1% and 7.9% on a year-to-year basis respectively.

“The fall in lending indicators support our investment case that both lenders and borrowers are turning cautious with the impending 13th general election, which has to be called by the first half of 2013, and is now widely expected to be held in March,” says Cheah.

As at end-2012, business loans outstanding expanded by 9% year-on-year due to slower disbursements and base effect. Meanwhile, household loans continued to expand by 11.5% from a year ago.

“Drilling deeper into the business segment, the slowdown in year-on-year loan growth was mainly caused by transport, storage and communications as well as other sectors, with loans to these sectors contracting by 8.2% and 17.4% year-on-year respectively,” RHB Research analyst David Chong says.

He adds that it is possibly a reflection of lumpy repayments or refinancing via debt capital markets.

Key loan growth drivers came from real estate, construction, wholesale and retail trade, hotels and restaurants, and primary agriculture sectors.

CIMB Research banking analysts Winson Ng says the weak lending loan indicators do not point to a strong rebound in loan growth in the coming months. “On the other hand, we think that the erosion of net interest margin will be less drastic this year as banks will be more rational in their pricing of loans after the stiff rate competition in the past two to three years,” he says.

Ng reiterates his “neutral” rating on Malaysian banks. He adds that asset quality is expected to remain intact, which alleviates fears of a spike in credit costs for new impaired loans. “There are still some positives for Malaysian banks including financing opportunities from ETP projects, undemanding calendar year 2013 price-earnings of 11.5 times, and an attractive net dividend yield of 4.5%,” he says.

The banking sector could face two potential de-rating catalysts, which could pose further downside risks to analysts’ loan growth forecasts for 2013.

“Lending activities could decelerate in the first quarter of 2013 with slowing corporate loan disbursements and consumers turning cautious pending the upcoming general election,” Cheah says.

Another catalyst would be if the Government were to implement the goods and services tax (GST) and resume the subsidy rationalisation programme and raise the electricity tariff to close its budget deficit. “This fiscal tightening policy could have an adverse impact on consumer spending and consumer loans in the later part of the year,” says Cheah.

CIMB notes its preference for big banks that have better defensive qualities. “Maybank’s diversified business portfolio with top-three ranking in all business segments will enable it to reap the greatest benefits from the implementation of the broad-based ETP,” Ng says.

He adds that Maybank’s key earnings catalyst will be its rapid expansion in Indonesia which will enable the group to gain market share in the region and fuel its fee income growth.

Fundamentals

Meanwhile, Public Bank Bhd’s fundamentals remain unrivalled, with a return on equity in the mid-20 percentage point range, the best asset quality with an impaired loan ratio of below 1% and a cost-to-income ratio of 30%.

“We expect the group to keep its credit cost low in 2013 to 2014, thanks to its superior asset quality, especially with the full adoption of FRS (Financial Reporting Standard) 139. Loan growth is projected to be a decent 11%-12%. The push for fee income growth, primarily from wealth management and bancassurance, will provide a further fillip to topline growth,” Ng says.

However, Alliance Research believes that Public Bank’s future risk-reward dynamics are less appealing.

“With the election uncertainties expected to be cleared by the first half of 2013, we believe that Public Bank may underperform its higher beta banking peers post-elections,” Cheah says. This is coupled with its rich 2013 price-to-book valuation of 2.8 times and declining asset growth trajectory.

Cheah expects high beta banks that underperformed in 2012 to outperform its competitors in 2013.

“RHB Capital Bhd serves as our top pick of the banking sector since we believe that its current low valuation is no longer justified,” he says.

In the mid-cap section, Cheah has cast his eye on the often-overlooked Affin Holdings Bhd due to its turnaround story and good proxy to the merger and acquisition theme.

For investors looking for a direct and pure exposure to the fast-growing Islamic banking sector, BIMB Holdings Bhd is the way to go, says CIMB’s Ng.

“Re-rating catalysts include the best loan growth among the Malaysian banks under our coverage, the potential to venture into the under penetrated and fast-growing Indonesian financial market, brisk fee income growth, primarily from its takaful operations, and expected expansion of its net interest margin by optimising its loan-to-deposit ratio which is currently only 50% plus,” he says.

RHB Research and Kenanga Research remain “overweight” on the banking sector, while Alliance Research and CIMB Research maintain their “neutral” stance.

By WONG WEI-SHEN weishen.wong@thestar.com.my

Is having a car still a symbol of freedom?

HAPPY 2113! Rest assured there is no typo error on the intended year of the greeting. I am wishing everyone a Happy 2113 at the beginning of 2013, to invite you to an adventurous ride to see the world 100 years ahead.

Imagine yourself embarking on a flying public vehicle that can carry you almost anywhere without the hassle of traffic jams. Late and missed appointments will be a thing of the past.

With an effective and efficient public transportation system in place, using your own vehicle other than for leisure or emergencies would seem unnecessary.

Imagine that the highways, car lanes and open car parks that once filled the landscapes are now replaced with parks, pedestrian friendly streets, public halls, malls, cafés and restaurants.

Travelling far to enjoy a good meal or watch a movie at the cinema becomes a distant past.

With ample time at hand, you can even catch up with colleagues, friends or family members at these easily accessible and beautiful sites or if you prefer, indulge in your favourite sports such as jogging, cycling, etc.

Now, that is creating true work-life balance.

This scenario sounds like a fantasy but it may become a reality in 2113, a hundred years from now. A hundred years ago, the sky was the limit.

Today, outer space is the limit. With the advancement of technology nowadays, there is no limit to our imagination.

However, we do not need to wait a hundred years to enjoy such a lifestyle. We can have a city with a hassle-free public transportation system if we start planning and building it now.

Efforts must be made before we can move towards a world-class city where the citizens can travel freely despite the growing population.

To achieve this, one of the areas that everyone can contribute is to reduce the usage of private vehicles which is currently the main mode of transportation in our country.

Every year, we have more than 600,000 new vehicles joining the traffic league.

Imagine what will happen to our traffic condition 100 years later if this number keeps increasing?

The strong demand for cars is understandable as cars have long been associated with the symbol of freedom and independence. This symbol is further hyped in many movies such as the James Bond series and associated with many famous celebrities including James Dean.

Today, we are still embracing a vehicle-centric culture. Given a choice to pick between a self-owned vehicle or a self-owned property, the vehicle always gets the thumbs up especially for the younger generation. The young ones plan for the wheels they ride in but give less attention to the homes they live in.

According to the 10th Malaysia Plan, our public transportation usage has only reached 12% in 2009. Our government aims to increase it to 30% by 2015. In other vibrant cities such as Hong Kong and Singapore, their public transportation modal shares are about 90% and 60% respectively. In terms of car ownership,

Malaysia has a ratio of 200 cars for every 1,000 people, compared with Hong Kong’s 59 cars per 1,000 residents, and Singapore’s 117 cars per 1,000 residents.

With the number of vehicles rising significantly in our country, there is little room left for a car to continue being a symbol of freedom as portrayed in James Dean’s movies. Where is the freedom in owning a car if it is common to have long queues on our roads and our car is caught in traffic congestion?

Even in America, where the population is traditionally obsessed with cars, the Frontier Group and US Public Interest Research Group found that, Americans between 16 and 34 years old have in fact drove 23% fewer miles in 2009 compared with 2001. Meanwhile, they increased bicycle riding by 24% and their mileage on public transport by 40%.

To effect these similar changes in our country, a comprehensive and efficient public transportation network must be provided. One of the notable efforts made is the the Mass Rapid Transit (MRT) project.

The Sungai Buloh-Kajang line which is expected to be completed in 2017, is purportedly able to serve a population of 1.2 million people and attract 400,000 passengers per day.

The announcement on the alignments of Line 2 and Line 3 next year is a good move to transform our transportation landscape.

As we wait for the completion of the MRT networks, other alternatives such as providing more feeder buses and taxis, or extending the current number of our LRT coaches should be considered.

The 2113 scenario with all its sophistication and engaging living environment is a lifestyle worth pursuing. Best of all, we do not need to wait 100 years to enjoy this lifestyle if the public transportation projects can be expedited. It is done in many great cities, why not our own cities?

Today’s infrastructure is built for decades to come, it is meant to support the demand and growth of our future generation. A comprehensive public transportation system will be the answer to the challenges posed by a world class and people-oriented city. And the true symbol of freedom is captured when you are able to speed on an MRT which bypasses the cars stucked in the traffic below. ·

 Food for thought  By DATUK ALAN TONG

FIABCI Asia-Pacific regional secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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Taking a loan is fine, but if you can’t pay back your loans ...

HAVING gone through a few recessions and occasional global financial crisis in my lifetime, I have seen enough suffering by genuine business owners and their families.

When the going gets tough, the banks call in the loans and their cash-strapped business just fold up. The bank will then sell their pledged collateral and sue them till they are declared bankrupt. Standard operating procedures (SOP) for the bank and sobbing by the poor chap.

Then you have property speculators and big-time stock market manipulators bankrolled by greedy bankers until the bubble burst and the market crash. All hell will break loose as all parties scramble to damage control mode. The cash rich speculators will survive but the bankers always end up with having to take an unwanted haircut. High margins come with high risks. Fair game.

To get a loan, small businessmen have to charge to the bank whatever properties they have as collateral. At all times, they have to sign a personal guarantee too, just in case the bank cannot fully recover their loan sum from the forced sale of the property.

Unless you are someone special with VVIP status, the bank will come after you. Trust me, bankers are sticklers to SOP and they will make sure your name appear in the classified pages for bankruptcies if you don't pay up.

So, I am sure everyone is watching with great interest the latest promise in parliament by our Agriculture and Agro-based Industries Minister on the full recovery of the RM250mil loan from the National Feedlot Corp.

It looks like there were no properties charged to the Government as the 600ha in Gemas was leased from the Negri Sembilan government for RM200,000 a year and the condominiums were bought with the loan money. Did the borrowers provide the Government with any personal guarantees?

As with all loans, recovery of the loan sum will start with a demand letter saying that the bank/government is recalling the loan and you are given three months to pay back in full, principal sum with interest. Or else they will take you to court and sue you. Once they get judgement against you, the court will appoint a liquidator to salvage whatever assets you have and sell whatever cows and bells left to any interested cowherd with a big haircut. If you have signed a personal guarantee, you will be a bankrupt. Nothing personal, just SOP.

Now you are really on your own, with nobody to turn to. All your so-called friends are avoiding you like the plague. What can you do?

As an experienced restructuring expert and part-time lipstick salesman, my advice to you is not to hire sleazy advisors to solve your problems or you will end up suing him for unsatisfactory service levels filled with lies and empty promises.

There is no bypassing the SOPs. When the shit hits the fan, it is every man for himself. You still have to pay back... in full. Stay calm and meditate and God will show you the way.

First step is to look for a friendly tycoon who can buy over the cow business for RM250mil in the name of national interest. It is only petty cash to the tycoon but it will blend in nicely into his portfolio of staple food businesses.

Do not worry if nobody wants to talk to you now because the concerned ministry is already talking to a few parties for a friendly takeover. Maybe an attractive haircut might work.

If the first step doesn't work, I suggest you take the next step with caution. You can borrow RM250mil from Ah Longs but make sure you pay the high interest rates or your house will be splashed with red paint and your neighbours will know about your non-payment. That would really be embarrassing.

Ok, maybe that was a wrong step to recommend. As a last resort, when in court, plead ignorance, blame everybody else for your ills. Be a man like William Hung, admit you have no experience and you did not know a bull from a cow. Since you have not signed any personal guarantees, they will only take whatever is left in the company which should be fine with you. It was never yours in the first place.

My simple advice to entrepreneurs who need bank loans to expand the business, make sure you treat the approved loans with utmost respect. The loan officers have put their heads on the chopping block when they recommended your loan application.

If you failed them due to mismanagement and misinformation, you can bet your last dollar they will come after you and make sure your next four generations will continue to pay your debt.

Oh yeah, another piece of an advice. Do not wear V neck pink t-shirts when you meet your bankers. Just play it straight.

There are just too many issues raining down on our heads nowadays and we do not need another downpour.

ON YOUR OWN
By TAN THIAM HOCK

To access earlier articles of On Your Own, log on to www.thiamhock.com. Honest comments welcomed and approved.

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