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BusinessToday
2 days ago
- Business
- BusinessToday
Malaysia's PMI Remains Contracted Amid Weak Demand And Tariff Concerns
Malaysia's Manufacturing Purchasing Managers' Index (PMI) saw a marginal increase to 48.8 in May, up from 48.6 in April, according to the latest data. However, the index remained below the neutral 50.0 mark for the twelfth consecutive month since June 2024, signaling a continued, albeit mild, deterioration in manufacturing conditions midway through the second quarter of 2025. Despite the prolonged contraction, economists anticipate that Malaysia's Manufacturing GDP growth in 2Q25 is likely to remain relatively stable, mirroring the performance of the previous quarters (1Q25: 4.1%; 4Q24: 4.2%). Weak Demand Persists, Weighing on Key Indicators: The latest PMI reading highlights the persistent challenge of weak demand. Total new orders continued their downward trend for the third straight month, although the pace of decline has eased. Notably, new export orders also contracted for the sixth consecutive month, indicating sluggish external demand. Finished goods inventories continued to decline, suggesting manufacturers are adjusting to lower order volumes. While the rate of inventory reduction has slowed, overall stock levels remain lower. Rising Input Costs Amid Stable Output Prices: Manufacturers faced increased pressure from rising input costs in May. Input prices saw their most significant jump since November 2024, primarily attributed to unfavorable exchange rates and the impact of new tariffs, which have increased the cost of imported raw materials. Interestingly, despite the higher input costs, output charges remained unchanged in May, ending a four-month period of price declines. This suggests that manufacturers are absorbing some of the cost increases rather than passing them on to consumers. Business Optimism Dips Amid Global Uncertainties: Business sentiment within the manufacturing sector has taken a hit, falling to its lowest level since June 2021. While firms expressed relative optimism for better demand conditions in the coming year, the prevailing concerns surrounding US trade tensions and ongoing labor shortages have dampened overall confidence. Employment levels remained steady in May, halting a seven-month streak of job cuts. Companies continued to work through outstanding orders, with backlogs declining slightly. Outlook: Domestic Demand to Provide Cushion Amid Tariff Uncertainty: MIDF Research has revised its 2025 GDP growth forecast for Malaysia downwards to 4.3% (from 4.8%), following a weaker-than-expected performance in 1Q25 (4.4%). The downgrade also factors in anticipated headwinds in the second half of the year stemming from global trade uncertainty linked to potential US tariffs. While the possibility of a favorable Malaysia-US trade deal exists, a return to pre-2024 tariff levels is deemed unlikely. Despite these external challenges, MIDF believes that Malaysia could still benefit from trade and investment diversion resulting from the ongoing US-China decoupling, leveraging its strategic location and diversified export portfolio. Domestically, the services and construction sectors are expected to be key drivers of growth, providing a buffer against external pressures Related
New Straits Times
2 days ago
- Business
- New Straits Times
Net selling of foreign funds extend to second week
KUALA LUMPUR: Foreign investors extended their selling streak on Bursa Malaysia for the second consecutive week, with net outflows reaching RM1.02 billion. This was nearly 2.6 times higher than the RM392.3 million recorded the previous week, according to MIDF Research. In its fund flow report for the week ended May 30, MIDF Research said foreign investors were net sellers throughout all trading days, with daily outflows ranging from RM61.4 million to RM456.7 million. The highest outflow occurred on Friday at RM456.7 million, followed by Thursday's RM234.6 million. "The three sectors that recorded the highest net foreign inflows were property (RM47.9 million), construction (RM33.3 million) and energy (RM5.2 million). "The top three sectors that recorded the highest net foreign outflows were financial services (-RM565.8 million), consumer products & services (-RM172.2 million) and healthcare (-RM129.9 million)," it said. MIDF Research said local institutions maintained their buying momentum for the second week, with net inflows totaling RM876.5 million, raising their year-to-date net purchases to RM8.78 billion. Local retailers also sustained their net buying trend for a second week, posting inflows of RM142.6 million. The firm noted that the average daily trading volume recorded a broad-based increase over the week. "Local institutions and local retailers saw an increase of 0.03 per cent and 1.0 per cent respectively, while foreign investors saw a rise of 45.6 per cent," it said.
The Star
2 days ago
- Business
- The Star
Foreign investors withdraw RM1.02bil from Malaysian equities market
KUALA LUMPUR: The exit of foreign investors from the Malaysian stock market accelerated past the RM1bil mark over the past week. According to MIDF Research data, the net outflow of foreign funds rose to RM1.02bil, nearly 2.6 times more than the previous week's outflow of RM392.3mil. The increase in net selling is in step with the regional trend, where foreign investors have been selling down their holdings amid growing anxieties over the trade and economic uncertainties. On Bursa Malaysia, the sectors that saw the highest net foreign outflows were financial services (RM565.8mil), consumer products and services (RM172.2mil) and healthcare (RM129.9mil). Conversely, the sectors with the highest net foreign inflows were property (RM47.9mil), construction (RM33.3mil) and energy (RM5.2mil). As the offshore funds left the domestic market, local institutions stepped in for a second consecutive week, with net purchases of RM876.5mil. Local retailers were also net buyers for a second week with a net inflow of RM142.6mil. The average daily trading volume (ADTV) saw a broad-based incline last week. Local institutions and local retailers saw an increase of 0.03% and 1% respectively, while foreign investors saw a rise of 45.6%. Trading ideas: Alliance, LSH, LYC, 7-Eleven, RHB, Master Tec, Mah Sing, CIMB, Capital A, SKP, Yinson, Berjaya, BAT, Bintulu, Bank Islam
The Star
6 days ago
- Business
- The Star
HLB's strong 3Q results offset dilution of stake in China bank
CGS International Research has raised its FY25 core earnings per share forecast by 14.8% to factor in the RM399mil writeback. PETALING JAYA: The RM407mil dilution loss that Hong Leong Bank Bhd (HLB) recorded for its stake in Bank of Chengdu Co Ltd (BoCD), in China does not overshadow the strong financial performance of the bank for its third quarter ended March 31, (3Q25). The bank experienced the dilution after its stake in BoCD fell to 17.8% from 19.8% following the latter's move to complete the conversion of its convertible bonds into new ordinary shares, following an early redemption process concluded in February. 'This dilution loss came about after BoCD's minority shareholders exercised their convertible bonds (C-bonds) at a lower share price. 'The price differential forms the basis of the dilution impact. As a result, HLB now has a reduced stake in BoCD, which is still worth RM9bil. No further conversions of this scale are expected. 'Further dilutions, if any, will be extremely minor, and will come from either placements or rights issues,' MIDF Research stated in a report following HLB's result filings. The bank posted core net profit of RM1.35bil in 3Q25, up by 18% quarter-on-quarter (q-o-q) due mainly to the large writeback of its RM399mil management overlay. For the nine-month period (9M25) HLB's core net profit beat analysts expectations and was up 14% year-on-year to RM3.59bil on improved net interest income and non-interest income, aside from the overlay writeback. On the issue of the overlay, MIDF Research said the move brings HLB's loan loss coverage (LLC) rate down to 85% from 139% and leaves RM175mil worth of overlays remaining. 'Management is comfortable with the current LLC level, so we don't expect any major overlay allocations as the current gross impaired loan (GIL) ratio is to be maintained with only a few one-off impairments expected in overseas markets,' MIDF Research said. It maintained a 'buy' call on the bank with a revised target price of RM23.09 a share from RM22.10. Meanwhile, CGS International Research, which has HLB as its top pick for the sector with a target price of RM30.70 a share down from RM31.40, has raised its FY25 core earnings per share (EPS) forecast by 14.8% to factor in the RM399mil writeback. It also reduced its projection for associate contributions from BoCD by 10% for FY26 to FY27 to reflect the dilution of HLB's stake in the Chinese bank, leading to a 2% drop in its FY26 to FY27 EPS estimates. UOB Kay Hian Research said that, with HLB's capital ratio improving, it foresees a gradual increase in the dividend payout ratio from 35% in FY24 to 40%, 45%, and 50% for FY25 to FY27, implying a 4% to 6% yield over the period. It also has maintained its 'buy' call on the bank with a higher target price of RM23.80 a share from RM23.60.
BusinessToday
6 days ago
- Business
- BusinessToday
NexG's Decision To Diversify Could Open New Revenue Streams
MIDF Amanah Investment Bank Bhd (MIDF Research) has maintained its BUY call on Nexg Bhd with an unchanged target price of RM0.58, following the release of the group's full-year FY25 results. While fourth-quarter earnings were weaker due to softer demand for smart card and passport services, MIDF Research said the company's overall performance remained on an expansionary track, registering a +12.5% year-on-year increase in normalised full-year earnings. For 4QFY25, Nexg posted a normalised net profit of RM30.9 million, down 19.3% from the same period last year, as revenue fell 15% to RM88.1 million due to lower supply of smart cards and personalisation services. Despite the quarterly dip, MIDF Research said the full-year earnings performance met its expectations, contributing 103.5% to its full-year forecast, although slightly below consensus estimates at 103.3%. Cumulatively, FY25 normalised net profit rose to RM101.1 million, underpinned by modest revenue growth of +1.4% year-on-year to RM373.5 million, coupled with a -4.1% decline in operating expenses to RM236.5 million. This led to improved profit margins, which MIDF Research said reflect better cost efficiency and operational discipline. Looking ahead, MIDF Research expects revenue to continue rising in the coming quarters, driven by ongoing contract extensions for existing services and potential new project wins. The research house said Nexg's strategic focus on expanding its non-government income stream would diversify its revenue base and reduce risk exposure, placing the group on stronger footing for sustainable growth. MIDF Research left its earnings projections for FY26 to FY28 unchanged, as well as its target price, which is based on a CY25 earnings per share estimate of 3.7 sen and a target price-to-earnings ratio of 15.6 times. Financially, Nexg ended the quarter with a net cash position of RM20.9 million, reversing a net debt of RM31.2 million a year ago. The improvement was supported by higher cash reserves of RM73.2 million, a 155.9% increase year-on-year, and lower borrowings of RM52.3 million, down 12.6% from 1Q24. MIDF Research concluded that while short-term headwinds remain, the group's fundamentals and strategic direction justify a positive investment stance. Related
