SINCE the Government is asking for feedback on the Budget 2022 proposal, I would like to offer my comment and I trust the Government will take appropriate action.
On the first stock trading day after the Budget 2022 announcement, Bursa Malaysia took a beating. The FBM KLCI which is a gauge of the 30 biggest companies on Bursa Malaysia dipped by 2.2%.
Some RM34 bil of market capitalisation was wiped off from the stock market; 178 stocks went up, 996 stocks retreated while 327 remained unchanged.
The biggest culprit is the prosperity tax increase from 24% to 33% for companies whose annual profit exceeded RM100 mil. All investors, particularly institutional and foreign funds can already foresee that practically all the larger capitalised companies will report reduced profit next year.
Among all the stock selection criteria such as net tangible asset (NTA), cash flow, debt or healthy balance sheet, earnings per share (EPS), to name a few criteria, the most powerful catalyst to push up stock price is profit growth prospect.
Investors will not buy any stock if the company reports reduced profit.
As a result, many larger capitalised companies have move away from Malaysia as follows:
- Hyundai had closed its Asia Pacific regional headquarters in Malaysia and relocated to Indonesia after splashing US$1.55 bil (RM6.26 bil) in a new factory there.
- IBM had closed down its Global Delivery Centre (GDC) in Cyberjaya on May 31 and relocated to Singapore.
- Shell moved its IT operations from Cyberjaya to India.
- Citigroup exited retail banking in Malaysia after more than six decades to shift to Singapore.
- German IT company T-Systems sold its business in Malaysia and quit the country.
- Toyota Motor Corp invested US$2 bil to develop electric vehicles (EVs) in Indonesia from 2019 until 2023 starting with hybrid vehicles.
- Tesla and SpaceX boss Elon Musk has agreed to explore investment opportunities in the electric car battery – and even space launch station – in Indonesia following a talk with President Joko “Jokowi” Widodo.
- Facebook, Lazada, Tencent, Byte Dance and Alibaba are some of the big names that have made Singapore as their regional hub, strategic location or data centre hub, leaving Malaysia behind.
- Indonesia, Southeast Asia’s largest digital market, has attracted investments from four American tech giants – Google, Microsoft, Facebook and PayPal.
- Zoom Video Communications has chosen Singapore over Malaysia for their first research & development (R&D) centre and new data centre in the region.
- Google and Facebook had bypassed Malaysia for the Apricot 12,000-km internet subsea cable project due to the unresolved cabotage policy because of “unknown” reasons.
Malaysia must wake up and make the necessary changes. I trust the Government will take appropriate action. – Nov 22, 2021
Koon Yew Yin is a savvy investor and philanthropist.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
