Banking sector performance likely to moderate next year

(Published in the Star BizWeek 24th December 2011 issue: Page 12)

KUALA LUMPUR: The performance of the Malaysian banking industry is likely to moderate next year in line with the economy, said RAM Holdings’ group chief economist Dr Yeah Kim Leng.

He said loan growth was expected to ease to 9% next year after expanding at 12%-13% annually in 2010 and this year.

Yeah said deposit growth was projected to ease slightly to 8% in 2012 from about 11.6% rise in 2011.

“Although the banks’ interest margin and non-interest income are expected to come under pressure due to a more challenging economic and business environment, we do not expect any severe erosion of their profitability and asset quality,” he told Bernama yesterday.

However, Yeah said, the strategies outlined for the banking industry in the Financial Sector Blueprint 2011-2020 would provide firmer indications of the sector in the long run and positioned the industry on a stronger footing.

He said Malaysia’s banking and financial services were largely driven by domestic demand and monetary conditions.

However, these drivers were partly influenced by the external economy and the extent to which consumer confidence and investor sentiments were affected by uncertainties in the global economy, Yeah said.

“As demonstrated by its resilience during the recession in 2009 and given its enhanced balanced sheet strength and ample liquidity in the economy, the banking industry is well-placed to weather any global credit crunch, liquidity shock and financial market turbulence that may intensify in 2012,” he said.

Yeah said banks could face major challenges relating to uncertainties in the external environment, especially the increased risk of a double-dip in the eurozone economies and its knock-on effects domestically.

“A more pronounced slowdown in the domestic economy may increase financial distress among highly-indebted companies and households, leading to a rise in loan delinquencies.

“However, we do not expect a full blown global recession in 2012 and the Malaysian economy in general and the banking industry, in particular, are well-placed to ride through the turbulence next year,” he said.

He said among the key factors supporting the local economy and the banking industry were several positive factors buttressing domestic consumption and investment that in turn, underpinned banking activities in the country.

“These include steady employment and income increases, rising private investment, moderately strong commodity prices, high private sector savings and liquidity, increasing number of middle- and upper-income households and growth-accommodative fiscal and monetary policies,” he said. — Bernama.

Roadmap to stronger banks

(Published in the Star BizWeek 24th December 2011: Pages 18-19)

By DALJIT DHESI 

BANK Negara governor Tan Sri Dr Zeti Akhtar Aziz was in high spirits when she briefed the media ahead of the unveiling the Financial Sector Blueprint.

She has grounds for feeling cheery in the holiday season. The first Financial Sector Masterplan (FSMP) had met most of its targets set for the 10-year period when it was introduced in 2001.

And the new blueprint, although containing fewer proposals than its predecessor, aims to put the financial sector on a stronger footing to compete globally and withstand any financial headwinds.

Themed “Strengthening Our Future”, the new blueprint will be a 10-year strategic plan that charts the future direction of the financial system as Malaysia transitions towards becoming a high value-added and high income economy.

Looking back, although the banking sector had its ups and downs, it has nonetheless over the years become stronger and better capitalised to ride out the financial challenges constantly taking place in the global arena.

That strength, which was the priority of the central bank after the Asian Financial Crisis in the late 1990s, saw the local banking sector escape relatively unscathed during the 2008-2009 financial turmoil when its counterparts were sinking in the west.

The FSMP ensured that the domestic financial system had sufficient buffers in place and a sound risk management system as well as adequate level of capital for it to undertake organic and expansion activities.

Whether by devise or through the natural evolution of the local banks, the financial sector expanded by an annual growth of 7.3% during the tenure of the FSMP and transformed the financial landscape to one where the banks were more competitive and diversified, possess better financial infrastructure development, regulatory reforms, greater usage of technology and efficient delivery channels.

Progressive liberalisation in the banking sector also saw more foreign participation in the domestic banking scene, and that fuelled greater competition in the sector.

As all roadmaps, there were some areas that did not meet the FSMP targets, especially in the consolidation of the insurance sector and Internet banking.

But this has changed and more mergers and acquisitions have taken place and some are in the pipeline. Internet banking has been growing dramatically in recent years, and will see continued take-up as broadband becomes more pervasive and more effort spent to promote its growth.

Unlike its predecessor, the Financial Sector Blueprint's recommendations are based on shared outcomes applicable to various sub-sectors within the financial sector instead of being sector-based. This is due to the increasing linkages, greater connectivity and regional integration in the financial sector.

Another area of difference is that the blueprint envisions greater participation of Malaysian banks beyond domestic borders in facilitating regional trade and investment, regional financial integration as well as the internationalisation of Islamic finance.

Illustrating the impact banking has had on the economy, the sector grew from 1.3 times gross domestic product (GDP) in 2001 to 2.4 times GDP when the FSMP ended. The deepening of the banking sector with the real economy has multiplied its importance to the economy and under the new blueprint, Bank Negara envisages the banking sector to grow to three times GDP by 2020.

Financial sector growth

On the growth of the financial sector, Zeti says that by the end of 2020, it is expected to expand to six times of GDP from the current 4.3 times. Correspondingly, she says, the financial sector contribution to GDP is projected to rise to between 10% and 12% for the period from the current 8.6%.

More than half of total financing in 2020 will be raised through the financial markets, while Islamic finance will continue to increase in prominence, growing at a faster pace to account for 40% of total financing by the end of this decade, she says.

With growth of the financial service sector prjected to rise, so will risks inextricably.

RAM Holdings Group chief economist Dr Yeah Kim Leng feels the financial sector contribution to GDP of 10% to 12% was rather high currently and there should be more balanced growth.

Over imbalance expansion of the financial services sector could create credit bubbles and over-leveraging, he says, adding that the projected growth of 10% to 12% should be supported by the effective channelling of Malaysia's high savings into productive investments leading to sustained growth of the real economy.

Nine areas of focus have been identified under the blueprint. They are the effective intermediation for a high value-added and high income economy; development of deep and dynamic financial markets; greater shared prosperity through financial inclusion; strengthening regional and international financial integration; internationalisation of Islamic finance; safeguarding the stability of the financial system; achieving greater economic efficiency through electronic payments; empowered consumers and talent development for the financial sector.

Of the nine, Zeti says, three will be critical ones although all the others will also be given strong priority. The three she made reference to are from the intermediation aspect, strengthening the regional and international financial integration including internationalisation of Islamic finance and the stability of the financial system.

Bank Negara says effective intermediation entails the mobilisation of diverse savings to productive investments to meet the needs of both businesses and households. In this regard, vibrant risk-capital ecosystem to support innovation-driven economic activities and start-up ventures will be developed. The initiatives will include enhancing the provision of large and long-term project financing for infrastructure development.

As Malaysia deepens its trade and investment linkages, the financial sector is envisaged to have a larger role in supporting the internationalisation of Malaysian businesses.

To cater to Malaysia's growing affluent segment and maturing population, emphasis will be placed on enhancing the provision of financial services for wealth management, retirement and long-term healthcare.

The development of a vibrant private pension industry is expected to enhance the role of pension funds as a key source of funding for the longer-term and risk-based financing needs of the economy.

A banking analyst says forging regional integration with Asia and other emerging markets is the right direction to take, judging from the encouraging economic growth and high savings rate in the region. The savings, he adds, can be invested in productive activities in other Asian countries rather than using the funds to invest in volatile market like in Europe and the United States.

The blueprint appears to also favour stronger banks with scale and reach and there is a fear smaller banks with an introverted view on banking could see the gap with its larger peers expanding as a result of the push in the blueprint.

Yeah feels that forging greater linkages will result in higher cost, especially for smaller banks. “Banking services are driven by scale and technology. Smaller banks will find it difficult to compete unless they have a niche, for example in small and medium enterprises or technology financing,” he adds.

Regional integration

One of the big successes of Malaysian banking under the last plan has been the expansion of reach beyond the shore of the country. Large banking groups have stakes in a number of Asean countries and the focus on growing such linkages wiill benefit them.

On way that will happen is through the recycling of Asian savings to invest in the region. By 2030, Zeti says, emerging economies are projected to account for 60% of total world output, from the current 40%, and greater regional integration will benefit banks.

On the financial sector liberalisation aspect, which is also given prominence in the blueprint, foreign financial institutions intending to set up operations in Malaysia will be guided by two key considerations. They are the prudential criteria and the best interest of Malaysia criteria.

The latter will take into account whether the foreign investment, among others, will contribute to the Malaysian economy and its impact on the financial stability. Banking licences will be issued to those with expertise and in niche areas to ensure it can value-add to the banking industry.

That stance does not mean licences will be given freely as the central bank does not want the country to be over-banked despite protestations from parties wanting a slice of the Malaysian market.

A banking analyst with a foreign brokerage opine that the conditions for issuing of licenses to foreign banks under the blueprint was relevant. “Its quite fair that any banks intending to operate in Malaysia should adhere to the prudential aspect in terms of having sound risk management, strong capital base and good governance.

“It should be in the interest of country to ensure local banks are protected and there is no over competition in terms of products and services. We need foreign banks with specific expertise to add dept and breadth to the domestic financial sector,” he explains.

RAM Ratings head of financial institution ratings Wong Yin Ching says the blueprint which advocates further liberalisation is envisaged to lift the financial sector to new heights as doors are now opened to foreign institutional shareholders.

“We think that Bank Negara may consider more flexibility with respect to foreign shareholdings in banks beyond the current cap of 20% on a case by case basis as long as it is within the best interests of Malaysia. Liberalisation could be viewed as beneficial if the foreign shareholder is an international banking group given the potential for transfer of knowledge and best practices. Additionally, the central bank is receptive of issuing new licences to foreign financial institutions with specialised expertise,” Wong says.

With liberalisation, she says local banking groups can expect stiffer competition which may exert pressure on their margins, adding that this may also spur local banks to innovate and provide better services to customers. As competition in the Malaysian banking scene intensifies, she says local banking groups will continue to seek opportunities offshore.

Islamic financial centre

While Malaysia has made significant inroads in becoming an international Islamic financial centre, Zeti says efforts under the blueprint will continue to be undertaken to enhance the Islamic financial ecosystem.

This will entail developing a more conducive environment for the mobilisation of higher volumes of international Islamic financial flows from a diverse range of players to be channelled through innovative Islamic financial instruments.

“We want to be an international Islamic financial hub. We have an edge over other Islamic financial jurisdictions as we have a comprehensive Islamic financial infrastructure and strong Islamic legislation in place,” she says.

But that does not mean its an open revolving door for any new players into Malaysia. They too have to adhere to stringent requirements and that explains why the conditional licences for two mega Islamic banks have yet to be fulfilled.

In strengthening the legal and syariah frameworks and further advancing Malaysia's thought leadership in Islamic finance, a single legislated body to be the apex authority on shariah matters in Islamic finance will be established.

Malaysian Rating Corp Bhd (MARC) CEO Mohd Razlan Mohamed says the focus on internationalisation of Islamic finance would benefit MARC as a domestic credit rating agency.

“As the largest global market for sukuk issuance, we believe we will benefit from the attraction of more global issuers to raise rated sukuk in Malaysia. The domestic credit rating industry would benefit from the availability of a wider international rating universe and foreign issuers against which our local issuers may be benchmarked to build our capability and experience to rate foreign credits,” he explains.

Malaysia is the largest sukuk market in the world with 65% valued at US$96bil in 2010. In the global takaful sector, Malaysia was the second largest takaful market with 26% share of the global takaful assets in 2009.

In fostering a sound and stable financial system, efforts will also be intensified towards ensuring a robust surveillance, regulatory and supervisory framework.

Efforts will be directed towards improving the liquidity, depth and participation in the money, foreign exchange (forex) and government securities markets in Malaysia, in enabling more effective intermediation, transfer of risks and management of liquidity.

The forex administration rules will be progressively liberalised to further raise efficiency in financial market transactions. On the internationalisation of the ringgit, Zeti says Malaysia is in no hurry to do so. She adds, this will only be done when there is a developed forex market in the country, which she hopes will be established over the decade, to handle manage activity on the ringgit.

An important agenda under the blueprint will be to accelerate the migration from paper-based payments to electronic-payments. In the next 10 years, electronic payment transactions is targeted to increase the number of e-payments per capita from 44 transactions to 200 transactions, and reduce cheques by more than half from 207 million to 100 million per year. Consumer protection is also not disregarded. To this end, the infrastructure to support greater consumer empowerment will be strengthened through establishing a single consumer credit legislation, integrated dispute resolution system and an enhanced credit information framework.

In talent development, a Financial Services Talent Council will be established to drive, oversee and coordinate talent development efforts in the financial sector. Other initiatives include developing talent for entry level, promoting continuous learning for the existing workforce, and attracting talent from abroad.

Ensuring an adequate supply of skilled talent to meet the challenges in the new financial landscape will require greater collaboration and coordination among various agencies beyond the financial sector.

An industry observer says talent has always been one of the pressing issues in the banking sector and local bankers need to be upskilled at a higher pace in order to meet the blue print's target of 10% to 12% contribution to GDP from the financial sector at the expiry of the blueprint.

“There is need for further upgrading of skills and talent in the private banking and wealth management side as banks have to compete with countries like Singapore, Hong Kong and Dubai. Although Malaysia has an established Islamic financial infrastructure, it is still facing shortage skill as talent is being poached by other countries,” he notes.

1MDB embarks on tender process for KLIFD project

(Published in the Star BizWeek 24th December 2011 issue: page 12)

PETALING JAYA: The tender process on major foundations works for the Kuala Lumpur International Financial District (KLIFD) has started,1Malaysia Development Bhd (1MDB) said.

The Government-owned company had invited contractors to participate in a pre-qualification exercise in the construction and completion of earthwork and excavation works, retaining structure, piling works and related sub-structure works.

Deputy chief executive officer (operations) Datuk Azmar Talib said in a statement yesterday: “This is probably among the largest earthwork, covering the size of about 20 football fields (12ha) and excavating about 20m or about four storeys into the ground.”

Azmar said many activities had been taking place in view of the start of construction in the first quarter next year. Amid this, they are creating and enhancing value to the site.

Acting as the master developer for KLIFD, 1MDB is taking measures in environment management planning to minimise the impact of construction on the surrounding environment.

“As the master developer for KLIFD, we are always conscious of our responsibility to the community. We have sought the guidance and cooperation of Dewan Bandaraya Kuala Lumpur. We have taken proactive steps to submit the Environment Impact Assessment (EIA),” Azmar said.

The EIA is voluntary as the size of the KLIFD development is below 50ha, which is the minimum development size that will call for a mandatory EIA.

The notice of pre-qualification will close on Jan 6. Short listings and invitations to tender have been scheduled to complete by mid-Feb next year.

Azmar said 1MDB sought an inclusive participation by both big and small players. Companies can form joint ventures (JV) or consortium to participate in the pre-qualification.

The JVs can also be between local companies and international companies with locally incorporated operations. This will promote a blend of global and local expertise as well as technology transfer.

1MDB is also developing a Digital Master Plan for a digitally smart financial district, utilising technologies that are smart, intelligent and future proof.

The 30ha development in the Imbi area in between Jalan Tun Razak, Jalan Sultan Ismail and the Putrajaya elevated highway, seeks to create a catalytic pool of world-class players by combining leading financial institutions and top global companies.

‘Superman’ Li Ka-Shing swoops on another M'sian mall

Li Ka-shing-owned Cheung Kong Group is buying The Citta, the new suburban mall in Ara Damansara

The Cheung Kong Group, owned by Hong Kong tycoon Li Ka-shing, is buying The Citta Strip Mall for an estimated RM245 million.

Sources told Business Times that the purchase was done through Cheung Kong Group’s ARA Asia Dragon Fund.

Citta, the new suburban mall in Ara Damansara, is 70 per cent-owned by German real estate fund SEB Asset Management and 30 per cent by property developer Puncakdana Group.

“There are a few conditions precedent that have to be met before the deal is completed and one of it is state approval,” a source told Business Times.

Messages left at the office of Mah Siew Sian, the managing director of Puncakdana, were not returned.

The open air shopping mall, with some 424,467 sq ft of nett lettable space, opened for B4business in April 2011.

The mall covers three floors, excluding the basement and rooftop, and has over 800 car park bays.

Tenants in the mall include Harvey Norman, MBO cinema, Pappa Rich, Chili’s, Julia Gabriel, RakuZen and Anjappar Restaurant.

Li, who is in the list of Asia’s richest men, is known as “Superman” in Hong Kong due to his deal-making ability.

His Cheung Kong conglomerate is one of Hong Kong’s biggest property developers and owns the world’s largest operator of container ports, among others.

Cheung Kong’s affiliate, ARA Asia Dragon Fund, bought two properties in Malaysia last year – One Mont’ Kiara in Kuala Lumpur and Aeon Bandaraya Mall Melaka – for a total of RM710 million.

In May, ARA Asia Dragon Fund won the bid for three shopping complexes – Klang Parade in Selangor, Ipoh Parade in Perak and Seremban Parade in Negri Sembilan.

It paid some RM450 million to TMW Asia Property Fund.

-Business Times

Property market to see a gradual slowdown next year

KUALA LUMPUR- The Malaysian property market is likely to see a gradual slowdown next year, taking into consideration the uncertainty in the global economic situation.

Fiabci Malaysia president Yeow Thit Sang said the high end residential units were already seeing a slowdown both in pricing and take-up rate.

“There are fewer expatriates from multinational companies coming here and rentals with a yield of between 6% and 8% are no longer achievable. Investors in these units will have to wait longer to realise their investment. The slowdown in global economy is definitely affecting the high-end property market,” he told Bernama recently.

He also saw a fallout for office space next year, saying the category was already overbuilt and the overhang felt in the market with rental falling and a slow take-up rate.

Meanwhile, Zerin Properties chief executive officer Previndran Singhe said the slowdown in the property market would only last until the first quarter next year and the industry would be stable afterwards.

“Prices will remain stable, with asking prices, not values, becoming more reasonable as owners check their values to real pricing. At present, sentiment is down due to the eurozone financial crisis and the US double dip fears, which has been faring for a long time, but I think we are more Asia focused,” he said.

- Bernama

http://www.malaysia-chronicle.com/index.php?option=com_k2&view=item&id=25040:property-market-to-see-a-gradual-slowdown-next-year&Itemid=3

Basel rules from 2013

(Published in the Star Biz Foreign News 20th December 2011 page 10)

Banks worldwide will have to use common format for capital disclosures

LONDON: Banks across the world will have to use a common format for disclosing the size and quality of their capital safety buffers from 2013 to help reassure investors they are stable.

The Basel Committee on Banking Supervision, made up of regulators from nearly 30 countries, including the United States, China, Japan and large European Union countries, published draft disclosure templates yesterday for public consultation.

In the run up to the financial crisis, it was hard for regulators and investors to compare capital buffers of banks.

“It is often suggested that lack of clarity on the quality of capital contributed to uncertainty during the financial crisis,” the Swiss-based Basel Committee said in a statement.

“Furthermore, the interventions carried out by the authorities may have been more effective if capital positions of the banks were more transparent,” the committee said.

The requirement to fully disclose details of capital buffers was enshrined in the Basel III accord which will force banks to hold more capital and liquidity from 2013. Banks will have to comply with disclosure rules from the date of publication of their first set of financial statements on or after Jan 1, 2013.

They will be required to publish updated data each time they publish financial statements, which for big banks is typically on a quarterly basis.

Lenders would also have to update disclosures whenever a new capital instrument is issued and included in capital buffers.

The Basel III accord will require banks to hold at least 7% of core Tier 1 capital in the form of retained earnings or pure equity.

Regulators and markets have already forced banks to hold well above the planned minimum that is not due to take full effect until the start of 2019. Banks are already disclosing their capital levels in a bid to reassure jittery investors. - Reuters

Digital master plan for KLIFD

(Published in the Star Biz 20th December 2011 page 3)

KUALA LUMPUR: 1Malaysia Development Bhd (1MDB) is developing a Digital Master Plan for the Kuala Lumpur International Financial District (KLIFD).

In a statement, 1MDB Real Estate Sdn Bhd deputy chief executive officer Datuk Azmar Talib said the aim was for KLIFD to be a leading financial district with state-of-the-art connectivity, utilising technologies that were smart, intelligent and future proof.

The blueprint will be used to build solutions that embrace sustainability and connectivity through new Internet technologies and infrastructure services.

1MDB has gathered a global team of IT experts and digital planners led by Accenture Solutions Sdn Bhd to draw up the Digital Master Plan for KLIFD.

“With their proven experience, Accenture will be able to help us identify the scale of the infrastructure and how to put it best, focusing on strategic services that work towards current and future needs,” said Azmar.

“Today, nearly everything can be done electronically and remotely. But nothing can replace the human connectivity – the personal touch and personal interaction for ideas and businesses to thrive.”

In the same statement, Accenture Malaysia country managing director Goh Aik Meng said digital services would help differentiate KLIFD as a pioneering financial district and as a place to live and work.

“It is a pleasure to be teaming with 1MDB on this project, and it confirms our long-term commitment to Malaysia in supporting the national development objectives of the Economic Transformation Plan.”

KLIFD is currently at the master planning phase and is on track to start construction beginning of next year.

The 75-acre development in the Imbi area fronting Jalan Tun Razak aims to bring together leading financial institutions and top global companies to create a catalytic pool of world-class players. It will leverage on Malaysia’s existing strength in Islamic finance and play on its strategic location to complement other financial centres within the region.

1MDB recently appointed Akitek Jururancang (M) Sdn Bhd and its international partner Machado Silvetti and Associates as the master planners for KLIFD.

1MDB is wholly-owned by the Government and serves as a strategic enabler for new ideas and sources of growth to propel economic transformation.

Household debt to rise

(Published in the Star Biz News 20th December 2011: page 3)

By DALJIT DHESI 

This is possible if the external headwinds continue and impact growth

PETALING JAYA: Household debt to gross domestic product (GDP) ratio is expected to further balloon by 1 to 3 percentage points from its current level of about 78% if the external headwinds continue and impact the growth of the domestic economy.

The rise in household, debt analysts said, could impact banks' profitability with the recent Bank Negara's guidelines to contain surging household debt with stricter policies for loans and credit cards, hence restricting overall loans growth.

Household financing facilities currently account for the bulk of the local banking system's loans at more than 55%.

MIDF Research chief economist Anthony Dass told StarBiz that the risk of an economic slowdown in Malaysia was still there amid the global economic uncertainties and eurozone debt crisis.

He said the research house was projecting a 4.8% GDP growth next year and if the external headwinds persisted and the domestic economy did not improve by the Government's pump priming activities, household debt to GDP ratio could be maintained at current levels or could inch up by another 1 and 3 percentage points.

Supporting the view, Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias said in terms of its ratio to the country's output, Malaysia's household debt would likely remain high or even increase slightly in 2012, especially if nominal GDP fails to increase substantially due to a general slowdown in the global economy.

“This will be almost similar to the 2009 experience when Malaysia's household debt as a percentage of GDP soared to 77% from 64% in 2008 when the economy mired into recession. In addition, during an economic slowdown, households tend to stretch their borrowing needs to compensate for their loss of incomes.

“While banking institutions will generally impose stricter lending guidelines during periods of economic slowdown, consumers will likely resort to borrowing from non-financial institutions such as cooperatives, etc. Therefore, we foresee household debt to remain above 70% of GDP next year,'' Zahidi noted.

RAM Holdings Group chief economist Dr Yeah Kim Leng, however, felt with the slew of new measures introduced recently by the central bank to curb over-borrowing, especially by the more vulnerable groups, he expected the country's household debt level in 2012 to stabilise close to 76% of GDP.

It may ease to or slightly below 75% of GDP in 2012 if the annual increase in household debt was capped below 7% and nominal GDP growth was maintained at the current pace of 9%, he noted

Borrowings from banks accounted for 84.2% of total household debt in 2010. In the first 10 months of this year, banks' lending to the household sector grew by 12.6% to RM540.5bil.

A banking analyst from MIDF Research added that he expected household loans to trend downwards with Bank Negara's stricter guidelines on credit cards and new lending guidelines that required banks to use net income to calculate the debt service ratio for loan approvals.

The guidelines, which comes into effect in January next year, cover all consumer loan products including housing loans, personal loans, car loans, credit card receivables and loans for the purchase of securities.

He said the recent Responsible Lending Guidelines to ensure prudent lending to retail sectors would also ensure only those who were eligible to furnish their loans be allowed to obtain financing.

The analyst, who is projecting loans growth to slow down to about 9% next year, said he expected moderation in banks' net profit growth next year. As of October 2011, loans growth was 13.1% year-on-year. For the first 10 months of this year, it stood at about 10.7%.

To cushion the impact of slower loans growth and boost banks profits, he said banks would opt and focus more on low-cost deposits like current accounts and savings accounts rather than fixed deposits.

Analysts also feel that since interest income from loans would be impacted, banks would also focus on non-interest income like fee and investment banking-related businesses to boost their revenue base.

RM20 note to make a comeback

KUALA LUMPUR- The Ringgit will be sporting a new and exciting look, with the RM20 note making a comeback.

The new banknotes, except for the RM50 note which has been in circulation since 2007, will be in the market beginning mid next year.

The fourth series of the RM50 note was issued in commemoration with Malaysia's 50th Merdeka Day celebration.

The complete new Malaysian currency series - which also include the RM1, RM5, RM10, RM20 and RM100 banknotes - was launched by Prime Minister Datuk Seri Najib Tun Razak on Wednesday.

On the observe side, all the banknote denomination in the new series retain the potrait of the first Yang di-Pertuan Agong Tuanku Abdul Rahman ibni Tuanku Muhammad, the bunga raya and patterns of the traditional woven fabric - the songket.

The reverse side of each note features different elements of nature, tradition, culture, flora, fauna and the economy that are distinctively Malaysian.

-TheStar

http://www.malaysia-chronicle.com/index.php?option=com_k2&view=item&id=24969:rm20-note-to-make-a-comeback&Itemid=2

City&Country: Cover Story-- Semenyih attraction

(Published as Cover Story of City & Country of the Edge Weekly 7th November 2011 issue)
By Haziq Hamid and Lam Jian Wyn of The Edge Malaysia

Sleepy Semenyih awakens

The Klang Valley southern corridor has recently seen an upsurge in real estate investment with several of the country’s leading developers such as S P Setia Bhd, UEM Land Holdings Bhd and Dijaya Corp acquiring land in the Semenyih/Kajang corridor in Selangor.

This could have been prompted by a number of factors, namely the completion of the Kajang-Seremban Highway (Lekas), rising land prices in the more established parts of the Klang Valley and more demand for affordable housing.

Situated 8km southeast of Kajang along the Kajang-Seremban Highway, the once quiet place of Semenyih is now appearing on the radar screen of investors and buyers. The Semenyih-Kajang corridor comes under the jurisdiction of the Kajang Municipal Council (MPKJ), whose area of administration is approximately 787.61 sq km and includes all mukim (sub-district) within the Hulu Langat district such as Kajang, Cheras, Semenyih, Beranang, Hulu Langat and Hulu Semenyih, but not Ampang. 

Separated from Kajang by Bangi, Semenyih is known for Semenyih Memorial Hills, the industrial parks and swathes of rubber and oil palm estates. 

Industry observers suggest the recent attention Semenyih has attracted is due to the large tracts still available for development there, and that land there is more affordable compared with the more developed parts of the Klang Valley. No matter the reason, it is evident from the presence of the major developers that Semenyih and its surrounding areas are receiving more attention than before.

Developers such as S P Setia that are looking for available land at affordable prices just move further away from the heart of Kuala Lumpur and turn their attention to growth areas such as Bangi, Kajang and Semenyih - Choy

“Klang Valley land is getting scarce and the remaining parcels are expensive. So, rather than branching out to other states, developers such as S P Setia that are looking for available land at affordable prices just move further away from the heart of Kuala Lumpur and turn their attention to growth areas such as Bangi, Kajang and Semenyih,” says Rahim & Co (Selangor) managing director Choy Yue Kwong.

Since the end of last year, there have been activities indicating a growing interest in Semenyih, including a number of sizeable acquisitions in the town. 

UEM Land Holdings Bhd acquired two parcels of freehold agricultural land totalling 463.51 acres for RM268.5 million, or RM13.30 psf, in Semenyih last year.

In September, Dijaya Corp entered into a conditional sales and purchase (S&P) agreement to acquire 198.54 acres of freehold land at RM228 million, or RM26.36 psf, in Kajang Hills. 

Ireka Corp, known for high-end luxury developments, also announced recently that it was keen on penetrating the mid-priced property development and industrial development segments in the southern corridor. The company is buying 20.6 acres of freehold land in Kajang for RM22.4 million.

Leaders generate confidence 

Choy believes the emergence of S P Setia, Malaysia’s largest listed property developer by sales, in Semenyih and its vicinity will create more value for the surrounding developments due to the developer’s solid reputation. 

S P Setia recently acquired two parcels of land in the area. In October, it entered into an S&P agreement  to acquire 673.3 acres of freehold land in Semenyih for RM381.26 million, or RM13 psf, boosting its landbank in the immediate three-month period to about 1,683.8 acres. The tract, situated mid-way between Semenyih and Bangi old town and Beranang, was purchased by S P Setia’s wholly-owned subsidiary Setia Hicon Sdn Bhd, 13km south of Kajang while 35km south of KL city centre.

The other parcel, 1,010.5 acres of freehold land in nearby Beranang, was acquired about two months earlier by another of S P Setia’s subsidiaries, Bukit Indah (Selangor) Sdn Bhd, for RM330.13 million or RM7.50 psf.

S P Setia plans to develop starter homes for first-time homeowners in the  1,010.5-acre parcel, with an estimated gross development value (GDV) of RM3.5 billion, while upscale products with a projected GDV of RM4 billion are planned for the smaller parcel due to its better accessibility.

S P Setia declined to comment further on its plans for the two parcels. However, it can be said to be a relative latecomer as other developers have already established themselves in the area. 

“Sunway Semenyih had ventured there earlier. Boustead then started the development of Mutiara Semenyih while AP Land developed a few medium-sized projects there in the early to mid-1990s,” says CH Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen. 

Sanctuary Gasing Group Sdn Bhd and MKH Bhd, formerly known as Metro Kajang Holdings Bhd, were among  the developers that began developing there in the mid-1990s.

Leo Tan, director of Gasing Meridian, a unit of Sanctuary Gasing Group, says: “We got involved in Semenyih because we saw opportunities in that area and wanted to get a foothold in the southern districts of KL.” 

“We had heard word that the new international airport [now KLIA] and a federal administrative capital [Putrajaya] were being planned in the vicinity. The Multimedia Super Corridor added to the excitement as well as a lot of other exciting proposals. So you would think that the new KL was going to be located down south,” he recalls. 

The Australian-Malaysian property group’s development, Kesuma Lakes, developed in 1996, is located 11km south of Kajang town centre. The entire township, which covers 1,357 acres initially planned for only 1,000 bungalows, has a gross development value (GDV) of RM1.6 billion.

“Most of the purchasers then were investors from KL who were looking at the planned developments down south such as Putrajaya, KLIA, and the Multimedia Super Corridor [Cyberjaya],” says Tan.

However, around 1997 to 1998, Sanctuary Gasing sold the development to Nam Fatt Corp Bhd, which has delisted and liquidated this year.

Meanwhile, MKH Bhd owns at least four parcels of land amounting to 390 acres in the Semenyih vicinity. 

Managing director Datuk Eddy Chen says the company ventured into Semenyih because it had a “very bright outlook”.

“The demand for housing is high there due to its affordability, especially for migrants from other areas of the Klang Valley, good infrastructure, highway networks and supporting amenities while its proximity to Putrajaya and KLIA is an added bonus,” says Chen. 

On one of the four parcels, MKH is developing Pelangi Semenyih 2,  which follows the developer’s earlier 294.66-acre Pelangi Semenyih township development.

Pelangi Semenyih 2 covers 168 acres of freehold land has a total GDV of RM360 million. The mixed-use development comprises 2-storey link houses, semi-detached houses and shopoffices. The current take-up for the three phases launched so far is 95% while the launch for the fourth phase is in the works. The fourth phase will consist of 2-storey terraced houses priced at RM373,900 and semidees at RM538,000. MKH has said that the fourth phase will not be the final phase and there will be more to come. 

The second and third parcels will be planned for a medium high-end mixed-use housing development known as Hillpark 2 and Hillpark 3 located in Bandar Teknologi Kajang. Hillpark 2 will sit on 60 acres of freehold land with a GDV of RM150 million, and will feature 2-storey link houses and 2-storey semidees. Hillpark 3 will span 100 acres with an estimated GDV of RM320 million, and will consist of 2 to 3-storey super-link houses and 2 to 3-storey semidees. 

The remaining 130-acre parcel in Semenyih has been proposed for a high-end mixed-use housing project with an estimated GDV of RM550 million.

According to Chen, MKH is still looking for land in the Semenyih area as it is still relatively inexpensive. “This is where we are able to build affordable housing as land is still cheap. But having said that, the land price in this area has gone up more than 50% from our purchase price in 2009. Given this scenario, it may be more and more challenging to build affordable houses.”

A rough calculation shows that the land purchased by S P Setia in 2011 is 50% more expensive than the land purchased by MKH in 2009, giving an indication as to how much prices have increased.

Other notable developers in Semenyih include Sunway Group with its 700-acre Bandar Sunway Semenyih, and Bandar Semenyih Sdn Bhd with its Taman Tasik Semenyih.

In neighbouring Kajang, a number of developers have ongoing projects there including Naza TTDI (TTDI Grove), Gamuda Land (Jade Hills Kajang), Country Heights Holdings Bhd (Country Heights Kajang), OSK Property Holdings Bhd (Taman Sri Banyan development within Country Heights Kajang), Nadayu Properties Bhd (Nadayu 92) and Sime Darby Group (Saujana Impian).

Basis of attraction

Besides the lack of development land closer to Kuala Lumpur city, there are other factors tempting developers to snap up land in the Semenyih/Kajang corridor. 

“The Sungai Buloh-Kajang mass rapid transit (MRT) line, coupled with the better road infrastructure due to the completion of the Kaseh highway that links KL and Mantin as well as Seremban, could also spur growth,” says CH Williams Talhar & Wong’s Foo. 

Other than the new Lekas highway, the improved road links to Semenyih include Infra-Lekas that links Kajang, Semenyih, Mantin, Pajam, Seremban and Paroi, and the SILK highway that connects Cheras, Kajang, Semenyih and Bangi. Due to the extension of Greater KL to include Kajang and its proximity to Nilai, Pajam and Mantin, the Semenyih and Kajang area will play a key role in capturing the Selangor and Negeri Sembilan market. 

According to Knight Frank Malaysia, the recurring theme for developers choosing to build there is the availability of land for development at competitive and attractive prices. These provide opportunities for developers to plan and develop new comprehensive and integrated townships. 

“This will cater for the growing demand for affordable and mass housing that follows the recent spike in prices for landed property in selected locations within the Klang Valley. This also fulfils the needs of upgraders within the area seeking modern homes within secure neighbourhoods,” the consultancy explains. 

Knight Frank believes that rapid population growth in the area is also spurring the growth of Semenyih. “The population of the Ulu Langat district as per the Population & Housing Census 2010 has been recorded at 1,156,585. The current population of the district represents about 21.2% of Selangor’s total population,” the consultant says. According to the census report, the main ethnic group in the Ulu Langat district are bumiputra (50.7%) followed by Chinese (30.8%) and Indian (9.8%). 

Semenyih alone has a population of 68,000, and large retail shops have opened up, adding to the area’s attractiveness and boosting further growth.

“We feel the retail facilities and amenities that cater for the convenience and needs of the growing population adds to the area’s attractiveness including established retailers such as The Store located in Semenyih Sentral, Tesco Semenyih at Pelangi Semenyih and Metro Point Kajang on Jalan Semenyih Kajang,” the consultancy explains. 

Previously, Semenyih gave people the impression that it was an industrial area but residential developments are actually supporting the area. The two big land acquisitions by S P Setia will change everyone's perception -- Hee

According to Rahim & Co senior manager Hee Chee Meng, perceptions of Semenyih have only changed in recent years. Due to its growing population, KFC, McDonalds and Pizza Hut outlets have popped up in the area, along with a Tesco hypermarket.

In 2005, the University of Nottingham Malaysia Campus (Unim) was established on 101 acres of land worth RM120 million in Semenyih. The higher learning institution’s entry has benefited the area, particularly Taman Tasik Semenyih and other neighbouring housing schemes. Semenyih’s proximity to other educational institutions such as Universiti Kebangsaan Malaysia (in Bangi), Universiti Putra Malaysia (Serdang) and Universiti Tunku Abdul Rahman (Utar) Bandar Sungai Long campus among others, has also raised its profile.

Prices on the rise? 

Considering that Klang Valley real-estate prices have shot up, investors and developers are looking towards the southern corridor for cheaper and more affordable opportunities. But how long before prices there follow suit? Knight Frank believes that it is just a matter of time. 

Knight Frank states developers are gradually introducing higher-end products there to cater for the growing market of discerning home buyers and upgraders. These include properties that may have gated and guarded precincts, modern and contemporary facades, good floor layouts that segregate public and private space and promote natural lighting, quality finishing and fixtures, wide car porches and green-building features that incorporate rainwater harvesting and others. 

“However, by introducing such features, the prices of these new and innovative homes will inevitably increase due to higher construction costs compared with conventional houses in the secondary market,” it adds. 

CH Williams Talhar & Wong’s record of transactions shows that when Taman Pelangi Semenyih 2 was launched by Metro Kajang Holdings Bhd in 2009, double-storey terraced units were going for RM240,000 while semidees ranged from RM454,000 to RM465,000. Since then, terraced units there have risen 14% to RM287,000 while the semidees are up 7% to RM500,000. 

Based on data provided by Rahim & Co, double-storey terraced houses in Bandar Rinching with a land area of 111 sq m (1,194.8 sq ft) that went for RM130,000 to RM150,000 in 2009 have seen a 10.7% price hike to RM147,000 to RM168,000.

At Taman Pelangi Semenyih, 2-storey terraced houses with a land area of 130 sq m (1,399 sq ft) that were sold at RM210,000 to RM240,000 in 2009 have jumped 22.9% to RM250,000 to RM295,000. 

In Taman Tasik Semenyih, 2-storey terraced houses with a land area of 109 sq m (1173.3 sq ft) went for an average price of RM100,000 in 2009. A year later, the prices jumped by as much as 70% to between RM130,000 to RM170,000.

Bandar Rinching shoplots with a land area of 130 sq m (1,399 sq ft) were sold for RM100,000 to RM200,000 in 2009, but now cost 30% more at RM200,000 to RM260,000.

Two-storey shoplots in Taman Pelangi Semenyih with a land area of 153 sq m (1,646.9 sq ft) in 2009 were going for RM430,000 to RM520,000. In 2011, prices leapt 48% to RM630,000 to RM770,000.

Mushrooming hotspots 

It cannot be denied that Semenyih has cast a spell on developers. The area’s potential for growth has risen considerably and CH Williams’ Foo expects to see some real estate hotspots come up around Semenyih and Ulu Lalang all the way to Beranang. 

Currently, the more popular projects here include the Bangi estate that UEM Land recently purchased from Inch Kenneth, the Glengowrie estate owned by Sime Darby, Dijaya’s Kajang Hills, Bandar Rinching and Boustead’s Mutiara Semenyih, says Foo. 

Knight Frank suggests that these schemes are successful due to good planning by reputable developers. “Some of the schemes in Semenyih are popular because they are well planned and undertaken by reputable developers with a proven track record, providing a range of facilities and amenities that caters for the growing population,” it offers. 

“With the existing and improved road infrastructure, connectivity and accessibility to this corridor has been enhanced. The proposed MRT line will spur the growth of this corridor when it is completed in the near future,” it adds. 

Rahim & Co’s Hee says there is still great potential for residential developments in Semenyih. “Previously, Semenyih gave people the impression that it was an industrial area but residential developments are actually supporting the area. The two big land acquisitions by S P Setia will change everyone’s perception.” 

“We have great confidence when carrying out valuations in the area. Sometimes, we do need big developers to come in and bring in the crowd,” says Hee, adding that the likes of S P Setia “have done just that”.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 883, Nov 7-13, 2011