US Embassy in Kuala Lumpur has said that Malaysia is a safe place to travel following claims by a visiting American academician who had stated the contrary.

The South China Morning Post reported the embassy’s rebuttal to Bruce Gilley’s statement, saying there was no change to the US travel advisory, which remains at level 1, for Malaysia.

Level 1 is the safest and level 4 is “do not travel”.

The US State Department website showed that Malaysia has been Level 1 since its last update on July 24, 2023.

The department said the US and Malaysia have healthy bilateral ties.

“Economic ties are robust, and there is a long history of people-to-people exchanges. Malaysia has a diverse democracy and is an important partner in US engagement with Southeast Asia,” it said.

Earlier Prime Minister Datuk Seri Anwar Ibrahim called Gilley a “mediocre scholar” who should not have been invited to be a visiting professor in Malaysia.

Gilley, a political science professor at Portland State University, said in a talk at Universiti Malaya that Malaysia was pushing for a “second Holocaust against the Jewish people”.

Gilley made the remarks in a keynote address entitled “Will Malaysia become an active middle power?” on April 23.

niversiti Malaya has apologised for the controversy arising over his “pro-Zionist”. It said it has cancelled all programmes and activities scheduled to be attended by the US speaker.

Amid signs of easing tensions in the Middle East, the ringgit  followed the expected trajectory, strengthening and stabilising  within a narrow range of 4.776 to 4.780 against the USD this week. 

Kenanga Investment Bank’s (Kenanga) Economic Viewpoint today (Apr 26), said this uptick can largely be attributed to the improved risk sentiment  among investors, leading to a softening in USD demand.

Coupled with sluggish US PMI and lower-than-expected 1Q24 US GDP  reading, the USD index (DXY) depreciated to below the 106.0 level,  further contributed to the strengthening of the ringgit. Domestically, a stable inflation rate and ongoing support from authorities have significantly contributed to stabilising the ringgit.

It is noteworthy that yesterday’s release of weak US GDP growth (1.6% QoQ; Consensus: 2.5%), was accompanied by the 1Q24 core  PCE, which rose to 3.7% QoQ (Consensus: 3.4%).

This explains why  the DXY did not weaken significantly and why the 10-year US Treasury rose above 4.70%.

There is potential for a higher March  core PCE reading tonight, which could keep the DXY close to the  106.0 level, leading to a weakening of the ringgit.

The possibility  of a higher inflation figure and still robust job report next week may  prompt the Fed to maintain their higher-for-longer guidance,  potentially pushing the ringgit to test the 4.80/USD level again. 

However, a hawkish hold and potential FX intervention by the Bank  of Japan may help to limit the appreciation of the DXY.

Technical Analysis

The technical outlook for USDMYR next week is neutral, with  expectations for the pair to stay close to its 5-day EMA of 4.778.

A hawkish recalibration in the Fed’s monetary policy outlook may  push the MYR above (R2) 4.782 and potentially test 4.800.

The Inland Revenue Board (IRB) has extended the deadline for non-business taxpayers to submit their tax return form for the year of assessment 2023 via e-Filing from April 30 to May 15.

In a statement on Friday (Apr 26), the IRB said that the taxpayers comprise resident individuals (knowledge workers/expert workers/non-citizen workers holding key positions) and non-resident individuals.

The extension also involves non-resident individuals (knowledge workers), organisations, deceased persons’ estate, and Hindu joint families, it said.

According to the IRB, the deadline for the submission of the tax return form for the year of assessment 2023 for the employer (company and Labuan company) category and the non-company/non-Labuan company employer category through e-Filing has been extended from March 31 to May 30.

It advised taxpayers to submit the tax return form, and pay their income tax within the stipulated period, to avoid any penalty for late submission of forms or any increase for late payment.

“Taxpayers are also advised to key in and update their personal and banking information accurately to assist in the tax refund process,” the IRB said.

Berjaya Corp Bhd (BCorp) has denied allegations of its founder Tan Sri Vincent Tan’s involvement in discussions regarding casino licence in Forest City, Johor.

BCorp said the reports from The Edge Singapore and Bloomberg had included “inaccurate information that misrepresented its supposed involvement in discussions with Prime Minister Datuk Seri Anwar Ibrahim regarding the project.

“We would like to make it clear that Tan Sri Vincent Tan Chee Yioun has not participated in any such discussions and refute the inaccurate claims presented in the articles.

“In response to these inaccuracies, we kindly request the following actions from the concerned parties: clarification and removal of any misleading content from the articles in question across all platforms. Cessation of further dissemination of the inaccurate information.

“We trust that the responsible parties will understand our concerns and take appropriate action,” BCorp said in a statement today (Apr 26).

On Thursday, the prime minister denied reports that the government was mulling a casino licence to revive Forest City in Johor.

In a brief response to the media, Anwar said news of the casino licence was a “lie” and “not right”.

A Bloomberg report on Thursday claimed that Malaysia was in early discussions with tycoons on opening a casino in Forest City, in efforts to revive the RM478.35 billion property project.

Quoting sources, it said Anwar had met with Tan and Genting Group’s Tan Sri Lim Kok Thay last week at the development in Johor.

Forest City is built on land near Singapore, which is linked to Johor by bridge.

A light aircraft was forced to make an emergency landing at Sultan Abdul Aziz Shah Airport in Subang, Selangor, today (Apr 26), as confirmed by the Civil Aviation Authority of Malaysia (CAAM) in a statement.

The incident involved a Diamond DA-42 aircraft bearing registration number N566CB and operated by Techstrait Ltd. According to reports, the aircraft departed from Sultan Abdul Aziz Shah Airport at 8:26 a.m. Shortly after takeoff, the Subang Air Traffic Control Tower received an emergency distress call from the aircraft.

Responding swiftly, the aircraft executed an emergency landing at 8:28 a.m., averting any potential catastrophe. Both pilots aboard the aircraft were reported to be unharmed, ensuring a fortunate outcome amidst the tense situation.

As a precautionary measure, the runway at the airport was temporarily closed to flight operations until the aircraft could be safely removed from the runway, ensuring the safety of all air traffic.

In the wake of the incident, the Air Accident Investigation Bureau, operating under the Ministry of Transport, has announced plans for a thorough investigation. The inquiry will adhere to Part XXVI of the Civil Aviation Regulations 2016, aiming to determine the underlying causes and prevent similar occurrences in the future.

Datuk Captain Norazman bin Mahmud, the Chief Executive Officer of the Civil Aviation Authority of Malaysia, assured the public of their commitment to ensuring aviation safety and pledged full cooperation with the ongoing investigation.

A new account for anytime access

The Employee Provident Fund (EPF) recently announced the creation of the Flexible Account (or Account 3) – a scheme that allows 10% of members’ balances to be dedicated to unconditional withdrawal, subject to the current balance in their Account 2.

CGS International (CGS) said today (APR 26) that contributors will need to opt-in to have the initial balance transferred to the Flexible Account, but future contributions will be channelled into the account by default.

The scheme will start on 11 May 2024. RM20bn-30bn potential boost to consumption

CGS argued that the EPF Flexi account could add further support, albeit limited, to consumption.

EPF has guided that RM20bn-30bn will likely be available for withdrawal from the facility, although the pattern of withdrawal will depend on members’ available balances.

Those who used the withdrawal facility during the pandemic may have a limited amount in Account 2, and by extension, a lower amount in the Flexible Account.

The majority of EPF members have limited balances

About 5.2m, or 62% of active members, have a total balance of less than RM50,000. Within this segment, 3.2m active members have less than RM10,000. Impact of past EPF withdrawals The impact of past withdrawal measures on the economy was seen in several ways:

Increases in excess savings, reflected by the higher CASA (current + savings account) balances which were then spent, supporting robust consumer spending.

Gold was a favourite for consumers

There was a noticeable increase in the import of non-monetary gold, which coincided with the Special Withdrawal in Apr 22.

Evidence from retail sales data points towards a spending increase when i-Citra and Special Withdrawal were announced, although it may have also corresponded with the removal of COVID-19 mobility restrictions.

On the stock market, the behaviour of retail players in KLCI is not obvious. CGS saw a spike in the volume of transactions upon the rollout of measures but this was likely a result of positive news effect.

Drawback: Present bias and dependency

CGS thinks present bias is common – if given the opportunity, consumers prefer to spend their wealth now, regardless of the impact it might have in later years.

With no limit for withdrawals, CGS believes members are likely to empty their account even if there are no emergencies.

Also, members could rely on the Flexible Account withdrawals to supplement their monthly income, leading to an unhealthy culture of dependency and living above their means.

Trade-off could be costly for the country

CGS thinks generous retirement fund withdrawals should never be permanent. The scheme may boost near-term consumption; however, the trade-off is fewer funds available for investment, affecting economic growth potential. In addition, those who are in dire need for cash support are likely those that have limited balances, or not an EPF member at all.

CGS thinks the key is to have in place mechanisms that disincentivise recipients from being overly dependent on the EPF Flexible Account. This could include requiring a higher percentage of EPF contribution, or requiring a minimum threshold amount of total balances before the Flexi Account can be created.

Inflation growth buffered by moderation in food costs Malaysia’s Consumer Price Index (CPI) rose 1.8% yoy in Mar 2024.

CGS International (CGS), in its Economics Update today (Apr 26) said the headline figure was below CGS’s and Bloomberg’s consensus forecasts.

Meanwhile, core CPI growth moderated to 1.7% yoy in Mar 2024 (+0.2% mom); this is the first time since Oct 2022 that core inflation had come in below headline inflation.

The sustained low inflation in Mar 2024 was mainly attributed to slower growth in food costs (1.7% yoy in Mar 2024 vs. 1.9% in Feb 2024) with yoy inflation in subcomponent food at home moderating further to 0.3% while food away from home sustained at 3.5%.

CGS thinks the expansion of Payung Rahmah Madani initiatives such as Rahmah Ramadan Bazaar programme, contributed to suppressed food prices during Ramadan (10 Mar-9 Apr). This was in tandem with the Ihsan Rahmah programme which provides discounts up to 30% on purchase of daily necessities.

Price pressure likely to build up higher in 2H24F

Mar 2024 data marks the 16th month of continued moderation in the percentage of yoy inflation. For the next three months, CGS thinks prices will remain soft based on:

1. The 8% service tax implemented in Mar 2024 has thus far seem to show minimal impact, based on the headline breakdown for the month. There could be a lagged impact whereby an increase could be reflected in Apr CPI. In CGS’s estimate, the increase in service tax will impact around 7% of the total CPI items and hence will only raise the overall CPI by +10bp.

2. CGS expects CPI growth to be limited in Apr 2024F given the price control scheme for Eid from 5-19 Apr alongside the ongoing Payung Rahmah Madani initiative.

3. The High Value Goods Tax (HVGT) which was to be implemented on 1 May 2024 has been postponed, as announced by the Deputy Finance Minister. To recap, the government has indicated that the HVGT would range 5-10% and generate revenue of RM700m.

CGS thinks this tax will have limited impact on CPI growth. Given the government’s intention of lowering its subsidy burden, we believe Malaysia’s fuel subsidy will be revised as early as May 2024F.

Changes here may seep into CPI headline gradually, depending on the magnitude of the subsidy rationalisation. Overall, CGS maintains their 2024F inflation forecast at 3.2% with upside risks, especially if the government decides to implement any targeted subsidy adjustments in the near term.