US Economy and Home Prices

NEW YORK, Sept 30 — US house prices rose for a third month in July, but consumer confidence fell unexpectedly in September as the worst job market in 26 years fuelled worries about personal finances, private reports showed yesterday.

The data indicates the economic rebound is still in its early days following the worst recession in decades, and it could be a long time before consumers contribute to growth.

Despite improvements elsewhere in the economy and a roaring stock market rally since March, the weakness of the consumer sector bodes ill for the year-end, traditionally a period of heavy shopping and spending.

“Companies haven’t started to hire yet, which is going to weigh on confidence,” said Sean Simko, fixed income portfolio manager at SEI in Oaks, Pennsylvania.

“Offsetting that is the positive move in the equity market. But in the end, as individuals feel under pressure from the labour market, you will have confidence lower than where it needs to be to bolster the economy.”

Consumers’ job prospects might not improve anytime soon, judging by the plans of senior managers. US chief executives are not ready to step up hiring or capital spending, according to a Business Roundtable survey.

It said 40 per cent expect to cut US jobs over the next six months, compared with 13 per cent who expect to add them.

Stocks were lower after turning negative following the weaker-than-expected consumer confidence report. US government bonds, which are investors’ favorite safe haven during weak economic times, pared early losses.

CONFIDENCE GAME

The Conference Board, an industry group, said its index of consumer attitudes fell to 53.1 in September, versus a revised 54.5 in August and expectations of a rise to 57.0.

Reflecting Americans’ worries about employment prospects, the Conference Board’s index measuring jobs “hard to get” rose to 47.0 from 44.3.

At the other end of the scale, the gauge of “jobs plentiful” fell to 3.4 from 4.3. That was the lowest since February 1983 and ties in with Labor Department data showing the US unemployment rate was at a 26-year high of 9.7 per cent in August.

“While not as pessimistic as earlier this year, consumers remain quite apprehensive about the short-term outlook and their incomes,” said Lynn Franco, director of the Conference Board Consumer Research Center.

“With the holiday season quickly approaching, this is not very encouraging news.”

The poor outlook overall led consumers to evaluate their present situation as the worst since March. The present situation gauge fell to 22.7 from 25.4.

In a bit of good news for the Federal Reserve, which has pumped easy money into the financial system in an effort to revive the economy, one-year inflation expectations fell to 5.2 per cent from 5.4 per cent in August.

September’s inflation expectations were the lowest since October 2007. Some investors have worried that the Fed’s recovery efforts will ultimately spark inflation.

IN THE HOUSE

The S&P/Case-Shiller composite index of house prices in 20 metropolitan areas rose 1.6 per cent in July from June, more than triple the estimate of a 0.5 per cent rise found in a Reuters poll. This index rose 1.4 per cent the previous month.

The 10-city index gained 1.7 per cent in July after a 1.4 per cent rise in June.

Housing was at the epicenter of the financial crisis that pushed last year’s mild recession into deep a downturn, and massive foreclosures have heaped pressure on consumers.

“These figures continue to support an indication of stabilization in national real estate values, but we do need to be cautious in coming months to assess whether the housing market will weather the expiration of the Federal First-Time Buyer’s Tax Credit in November, anticipated higher unemployment rates and a possible increase in foreclosures,” David Blitzer, chairman of the index committee at S&P, said in a statement.

A first-time buyer credit of US$8,000 (RM27,962), which ends November 30, has jump-started housing activity this year. But there are concerns about the impact when this incentive disappears.

The monthly price increases helped slow the annual rates of decline but home prices were still down 12.8 per cent in the 10-city index and 13.3 per cent lower in the 20-city index.

Meanwhile, Fannie Mae, the largest provider of funding for US home mortgages, said delinquencies on loans it guarantees accelerated. — Reuters

Fancy Seeing Miyabi in an Indonesian Movie?

So what do you know, megastar Japanese porn star Miyabi is coming by to Indonesia to act in a comedy. The clerics are almost in arms!

Read on, this could be fun!

The Straits Times reported on Sept 29 that filmmakers in Indonesia are adamant on this.

Muslim leaders have blasted plans to bring in erotic film megastar Maria Ozawa, 23, popularly known as Miyabi, to play herself in the upcoming film, Menculik Miyabi (Kidnapping Miyabi).

But Maxima Productions general manager Adi Sudiadi said the firm would stick to plans to include Ozawa in the film, which tells the story of a group of university students who accidentally kidnap the starlet.

“We guarantee that Miyabi won’t be playing in a porn film here. We will bring her here not as a porn star, but purely for a comedy,” Sudiadi said. “Miyabi is well-known to Indonesians. We are expecting her to attract a lot of audience here."

“We are also trying to fix Miyabi’s image by showing she can do more than a porn star,” he said, adding that no final agreement had been reached with Ozawa to act in the film.

Indonesian Council of Ulema chairman Amidhan slammed the choice of Ozawa — who has gained notoriety in Japan’s porn industry, thanks to her Canadian-Japanese looks — as a threat to the moral health of the country’s youth. “Even if the film isn’t pornographic, it is very dangerous for our young people, particularly if they become fans of this porn actress and become curious enough to watch her films,” he said. “We have to be firm and not let rubbish into our country. This is about Indonesia’s reputation as the world’s most populous Muslim country”’

Nearly 90 per cent of Indonesia’s 234 million people are Muslim.

Indonesia’s Parliament earlier this month passed a controversial film law that imposes tighter controls on content, including violence and sex.

Will these tighter legal fetters torpedo Maxima Productions'great Miyabi dreams?

The Brain Drain Continues.....

The Straits Times has this story to tell about the topic of the continuing brain drain from Malaysia.

According to its report today (27 Sept), Harvard-trained Malek Ali,BFM's radio owner has recently lost two staff members of his radio station.He felt the reason of his loss was unnecessary.

One was an Australian radio station engineer and the other was the man's Malaysian wife. The couple returned to Australia after the husband could not renew his work permit.

“These are good people. He was among the best in his field,” Malek said. “He and his wife are now contributing to the Australian economy.”

That was a stark contrast to his own experience — in Singapore.

In 2000, he became a permanent resident there, while working for the Singapore operations of a Malaysian company. Six months later, he was asked if he wanted to apply for citizenship.

He did not. He came back to start the BFM radio station, but without his family. He felt it was better for them to continue living across the Causeway. He commutes every weekend to Singapore.

Malek's stories tell a succinct tale of the double whammy Malaysia is facing in the global grab for talent. Its citizens are being wooed by other countries, while its labyrinthine process of applying for permanent residence or even work permits drives away those who might want to stay.

This is not a new story. But it came to the forefront last week when complaints poured out on Internet forums after the Home Ministry held a high-profile exercise to award citizenships to 92 people.

The 92 were among the 33,000 “stateless” persons in the country. Most of them were born in Malaysia, but did not have legal papers as their births were never registered or the papers lost.

Among them was Leong Chwee Chun, 64. She had waited 36 years after her papers were lost during the Japanese Occupation.

But many of the best-qualified of these “stateless” residents have not stayed. Some left long ago, frustrated with inconclusive outcomes of their applications.

Plain-speaking Gerakan politician Dr Hsu Dar Ren tells of a former classmate who did not have citizenship, even though he was born in pre-independence Malaya, because his mother did not apply for it then.

The classmate was consistently top in his class and was later offered a scholarship to study in Singapore, where he became a citizen after graduating as an engineer. No one could blame him.

“The brain drain is really one of the biggest problems in Malaysia today, and this sort of thing does not help,” said Dr Hsu.

The citizenship ceremony was held with pomp last week to showcase the Home Ministry's pledge to clear the backlog of applications by the year end. It has already processed 70 per cent of the 32,927 outstanding applications for citizenship, 16,812 for permanent residency and 93,360 cases of late registration of births.

Malaysia's difficulty in retaining talent has become more acute as the government tries to lift the economy up and out of the low-cost, low-wages model. It needs to have better brains to operate in this country.

Prime Minister Najib Razak had asked the government's Economic Council for a new economic model to emphasise innovation and creativity. I wonder whether this can be done in a country that is steep in religious conservatism as generally wary of championing new ideas for early adoption. Malaysia has always been a laggard in this department.Even its academia is beginning to look suspect because of the so called fake degree uproar unleashed recently.

But as Malaysians like Malek have noted, the malaysian authorities ought to be more efficient about keeping talent. The Malaysian process is opaque and convoluted and the delays are notoriously legendary.

Many have complained that they are kept in the dark about the criteria — unlike countries such as Australia, which uses a clear points system.

There is widespread belief that much hinges on what Dr Hsu describes as “a numbers game”. In a country where race is linked to power, the racial balance is always part of the consideration. Fear is the key and as such the nation suffers.

It may not be an official policy, but there are scores of stories that hint of unspoken racial considerations.

But as it has been pointed out, even if they number in the thousands, new immigrants will hardly change Malaysia's demography.

“The demographic trend clearly shows that the major ethnic group is going to form a bigger and bigger proportion of the total population as time goes on,” said Dr Hsu.

The pledge to clear the huge backlog — which is part of the Home Ministry's Key Performance Indicators (KPIs) — is welcomed, but it will not go very far as long as the process itself is not reformed.

Management-style KPIs may focus on statistics, but not necessarily the right decisions.

“They can easily say 'no' to everyone and meet the KPI,” said Malek. “But we haven't done what is needed — provide a clear policy, transparency and speed.” —

The Hums at the Factories are Getting Louder

The Singapore Straits Times (Sept 27)did bring some indicative good news today about the state of the manufacturing sector in Malaysia.

Yes, at this time last year,it was bleak time for Malaysia’s manufacturing sector.Since last December, many factories started four-day work weeks which slashed the income of its employees by up to 20 per cent. Rumours were rife then that a three-day work week would be next. Some workers were told to go especially new ones.

Today some relief has slowly returned. Many are of the view that the worst may be over for the global economy.There has been a rebound in orders for most factories. Work schedules have been restored and many have their pay elevated to former levels.The morale in the factories is so much better these days.

The crash and subsequent rebound of the manufacturing industry, particularly in the electronics and electrical (E&E) sector, has resulted in Malaysia’s see-saw unemployment rate.E&E accounts for 40 per cent of Malaysia’s exports.After holding steady at 3.1 per cent for the third and fourth quarters of last year, unemployment shot up to 4 per cent in the first quarter of this year. Some 100,000 jobs were shed in those three months, most of them in manufacturing.

Given that sharp rise, the Malaysian government had forecast unemployment to be 4.5 per cent for this year, based on the assumption that the global downturn would last for a few more months, a government official told The Sunday Times.But then, monthly unemployment figures started falling. The jobless rate dropped steadily from 4.1 per cent in February to 3.6 per cent in May, which are the latest monthly figures available. Hence, the government may now revise the unemployment forecast for the year to below 4 per cent, the official said.

People working in the manufacturing industry, which had borne the brunt of layoffs during the downturn, are now the ones who are getting their jobs back, said Malaysian Trades Union Congress secretary-general G. Rajasekaran.“We haven’t heard much news of people being retrenched in the last two months. Instead, we hear that companies are rehiring,” he said.

Economists say that the return of orders to the E&E industry is one big reason for the rebound in employment. When the global meltdown struck, the sector was one of the worst hit. Like Singapore, Malaysia is an export-driven economy, and its E&E industry exports almost all of its products to key markets like the United States and China.With the global economy grinding to a halt at the end of last year, orders fell dramatically. But the demand for electronic products seemed to have recovered quickly.

Datuk Wong Siew Hai, chairman of the Malaysian American Electronics Industry (MAEI), feels that growth in the sector was driven by strong consumer demand for products like netbooks, mobile phones and smart phones, which continued to sell well in a sluggish economy.“Look at the new iPhone and the netbooks. They’re not too expensive, and everyone wants one,” he said.

MAEI represents 17 US companies, including giants Intel, Dell and AMD. The companies make up almost a third of the total value of Malaysia’s E&E exports, and contributed 11.3 per cent of the value of Malaysia’s total exports.MAEI members’ export sales rose more than 20 per cent in the second quarter of this year, and are expected to increase by at least another 10 per cent in the third quarter, said Wong.Besides E&E, there are other bright spots in the Malaysian economy.

Six days ago, Prime Minister Najib Razak said that the government’s two stimulus packages totalling RM67 billion were having a positive impact on the economy.He singled out the construction sector, one of the biggest beneficiaries.Construction grew by 2.8 per cent in the second quarter, while the services sector grew by 1.6 per cent.

But labour lobbyists like Factory Workers’ Coalition coordinator A.Sivarajan feel that it is too early to cheer.He noted that some retrenched factory workers have still not found jobs.Some became drivers while others ran illegal food stalls.Indeed, while Malaysia’s economy is rebounding, it is far from roaring.This year’s approved manufacturing investments are forecast to be only half of last year’s US$13.3 billion.It may be a while before the country sees quarterly growth rates of more than 7 per cent — the comfortable position it was in merely two years ago.

So, hold yuor horses! It is still too early to chill the beer glasses for a good cheer.

Building muscles in KL-Pumping Iron

As the numbers rolling do not seems to really encourage growth, the government is out to do more.

As such,construction companies are expected to continue to get a shot in the arm and shine in the current year as the government step-ups awards of infrastructure contracts to meet development and fiscal stimulus targets.

Business Times Singapore (24 September 2009)reports that analysts estimate the development spending for this year under the 9th Malaysia Plan would amount to about RM52 billion, increasing to between RM55 billion and RM58 billion next year.

In addition, an estimated RM10 billion of the total RM22 billion set aside for fiscal injection has yet to be awarded.

Because of its big multiplier effect on the economy, the sector is invariably singled out for additional funds.

Earlier this week Prime Minister Datuk Seri Najib Razak said nearly RM8 billion had been paid out to contractors who had completed some 41,000 projects or about half of the total awarded.

The stimulus packages were “on track”, he said, pointing to the construction sector’s growth of 2.8 per cent in the second quarter from 1.1 per cent in the first, as evidence the fiscal injection was beginning to have a favourable impact on the economy.

Because 2010 marks the last year of the 9th Malaysia Plan (2006-2010), the forthcoming national budget scheduled to be tabled in Parliament at the end of October is expected to focus on implementation, given that as at the middle of this year an estimated RM139 billion or only 60 per cent of the RM230 billion allocated for the five-year period had been spent.

Contractors expect the pump to remain open and believe there would be “a flurry of contracts in 2010,” HwangDBS Vickers, which is overweight the sector, said in a report this week.

Maybank IB is also positive, noting infrastructure projects worth some RM33.5 billion under the 9th Malaysia Plan were currently at various stages of being constructed with most expected to continue into the coming 10th Malaysia Plan (2011-2015).

A number of new infrastructure projects have already been earmarked for the new 5-year development plan.

These are likely to exceed RM30 billion and include the electrified double-tracking rail job for the southern portion of West Malaysia, a new light rail transit line linking Kota Damansara to Cheras, and the Pahang-Selangor interstate water transfer project.

However, the pick-up in local construction jobs isn’t the only reason to be positive. Vietnam — where a number of Malaysian builders have invested heavily — has also turned the corner.

Companies like Gamuda and WCT are looking to accelerate their planned billion-dollar mixed-developments to ride on the economic upturn and to cash in on the desire and better purchasing power of young Vietnamese to own a home.

A number of construction stocks have more than doubled year-to-date, including Sunway, Hock Seng Lee, and IJM Corporation.

Even so, the construction bulls noted because “pump-priming remains a cornerstone to drive economic growth” further upside is possible, share prices for some building companies may move upwards on sustainable positive news flow based on new book value.

Fight for it First!

Tourism Minister started the food fight in retaliation to claims of many things Malaysian by Indonesia. Now another way is being waged with the nation from across the Causeway. She may be the one that opens Pandora's Box but certainly be the one to bite the bullet;as Malaysia is often the talk and hardly the walk,

Truth be told,top businessmen and executives from around the world were gathered at the Ritz Carlton hotel ballroom in Singapore as early as during the 2005 Chinese New Year for a glittering award ceremony dinner. At the centre of each table was a colourful raw fish salad, known to Malaysians as “yee sang”.

"Welcome. I hope you enjoy this dish which is unique to Singapore," said the host to the excited guests as they reached for their chopsticks.

This incident is likely a common one in the city state with different types of food and illustrates what has become a contentious and possibly explosive issue of "food hijacking" between the two neighbouring countries that share a common heritage and was once a unified nation.

When Tourism Minister Datuk Seri Ng Yen Yen suggested that Malaysia promote its rich culinary heritage and claim certain dishes as its own however, it sparked off a storm of protest across the Causeway and was also condemned by some Malaysians.

The fact is, however, Singapore is already ahead in branding itself with food — chilli crabs being the most famous example as it has become synonymous with the island republic, with no Malaysian equivalent. However, chili crabs were famous in China even after the war years and found its way to the china-towns of the mighty US of A.

One incident vividly recalled by many Malaysians is when celebrity chef Anthony Bourdain made a visit to Singapore and was filmed eating Ampang yong tau foo, instantly creating an image in the minds of millions of foreigners who watch his popular show that Ampang yong tau foo is a Singapore dish.

Michael Tung, a product management and marketing executive at DiGi, one of Malaysia's most savvy marketing companies, says that it was an illustration of how Singapore benefits due to good marketing.

"Singapore did a good marketing job and we didn't," he tells The Malaysian Insider. "If other people start claiming a particular food, we lose an edge and an asset."

Tung agrees with the view that branding specific dishes will boost tourism.

"Just look at Sipadan, for example. If you don't market it, Malaysia will be known in general for nice beaches but nothing specific. Tourists won't know where to go. But Sipadan has been marketed as one of the top 10 dive sites world and it has paid off. Marketing something specific in that sense, you never fail to gain benefits," he says.

Beyond tourism, the concept of identifying a country with certain products also boosts pride and has long-term economic benefits.

A few years ago, a top Singapore businessman shared some insights with a gathering of his Malaysian counterparts in Kuala Lumpur about how the island republic was looking for ways to create something that would always be unique to the country.

"Everyone thinks of Swiss chocolate and English tea even though Switzerland does not grow cocoa and England does not grow tea," he said. "This is something you can think of doing for Malaysia."

Some companies in Singapore have apparently taken this concept to heart and attempted to sell Malaysian rambutans as "Singapore lychee".

It is also more likely for foreigners to know Singapore laksa and Singapore bee hoon but not Malaysian laksa or Malaysian prawn mee.

Tung warns however that Malaysia should execute the food campaign well and pick its fights carefully.

"Marketing is all about who shouts the loudest, the longest. If you want to do it, do it right or don't do it at all. If you want to market Ampang yong tau foo, for example, you must do it comprehensively and not half heartedly otherwise there will be no impact," he says.

“Make sure all the brochures carry it and tourist guides and hotel staff are knowledgeable about where to eat it. Select the right channels such as the Internet to promote it as that is where tourists go to do research."

He adds that the government should carefully research the origins of dishes which are being disputed or risk a backlash as what is already happening with the torrent of abuse towards Malaysia in Singapore cyberspace.

The dishes mentioned by Ng that are most passionately disputed by Singaporeans are chili crab, Hainanese chicken rice and to a lesser degree nasi lemak and bak kut teh.

Of these dishes, probably the one most widely accepted as Malaysian in origin is bak kut teh which is said to have come from Klang though Singapore has a peppery version of it.

A communications and public relations executive, Tan, tells The Malaysian Insider that he feels the whole exercise could come off "in bad taste".

"Food is all about caring and sharing. Trying to claim something as our own, it just goes against the spirit of our food culture," he says.

One way Malaysia can market its food and limit the risk of antagonism is by simply branding its dishes as a Malaysian version but without claiming exclusive rights to it, the way California, Chile, Australia and France have branded their wines.

In terms of dishes like Penang laksa and Ampang yong tau foo or Terengganu keropok lekor, it can consider the way Japan has marketed Kobe beef or France its Champagne sparkling wine. In intellectual property law, this is called geographical indications.

Done right, Malaysia could derive tourism dividends from its food, heighten national pride and yet keep relations with its neighbours intact.

But let us not shout too loud and too long without first doing our homework first. We might just find our shoe not on our feet but in our mouth!

False Confidence or Just Plain Gungho?

KUALA LUMPUR: Malaysia’s central bank has become more confident the South-East Asian nation is recovering from the global recession, Credit Suisse Group said, citing a meeting with deputy governor Datuk Ooi Sang Kuang.

The central bank’s “view is that the signs of an economic recovery seem evident,” Danny Goh, an analyst at Credit Suisse, said in a report yesterday.

It “is only unsure on whether the economic rebound will be modest or sharp,” he said.

Malaysia’s economic contraction eased to 3.9% last quarter from a 6.2% decline in the first three months, and policy makers expect gross domestic product (GDP) to resume growth at the end of the year.

The country’s export and manufacturing slump has abated as economies from Singapore to China emerge from the world’s deepest recession since the Great Depression.

The US$195bil economy may post “mild positive or negative GDP growth” this quarter from a year earlier and may expand in the next three months as the government’s stimulus measures take effect, Credit Suisse cited Ooi as saying.

He had said in June that the economic improvement in the second quarter may not be sustainable, according to the report.

Ooi also noted that retrenchments had slowed and there had been evidence of re-hiring in some industries, Credit Suisse said.

The central bank’s monetary policy would be “supportive of growth,” and the reductions in the benchmark interest rate in the past year had worked well in bringing about lower lending rates, Ooi was cited as saying.

Inflation was expected to remain “benign,” he said. Bank Negara, which has cut its benchmark interest rate from 3.5% in mid-November to 2% to revive growth, may lower its inflation forecast for this year, Governor Tan Sri Dr Zeti Akhtar Aziz said on Aug 27.

The central bank kept interest rates unchanged for a fourth straight meeting last month.

Malaysian banks were well capitalised and banks weren’t under pressure to further strengthen their capital, Ooi was cited as saying. The worst appeared to be over for non-performing loans in the banking system, he said. — Bloomberg