Who Will Win The Trade War?

On 4th of March 2025, US has imposed 25% tariffs on import from Canada & Mexico, and at the same time increased tariffs on China import to 20% from 10% just imposed a month ago.

The stock market reacted negatively as there are lots of uncertainty.

Trump stressed that the tariffs will revive US manufacturing sector and create more jobs, and will not increase the cost of living of its citizens. Is it true?

Anyway, it's almost certain that those countries being imposed the tariffs will suffer, and they will retaliate with tariffs against the US.

In the end, who will win? Or may be there will be no winner?

破屋更遭连夜雨，漏船又遇打头风

"Broken house meets torrential rain, broken boat meets strong wind"

Covid19 spread, supply chain worries and politics drama are not enough, here comes the sensational crude oil price collapse in a day.

Brent oil price plunged 30% from $45 to $31 in a single day today, thanks to the price war between Saudi & Russia. 

This is the worst intraday drop since Gulf War in 1991, and it might drop further according to some "experts".

So, are we witnessing the once-every-10-years major financial recession now, despite a slight delay?

Almost all stocks traded in Malaysia fell sharply. Without a doubt oil & gas related stocks suffered the most with a drop of 20-40% in a day.

Hibiscus which is directly affected by the oil price fell 42% to 41sen. This looks like an attractive price but I think I better wait for the dust to settle first before deciding to average down.

Oil price might continue to drop but should not be depressed for too long.

My portfolio has shrunk in value significantly. Even though I sensed that market will not be good in near term, I still decided to keep those stocks and only have myself to blame.

If not because of those stocks sold last month, my loss will be much more year-to-date.

Investors with lots of cash must be very happy as this is a golden opportunity to buy shares at great discount.

Currently my cash:stock ratio is about equal, but I need to be more cautious before buying any shares.

Anyway, if you're suffering temporary loss, it's quite "normal" and don't be too depressed. History has repeatedly shown that after a bear market, bull market will follow.

Budget 2016 Highlights

MALAYSIA BUDGET 2016 Highlights

Budget allocation

• 2016 budget allocates total RM267.2 billion, an increase from a revised allocation of 260.7 billion for 2015. The initial allocation for 2015 was 273.9 billion.
• For 2016, federal government revenue collection is projected at RM225.7 billion, up RM3.2 billion from 2015.
• The first priority of Budget 2016 is to spur domestic investment to contribute 26.7% to the GDP in 2016.
• The Budget aims to increase private investment to RM218.6bil and public investment to RM112.2mil.
• Subsidy allocations seen falling slightly to RM26.1 billion from RM26.2 billion this year. 

Taxes

• Income tax increased from 25% to 26% for people earning between RM600,000 and RM1 million. Increased to 28% for those earning above RM1 million. 
• Income tax relief for each child below 18 years of age is increased to RM2,000 from RM1,000 from year of assessment 2016.
• Tax relief for individual taxpayers whose spouse has no income is increased to RM4,000 from RM3,000.
• Children supporting their parents, even if not living together with their parents, to get tax relief of RM1500 (for the mother) and RM1,500 (for the father), if the parents are above 60 years of age.
• Parents of disabled children get RM6,000 tax relief and another RM14,000 if their child furthers his or her studies.
• Tax exemption of RM8,000 instead of RM6,000 is also set aside for every child above 18 years of age in an education institution, both local and overseas.
• GST to increase government revenue by RM39 billion, versus RM27 billion in the first eight months of 2015. Some basic goods to be zero-rated, including over-the-counter drugs, baby milk, nuts based food, noodles.
• The GST sum is to be credited into value of prepaid reloads from Jan 1 next year.
• All domestic economy class flights will be exempted from GST for rural folk.

Expenditure

• RM41.3 billion allocated to improve education.
• Defence Ministry allocated RM17.1 billion.
• Allocation of RM30.1 billion for development projects, RM5.2 billion for security, social development gets RM13.1 billion.
• Majlis Amanah Rakyat, an agency to facilitate the development of ethnic Malays and other indigenous Malaysians, allocated RM3.7 billion.
• RM100 million is to be provided by Communications & Multimedia Ministry for eRezeki, eUsahawan programmes which is expected to benefit some 100,000 people.
• RM360mil is proposed to improve National Service, with RM160mil allocated for non-governmental organisations.
• TEKUN to provide RM600mil + RM500mil for Bumiputras and RM100mil for Indian entrepreneurs.
• RM90mil is allocated as micro-credit loans for small traders and Chinese entrepreneurs.
• RM300mil is proposed to improve the welfare and development of the Orang Asli community. RM45mil is also set aside to assist with extra food, pocket money and school transport fees for the Orang Asli community.
• RM930mil is allocated to the Youth and Sports Ministry, with RM145mil set aside for training athletes.

Subsidies and handouts

• Spending allocation for Bantuan Rakyat 1Malaysia (BR1M), a programme providing cash assistance for low income households, will be raised to RM5.9 billion in 2016, up from an estimated RM4.9 billion in 2015.
• The Government will allocate a BR1M payout of RM400 to unmarried persons above 21 with incomes below RM2,000. 
• A BR1M payout of RM1,050 (for those with incomes below RM1,000), RM1,000 (for those with incomes below RM3,000), RM800 (for those with incomes below RM4,000).
• From Jan 2016, RM100 will be given in schooling aid to students from households with a monthly income of RM3,000 and below.
• RM250 1Malaysia book vouchers will be available for 1.2mil students.
• A payment of RM500 for all civil servants and RM250 is allocated for Government retirees to help with cost of living.

Development

• Affordable housing projects allocated RM1.6 billion, to be spent building 175,000 houses.
• RM28 billion is allocated for new MRT projects.
• RM900 million allocated to resolve Kuala Lumpur traffic congestion.
• Telecommunications infrastructure allocated RM1.2 billion.
• RM1.4 billion earmarked for development of rural roads nationwide.
• Pan-Borneo highway to be toll free when completed in 2021.
• Government to improve infrastructure in rural areas, including building houses and water supply.
• RM5.3 billion allocated to modernize agricultural sector.
• RM515 million allocated to improve electricity supply in Sabah state.
• RM200mil will be allocated to improve roads in Felda settlements.
• RM1.2bil is allocated to improve Internet speeds, from 5mbps to 20mbps.
• RM67mil is allocated for bus operation routes outside the city.

Tourism

• Government allocates RM1.2 billion to the tourism industry.
• Tourism is expected to contribute RM103bil to the economy. 
• E-Visa for seven countries (China, India, Myanmar, Nepal, Sri Lanka, United States and Canada) to be launched in mid-2016.

Oil project

• Pengerang oil project to receive RM18 billion in 2016.

Minimum wage

• Increased from RM900 per month to RM1,000 in peninsular Malaysia, from RM800 to RM920 in East Malaysia, starting from July 2016.
• The minimum starting salary in the civil service is set at RM1,200 a month from July 2016. The move is expected to benefit some 60,000 civil servants.
• From July 2016, the minimum pension rate is set at RM950 a month for pensioners with at least 25 years of service.

Source: The Star & Malaymailonline

2015/2016 Economic Report

MALAYSIA 2015/2016 Economic Report

• Goods and Services Tax (GST) to rake in RM39 billion in 2016 (3.1 percent of GDP) (2015: estimated RM27 billion from April).

• Malaysia's GDP to remain on a steady growth in 2016, to expand between 4.0 percent and 5.0 percent (2015: 4.5-5.5 percent).

• Growth in Malaysian economy to be driven by domestic demand with private expenditure to remain the main anchor.

• Malaysia's fiscal deficit is projected to decline to RM38.8 billion or 3.1 percent of GDP in 2016 (2015: 3.2 percent).

• Federal government revenue collection next year to grow marginally by 1.4 percent to RM225.7 billion, largely due to higher collection of tax revenue.

• Oil-related revenue to drop 14.1 percent in 2016 due to lower global crude oil prices (2015: 19.7 percent).

• The federal government expenditure to increase 1.7 percent to RM265.2 billion in 2016 (2015: RM260.7 billion).

• Of the RM265.2 billion Federal government expenditure, 81.1 percent allocated for operating expenditure while 18.9 percent for development expenditure.

• Operating expenditure in 2016 to increase marginally by 0.9 percent following continuous efforts to rationalise and optimise government spending.

• The development expenditure is expected to rise 5.4 percent next year, of which RM30.3 billion would go to the economic sector.

• The security sector would be provided RM5 billion in 2016 to enhance the capability of the armed forces and police.

• A total of RM1.6 billion would be allocated next year for general administration sector for upgrading of government facilities nationwide.

• Domestic demand is expected to register a growth of 5.5 percent this year driven by private sector spending.

• Private investment to increase 6.7 percent in 2016 with the bulk of investment in the manufacturing and services sectors.

• Private consumption is anticipated to expand 6.4 percent in 2016, benefitting from stable employment prospects and favourable wage growth.

• Public investment to record a higher growth of 2.3 percent in 2016 from 1.6 percent expected this year supported by new projects under the Economic Transformation Programme and 11 Malaysia Plan and the ongoing projects under the 10 Malaysia Plan.

• Services sector is projected to grow 5.4 percent in 2016 and increase its share to 54 percent of GDP from 53.8 percent this year with all sub-sectors continuing to expand.

• Inflation to remain stable at two to three percent in 2016 (2015: 2.0-2.5 percent).

• Nominal GNI per capita to increase 5.6 percent to RM38,438 next year from 4.2 percent anticipated growth to RM36,397 this year.

• Malaysia’s current account to post a surplus in the range of 0.5 percent to 1.5 percent of GNI compared with a surplus of 1.5-2.5 percent expected this year.

• Current account surplus in 2016 to be down more than half to RM11.3 billion from RM23.4 billion this year and RM47.3 billion in 2014.

• Gross exports are expected to rebound 1.4 percent in 2016 from a 0.7 percent contraction this year, supported by higher public investment and capital spending in the manufacturing and services sectors.

• Malaysia’s 2016 external position to remain encouraging in line with better growth prospects for regional and advanced economies, reinforced by steady expansion in the domestic economy.

• The outlook for world trade is projected to improve next year.

• The deficit in the services account next year is expected to improve to RM11.4 billion from RM14.7 billion this year.

• The federal government debt remains within prudent limits, and is well capped at 55 percent to GDP, placing Malaysia among medium-indebted countries.

• Offshore borrowings remained manageable at 1.6 percent of GDP, despite the appreciation of the US dollar.

• Malaysia’s financial system remains strong this year despite heightened challenges, i.e declining commodity prices and weakening ringgit.

• The East Coast Economic Region (ECER) has attracted RM78 billion in investments since its inception in 2007, accounting for 71 percent of the RM110 billion target by 2020.

• Insurance and Takaful Industry performance remains resilient with strong capitalisation and improved profitability.

• Trade surplus is expected to be higher at RM85.3 billion or 7.3 percent of gross domestic product (GDP) in 2015 (2014: RM82.5 billion; 7.5 per cent).

• Government commits to improve and strengthen the Islamic financial market, as part of its strategies to develop and prosper the nation.

• Agriculture to pick up in second half 2015 on higher palm oil, rubber output.

• Asean to set up working committee to enhance financial inclusion.

Source: Bernama, https://www.malaysiakini.com/news/316911