...Maybank IB Research PP16832/01/2013 (031128) Economics & Market Update 2 May 2012 Minimum Wage Labour Day “Gift” Another SRI delivered. PM Najib announced the country’s minimum wage policy on the eve of Labour Day. The National Minimum Wage Policy is part of the Strategic Reform Initiatives (SRI) for Human Capital Development under the Economic Transformation Programme. The minimum wage is set at MYR800-MYR900 per month with some allowances or fixed cash payments allowed to be considered in the calculation for minimum wage. It will be enforced six months from the date the Order is gazetted and will benefit 3.2m private sector workers (26%) out of the 12.3m total employment in the country. Impact on inflation should be gradual. Labour costs account for 9% of total production costs for the whole economy. But with only 26% of workers to benefit from the minimum wage, this group, at most, constitutes only 2.4% of total production cost, we estimate. According to a World Bank study in 2011, Malaysia’s wage growth (2.6% p.a.) was slower than productivity growth (6.7% p.a.), implying the capacity to implement minimum wage without causing excessive inflation rate pressures. We expect a gradual impact on inflation and maintain our inflation rate forecasts of 2.7% for 2012 and 3.3% for 2013. Gradual implementation to help manage the impact. The impact on other macroeconomic variables like employment and investment can only be gauged after some time since this is the first time an economywide...
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...CIMB-Principal Positive on Bonds with New Fund | 24 January 2011 | Kuala Lumpur: CIMB-Principal Asset Management Berhad (“CIMB-Principal”) today launched the CIMB-Principal Strategic Income Bond Fund (“the Fund”), a fund that allows investors to capitalise on Asia, Australia, New Zealand and the Middle East’s improving credit conditions given the high potential of more rating upgrades. Campbell Tupling, Chief Executive of CIMB-Principal Asset Management said, “The demand for high-quality bonds in Asia, Australia, New Zealand and Middle East continues to remain high given the low interest rates outlook in the US and Europe, and this should support bond prices for the next few years. In addition, the slower economic recovery of these developed markets is shifting investment appetite to Asia. Combined with the likelihood of bond rating upgrades, this will mean potential good returns for investors who want to invest in regional high growth prospects in a stable manner.” Post-financial crisis, bonds remain the preferred asset class for more conservative investors because it is less volatile than equities. Asia, for example, remains a sound investment destination with rapid urbanisation, as a younger and higher population growth will necessitate greater infrastructure spending in the coming years. This provides the golden opportunity to profit from the economic power of Asia, Australia, New Zealand and the Middle East. “By taking a three year buy-and-hold strategy, the...
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