MY MIDDAY INSIGHTS | LOWER AT MIDDAY, KLCI DROP 7.30 POINTS

The Asian regional stock market generally declined in early trading on Monday, with the Hong Kong stock market falling by more than 1%.

The turnover for the first half of the day was 1.8 billion shares, with a transaction value of RM1 billion.

The FTSE Malaysia All Stock Index closed at 10706.85 points, down 40.05 points.

There were 335 rising stocks, 463 falling stocks, 446 had no ups or downs, and 1,155 were not traded.

As of 12:30 noon, the exchange rate of ringgit was 4.685 ringgit to 1 US dollar.

Inflation in Malaysia remained at a low level of 2% in August, yet investment bank economists have different opinions about the price prospects of rice and other food prices where inflation is still high. Some believe that the risk of food security in the country will increase in the future, but others believe that the price of white rice is already showing signs of falling.

Wan Heming, head of economic research at Kennager Investment Bank, quoted the World Bank's latest food safety update report, saying that as of September 11, there are 19 countries around the world that have imposed export bans on 27 types of food, including India banning exports of all white rice other than Basmati Rice (Basmati Rice), putting inflationary pressure on the price of Malaysian rice.

“India's ban on exports of white rice is expected to increase inflationary pressure on rice prices in Malaysia because the country's white rice supply is very dependent on India.”

In addition to white rice, Wan Heming pointed out that since China is entering the transition period of the rainy season, domestic vegetable prices may rise as a result.

“Coupled with the closure of food transportation routes in the Black Sea, the El Niño phenomenon, and higher crude oil prices, there is a risk that prices in Malaysia will rise further in the coming months.”

Currently, Wan Heming has maintained Malaysia's inflation forecast at 2.9% this year. Inflation in Malaysia was 3.3% last year.

Nazmi, an economist at Lianchang International Investment Bank, has a different idea about the future of rice prices. He said that whether India will be exposed to the export ban is the key to whether international rice prices can drop, and the Indian White Rice Exporters Association seems to have brought good news.

“According to the Indian White Rice Exporters Association, the country has had an adequate amount of rain so far, and at the same time has a good harvest in the fall, which should improve the supply of white rice, and it is hoped that the export ban will be lifted in December this year.”

Nazmi also said that although the rise in rice prices has become a hot topic for the public over the past few weeks, in fact, international rice prices have declined slightly from a new high level of 15 years ago.

“5% of crushed rice in Thailand fell to US$612 (about RM2,870) per ton on September 20, and peaked at US$648 (about RM3038) on August 9.”

In any case, he added, the price of rice mentioned above is still far higher than the 2022 average of US$437 per tonne (about RM2,049).

Furthermore, Nazmi pointed out that the Malaysian government is also stepping up efforts to ensure the stability of the supply and price of white rice, including increasing production in the domestic market, randomly inspecting wholesalers, and restricting merchants from buying white rice.

“Currently, Malaysia has 900,000 tons of white rice in stock, which is equivalent to a supply of 4 to 5 months.”

Nazmi believes that the impact of rising rice prices on Malaysia's overall inflation is negligible; after all, it only accounts for 1.1% of the weight.

“As a result, we have maintained our inflation forecast for this year at 2.8% and next year's forecast at 2.5%.

Wu Meiling, a senior economist at UOB, believes that inflation for the remaining months of this year should hover around 2%, and the average annual inflation is expected to be 2.8%. The reason is that the government promised to maintain most of the subsidies in the second half of the year. There were no problems with the international supply chain, and at the same time, the domestic currency exchange rate forecast was stable.

However, she estimates that the risk of inflation will increase in 2024 as crude oil rises above the level of 90 US dollars per barrel (about RM422) and the El Niño phenomenon intensifies.

“The El Niño phenomenon has had more significant consequences for the production of staple foods, particularly white rice.”

Ng Meiling also said that her government plans to rationalize the subsidy policy next year, which is also an important factor in increasing the risk of inflation.

“We will maintain our inflation forecast for next year at 2.8% until the government passes the 2024 budget and announces details on the rationalization of subsidies and the progressive wage mechanism.”

Although there is a risk that inflation will rise, Wan Heming pointed out that the National Bank of Malaysia is expected to keep the overnight policy interest rate (OPR) unchanged at 3% for the next 12 to 15 months.

“We estimate that the Bank of Malaysia will not adjust interest rates in the future. The reason is that the domestic economic growth momentum is slowing down, and the global economic outlook is weakening.”

Currently, Apple is already producing iPhones in India and plans to start manufacturing AirPods next year.

For the first time, Apple released the Indian-made iPhone 15 on the global launch day of this month, and the first batch of orders has already been shipped, and this order will continue to increase in the future.

Currently, about 7% of Apple's phones are manufactured in India. Although the market share of iPhone series phones made in China is still higher than India, the market share made in India is expected to continue to grow over the next few years.

And Apple products made in India, such as the iPhone 16, will become more and more common.

India's Deputy Minister of Technology Rajiv Jandrasekha said earlier this month that India is seeking to expand its electronics industry to 300 billion US dollars (about RM1.41 trillion) by 2026.

Earlier, there was a rumor that the iPhone 15 is made in India and is exclusively for the Chinese market. Apple has already refuted this rumor, adding that it randomly processes orders in different batches.

Regardless, did Apple shift its manufacturing center to India or did it cause some backlash in China. It appeared on the Chinese Internet: “I wouldn't buy the first batch assembled in India.” This kind of boycott of the “Made in India iPhone 15” mainly used this to express dissatisfaction with the continued expansion of the production scale of Apple products in India.

There is even public opinion that “Apple's sending producers to India is related to the political intention of de-Chinization, and is related to the decentralization of the supply chain, not the result of competition in the Indian production market,” and “This is blocking the lives of our compatriots, so why can't consumers give it a clear signal through returns, don't block me.”

However, when the iPhone 15 went on sale in China last Friday, it still set off a rush to buy.

China Evergrande recently announced that the sales situation was not as good as expected. Based on the current situation and negotiations with its advisors and creditors, it was felt necessary to re-examine the terms of the proposed restructuring to match the company's objective situation and creditors' demands, so it cancelled the relevant creditor meeting originally scheduled to be held this week.

The company also stated that since the main subsidiary Evergrande Real Estate Group Co., Ltd. is being investigated, the company did not meet the regulations of the China Securities Regulatory Commission and the National Development and Reform Commission relating to the issuance of new notes, and was unable to meet the eligibility to issue new notes in the proposed overseas debt restructuring plan.

This means that the implementation of the restructuring plan proposed by the company in March, which includes issuing new notes to replace old debts, is facing resistance.

Evergrande will also face a winding-up hearing in Hong Kong at the end of October.

The latest twists and turns in Evergrande's restructuring have dragged Chinese real estate stocks down. The Bloomberg Industry Research (BI) Chinese Real Estate Index fell by nearly 5.6%, the biggest intraday decline since December 20 last year.

China Evergrande had the biggest intraday drop of nearly 24%.

Recently, the Chinese police arrested some employees of a wealth management company under the Evergrande Group, causing the company to face the development of an incident in the direction of a criminal case.