MY Midday Insights | Lower at Midday, KLCI dropped 7.30 points.

Asian regional stock markets opened lower on Monday, with the Hong Kong stock market experiencing a decline of more than 1%.

The trading volume in the morning session was 1.8 billion shares, with a transaction value of 1 billion ringgit.

The FTSE Bursa Malaysia All-Share Index closed at 10,706.85 points, down 40.05 points.

335 stocks rose, 463 stocks fell, 446 stocks remained unchanged, and 1155 stocks had no transactions.

The exchange rate for the ringgit at 12:30 pm is 4.685 ringgit to 1 US dollar.

In August, Malaysia's inflation remained at a low level of 2%, and investment bank economists have different views on the outlook for inflation in staple food such as white rice. Some believe that the risk of domestic food security will increase in the future, but there are also people who believe that the price of white rice has shown signs of decline.

Kennag Investment Bank's chief economist, Wan He Ming, quoted the latest food security update from the World Bank, stating that as of September 11, a total of 19 countries have implemented export bans on 27 types of food, including India's ban on all white rice exports except for Basmati Rice. This has put inflationary pressure on the price of rice in Malaysia.

The ban on India's white rice exports is expected to increase inflationary pressure on rice prices in Malaysia, as the country heavily relies on India for its white rice supply.

In addition to white rice, Wan He Ming pointed out that as Malaysia is entering the transition period of the rainy season, the price of domestic vegetables may increase as a result.

"In addition to the closure of the Black Sea grain transportation route, the El Niño phenomenon, and the rise in crude oil prices, there is a risk of further price increases in Malaysia in the coming months."

Currently, Wan He Ming maintains Malaysia's inflation expectations for this year at 2.9%. Malaysia's inflation was 3.3% last year.

However, Nazmi, an economist at Lianchang International Investment Bank, has a different view on the outlook for rice prices. He believes that whether India will lift the export ban is the key to whether international rice prices can decline, and the Indian Rice Exporters Association seems to bring good news.

"According to the Indian Rice Exporters Association, the country has had adequate rainfall so far, and the autumn harvest is also good, which should improve the supply of white rice. It is expected that the export ban will be lifted in December this year."

Nazmi also pointed out that although the rise in rice prices has been a hot topic among the public in recent weeks, international rice prices have actually slightly declined from the previous 15-year high level.

"Thailand's 5% broken rice fell to $612 per ton (about 2870 ringgit) on September 20, compared to the peak of $648 (about 3038 ringgit) on August 9."

Nevertheless, he added that the aforementioned rice prices are still much higher than the 2022 average of $437 per ton (about 2049 ringgit).

In addition, Nazmi pointed out that the Malaysian government is also intensifying efforts to ensure stable white rice supply and prices, including increasing production for the domestic market, conducting random checks on wholesalers, and limiting rice purchases by retailers.

"Currently, Malaysia has 0.9 million tons of white rice inventory, equivalent to 4 to 5 months of supply."

Nazmi believes that the impact of rising rice prices on Malaysia's overall inflation can be considered negligible, as it only accounts for 1.1% in terms of weight.

"Therefore, we will maintain this year's inflation expectation at 2.8%, with a forecast of 2.5% for next year."

UOB senior economist Wu Meiling believes that inflation for the remaining months of this year will hover around 2%, with an average inflation rate of 2.8% for the whole year. The reason is that the government has promised to maintain most of the subsidies in the second half of the year, there have been no issues with the international supply chain, and the exchange rate of the domestic currency is forecasted to be stable.

However, she estimates that with the increase in crude oil prices surpassing $90 per barrel and the strengthening of the El Nino phenomenon, inflation risks will increase in 2024.

The El Nino phenomenon will have a more significant impact on major crops, especially rice production.

Wu Meiling also stated that the government's plan to rationalize subsidies next year is another important factor increasing the risk of inflation.

Until the government announces the details of rationalizing subsidies and the progressive wage mechanism in the 2024 financial budget, we will maintain the inflation expectation for next year at 2.8%.

Although there is a risk of rising inflation, OPR is expected to remain unchanged at 3% by the Malaysian central bank in the next 12 to 15 months.

We estimate that the Malaysian central bank will not adjust interest rates in the future due to slowing domestic economic growth and weakening global economic prospects.

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

Apple unveiled the iPhone 15 manufactured in India on its global release day this month, and the initial batch of orders has been shipped worldwide. The subsequent orders are expected to continue increasing.

Currently, around 7% of Apple's phones are manufactured in India, although the market share of iPhones manufactured in China is still higher than in India. However, the market share of iPhones manufactured in India is expected to grow continuously in the coming years.

In the future, products from Apple manufactured in India, such as the iPhone 16, will become more common.

Rajiv Chandrasekhar, the Deputy Minister of the Indian Ministry of Technology, said earlier this month that India is aiming to expand its electronics industry to $300 billion (approximately 1.41 trillion Malaysian Ringgit) by 2026.

Earlier rumors suggested that the Indian-made iPhone 15 is exclusively for the Chinese market, but Apple has denied this and stated that it is randomly processing orders from different batches.

In any case, Apple's move to manufacturing centers in India has caused some backlash in China. Comments on Chinese social media suggest that people are boycotting the "Made in India iPhone 15", expressing dissatisfaction with Apple's ongoing expansion of production in India.

There is even a public opinion that "Apple sending manufacturers to India is related to its political intentions of reducing dependence on China and diversifying the supply chain, rather than the result of competition in the Indian manufacturing market." Some people suggest that consumers should send a clear signal to Apple through returning products, saying "Don't cause trouble for us."

However, iPhone 15 still sparked a buying frenzy when it went on sale in China last Friday.

Evergrande recently announced that its sales performance was not as expected. Based on the current situation and consultations with its advisors and creditors, it believes it is necessary to reconsider the proposed restructuring terms to match the company's actual situation and the demands of the creditors. As a result, the meeting with bondholders scheduled for this week has been cancelled.

The company also stated that, as its main subsidiary, Evergrande Real Estate Group Co., Ltd., is under investigation, the company does not meet the regulations of the China Securities Regulatory Commission and the National Development and Reform Commission regarding the issuance of new notes, and does not qualify to issue new notes as proposed in the planned overseas debt restructuring.

This means that the implementation of the restructuring plan proposed in March by the company will face obstacles. The plan includes issuing new notes to replace old debt.

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

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

China Evergrande suffers its biggest intraday drop of nearly 24%.

Recently, the Chinese police arrested some employees of Evergrande's wealth management company, leading the company to face the possibility of criminal charges.