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Sunday, February 7, 2016

2016 EPF Contribution Rate: 8% or 11%?

Malaysia Prime Minister Dato Seri Najib Abdul Razak announced a re-calibrated budget to be in line with the low crude oil price on the 28th of January 2016. Among the most debated issue from the new budget is the EPF contribution rate, either to go for the 8% or maintaining 11% contribution for the next 22 months.

There is no right or wrong to go for either one as both options have own pros and cons. By opting for 8%, one will have additional 3% to help cushion the rising cost of living, or it can be used for loan repayment or investment; while maintaining 11% will have everything status quo and maintaining the retirement fund availability.

Some argue that by opting 8% will end up paying more tax, but how true this statement is? To me, it depends on how the 3% is use. While I agree that spending the additional 3% on goods will end up paying more tax in the form of GST, I don't totally agree that opting for 8% alone will end up paying more tax. Of course, some might end up paying more income tax because they have yet to fulfill the RM6,000.00 cap of relieve.

I've drawn out the chart, and from the chart I have only include the personal relieve of RM9,000 in the calculation besides the EPF contribution and life insurance relieve. It is obvious for people earning RM2,000 per month (RM24,000 annually) to RM6,000 per month (RM72,000 annually) will be impacted where as people earning more than are paying the exact same amount of tax.

So, after knowing about the difference of income tax payable by opting for eight percent versus eleven percent, which one will you opt for?


Saturday, February 6, 2016

Broker Report: EXTERNAL TRADE - ending 2015 with softer growth

JF Apex Securities Berhad released a research report on Malaysia's export data.


Malaysian export in December 2015 stood at RM68.3 billion, having increased 1.4% year-on-year. In comparison, November's growth was at 6.3%.
The Malaysian's export figure in December was below JF Apex Securities' expectation at 6.2% and the market consensus of 4.9% respectively. The weaker than expected results was due to contraction in export of main products including Refined petroleum products, Liquefied natural gas (LNG), crude petroleum products and palm oil and palm-based products. Other main products such as timber and timber-based products also seen slower export growth in Dec, 15. On a monthly basis, exports rose slightly by 1.0%.


Moderate reading in imports in Dec, 15 of RM60.3 billion, rising 3.2% year-on-year while November was at a 9.1%.

"This result came below our expectation and market consensus of +6.1% and +4.1% respectively," said the research house.

Strong decline in import of capital goods was the main reason for the moderate growth. In comparison to the previous month, imports increased 5.1% due to positive growth in two of its main components.

As such, the country's trade surplus in Dec, 15 was RM8.0 billion, declined on yearly and monthly bases of 10.3% and 22.0% respectively.

E&E products continued uptrend while semiconductor industry in negative growth

The E&E products, which contributed 36.5% of total export, continued its positive growth of 6.4% y-o-y while declining 7.3% m-o-m.

According to Semiconductor Industry Association (SIA), global semiconductor sales were 5.2% y-oy lower in Dec’15 while declining 4.4% m-o-m due to softening demand and strengthened US dollar.
Slower growth in imports on yearly basis

Total imports in Dec’15 recorded a moderate growth of 3.2% y-o-y mainly caused by contraction in its main component, capital goods which declined strongly by 15.2% y-o-y (vs Nov’15: +2.6%) due to the negative growth in transport equipment, industrial and capital goods.

Meanwhile, import of consumption goods increased +37.8% compared to +43.8% in Nov’15. 

Weaker expansion in 2015

Malaysia’s exports posted a slower growth of +1.8% y-o-y compared to +6.8% in 2014 mainly due to the continued slowdown in our main trading partners’ economies including China which posted a weaker PMI data that also lead to softer export of our products.

Furthermore, the export performance also weighed down by lower sales of commodity-based products due to lower prices of crude oil, palm oil and natural rubber.

Similarly, total import in 2015 only inched up by +0.5% y-o-y (vs 2014: +5.4%) owing to decrease in import from main trading partners on the back of weaker domestic demand, after a Goods and Services Tax (GST) took effect on April 1, 2015 as most imported goods are subject to GST.


For Jan’16, we opine that export and import will continue to post moderate growth of 3.0% and 4.3% respectively following softer growth recorded in Dec’15, coupled with shrinking economy growth in our main trading partners especially China after its PMI data skidded to a three-year low point in January’16 and marked the sixth straight month in contraction territory.

Going forward, our trade performance will be supported by higher growth in E&E products and recovery in semiconductor industry. 



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