Unit Trust in Malaysia

By the Edge

The Securities Commission (SC) is streamlining regulations governing the unit trust industry to enable benchmarking against international standards and enhancement of fund management while spurring the growth of the industry.

Its chairman Datuk Zarinah Anwar said the revised guidelines, to be issued on March 3, would make it easier for fund managers to develop the necessary capabilities to improve their global fund management skills to meet investor expectations for better returns from its investments.

Within the investment management industry, Zarinah said unit trust funds were the largest contributor to assets under management, with the number of funds in operation growing 26% in 2007 to 495, of which some 128 were Islamic funds.

The Malaysian unit trust funds, which hold a 45% share of the local equity market, the largest share among Asean bourses, saw its net asset value (NAV) grow 39% to RM169.4 billion last year, while total investments abroad grew 79% to RM15.16 billion, representing 10% of assets under management.

Speaking at The Edge-Lipper Malaysia Fund Awards 2008 here yesterday, Zarinah said the SC would allow the dissemination to investors of an abbreviated version of an interim report on a fund’s performance.

“We want to make it easier for investors to track their investments. However, the full version of the interim report must still be prepared, made available upon request and posted on the unit trust manager’s websites.”

The revised guidelines include the removal of prescriptive investment restrictions, such as a limit on exposure to options and futures, which would be replaced with prudential limit for investments in derivatives.

“This allows more flexibility to fund managers to transact in derivatives other than for risk management purposes. It would also allow unit trust managers to launch new products that predominantly invest in derivatives,” she said.

To increase domestic fund managers’ competitiveness in the region, Zarinah said SC’s approval for fund managers venturing into foreign markets would be removed on condition that the markets fulfil certain criteria, such as their home regulator being a member of the International Organisation of Securities Commission (IOSCO).

She also said cash borrowing restrictions would be lifted to allow for redemption requests without the need to dispose of assets in a fund’s investment portfolio, which could affect the interest of the remaining unit holders.

Asked on the SC’s move to revise its unit trust regulations, ING Funds Bhd chief executive officer Steve Ong said: “This would help local fund managers to respond better to market needs and market volatility because investments today are moving very fast.”

“As we are looking at different asset classes and investment structures, this move towards relaxing guidelines and restrictions would give fund mangers the option to structure more product solutions for customers.”

On the issue of wholesale funds, the SC would allow cash borrowing for investment purposes as wholesale fund investors were more sophisticated and receptive to higher levels of risk, Zarinah said.

“The relaxation to borrow cash for investments will provide greater flexibility for fund managers to meet investor’s expectations,” she said, adding qualified investors (institutions) for the fund would be expanded, allowing trust asset investors with more than RM10 million to invest in wholesale funds.

SC revises guidelines to boost unit trust industry!

The Great potential of rubber in Malaysia

By Biz Times

MALAYSIA exported RM5.88 billion worth of rubber gloves in 2007, the fifth consecutive year of rising exports, despite challenges of profit erosion from the weakening US dollar and costlier shipping.

Malaysia maintained its position as the world’s biggest rubber glove exporter, churning out some 40 billion pieces last year.

“Last year’s rubber glove exports added another RM430 million to RM5.88 billion,” said Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui.

“This is a very good achievement considering our rubber glovemakers had to contend with the devaluing of the US dollar and costlier freight rates,” he told Business Times.

The rubber industry has been the pillar of Malaysia’s economy since colonial times and continues to contribute to export earnings, employment and income generation.

Spurred by the government’s industrialisation drive in the 1980s, Malaysia became the world ’s No.1 exporter of rubber gloves, catheters and latex thread.

In a separate interview, Malaysian Rubber Glove Manufacturers Association (Margma) president Oon Kim Hung expressed confidence of a reasonably good growth this year despite the impending price hike in natural gas.

Rubber gloves manufacturing is among the heavy users of natural gas.

An increase in natural gas pricing will hit manufacturers twice — once through natural gas and secondly via electricity tariffs — as the power sector is expected to pass through the added costs to industrial consumer s.

Asked how rubber glovemakers will cope with the prospective burden, Oon replied: “We ’ve submitted our appeal to the government to consider that any increase in gas prices be implemented on a staggered basis. ” “Rubber glove prices will go up as raw material and fuel costs escalate. Depending on whether all 48 Margma members are selling forward or via spot contracts, consumers are informed of costlier natural rubber and transportation and freight costs,” he said.

Another challenge lies in the possibility of the slowdown in the US economy having a negative impact on Malaysian exports.

Oon said American hospitals will continue to buy from Malaysia because medical gloves are a necessity.

“Even hospitals in developing countries like China, India and Vietnam are starting to buy our rubber gloves,” Oon said.

*I always believe there is great potential for rubber industry in M'sia with our tropical weather! hehe.. Go Durex! lolx..

Axis-REIT buys warehouses for RM27m

By The Edge

Axis Real Estate Investment Trust (Axis REIT) is acquiring two warehousing properties in Pasir Gudang industrial area for RM27 million in Johor, said its manager Axis REIT Managers Bhd (ARMB).

It is acquiring a single-storey detached factory with ancillary buildings from Oriental Pulse Sdn Bhd for RM12.5 million, and a single-storey warehouse building with a three-storey office plus guard house and ancillary buildings from Niro Ceramic (M) Sdn Bhd for RM14.5 million. Both properties are developed by the Johor State Economic Development Corp.

ARMB said the factory acquired from Oriental Pulse was for Delfi Cocoa (M) Sdn Bhd. Delfi Cocoa, a leading exporter of cocoa related products, had renewed its tenancy for three years from Jan 1 last year at a monthly rental of RM108,864 with an option to renew for two further terms of three years each.

The property has a gross yield of 10.26% and a triple net yield projected at 9.1%. The acquisition is yield accretive at 23 sen per unit.

The second property is a sale and leaseback arrangement with Niro Ceramic (M) Sdn Bhd, which has agreed to lease it for six years at a monthly rental of RM130,000 for the first three years with a step-up in rental on the second three years. It has an option to renew the lease for an additional six years. The property has a gross yield of 10.55% and a triple net yield projected at 9.77%. The yield is 345 sen per unit.

ARMB said it intended to use the funds from the recent fundraising exercise with the placement of the Axis REIT 50 million new units to finance the acquisitions. The proposed debt financing will increase Axis REIT’s gearing ratio but it will still be below 50%.