Bank losses worrisome !

It is imperative for banks to have a better prediction of their losses so that their capital position will be better reflected

IT may seem strange to analyse bank losses at a time when major banks, even the taxpayer-owned ones, are profitable.

Moreover, major economies are also said to be turning around. So why would we be so worried about bank losses?

According the analysts at Barclays, this is related to the bank's risk-weighted assets.

With so much focus on capital and the need to boost capital for the taxpayer-owned banks, it is inevitable that the question on losses would pop up.

That's when the banks accurately forecast the capital required.

However, if they do not have a fairly accurate idea of the losses they may be incurring, they may not be allocating enough capital buffer for it.

Therefore, the analysis on bank losses should be seen in a positive light as it helps to shed information early on the capital position of the bank.

The startling fact is that the banks themselves may not be able to predict their losses with a fair degree of accuracy, said the Telegraph.

UK, European and Asian banks, on average, forecast losses of nearly 30% higher than those they actually faced, the survey by analysts at Barclays found.

According to the report, Lloyds and HSBC predicted a default rate on their lending portfolios more than 50% above what they actually experienced.

Barclays was found to have been too pessimistic, particularly with assets in its investment bank where it forecast a default rate 78% higher than in reality.

“Most of the time banks' PDs (predicted defaults) are lower than forecast, suggesting a degree of conservatism,” the analysts said, as quoted by the Telegraph.

“The forecasting errors' can be massive, which raises questions over both their predictability and hence meaningfulness of the resulting risk weighted assets,'' they said.

It is therefore imperative for banks to have a better prediction of their losses so that their capital position will be better reflected.

Banks' boards of directors are fortifying themselves with new knowledge.

HSBC, the largest British bank, has appointed former director-general of British Security Service, Sir Jonathan Evans, onto its board, with expertise in counter terrorism and cyber threats.

With the accusations of money laundering, these major banks are coughing up a lot of money to engage top guns that can deal with the intricacies of it all.

Before terrorim, it was risk posed by over dabbling in derivatives. Banks engaged armies of risk and compliance oficers

Whether these counterrorism and cyber threat themes really emerge into trends remains to be seen.

A survey by pension fund The Scottish Widow indicated that in 10 years' time, Britons will have to work till 70.

They do not have enough savings to last through, as they are currently caught up in daily living expenses, it was reported in The Guardian.

That sounds chilling but fast becomig a reality soon in many other countries.

Many will start rushing for health and pharmaceutical products to strengthen themselves while others will just struggle on.

Plain Speaking by YAP LENG KUEN

>Columnist Yap Leng Kuen reckons it's easier to think positive.

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UK taxpayer-owned banks take harder hit

Samsung S4 new heir to Galaxy smartphone throne

 The S4 lives up to all the buzz to take over the torch for Samsung's outstanding range
 
WITH over 10 million units sold worldwide since its launch last month, an introduction to the Samsung Galaxy S4 seems somewhat redundant.

So we are going to head straight into discussing whether the latest addition to Samsung’s arsenal of Galaxy devices lives up to all the buzz.

There are two variants of Samsung Galaxy S4, one powered by the 1.9GHz Snapdragon 600 quad-core processor, and the other by Samsung’s Exynos 5 1.6 GHz Octa-core processor (which we find on our shelves here).

Octa-core, on paper, sounds astounding but, in reality, it is somewhat disappointing.

Make no mistake, it is fast: Multi Window and multi-tasking run much better here. But for that much processing power, it is fair to expect the device to run as smooth as butter all the time.

When you fire up the five-inch full HD display, the awe factor goes up.

The Super AMOLED display is stunning and you will soon forget about the cheap-looking and prone-to-grime polycarbonate back plate that covers the removable 2,600mAh battery, microSD slot and micro SIM slot.

We found the new features the Galaxy S4 came with to be rather useful, especially Air Gesture which lets you scroll up and down a web page, change music track, or even answer a call by waving your hand.

You can even wake the device up enough to show you the time and notifications that way.

With Samsung Smart Scroll, we can easily scroll up and down web pages by tilting the device. The only catch is that you can only use both Air Gesture and Samsung Smart Scroll on web pages opened with Internet Browser.

Other features include the S Translator which provides instant translation and Optical Reader which automatically recognises text, a business card or QR code information.

There is also the WatchON which transforms the device into an infra-red remote control for your home entertainment system including your television, set-top box, DVD player and air-conditioner.

Dubbed as the Life Companion, the Galaxy S4 also has an excellent snapper.

One of the best things about the Galaxy S4’s camera is its user-friendliness.

Owing to the camera software borrowed from the Galaxy Camera, swapping in-between the 12 modes onboard is a breeze.

The camera does extraordinarily well in an environment with good lighting, producing pictures with vibrant colours and details.

Otherwise, you’ll get some noisy pictures. However, the HDR mode manages to work very well in managing the tricky lighting scenarios.

Other Ingenious modes like Animated Photo which lets you create animated GIFs without leaving the camera app, and the Dual Camera function which allows simultaneous use of both front and rear cameras, also help make immortalising memories more delightful.

The battery in the Galaxy S4 holds up pretty well especially with the brightness turned down.

A full charge lasts a full day of heavy text messaging, web-browsing, taking pictures and multi-tasking between apps. It can easily last longer with Power Saving Mode turned on.

All in, the Galaxy S4 is an outstanding device despite its shortcomings and occasional stutters. It is undeniably deserving of taking over the S III in carrying the torch for the Galaxy line-up.

By Yeevon Ong lifestyle@thesundaily.com

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Solar wars threaten climate fight

Amidst gloomy news in the deteriorating climate change situation is this bright spark – the cost of solar energy has been going down dramatically.

 THE source of clean and renewable energy is seen as one of the major saviours that could help power the world without emitting greenhouse gases.

The drawback is that solar energy has traditionally been more expensive to use than carbon-intensive coal or oil.

But in recent years solar power has become much cheaper. Energy experts predict that its cost could match that of conventional fuels in the next few years in some areas.

Solar cell prices have been falling, from US$76 (RM235.52) per watt in 1977 to about US$10 (RM30.99) in 1987 and only 74 cents (RM2.29) in 2013. Between 2006 and 2011, Chinese cell prices dropped 80% from US$4.50 (RM13.95) per watt to 90 cents (RM2.79) per watt.

Factors for this include a drop in price of the main raw material polysilicon (due to oversupply), increasing efficiency of solar cells, manufacturing technology improvements, economies of scale and intense competition.

The use of solar energy has shot up as the cost goes down. Global installed capacity jumped by 28.4 gigawatts (one gigawatt is 100,000 megawatts) in 2012 to reach 89.5GW. The 100GW milestone will be crossed some time this year.

All this is good news for the fight against climate change. Now comes the bad news.

The growing global demand has prompted the rise of solar panel manufacturers, and the competition is fierce, with a number of companies facing closure. China’s biggest solar energy company Suntech is in serious trouble.

But China has even bigger problems. The United States government, receiving complaints from US solar panel manufacturers, has slapped high anti-dumping tariffs on Chinese imports.

Now the European Commission also plans tariffs averaging 47% on Chinese solar products which it claims are selling below cost.

China is taking these threats seriously. Premier Li Keqiang in a visit to Europe last week took up the issue with European leaders.

Senior trade officials say China will retaliate. A full-scale trade war is thus imminent.

In a surprise turn of events, Germany and 16 other European countries have told the European Commission they are against its move.

But EC Trade Commissioner Karel De Gucht will apparently still slap on the tariffs provisionally, which is within his power to do.

So the solar wars between China with Europe and the US will likely proceed. This is a real pity, as the commercial interests of the countries are coming in the way of rapid progress in solar energy and the fight against climate change.

The expansion of the solar panel industry in China has played a crucial role in getting prices down, making solar energy more and more competitive, and driving its explosive growth.

Yes, China subsidises and promotes its solar industry. But the US and Europe also provide massive subsidies and supports.

The US has provided its solar companies with loan guarantees, research grants and tax deductions including investment tax credits and accelerated value depreciation.

European countries have given subsidies to consumers using solar energy, and incentives to producers including through the feed-in tariff scheme, in which solar energy providers are paid prices higher than what is charged to electricity users with the price difference being met by governments.

Without the subsidies, the solar industry would not have grown. Trade protectionist measures taken by one against the other, or by all against others, would be a recipe for disaster – for trade, the solar industry and the environment.

Well known solar energy advocate and chairman of Solarcentury Jeremy Leggett uses the following analogy to illustrate the trade war: “A planet faces an asteroid strike. Its inhabitants manufacture rockets with which to head off the threat. But, as the rock nears, they descend into international bickering over who pockets what from rocket-making.”

No one wins in this trade war, because of global solar supply chain, explains Leggett. Solar ingots, the upstream feedstock, are mostly made in Europe and America. The midstream products, cells and modules, are mostly made in China.

If China is hit on the mid-stream products it exports, it could retaliate with tariffs on the upstream products it imports.

For example, in Europe, the tariffs against China would wipe out thousands of jobs because most are not in manufacturing but in the companies that install the modules, regardless of where they are made.

The solution, he adds, is for the leaders of the few countries where most solar panels are manufactured to make a deal that coordinates the subsidies required in the various parts of the solar chain, and which is required for the few years that some countries need to bring the price of solar energy to parity with that of conventional energy.

An apt conclusion is made by Leggett: “The world will have to embrace common security on a bigger scale. Engaging in international competition while clinging to the illusion that markets always work will never solve our common problems of energy insecurity, poor air quality and resource depletion, never mind development. We will keep on maiming industries that can save us.”

Global Trends
By MARTIN KHOR

China calls for peace & stability, patrols in Asian seas legitimate

East meets West: China’s People’s Liberation Army deputy chief of general staff, Lieutenant General Qi Jianguo (right), welcomes US Navy Admiral Samuel Locklear, the commander of US forces in the Pacific region, to a meeting on the sidelines of the 12th International Institute for Strategic Studies Asia Security Summit: The Shangri-La Dialogue, in Singapore on Sunday. Reuters/Edgar Su


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The 12th Shangri-la Dialogue, also known as the Asia-Pacific Security Summit, has concluded in Singapore. China’s representative has insisted that its development is peaceful and poses no threat to the Asia-Pacific region.

Instead of focusing on conflicts, this year’s Shangri-la dialogue has taken the theme of cooperation. That theme was evident in a speech delivered by Lieutenant General Qi Jianguo, deputy chief of general staff of the People’s Liberation Army of China.

Qi Jianguo, Deputy Chief of General Staff, PLA, said, "China will always follow the road of peaceful development and remain committed to peaceful, open, co operative and mutually beneficial development. China’s development and prosperity is a major opportunity rather than a challenge or even a threat to countries in the Asia-Pacific region. China seeks cooperation and mutual benefit, and just its own exclusive development."

Qi also said that China encourages dialogue and consultation to resolve disputes in the region, but it will not waiver in its determination to safeguard national interests.

"China’s hope for sustained peace and stability in this region, and its stress on dialogue and consultation for the sake of peace by no means denotes unconditional compromise. Our resolve and commitment to safeguarding core national interests always stands steadfast."

In 2012, the US officially laid out a strategy of rebalancing its presence in the region. One year on, its relationship with China has become a center of attention at the Dialogue. US Defense Secretary Chuck Hagel said the US welcomes the rise of a powerful and responsible China.

Chuck Hagel, US Defense Secretary, said, "We have interests here too, just as China and Russia and other nations have interests all over the world. We don’t want miscalculations and misunderstandings. The only way you do that is to talk to each other. You got to be direct with each other. You have to share with each other. I think we are on track with that. We’ve made progress on that. I think we’ve made continued progress and we’ll make more progress."

The Shangri-La Dialogue was launched in 2002. It aims to provide a platform for Asia-Pacific military and government officials to foster practical security cooperation in the region. - (Source: CNTV.cn)

Chinese patrols in Asian seas legitimate 

Chinese warships will continue to patrol waters where Beijing has territorial claims, a top general said Sunday, amid simmering rows with neighbouring countries over the South China Sea and islands controlled by Japan.

Lieutenant General Qi Jianguo, deputy chief of the general staff of the People's Liberation Army, defended the patrols as legitimate and said his country's sovereignty over the areas could not be disputed.

"Why are Chinese warships patrolling in East China Sea and South China Sea? I think we are all clear about this," Qi told the annual Shangri-La Dialogue security conference in Singapore.

"Our attitude on East China Sea and South China Sea is that they are in our Chinese sovereignty. We are very clear about that," he said through an interpreter.

"So the Chinese warships and the patrolling activities are totally legitimate and uncontroversial."

Qi was responding to a question from a delegate after giving a speech in which he sought to assure neighbouring countries that China has no hegemonic ambitions.

"China has never taken foreign expansion and military conquering as a state policy," he said.

One delegate however said there appeared to be growing regional scepticism over China's peaceful intentions because it was inconsistent with moves to send naval patrols to waters where other countries also have claims.

China is locked in a territorial dispute with Brunei, Malaysia, the Philippines and Vietnam in the South China Sea.

The four states have partial claims to islands but China says it has sovereign rights to nearly all of the sea, including areas much closer to other countries and thousands of kilometres from the Chinese coast.

China also has a dispute with Japan over the Senkaku islands, which Beijing calls the Diaoyus, in the East China Sea.

"I do hope the statements of the good general today will be translated into action," Philippine Defense Secretary Voltaire Gazmin told reporters.

He said Qi's remarks about China having no hegemonic ambitions were "far from what is happening" in the sea.

Manila last month protested at what it called the "provocative and illegal presence" of a Chinese warship near Second Thomas Shoal, which is occupied by Philippine troops.

Among the other moves that have caused alarm were China's occupation of a shoal near the Philippines' main island last year, and the deployment in March of Chinese naval ships to within 80 kilometres (50 miles) of Malaysia's coast.

Competing claims have for decades made the area -- home to rich fishing grounds and vital global shipping lanes and believed to sit atop vast natural gas deposits -- one of Asia's potential military flashpoints.

China and Vietnam fought in 1974 and 1988 for control of islands in battles that left dozens of soldiers dead.

The US-China strategic rivalry also loomed large during the conference, with US Defense Secretary Chuck Hagel on Saturday accusing Beijing of waging cyber espionage against the United States.

But General Qi on Sunday allayed concerns that China had dropped a pledge not to be the first to use nuclear weapons in a conflict.

Omission of the "no-first-use" pledge in a recent defence white paper had created ripples in military circles and sparked speculation that China may have abandoned the policy.

Qi also distanced his government from claims by some Chinese scholars that the Ryukyu Islands, which include Okinawa, do not belong to Japan.

"This is only an article of particular scholars and their views on these issues... it does not represent the views of the Chinese government," he said.

- Source: AFP France

Exercise for the brain

The therapeutic properties of exercise is well supported by a substantial amount of research.

Recent studies reported that an increase in the time dedicated to physical health-based activities is not associated with a decline in academic performance.

THE benefits of exercise are well publicised. Exercise is associated with a reduction in physical illnesses such as cardiovascular disease, colon and breast cancer, obesity and mental illness (including depression and anxiety disorders) across the adult lifespan.

The National Health and Morbidity Survey 2011 revealed that about 64.3% of Malaysians were physically active. The level of physical activity gradually decreased with increasing age, and this was particularly apparent in senior citizens.

Despite evidence of the importance of exercise, the prevalence of overweight and obese Malaysians was 29.4% and 15.1% respectively based on the World Health Organization (1998) classification.

Although some are aware of the benefits of exercise, there are many who are unaware that exercise has considerable benefits for the brain. This is put aptly by John Ratey, author of A User’s Guide to the Brain.

“Exercise is really for the brain, not the body. It affects mood, vitality, alertness and feelings of well-being.”

There is increasing evidence that exercise can improve learning and memory, delay age-related cognitive decline, reduce risk of neurodegeneration and alleviate depression.

Exercise and brain function

Exercise improves brain function in different ways. It enhances learning and plasticity, is neuroprotective, and is therapeutic and protective against depression

Exercise enhances learning and plasticity, which is the capacity of the brain and nervous system to continuously alter neural pathways and synapses in response to experience or injury.

Although some are aware of the benefits of exercise, there are many who are unaware that exercise has considerable benefits for the brain.

The effects of exercise have been demonstrated in ageing human populations in which sustained exercise has augmented learning and memory, improved executive functions, impeded age-related and disease-related mental decline, and protected against age-related atrophy in parts of the brain areas that are vital for higher cognitive processes.

Physical activity has a positive effect on cognition, which includes every mental process that may be described as an experience of knowing (including perceiving, recognising, conceiving, and reasoning).

There is a significant relationship between physical activity and improved cognition in normal adults as well as those with early signs of Alzheimer’s disease (AD), in which there is mild impairment of memory or cognition.

There is a dose-response relationship between exercise and health-related quality of life, with moderate exercise associated with the best outcomes.

The literature on the effects of exercise on cognition during children’s development is less substantial. However, a meta-analysis by Sibley & Etnier reported a positive correlation between physical activity and cognitive performance in children aged between four and 18 years in eight categories, i.e. perceptual skills, intelligence quotient, achievement, verbal tests, mathematic tests, memory, developmental level/academic readiness and others.

A beneficial relationship was found for all categories, with the exception of memory, which was unrelated to physical activity behaviour, and for all age groups, although it was stronger for children in the ages of four to seven and 11 to 13 years, compared with the ages of eight to 10 and 14 to 18 years.

Recent studies have reported that an increase in the time dedicated to physical health-based activities is not associated with a decline in academic performance.

The literature on the impact of exercise on cognition in young adults is limited, probably because cognition peaks during young adulthood and there is little room for exercise-related improvement at this stage of the lifespan.

Although there is considerable evidence that exercise can facilitate learning in humans and other animals, there are gaps in knowledge regarding the types of learning that are improved with exercise.

Therapeutic exercise programmes after a stroke accelerates functional rehabilitation.

Exercise protects the brain (neuroprotective). It reduces the impact of brain injury and delays the onset and decline in several neurodegenerative diseases. For example, therapeutic exercise programmes after a stroke accelerates functional rehabilitation.

Furthermore, physical activity delays the onset and reduces the risk for AD, Huntington’s disease and Parkinson’s disease, and can even slow functional decline after neurodegeneration has begun.

There is evidence that exercise is therapeutic and protective in depression, which is associated with a decline in cognition.

Depression is considered to be a health burden that is greater than that of ischaemic heart disease, cerebrovascular disease or tuberculosis.

Clinical trials have reported the efficacy of aerobic or resistance training exercise in the treatment of depression in young and older patients, with benefits similar to that of antidepressant medicines. More exercise leads to greater improvements.

Trials have also reported improvement in depressive symptoms in AD compared to those non-exercising individuals whose depressive symptoms worsened.

Bipolar disorders do not appear to respond as well to exercise, but those with anxiety respond even faster.

There is a convergence of the concept that brain health and cognition are influenced by the interplay of various central and peripheral factors. Brain function is believed to be impaired by peripheral risk factors that lead to cognitive decline, including hypertension, hyperglycemia, insulin insensitivity and dyslipidemia, features that are commonly known as the “metabolic syndrome”.

Of these factors, hypertension and glucose intolerance play crucial roles. Exercise not only reduces all these peripheral risk factors but also improves cardiovascular health, lipid–cholesterol balance, energy metabolism, glucose use, insulin sensitivity and inflammation.

As such, exercise improves brain health and function by directly enhancing brain health and cognitive function, and indirectly, by reducing the peripheral risk factors for cognitive decline.

It is believed that exercise initiates an interactive cascade of growth factor signals which lead to the stimulation of plasticity, improvement of cognitive function, reduction of the mechanisms that drive depression, stimulation of neurogenesis and improvement of cerebrovascular perfusion.

Although much is known about the effects of exercise and physical activity on brain and cognition, there are many important questions that are unanswered.

They include questions like the design of exercise interventions which optimise the effects on cognition and brain health; when it is best to begin; what are the best varieties, intensities, frequencies and duration of exercise; is it ever too late to start an exercise programme; and can exercise be used to reduce the effects of neurodegenerative diseases.

Knowing the how

Exercise affects many sites in the nervous system and stimulates the secretion of chemicals like serotonin and dopamine, which make humans feel calm, happy, and euphoric. You do not have to wait for these feelings to occur – you can initiate them by exercising.

There is no shortage of advice on the various physical exercises that enhances cardiovascular health. Prior to embarking on exercise, a consultation with the doctor would be helpful, especially for senior citizens. This will help in choosing the appropriate exercise for one’s individual situation.

In general, what is good for the heart is also good for the brain.

The usual recommended minimum is half an hour of moderate exercise thrice a week. This can be walking, jogging, swimming, playing games, dancing etc.

The public is often reminded about a healthy lifestyle, which is focused on physical health. However, it is also important to exercise mentally and keep the brain healthy.

There are publications and activities available that can help you make a start and continue to improve cognition, memory, creativity and other brain functions.

Anyone at any age can do so, even senior citizens. It is moot to remember the adage: if you don’t use it, you lose it.

Malaysia Festival of the Mind 2013

The ninth Malaysia Festival of the Mind will be held from June 15-16, 2013, at Universiti Tunku Abdul Rahman (UTAR) Perak Campus in Kampar, and June 22-23 at Tunku Abdul Rahman University College (TARC) Main Campus in Setapak, Kuala Lumpur.

It is open to the public from 9.30am - 4.30pm. Talks, workshops, exhibitions and competitions will be held to create awareness about the human mind and its unlimited potential; as well as ways of tapping into and developing one’s brainpower to the fullest.

For further information, visit www.utar.edu.my/mmlm or email mmlm@utar.edu.my or call (03) 7625 0328 (Justin/Sin Yee) or (05) 468 8888 (Wei See/Jamaliah).

By Dr MILTON LUM

> Dr Milton Lum is a member of the board of Medical Defence Malaysia. This article is not intended to replace, dictate or define evaluation by a qualified doctor. The views expressed do not represent that of any organisation the writer is associated with. For further information, e-mail starhealth@thestar.com.my. The information provided is for educational and communication purposes only and it should not be construed as personal medical advice. Information published in this article is not intended to replace, supplant or augment a consultation with a health professional regarding the reader’s own medical care. The Star does not give any warranty on accuracy, completeness, functionality, usefulness or other assurances as to the content appearing in this column. The Star disclaims all responsibility for any losses, damage to property or personal injury suffered directly or indirectly from reliance on such information.

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Malaysian property market sentiment after GE13

With the dust having settled after the 13th General Elections, all eyes are now on the freshly elected government for strategies for the real estate sector.

While other issues such as increasing the minimum purchase price for foreign buyers and reducing lending rates and stamp duties are also on the wish list of most Malaysians, latest figures released by PropertyGuru Group highlighted a continuing call for the government to address the issue of home affordability.

In the latest Property Sentiment Survey (Q2 2013) by the leading online property group, 76% feel that the government is not doing enough to curb the current price increase. This is more acutely felt in regions that have experienced a high foreign demand for residential properties, namely Johor (69%) and Kuala Lumpur (81%).

While 35% out of the total of 851 respondents claim that the outlook of the local property market will remain positive, four in five expect prices to increase further in the next six months.

Respondents also seem to favour stricter market restrictions on property ownership by foreigners, with nearly half supporting an increase in the minimum purchase price from RM500,000 to RM1 million for overseas buyers and investors wanting to buy properties in Penang and Johor.

Despite the growth in price, 74% of respondents intend to buy at least one property type (either residential or commercial) within the next six months, an increase of 10% as compared to the previous quarter. This is because of the perception that the more expensive a property becomes, the higher capital appreciation it will bring in the long term.

“There is a dilemma at play for Malaysians. As they see property prices spiral up, they also see their assets appreciating in value. But in the long term, they are also finding it more challenging to own properties,” Added Value Singapore managing director Raymond Ng says.

“Affordability is also a bigger concern for the younger adult population. There is no doubt that there are enough local funds to fuel the market and allow the government to control prices a bit better without relying on foreign investments. The challenge is finding the sweet spot that will entice locals to invest locally while not turning away all foreign investments.”

The survey was conducted by PropertyGuru Group in collaboration with Added Value-Saffron Hill, a Singapore-based independent professional research agency.

Conducted since 2010, it is the only independent local survey to measure property sentiments and expectations about the property market amongst Malaysians.

It is also carried out across the group’s four key target markets of Singapore, Malaysia, Indonesia and Thailand, attracting 4,062 online respondents aged 21 to 69 who are influencers or decision makers on property.

“The results are consistent with figures from previous quarters where 75% of Malaysians find property to be expensive.

Kho says Malaysians want more affordable homes and are looking to the government to deliver. 

“The message is clear; Malaysians want more affordable homes and are looking to the government to deliver. PR1MA is a step in the right direction, but Malaysians want more measures and existing measures to be expedited, PropertyGuru.com Malaysia country manager Gerard Kho says.

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Right move for the planned car prices reduction 20% ~ 30% in Malaysia 

Car prices in Malaysia will be reduced gradually

Right move for the planned car prices reduction 20% ~ 30% in Malaysia

 

The Government's plan to reduce car prices gradually by between 20% and 30% within the next five years is the best mechanism for consumers and the automotive industry without disrupting the ecosystem, said an industry expert.

“Five years is the right timing to reduce car prices because a sudden reduction would impact the second-hand car industry,” Malaysia Automotive Institute chief executive officer Madani Sahari said.
He said although the car price cut plan had recently received wide publicity, the exercise itself started last year with some popular car brands reducing their car prices by 2% to 5%.

“The Government has had the car price reduction plan in the yet-to-be-announced National Automotive Policy since 2011 and had started to implement it since last year in a silent way,” he said on the sidelines of a forum on “Business Time Insight The National Automotive Policy” here yesterday.

On Tuesday, Prime Minister Datuk Seri Najib Tun Razak reiterated the Government's commitment to gradually reduce car prices by 20% to 30% within the next five years.

Madani said the car price reduction did not involve a cut in the excise duties, as Malaysian companies in reality were only paying about 40% of excise duties, even though it hovered at around 65%-105%, depending on the segment, due to value-added activities undertaken in the country.

“Completely-knocked-down (CKD) cars which are assembled in Malaysia basically have value-added activities, and are therefore receiving the privilege of lower excise duties. “Based on our calculations, most of our CKD cars enjoy excise duties in the range of 40%,” he said. Meanwhile, Volkswagen Group Malaysia managing director Dr Zeno Kerschbaumer said the car price reduction policy showed the Government's effort to put consumers into the focus of their attention.

“This perfectly matches our (Volkswagen's) policy to continuously bring the latest technology to customers at the best price possible. I think it's a big message to consumers and gives them the confidence that the Government was giving the consumers interest in the focus of their policy,” he said.

He said the move was also in line with the principle that the customers had to drive the policy. “We need to leave all our options to the customers, and the customers in the end need to decide what better fits their requirements,” he said. - Bernama

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Car prices in Malaysia will be reduced gradually 

Car prices in Malaysia will be reduced gradually

Car prices will be reduced gradually until 2017, says International Trade and Industry Minister Datuk Seri Mustapa Mohamed.

As outlined in the 13th general election of the Barisan Nasional manifesto, Mustapa said the government had promised to trim car prices between 20 per cent and 30 per cent over five years.

“Infact, since October last year, the price of 10 popular models in the country have come down an average 7.3 per cent,” he told reporters yesterday after attending the ministry’s monthly gathering, the first after Mustapa was re-appointed to the Cabinet.

He said the price reduction was part of the market process as a result of more efficient and competitive players in the automotive industry.

Mustapa said the price reduction exercise should be done in an orderly manner so as not to affect the industry’s growth and existing jobs in the automotive and related industries.

“As such, we have had discussions with automotive manufacturers and they are aware of ongoing negotiations to conclude a free trade agreement which would be implemented soon,” he said.

JF Apex Securities in its research note on Monday said the ruling coalition will likely take some time to implement car price reduction considering the potential outcome which would dampen the national carmaker, Proton’s market share.

The research house said that a feasibility study needed to be done on the overall impact so as to avoid disruptions to the automotive ecosystem.

“We do not foresee changes for months to come while awaiting update from the revised National Automotive Policy,” said JF Apex.

In the meantime, Mustapa said industry players must now be ready to step up their competitiveness edge in tandem with the industry which was becoming more competitive in Malaysia and abroad.

Besides bringing down car prices, the government was also reducing traffic congestion by setting up a more efficient transport system in the country, he added. — Bernama

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