Latest news with #CIMBSecuritiesSdnBhd
New Straits Times
4 days ago
- Business
- New Straits Times
Mandatory EPF contributions for foreign workers may pressure margins, says CIMB
KUALA LUMPUR: The upcoming implementation of mandatory Employees Provident Fund (EPF) contributions for foreign workers starting October 2025 is expected to have a mildly negative impact on corporate earnings, particularly in labour-intensive sectors such as plantation, manufacturing, construction, and property, according to CIMB Securities Sdn Bhd. "We view the mandatory 2 per cent EPF contribution for foreign workers by employers as mildly negative for corporate earnings. This could weigh on profit margins, particularly for companies that are highly dependent on foreign labour and operate in price-sensitive markets where cost pass-through is limited. "The initial EPF contribution rate is relatively low, and, based on our preliminary estimates, should have a moderate impact on near-term profitability," the firm said. CIMB anticipates that the impact of higher labour costs, coupled with the recent Sales and Service Tax expansion, will begin to reflect in second-half 2025 (2H25) financial results, with a full-year impact becoming clearer in 2026. In response, affected companies are expected to pursue productivity improvements and automation to reduce reliance on manual labour. The EPF has confirmed that, from October 2025 onwards, both employers and their foreign employees will be required to contribute 2 per cent each of monthly wages to the EPF. This measure, announced during Budget 2025, applies to all foreign workers with valid passports and work permits, excluding domestic helpers. Previously, contributions were voluntary. Under the new policy, foreign workers may withdraw their savings upon the expiry of their work permits and employment. The EPF is also working on an integrated registration mechanism with federal agencies, including the Immigration Department, to automate worker enrolment and verify non-citizen bank accounts. The move is intended to bridge the social protection gap between local and foreign workers, improve labour standards, and promote fairer employment practices.
Malaysian Reserve
23-06-2025
- Business
- Malaysian Reserve
Bank credit costs seen rising on SME strain
CREDIT costs in the Malaysian banking sector are expected to edge higher as economic growth slows and risks mount within the small and medium enterprise (SME) segment. CIMB Securities Sdn Bhd, in its latest report on historical asset quality trends, is maintaining a 'Neutral' stance on the sector despite forecasting mild deterioration in credit metrics. 'We have reviewed our sector credit cost projections, taking into consideration the potential impact of slower growth on the SME segment and historical trends. Our assumptions indicate that sector credit costs may rise by 12 basis points (bps) on account of a possible change in probability of default assumption for the SME segment. 'However, as this is in line with our earlier assumed 15bps increase in credit costs, we are maintaining our forecasts and 'Neutral' rating,' it noted. The research house said that the SME portfolio remains under scrutiny. 'The initial segment that may face some risk is likely to be the SME segment, which currently accounts for 16.5% of total loans on average for the banks under our coverage,' it stated. 'Assuming probability of default (PD) is raised to 6% from 4.5% for the SME segment, while loss given default is maintained at 50%, this implies that the estimated credit loss (ECL) may need to be raised by 75bps for the SME segment in a slowing growth cycle. On overall basis, this translates to a 12bps increase in sector credit costs,' it explained. CIMB Securities noted that credit costs historically trend in tandem with macroeconomic cycles. 'During a normal economic cycle, credit costs usually range from 20bps to 30bps, while a good economic cycle typically leads to benign credit costs of 10bps-20bps. In a slower growth cycle, credit costs tend to climb higher than 30bps, towards the 40bps-50bps range.' The 2020 pandemic-driven recession provides a stark example. 'The most recent recession during the 2020 Covid-19 pandemic caused a significant jump in credit costs to 79bps in 2020, coinciding with a 5.5% year-on-year (YoY) decline in GDP and an 8.6% YoY drop in exports. Prior to that, during the 2008 recession, credit costs peaked at 70bps as GDP declined by 1.5% YoY and exports contracted by 10.9% YoY.' While direct trade-related loans remain low, secondary risks are a concern. 'Exports-related loans are insignificant, accounting for 1%-4.7% of total loans for banks under our coverage. We reiterate there will likely be a larger impact from secondary spillover effects on trade-related supply chain vendors and suppliers.' CIMB Securities is leaving its forecasts unchanged for now. 'We are maintaining our forecasts for now, as our latest estimate is based on broad assumptions while each bank's portfolio will have a different risk profile.' The firm retains its 'Buy' recommendations on Alliance Bank Malaysia Bhd, Public Bank Bhd and RHB Bank Bhd. 'We maintain our 'Neutral' sector rating, and retain our 'Buy' calls on Alliance Bank, Public Bank and RHB Bank, as dividend yields remain attractive at current levels,' it concluded. — TMR This article first appeared in The Malaysian Reserve weekly print edition
The Sun
20-06-2025
- Automotive
- The Sun
Auto sector to have minimum impact from SST expansion
KUALA LUMPUR: CIMB Securities Sdn Bhd has projected the upcoming Sales and Service Tax (SST) expansion in July 2025 to have a limited direct impact on the automotive sector. In a research note, it said vehicle sales are already subject to a 10 per cent sales tax, while maintenance and repair services incur an 8.0 per cent service tax. 'That said, there may be a slight increase in dealership and showroom rental costs due to the measure, although we believe the impact will be minimal. 'Indirectly, however, weaker consumer sentiment could weigh on new vehicle sales in the second half of 2025 (2H 2025),' it said. The Malaysian Automotive Association (MAA) has reportedly projected a 4.5 per cent year-on-year (y-o-y) decline in total industry volume (TIV) to 780,000 units in 2025, attributing this to demand normalisation and a reduced industry order backlog. CIMB Securities has, however, forecasted a sharper 7.0 per cent y-o-y decline in TIV to 760,000 units, due to potential headwinds from the planned removal of the RON95 petrol subsidy in 2H 2025, which Prime Minister Datuk Seri Anwar Ibrahim has affirmed will proceed as part of the government's subsidy rationalisation. 'Despite this, we expect demand in the sub-RM100,000 segment to remain resilient, supported by national brands and selective entry-level Japanese models. 'We project national brands to retain a dominant 64.5 per cent market share in 2025, with non-national marques accounting for the remaining 35.5 per cent,' it said. CIMB Securities also believed the removal of fuel subsidies could accelerate battery electric vehicle (BEV) adoption. BEV sales nearly doubled y-o-y in 1Q 2025 to 5,394 units from 2,703 units a year ago, with combined BEV and hybrid penetration rising 1.9 percentage points y-o-y to 7.3 per cent. 'With full duty exemptions for imported electric vehicles (EVs) set to expire by end-2025, and the government unlikely to extend it beyond the Dec 31, 2025 deadline, we expect a potential spike in EV demand in 4Q 2025 as buyers rush to benefit from tax savings,' it said. CIMB Securities has maintained its 'Neutral' rating on the sector due to a subdued growth outlook amid intensifying market competition.
The Sun
20-06-2025
- Automotive
- The Sun
Auto sector to have minimum impact from SST
KUALA LUMPUR: CIMB Securities Sdn Bhd has projected the upcoming Sales and Service Tax (SST) expansion in July 2025 to have a limited direct impact on the automotive sector. In a research note, it said vehicle sales are already subject to a 10 per cent sales tax, while maintenance and repair services incur an 8.0 per cent service tax. 'That said, there may be a slight increase in dealership and showroom rental costs due to the measure, although we believe the impact will be minimal. 'Indirectly, however, weaker consumer sentiment could weigh on new vehicle sales in the second half of 2025 (2H 2025),' it said. The Malaysian Automotive Association (MAA) has reportedly projected a 4.5 per cent year-on-year (y-o-y) decline in total industry volume (TIV) to 780,000 units in 2025, attributing this to demand normalisation and a reduced industry order backlog. CIMB Securities has, however, forecasted a sharper 7.0 per cent y-o-y decline in TIV to 760,000 units, due to potential headwinds from the planned removal of the RON95 petrol subsidy in 2H 2025, which Prime Minister Datuk Seri Anwar Ibrahim has affirmed will proceed as part of the government's subsidy rationalisation. 'Despite this, we expect demand in the sub-RM100,000 segment to remain resilient, supported by national brands and selective entry-level Japanese models. 'We project national brands to retain a dominant 64.5 per cent market share in 2025, with non-national marques accounting for the remaining 35.5 per cent,' it said. CIMB Securities also believed the removal of fuel subsidies could accelerate battery electric vehicle (BEV) adoption. BEV sales nearly doubled y-o-y in 1Q 2025 to 5,394 units from 2,703 units a year ago, with combined BEV and hybrid penetration rising 1.9 percentage points y-o-y to 7.3 per cent. 'With full duty exemptions for imported electric vehicles (EVs) set to expire by end-2025, and the government unlikely to extend it beyond the Dec 31, 2025 deadline, we expect a potential spike in EV demand in 4Q 2025 as buyers rush to benefit from tax savings,' it said. CIMB Securities has maintained its 'Neutral' rating on the sector due to a subdued growth outlook amid intensifying market competition.
New Straits Times
20-06-2025
- Automotive
- New Straits Times
Tax expansion poses limited direct impact on auto sector
KUALA LUMPUR: The upcoming expansion of the service tax scope, effective next month, will have a limited direct impact on Malaysia's automotive sector, according to CIMB Securities Sdn Bhd. The firm said this is because vehicle sales are already subject to a 10 per cent sales tax, while maintenance and repair services incur an eight per cent service tax. "That said, there may be a slight increase in dealership and showroom rental costs due to the measure, although we believe the impact will be minimal. "Indirectly, however, weaker consumer sentiment could weigh on new vehicle sales in the second half of 2025 (2H25)," it added. CIMB Securities also highlighted that the Malaysian Automotive Association has forecast a 4.5 per cent year-on-year (YoY) decline in total industry volume (TIV) to 780,000 units in 2025. This is attributed to demand normalisation and a reduced industry order backlog. The firm said MAA also flagged global economic uncertainty, exacerbated by US-China trade tensions, as a risk to Malaysia's economic outlook. In addition, the government has postponed the implementation of the revised open market value (OMV) calculation from January 2025 to January 2026. CIMB Securities views this delay as a short-term positive for the sector, as the new OMV formula could raise the average selling price of locally assembled vehicles by 10–30 per cent, based on MAA estimates. The firm also expects a sharper seven per cent YoY decline in TIV to 760,000 units, mainly due to potential headwinds such as the planned removal of the RON95 petrol subsidy in 2H25. "Despite this, we expect demand in the sub-RM100,000 segment to remain resilient, supported by national brands and selected entry-level Japanese models. "The government's plan, outlined in Budget 2025, to retain subsidies for at least 85 per cent of RON95 users should help cushion the impact and support affordability in the mass-market segment. "Consequently, we project national brands to retain a dominant 64.5 per cent market share in 2025, with non-national marques accounting for the remaining 35.5 per cent," it said. Furthermore, CIMB Securities believes the removal of fuel subsidies could further accelerate battery electric vehicle adoption. The firm also expects a potential spike in electric vehicle (EV) demand in the fourth quarter of 2025 as buyers rush to benefit from tax savings. Full duty exemptions for imported EVs are set to expire by the end of 2025, and the government is unlikely to extend them beyond the December 31, 2025 deadline. "Within our coverage, Sime Darby Bhd is well-positioned to ride this wave, supported by its expanding EV line-up across brands like BMW, Mini, Porsche, BYD, and Volvo," it said. Overall, CIMB Securities has maintained a "Neutral" rating on the auto sector due to a subdued growth outlook amid intensifying market competition. It noted that Sime Darby remains its top sector pick, supported by earnings recovery in the Australian mining sector, a broad EV portfolio, its stake in Malaysia's auto market leader Perodua, and the potential monetisation of non-core and land bank assets. Moving forward, the firm said key catalysts for the sector include the strengthening of the ringgit against the US dollar and Japanese yen, a reduction in interest rates, and favourable government policies aimed at reviving domestic demand. Key downside risks to its call include depreciation of the ringgit, interest rate hikes, and weaker consumer sentiment stemming from the potential subsidy rationalisation programme and new taxes.
