CAPEX RECOVERY BY PLCS TO CONTINUE IN TANDEM WITH ECONOMIC IMPROVEMENT - SC

KUALA LUMPUR, March 27 (Bernama) -- The Securities Commission (SC) expects the recovery in capital expenditure (capex) by public-listed companies (PLCs) to continue in tandem with the improvement in the economy post-pandemic.

This will increase their importance in driving investment activities and further underpin the productive capacity of the economy.

The SC said Malaysia’s PLCs showed tentative recovery in capex in 2021, in contrast to the trend seen among Micro, Small and Medium Enterprises (MSMEs).

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"This reversed the trend seen before the pandemic, where total PLCs’ capex growth historically trailed that of total investment in the economy.

"It is worth noting that capex by PLCs is about 20 per cent the size of total investment in the economy, of which 70 per cent are from PLCs in the FTSE Bursa Malaysia KLCI (FBM KLCI) constituents," the SC said in its Annual Report 2022 released today.

It said the FBM KLCI PLCs demonstrated a stronger capex growth performance of 8.2 per cent in 2021, outperforming their pre-pandemic trend and the rest of the economy.

The recovery in FBM KLCI PLCs’ capex growth was led by the utilities and telecommunication sectors, comprising 47 per cent of FBM KLCI PLCs’ capex and 19 per cent of FBM KLCI market capitalisation.

Meanwhile, the capex growth by non-FBM KLCI PLCs was relatively slower at 2.3 per cent, although overall growth remained faster than the 0.5 per cent expansion for the total investment.

Among the non-FBM KLCI PLCs, the growth in capex was led by the technology, telecommunication and healthcare sectors, which accounted for a combined 21 per cent of non-FBM KLCI PLCs’ capex and 23 per cent of non-FBM KLCI market capitalisation.

The SC said as the Malaysian economy recovers from the pandemic, the momentum in private sector investment, however, has remained relatively subdued. Unlike in past economic crises, private investment growth continued to trail that of real gross domestic product (GDP).

"While this can be attributed to the general increase in macroeconomic uncertainty affecting overall business sentiments, it also partly reflects the uneven and acute impact of the pandemic on Malaysian businesses, especially on smaller firms and contact-intensive industries," it noted.

The SC said 2021 marked the second consecutive year in which MSMEs' GDP growth lagged that of the Malaysian economy and the first time since 2003 that its growth trailed that of the overall economy.

The GDP of MSMEs grew by 1.0 per cent year-on-year (y-o-y) in 2021, while the overall economy expanded by 3.1 per cent. (non-MSMEs: 4.4 per cent y-o-y).

"The continued rise in input costs, alongside ongoing supply-chain imbalances, also made the operating environment increasingly challenging and has likely affected the overall capacity of MSMEs to undertake meaningful expansion in capital expenditure.”

Thus, the SC stressed that the recovery of MSMEs will be key to unlocking a more robust and broad-based revival in private sector investment.

-- BERNAMA