This Week’s Top Headlines

i) Apple joins in on the virtual reality (VR) craze as it reveals its Vision Pro headset. Retailing early next year at a starting price of $3,499, it is over three times more expensive than Meta’s Quest Pro at $999. Critics argue that the steep price may not justify the benefits it offers.

ii) The US Federal Reserve is expected to pause interest rate hikes for the first time in over a year during its June 14 meeting, according to a poll of 86 economists by Reuters. More than a third expect at least one more rate hike this year as inflation remains resilient.

iii) Foreign investors are on a selling spree in the Malaysian equity market. 16 out of 22 weeks this year have seen foreign funds exit local stocks, with a total outflow of -RM2.96 billion. Notable bank stocks such as Public Bank and RHB Bank have experienced a decline of 6-8% in the past two months.

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Apple’s Vision Pro will set you back by $3,499

On Monday (5 June), Apple revealed its new costly virtual reality headset, entering into a market dominated by Meta.

It is widely considered as the riskiest bet since the tech giant introduced the iPhone more than a decade ago.

The Vision Pro headset will retail at $3,499 early next year, more than three times the cost of the priciest headset in Meta's line of mixed and virtual reality devices.

Apple placed significant emphasis on the groundbreaking augmented reality functionalities offered by the headset, as well as the sports and entertainment partnerships it would offer. The tech giant also disclosed the utilization of an advanced chip named R1, which guarantees lightning-fast processing of sensor data.

Here are some of Vision Pro’s top features:

• Allows wearers look "through" the headset via an array of external cameras.

• See things through windows and video screens floating in the world around you.

• Utilizes the same M2 chip as Apple's Mac computer line.

• Twin displays will collectively feature 23 million pixels.

• Hand and gesture-based navigation with no physical controller required.

• Battery will last for about two hours, but indefinitely when plugged in.

The announcements had failed to excite Wall Street and many retailers, as the price is simply too steep for commoners to afford. I, for one, stand with the majority on this.

Here’s what $3,499 (RM16,095) means in Malaysia:

• 7.3 months of fresh grad salary (RM2.2k/mo)

• 15 months of mortgage payment (principal RM200k)

• 8 months rent in a lavish, fully furnished condo

• Downpayment + 26 months instalment for a new Perodua Axia

• 32 nights stay in Shangri-La KL

• Hilton Dinner Buffet for 80 people

• A full semester in Taylor’s University

• 320 days worth of meals (RM50/day)

• A decent laptop, smartphone, and television

• 24 years of Premium Netflix subscription (RM55/mo)

• One week vacation for 2 in Japan (flights included)

• 160 hours of full body massage

Ultimately, the decision on how to spend your money is entirely yours.

But frankly speaking, no one cares about that $3,499 headset or $10,000 Gucci bag for more than 2 minutes. It is our desire for social recognition that drives us to overspend on things that we don’t really need.

Opt for cheaper alternatives that will truly bring value to you, instead of how you want others to think of you.

Do what makes you genuinely happy, not social media happy

Fed seen to “skip” rate hike in June

The Federal Reserve will not raise interest rates during its upcoming meeting on Wednesday (June 14), according to 90% of the 86 economists polled by Reuters.

However, more than a third expect the Fed to go with at least one more rate hike this year as inflation, which came in at 4.9% in April, remained well above the central bank’s target goal of 2%.

The purpose of "holding off” rate hikes is to give policymakers time to assess the impact of the previous rate hikes on the economy and inflation.

This will be the first pause in well over a year after a historically aggressive tightening of 500 basis points from the Fed.

Data from CME Group shows that investors are in line with Reuters’s poll, as 70.1% of them expect the Fed to pause rate hikes.

Despite the slowing pace of the Fed’s rate hikes, the ringgit has continued to slump against the dollar.

After a brief retracement to RM4.575 last week, the local note resumed its downtrend against the dollar, weakening by almost 1% to RM4.611 on Friday’s close.

Chief economist of Bank Mualamat Malaysia Mohd Afzanizam Abdul Rashid said that investors were reluctant to take positions ahead of the US Federal Reserve's policy meeting.

The central banks of Australia and Canada have also unexpectedly raised interest rates this week, resulting in the local note falling against other major currencies.

"Against such a backdrop, the ringgit has been softening against the major currencies,” he told Bernama on Thursday.

The Malaysian market is down over 4% in the past 60 days

The recent selloff in the Bursa market saw notable banks such as Public Bank and RHB Bank shedding over 6-8% in the past 2 months.

Maybank IB said that the banking industry experienced a contraction in net interest margins (NIMs), indicating intense competition for deposits and a rise in operating expenses.

This trend accelerated following the reopening of the economy.

*Net interest margin (NIM) is an indicator of a bank’s profitability and growth. It reveals the amount of money that a bank is earning in interest on loans compared to the amount it is paying in interest on deposits.

Foreign investors are the largest net sellers in the Bursa market this year

According to the June fund flow report by MIDF, every trading day last week was a net selling day by the foreigners, with Wednesday seeing the heaviest net selling, at -RM199.3 million.

This trend has persisted for seven consecutive weeks, resulting in a cumulative net outflow of -RM506.5 million.

Taking a broader view, foreign investors have been net sellers for 16 out of the 22 weeks so far this year, with a total net outflow of -RM2.96 billion.

Are foreign funds abandoning Malaysia?

With the entire 2023 being a "dumping" year for foreign investors, their current holdings in Malaysian equities have slumped to the lowest point since the 2008 financial crisis.

This is also another reason for the ringgit’s weakness, as confidence from foreign investors have declined.

Local institutions have also contributed to the downward pressure.

MIDF Research's fund flow report shows that Maybank and CIMB were the top two stocks with the highest weekly outflows from local funds.

Only local retail investors remained as net buyers, marking the second consecutive week of net buying after last week's net buying of RM133.6 million. Except for Friday, every trading day saw buying activity from local investors.

Public Bank stands out as the top pick for retail investors. Throughout the week, they acquired over RM104.3 million worth of shares in Public Bank.

Despite the market weakness, MIDF Research has maintained a positive outlook on banks.

The firm emphasized that banks' asset quality remains manageable, which should negate the setbacks in the second half of 2023.

MIDF Research has listed Maybank and Hong Leong Bank as its top picks, with target prices of RM9.28 and RM24.91, respectively.

Hong Leong Investment Bank (HLIB) Research shares a similar optimism on the banking sector.

They find banks attractive based on their inexpensive valuations, appealing yields, and the recent slump in the ringgit.

The firm anticipates an 8.8% compounded annual growth rate in sector profit from 2022 to 2024, and has maintained buy calls for Public Bank, CIMB, RHB, AMMB, Alliance Bank, and Bank Islam Malaysia.

That’s all for this week’s newsletter!

*This issue was written at 10.15 AM on 11th June 2023 and completed at 3.30 PM the same day. To get early access to our newsletter, be our patron for as little as $1/month!

DISCLAIMER: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.