This article first appeared in Forum, The Edge Malaysia Weekly on October 3, 2022 - October 9, 2022

The record-breaking results of Poh Kong Holdings Bhd is a stunning reflection of the buoyant mood of Malaysians coming out from the pandemic.

The listed jewellery company registered a record profit of RM92.2 million on a turnover of RM1.3 billion for its financial year ended end-July 2021. It is the highest in recent times and grossly exceeded its performance before the pandemic.

Prior to the pandemic in 2018 and 2019, Poh Kong used to generate sales of more than RM1 billion with net profits hovering below RM26 million. The jeweller’s profit rose to RM36 million in 2021, despite its operations being hampered by bouts of strict Movement Control Order (MCO) rules that did not allow its shops to operate.

This year, the bottom line tripled amid a 30% increase in the top line, indicating improved margins.

The rising price of gold, viewed as a safe haven amid the uncertainties during the pandemic, could be one reason Malaysians flocked to shops selling gold.

But is that the only reason? It is highly unlikely.

A more probable cause is that the average household was flush with extra cash, thanks to the slew of incentives that the government whipped out in the last two years. On top of moratoriums on loan repayments, workers were allowed to withdraw their compulsory savings with the Employees Provident Fund (EPF).

Malaysians’ penchant for jewellery is well known. Leading the charge is no less than Datin Seri Rosmah Mansor, the wife of jailed former prime minister Datuk Seri Najib Razak. Her shopping sprees of precious metals and diamonds are well documented in court hearings.

Poh Kong’s record-breaking performance seems to suggest that the rush for gold is something that goes well beyond the rich.

The sheer number of people lining up outside shops selling gold is evidence enough that Malaysians were generally flush with cash even during the pandemic and its aftermath.

A large amount could have come from workers tapping on their savings from the Employees Provident Fund (EPF). The final withdrawal, amounting to RM10,000, was allowed in March this year.

Coincidentally, Poh Kong’s final quarter financial performance — for the months of April to July — was its best compared to other quarters. Whether it has anything to do with the RM10,000 withdrawal is anybody’s guess.

But what it confirms is that Malaysian consumers are generally on a spending spree despite the global economy inching into a recession.

It is not only gold that has seen a huge lift as the economy re-opens with the spate of withdrawals. For locally assembled cars, there is a long waiting list, easily stretching to nine months.

This came about following the exemption on sales tax, which the government extended three times over the last two years during the pandemic. The sales tax exemption of 100% for locally assembled cars and 50% for completely built-up imports finally ended on June 30 this year.

However, the leeway to register these cars stretches up to the end of March next year. This means that consumers can make their bookings and car manufacturers have until March next year to deliver.

Car buyers thronged the showrooms to take advantage of the sales tax exemption, and it was reported that on the last day, June 30, Perodua registered bookings of 25,100 units — its highest for a single day.

Proton has also seen a revival of its fortunes. Although its latest models are more expensive than Perodua, the waiting list is more than three months.

The last time the waiting list for locally assembled cars exceeded six months was in 1996/97. At that time, consumer spending boomed amid a period of high economic growth of 9%. The long waiting period created a demand for “delivery booking slots”.

Proton sales agents made money from merely selling the booking slots to those who wanted earlier delivery. Second-hand Proton cars that were a few months old were sold at about the same price as a new car. It was very unlike the reality of economics where cars are depreciating assets that see their value dropping the most in the first few years.

The long waiting period evaporated quickly as Asian economies were mired in a currency crisis. From July 1997, the ringgit slumped against the US dollar, resulting in shock waves hitting the Malaysian economy.

It extended to a meltdown on Bursa Malaysia in 1998, during which the economy contracted by more than 7%.

Proton’s earnings slumped as bookings were cancelled. In fact, the car maker never recovered and lost its dominant position in the local market to Perodua until recently, when it started producing new models together with China’s Geely.

So far, Malaysians have generally been shielded from the skidding ringgit and disquiet in the global financial markets caused by the rising US dollar.

The US has been raising rates since March this year, leading to turmoil for the rest of the world. The Japanese yen, Chinese renminbi and pound sterling are all at their lowest against the dollar. The ringgit has been depreciating against the greenback since 2014, and continues to weaken.

Economists are looking at the US going into a recession next year as interest rates continue to rise. Europe and the UK are also poised to see a distinct slowdown, or even tipping into recession largely due to energy-induced inflation.

A global recession generally involves the shutdown of factories and loss of jobs.

The South Korean semiconductor industry is already facing the heat. It said that demand for microchips for the second half of this year had dropped — the first decline in four years.

It is just a matter of months before the Malaysian semiconductor sector will also face cutbacks in production. When that happens, job losses can probably be expected. Consequently, consumer demand will drop and the long waiting list to take delivery of cars could whittle down.

M Shanmugam is a contributing editor at The Edge

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