SLIGHT HICCUP
THE government’s review of some mega projects is unlikely to derail foreign investors’ interest. Its focus to balance finances and improve corporate governance and efficiency are big pluses in enticing investors, say economists.
THE review of certain mega projects by the government is unlikely to derail investors’ interest in Malaysia for too long, said economists.
Instead, the government’s focus to balance its finances and improve corporate governance and efficiency are big pluses to woo foreign investors.
They said uncertainties caused by geopolitical events, particularly concerns over trade wars, had posed negative impact to Malaysia and other emerging markets.
MIDF head of research Mohd Redza Abdul Rahman said emerging markets were highly dependent on external demands than developed and economically stronger countries.
“An increase in risk from countries such as the United States would be magnified when it reaches the shores of emerging countries like Malaysia,” he told NST Business yesterday with regards to the current outflow of foreign funds.
Redza said Thailand, Indonesia and the Philippines had seen much worse outflow of funds.
Even India, South Korea and Taiwan were also in the negative territory year-to-date, he added.
“We do expect the outflow to feature in the short to medium term, considering the concerns over recession hitting the US in the coming year or two, lofty valuations of the developed markets and their hawkish and protectionist stances,” said Redza.
MIDF Research said foreign selling of Malaysian equities had surged 42.70 per cent to RM1.27 billion last week, from RM892.4 million in the week before. This extended the selling streak to 19 days, the longest since the 21-day selloff in May to June 2015.
Last month alone, foreigners withdrew RM5.83 billion net, the highest monthly outflow this year.
As of June 1, local retail and institution participation in Bursa Malaysia were 20.70 and 50.30 per cent, with net inflow amounting to RM8.9 million and RM216.3 million, respectively.
Redza said mega projects such as Kuala Lumpur-Singapore high-speed rail and Mass Rapid Transit Line 3 had affected the construction sector. However, he said sentiment would improve once the government had settled down and worked through its plans.
Maybank Investment Bank Bhd chartist Nik Ihsan Raja Abdullah said investors’ confidence largely depended on Malaysia’s ability to meet its fiscal target of 2.8 per cent of the gross domestic product after removing the Goods and Services Tax and reintroducing the Sales and Service Tax.
He said the tabling of a revised 2018 Budget this year and 2019 Budget would help ease concerns over the government’s finances.
Nik Ihsan said sectors that may take or had already taken a hit were construction, building material (cement) and telecommunications.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said more information on policy direction was critical.
He said frequent engagements with fund managers and analysts could provide clear guidance on government policy as this would assist in their macroeconomic and earnings forecast.