Malaysia exchange-traded fund draws most cash since 2011

NEW YORK: Looking for contagion from Turkey’s economic crisis? You won’t find it in Malaysia.

The South-East Asian nation’s stock market surged into overbought territory last week and the sole US-listed exchange-traded fund (ETF) tracking the measure attracted the most cash since 2011.

The rally came as investors in developing-nation assets fretted over whether Turkey’s plunging currency would spark a selloff in other countries.

The iShares MSCI Malaysia ETF, or EWM, attracted US$106mil last week, or almost 20% of its total assets, and the Malaysian equity index has recovered 8.7% from a July low.

Foreign investors have begun to return to the country after a flight following the surprise victory of Prime Minister Tun Dr Mahathir Mohamad, who decided to review some infrastructure projects and revealed the extent of a corruption scandal from the previous government.

“Foreign direct investment and exogenous demand for domestic goods is such a fantastic stimulus for an economy like that,” said Andy Wester, senior investment analyst at Proficio Capital Partners.

While Malaysia’s ringgit hasn’t escaped unscathed the weakening in emerging-market currencies, it’s held up well compared with other Asian countries. That’s likely added to the allure of EWM, which has almost 40% of the fund’s exposure in banks.

At the same time, the ringgit weakness will make Malaysian oil cheaper overseas, giving a boost to the country’s crude producers and investor sentiment about the broader economy. — Bloomberg