M’sia has strong framework to absorb excessive capital

KUALA LUMPUR: Malaysia has a strong and deep institutional framework to absorb excessive capital outflows, an international asset manager said.

Aberdeen Islamic Asset Management Sdn Bhd Investment Manager, Mohammad Hasif Ahmad Murad, said this gave Malaysia an advantage in facing uncertainty in global fund flows.

“Institutional investors, such as the Employees Provident Fund and pension funds that are nimble, have the capacity to support the market,” he told reporters in a briefing yesterday.

However, given the very high foreign ownership in the Malaysian bond market, he said, capital outflow poised a concern to the country’s economy. But then, the dynamics of foreign participants within Malaysia which were more longer term “real money” investors, has put the country in a better position than its regional peers, such as Indonesia, which has more “hot money” such as hedge funds, he said.

Meanwhile, on the uncertainty in the foreign exchange market, Aberdeen International Fund Managers Ltd’s Head of Multi-asset Solution for Asia-Pacific, Irene Goh, said such a situation was expected to continue in the next few years with further rate increases by the US Federal Reserve System (Fed). She said the Fed was expected to increase interest rates next month and two each in 2017 and 2018.

Goh said the outcome of the Organisation of the Petroleum Exporting Countries’ (OPEC) meeting in Vienna was expected to have less impact on oil prices. This was due to the growing contributions from non-OPEC countries as well as continuous supply from the US shale oil and gas industry, she said.

“Whether the outcome from the meeting is status quo or production cut, we expect it to be less significant due to the non-OPEC and US shale oil and gas factors,” she said.

OPEC countries are meeting in Vienna, Austria today to discuss potential output cut to curb oversupply that has reduced oil price by more than half since 2014.