Chinese investments in Malaysia halved to US$1.7 billion (RM7.1 billion) in the first nine months of the year from a year ago, though US investments soared seven times to US$5.9 billion (RM24.6 billion) – reflecting a diversion of funds due to the Beijing-Washington trade clashes.
Data provided by the Malaysian Investment Development Authority (Mida) to Reuters showed that China, traditionally Malaysia’s biggest investor, has now slipped to third position behind the United States and Japan.
Foreign direct investment (FDI) from Japan, with whom Prime Minister Dr Mahathir Mohamad is trying to strengthen ties, jumped more than four times to RM11.81 billion in the January-September period.
Total approved FDI into Malaysia rose 6.5% to RM66.3 billion, Mida said, adding it was “actively negotiating” on 682 other projects with proposed investments of RM37.6 billion.
Trade hostilities between the world’s biggest two economies have pushed mostly US companies to look for factories outside China to escape tit-for-tat tariffs.
For Malaysia, the biggest investments have come in the electrical and electronics industry, with one of the driving factors being that many semiconductor and other electronics products from the country do not attract US tariffs, unlike the 25% rate for China.
US companies such as chipmaker Micron Technology and iPhone supplier Jabil Inc are already building new factories in Malaysia.
Source : FMT
Malaysian stocks are getting cheaper but few are buying
On a year-to-date basis, foreign funds had taken out RM8.98 billion of local equities from Malaysia, making up 76.8 per cent of last year’s total foreign outflow of RM11.69 billion.
Asia’s worst-performing major stock market is getting cheaper by the day. But that’s not enough to lure investors back.
Malaysian equities aren’t ripe for a rerating even as valuations drop to near the lowest in a decade, according to investors.
Political risks and a weak earnings outlook have undercut appetite for local shares, which are heading toward a second year of losses, extending 2018’s worst showing since the global financial crisis.
“Malaysia remains a perennial underweight position for foreign investors,” said Michiel van Voorst, chief investment officer for Asian equities at UBP Asset Management Asia Ltd.
Local stocks have fallen substantially “but valuation without a catalyst is not enough. The profit cycle needs to improve on an incremental basis”.
Global funds have yanked more than US$2 billion from Malaysian stocks in 2019, the biggest outflow among emerging Asian equity markets.
More than a year after Prime Minister Mahathir Mohamad took office pledging to boost the stock market, investors have been left underwhelmed by a cut in public spending, a lacklustre ringgit and question marks over the succession of power.
The FTSE Bursa Malaysia KLCI Index’s 12-month forward earnings estimate has declined more than 12% since the Pakatan Harapan coalition assumed power in May 2018, according to data compiled by Bloomberg.
Business sentiment took a beating after the government shelved several large infrastructure projects and slashed spending to rein in its debt.
The share index’s price-to-book valuation of 1.5 times is near the lowest since 2009 and at a discount to the 10-year average. The market is 4% away from bear market levels.
Source : FMT
Malaysia faces up to RM33b outflow risk if bonds dropped from global index
Malaysia could face an outflow risk of about US$4 billion by passive funds and an additional US$2-4 billion by active funds, should FTSE Russell drop Malaysian bonds from the World Government Bond Index (WGBI), says Maybank Kim Eng.
“This means a total outflow risk of US$6-8 billion, or about RM24-33 billion by our estimates,” Maybank analysts Winson Phoon and Se Tho Mun Yi wrote in a note today.
The analysts said the final decision on whether to include or exclude Malaysia from the list may come following the annual review in September 2019.
global stock market indices provider FTSE Russell placed Malaysia’s market accessibility level in its World Government Bond Index under a review considering a downgrade from the current level of 2 (highest level of accessibility) to 1, due to concerns about market liquidity, at the end of the review period in September.
The downgrade may make the Malaysian local government ineligible for the index that helps with exposure to wider global investors.
Source : The Edge