Malaysia still a top investment spot for Chinese companies, says HSBC

Countries like Vietnam are unable to match Malaysia in terms of sophistication in manufacturing capabilities

by NG MIN SHEN / pic by MUD AMIN NAHARUL

MALAYSIA continues to be an attractive choice for investment by foreign companies, as a result of risk diversification on the part of both Chinese and non-Chinese companies that manufacture in China, said HSBC Bank Malaysia Bhd (HSBC Malaysia).

HSBC Malaysia group GM and Malaysia CEO Stuart P Milne said the banking group witnessed many companies coming into Malaysia from China last year, despite the cancellations or delays in several local mega infrastructure projects involving Chinese firms.

“It’s quite staggering, the dependence the world has on products being manufactured in China today.

“For many global companies, they’re looking at this and saying they’re not comfortable with the risk, therefore there is a case to diversify where they manufacture.

“This is where economies like Malaysia, Vietnam and the Philippines particularly stand to benefit,” he said at a media briefing in Kuala Lumpur yesterday.

While countries like Vietnam may have lower wage costs, they are unable to match Malaysia in terms of sophistication in manufacturing capabilities.

Milne said among the bank’s faster-growing businesses are those that involve China, with many Malaysian parties working to capitalise on the potential of doing business with the republic.

“Many medium-sized companies, private-sector enterprises in China, are looking for new markets and Malaysia is one of the key ones. Based on conversations with our customers, we expect growth to continue in this particular area going into 2019,” he said.

Among the local clients of the banking group, a subsidiary of British-based lender HSBC Holdings plc, many are in talks with Chinese companies interested in joint ventures or on-the-ground field expansion in Malaysia.

“A lot of business owners are spending a lot of time in China looking to partner Chinese companies that aren’t yet present in the market and might be looking for a lower risk of entering, like partnering a Malaysian company that has room for expansion.

“It’s still in early stages, because the full impact of potential new trade tariffs have not yet been felt. But everyone’s dusting off their plans and saying if this happens, then it will be a trigger to make an investment,” Milne said.

According to data from the Malaysian Investment Development Authority, foreign private investment in Malaysia stood at RM64.07 billion for the first nine months of 2018 (9M18), versus RM54.42 billion recorded for the year 2017.

China was the largest contributor to foreign investments in 9M18 with RM15.62 billion, compared to RM3.85 billion in 2017.

Indonesia placed second with RM8.99 billion, followed by the Netherlands (RM8.3 billion), the US (RM3.13 billion), the British Virgin Islands (RM2.71 billion), Republic of Korea (RM2.45 billion) and Japan (RM2.1 billion).

Milne said this proves that people are looking at Malaysia as a centre of production, with China in particular being an extremely relevant player.

HSBC Malaysia MD and head of global markets Alvin Kong noted that Malaysia is also recognised for its strategic location within the Asean region, sound infrastructure, strong financial sector, government support and availability of resources, all of which continue to attract more investments going forward.

“Trade liberalisation may open up opportunities for Malaysia going into next year. Malaysia has actually gained market share in exports, partly because of our ability to maintain costs, due to a fairly competitive currency and the move towards the Fourth Industrial Revolution.

“There’s more automation and streamlining of costs, especially in the manufacturing sector, and we continue to see this in Malaysia. That’s why we’re still bullish on Malaysia’s future prospects,” Kong said.

While the group expects Asean countries to see moderating growth in 2019 versus 2018, it also expects Asean to outperform other emerging markets, as some Asean economies will benefit from manufacturers choosing to invest in the Asean region rather than China, for future production.

HSBC also remains optimistic on Malaysia’s longer-term prospects due to its diversified economy, healthy export sector and strong private consumption as a pillar of economic growth, while the ringgit is expected to see stabilisation this year rather than fast-paced appreciation or weakening.