Optimism and caution for investors over a ‘new’ Malaysia


As Malaysia Baru closes in on its one-year anniversary, the commitment of reforms resonates among the business world. For businesses, the reassurance and the reset of the country was welcome.

But investors are treading cautiously as weak corporate earnings and uncertainties over policies cap their positive outlook.

Participants of the 15th edition of Invest Malaysia (Invest Malaysia 2019), which ended yesterday, were enlightened by the fiscal consolidation, spiralling debts, lack of check and balances, and management flaws.

Prime Minister Tun Dr Mahathir Mohamad’s keynote address hit all the right notes, announcing highly-anticipated reforms for government-linked entities and the end of a “nation of kleptocrats”.

The audience was receptive and quick to the cue, laughing when appropriate and cheering enthusiastically during the course of Dr Mahathir’s 35-minute address — his first at the conference.

Investors and industry leaders, however, were not so enthusiastic on the realities and the overall tepid sentiment.

A senior analyst at a local brokerage said there is an absence of new capital market-driven initiatives which were unveiled at the Invest Malaysia conferences in previous years.

“For example, last year, they proposed a cross-border trading link between Malaysia and Singapore, plus a three-year stamp duty waiver on mid-and small-cap companies trading locally.

So, that was good. This year, we came in not expecting anything, and there wasn’t anything announced,” the analyst said.

An investment banker said sentiment is still lukewarm, while corporate growth is either stagnant or regressing.

“There’s nothing to get people excited, not like those initiatives announced in past years. It’s a conference for investors, but there wasn’t anything really new said by Dr Mahathir or Finance Minister Lim Guan Eng.

“If you look at corporates, many aren’t announcing expansion plans or even guiding for growth this year. Some are also holding back because there’s still a lack of clarity over government policy,” said the investment banker.

Domestic corporates reported dismal earnings for the fourth quarter of 2018, dragging the FTSE Bursa Malaysia KLCI (FBM KLCI) to below the psychological level of 1,700.

The FBM KLCI is among the worst performers in the Asian region this year, declining 0.38% since January. The benchmark index closed at 1,684.21 yesterday, down 0.21% or 3.47 points from the day before.

In 2018, the main index fell 5.17% while the FBM Small Cap Index plunged 34.02%, as the MSCI Emerging Markets Index slid 8.92%.

Foreigners have also dumped Malaysian equities for five straight weeks now, according to figures by MIDF Amanah Investment Bank Bhd.

The research house said foreign investors sold RM421 million net of local equities for the week ended March 15.

But it said Malaysia recorded a sizeable foreign net outflow of RM272.3 million on Monday, a level not seen since late November last year.

Despite the uncertainties, investors are positive on the government’s direction towards better governance and accountability, as the country tries to shed its “No Kleptocracy” image.

A telecommunications industry executive said the current government needs to hit the reset button and tightens its regulatory surveillance, as well as improves accountability across corporate Malaysia.

“One thing investors should take away from (Invest Malaysia 2019) is that this is a year where the country has sort of hit the reset button in a number of sectors, and also in a micro-economic sense.

“It is also crucially a year where the government has set the tone in terms of what it likes to see, not just from the business community, but the various sectors including education, healthcare and telecommunications,” the exec said.

A local asset manager said the end of political influence over state-linked entities is in line with developed capital markets globally, which strive for greater transparency and corporate governance.

Invest Malaysia 2019 with some 2,300 participants were given a glimpse or a sought of report card performance update by the new 10-month government. The investing community will await the next Invest Malaysia and the fruits of all the new policies.