Emerging Markets: Malaysia in Focus


By Peter Kohli

AT number five, Malaysia is one of International Living’s best places to retire. But unlike Panama, which from an investment perspective I agree with, unfortunately I don’t when it comes to Malaysia. Back in September 2014, I met a senior Malaysian government official at an economic conference in Bombay who tried unsuccessfully to get me to invest in his country. I just wasn’t comfortable, mostly because of the unstable political environment.

There have been many high hopes after the last few years with regard to Malaysia being a top investment destination, but in my opinion, it has never really lived up to expectations. I have written previously about Malaysia becoming a manufacturing hub for companies like Hyundai, but that positive news has been tempered with allegations of rife corruption in the government. Yes, I agree that in some countries corruption is a way of life; India for instance. But India’s economy is much stronger, and you may recall I recently placed them on my hold list for at least six months, to see if there is any movement forward on important legislation.

Malaysia’s economy is not firing on all cylinders. In fact, according to an article in The Straits Times titled, “Malaysia November industrial output slips to lowest in 16 months”, Reuters reports that production has been “hurt by weaker global demand and a decline in mining production.” The article further states, “Economists said weaker growth in production stemmed mainly from poor external demand, which also resulted in unexpectedly weak growth in exports in November, and a contraction in the mining sector for the second consecutive month.”

Currently, the manufacturing sector is in a recession with the latest PMI coming in at 47.7 in the last quarter of 2015. In the same year, GDP growth slowed to 4.7% from a high of 6.5% in the second half of 2014. Malaysia has, however, successfully transitioned from an exporter of raw materials into an economy with its largest sector being services.

That sector accounts for 54% of GDP, though manufacturing sectors account for 25% of GDP and 60% of exports. The recent claims that Prime Minister Najib transferred 2.6 billion Ringgits to his personal account have not helped the political stability in that country, something that is vitally important to a foreign retail investor.

Malaysia’s stock exchange, the Bursa Malaysia benchmark index (KLCI) hasn’t fared as badly as some other emerging market stock indexes, but the currency was the worst performing Asian currency against the U.S. dollar in 2015. So what’s on the horizon for 2016 that would make this investor change his mind?

Unfortunately, as Bloomberg’s article titled “Return of Oil Slump Haunts Najib in Malaysia Budget Déjà Vu” details, nothing. I wish I had better news, but as long as the economy keeps contracting, foreign retail investors should stay clear. Look to Malaysia’s southern neighbor, the Philippines, as a better bet.

Disclaimer: This opinion piece was first published in www.nasdaq.com. The views expressed in this article are those of the author and do not necessarily represent the official views of, and should not be attributed to ismaweb.net



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