Malaysia still investors’ favourite emerging market, say academics

Universiti Teknologi Malaysia geostrategist Professor Azmi Hassan is upbeat about Malaysia’s economy.

KUALA LUMPUR: Malaysia is still the favourite emerging market of investors despite the current slow pace of foreign net inflow, says an academic.

Universiti Teknologi Malaysia geostrategist Professor Azmi Hassan said going into 2019, it was encouraging to note that Malaysia was considered the second lowest in terms of funds outflow, year to date, as observed by MIDF Amanah Investment Bank Bhd Research which monitors the performance of seven Asian nations.

“I am quite upbeat about the Malaysian economy compared with the less encouraging inflow of foreign investors for the six other nations,” he told Bernama.

Azmi also said the current persistent outflow was closely linked to the level of confidence among foreign investors who were perturbed by current negative external developments.

“I believe domestic factors such as the fiscal policy of the Pakatan Harapan government, coupled with Tabung Haji and Felda’s financial fiasco, played a part in adding to the already sluggish sentiment among foreign investors, but external factors assumed a greater role in swaying foreign investors’ decision to invest in Malaysia,” said Azmi.

He referred to the issue of Britain’s exit from the European Union, the lingering United States (US)-China trade war and contraction in Japan’s gross domestic product growth as “casting a dark cloud” worldwide and Malaysia was not spared the effect.

Bank Islam chief economist Mohd Afzanizam Abdul Rashid said the main driver for this week was none other than the US Federal Reserve (Fed)’s announcement of impending rates cuts, at least two more, in 2019.

“That would mean the Federal Fund Rate is nearing its neutral rate – a rate which is neither contractionary nor expansionary. So, again it is about the prospect of slower growth in the US as there is a lag time for monetary tightening to have an impact on the economy,” he said.

Afzanizam also said there was the possibility that the US Treasury yield curve would invert at some point in the near future.

“It would not be any different next week as the market will be very much data dependent. Perhaps some window dressing could happen that may help support markets as 2018 draws to an end,” he added.

Meanwhile, Putra Business School senior lecturer and manager for business development Ahmed Razman Abdul Latiff said market sentiment remained subdued as the Fed decided to raise interest rates on Wednesday and hinted of additional increases in the next two years.

“Crude oil’s price also fell and hit its lowest in more than a year due to concerns about oversupply and the outlook for energy demand.

“The ringgit remains weak and is hovering around 4.20. Local market sentiment will remain subdued until the end of the year as people are already in a holiday mood,” said Razman.

Meanwhile, OANDA head of trading Asia-Pacific Stephen Innes said foreign funds inflow was expected to be slower next week as investors were staying on the sidelines while waiting for fresh developments in the new year.

“With oil prices weakening, coupled with the 0.25 basis point hike by the Fed, led US equity markets to weaken which in turn saw Asian stocks taking a dip as well.”

Innes said over the week, the ringgit’s performance was affected by falling oil prices as well as regional risk sentiment.

The heightening of trade tensions between the Trump administration and China and the performance of palm oil and rubber export continuously affected sentiment for the ringgit.

“The ringgit is heavily reliant on oil and commodity exports. If the sentiment for both of these items is positive, the ringgit could have a positive push,” he added.