Indonesia has Chindonesia. Taiwan has the Strait story. Malaysia needs a unique selling proposition.
As elsewhere in Asia, money has dribbled from equities into local bank deposits as investors pause for summer. But, unlike in other markets, where strategists enthuse over sentiment and momentum, there are few immediate catalysts to tempt investors back into stocks, let alone encourage new flows from abroad. Malaysia is at the pricier end of ex-Japan Asian valuations, with a forward price/earnings ratio of 14.9, a fifth higher than the regional average. For that, investors have received sub-par earnings growth by the high standards of the violent rebound the region’s economies have enjoyed in the past year. This helps to explain Malaysia’s depleted capital account, now showing eight consecutive quarters of outflows. So far this year, on Emerging Portfolio Fund Research data, Bursa Malaysia has received just 2 per cent of total equity inflows into emerging Asia.
The country’s best bet to stir up interest would be the old standby of privatisations. Najib Razak, prime minister, dropped hints last month on the long-promised sales of holdings in the likes of Petronas Gas, Malaysia Airports and Sime Darby, the palm oil giant. Now would be a good time to capitalise on growing interest from China, which exported five times more capital in the first quarter to Malaysia ($59m) than it did in the whole of last year. Further, it just made Malaysia its 11th approved destination under its $64bn scheme allowing nationals to invest in overseas stocks. Accelerating the privatisations could trigger a virtuous cycle: a reduced budget deficit, a re-rating of the country’s local-currency debt – and a better chance of taking a bigger share of the waves of long-term western capital headed Asia’s way.
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