Foreign sell-off, economy top concerns despite reforms push

by Lee Wei Lian
The Malaysian Insider
Sep 19, 2011

KUALA LUMPUR, Sept 19 — Despite the Najib administration’s political reforms, a Bloomberg report today said foreign funds may continue paring down local share stakes in an indication that the world economy will remain the government’s biggest headache ahead of an expected general election.

Terence Wong, head of research at Kuala Lumpur-based CIMB, was reported as saying that worsening global economic turmoil may cause investors to keep unloading the nation’s equities.

Wong also said that promises made last week by Prime Minister Datuk Seri Najib Razak to burnish Malaysia’s democratic credentials and abolish the controversial security and media laws will not be enough to boost confidence.

The Bloomberg report said that KLSE data showed that foreign funds sold RM3.8 billion worth of Malaysian shares last month, the most since at least October 2009 after four consecutive months of inflows.

A continued outflow of funds could damage economic confidence during the crucial months ahead, as the prime minister is expected to call for a general election by the first half of next year.

The latest survey from local pollster Merdeka Center, which was done before the recent reform announcements, showed that Najib’s popularity slid to 59 per cent this August from the highest of 72 per cent in May 2010, fuelled by rising concerns over the surge in living costs and his government’s handling of the July 9 Bersih 2.0 rally.

Mark Matthews, head of research for Asia at Bank Julius Baer & Co in Singapore said that the repeal of repressive laws such as the ISA will unlikely boost share investor sentiment in Malaysia.

“It doesn’t have anything to do with the stock market; it’s already a fairly advanced economy and I’m not sure if anything political would be a huge catalyst,” said Matthews.

“It certainly won’t change perceptions of Malaysia in and of itself, but if it is part of an overall trend of a more open-minded stance in politics, maybe it is meaningful in some way.”

A report by HwangDBS Vickers Research, meanwhile, said today that Malaysian equities would continue to slump unless action is taken to raise investors’ confidence.

The research house said the benchmark FBMKLCI index is still on a declining course, and beyond any short-term relief rebound, the index would probably dip below the psychological 1,400 level soon.

It added that foreign funds would continue to withdraw from emerging markets across the region if risk-averse investors believe the unstable economic and monetary conditions in the United States and Europe was poised to deteriorate further.

  1. #1 by yhsiew on Monday, 19 September 2011 - 9:23 pm

    Foreign investors are hoping that Najib would repeal the NEP, not the ISA. The Economist reported that Najib’s greatest test is to abolish “institutionalised ethnic discrimination”. It is the system of ethnic quotas and divisions that is really holding the country back.

  2. #2 by monsterball on Monday, 19 September 2011 - 9:39 pm

    It is a clear sign of no confidence over matter how much so call ….good news ..Najib wishes to offer.
    It simply need a change of government.
    Foreign investors will play hit and run…make a fast buck…and no permanent investments or investors….as long as UMNO b is in power.
    Investors know too much….and they are certainly no fools.

  3. #3 by a g on Monday, 19 September 2011 - 10:10 pm

    TDM to NR: You’d better make sure you win the next general elections…if you’re not sure you can win, then make sure the ISA is gone before someone else come in to use it on…what’s his face ?

  4. #4 by Jeffrey on Tuesday, 20 September 2011 - 6:31 am

    ///This reform initiative by Najib – “It certainly won’t change perceptions of Malaysia in and of itself (hence “FBMKLCI index is still on a declining course”), but if it is part of an overall trend of a more open-minded stance in politics, maybe it is meaningful in some way/// -Mark Matthews, head of research for Asia at Bank Julius Baer & Co, S’pore.

    Just to touch on this part of his comment “maybe it is meaningful in some way” – it may well be so in context of Malaysia’s political culture…..Najib may not be inclined to this “open-minded stance” in politics had he not been “forced” by the pressure of negative publicity from fall out of Bersih’s mishandling and internal power struggle – he might not even be “sincere” about these reforms, their part of “public relations” image grooming & branding exercise – but never mind. The good part of him taking “advice” from a group of political strategists that includes “Kweiloh”/Western members of the team behind Tony Blair’s “New Labour” is that he, as a matter of unintended consequence, has set a sort of new benchmark (based on Kweiloh liberal values) against the prevailing feudal ethnocentric political culture in this country, which if unchecked, and allowed to proceed its inexorable course, will surely bring the country to the abyss.

  5. #5 by Jeffrey on Tuesday, 20 September 2011 - 7:00 am

    As Pak Lah said, “there are hardliners (right wing) who want to maintain the old system (ie the Ethnocentric Ketuanan Mahathirism ideology), controlling the flow of information and using laws to silence the public” opposing this political ideology/culture….Why do you think Ibrahim Ali (Perkasa) is less than enthusiastic about what Najib declared? Because what Najib promised (repeal of draconian law) if really carried through, will undercut the entire regime of draconian laws which have been used in this last 50 years to silence critics and opposition to this ethnocentric Ketuanan Mahathirism ideology which the ruling elites use to stay in power! Which is why what Najib said, even if not done, strikes fear and insecurity amongst thoe with veste interest in the present moribund system. They reluctantly go along (for the time being) if they think the UMNO president is merely paying lip service and using this ploy of promised reforms as mere public relation exercise to win sufficient votes for BN to regain 2/3 Parliament, and some of the states lost in 308.

  6. #6 by waterfrontcoolie on Tuesday, 20 September 2011 - 7:42 am

    I think the Gomen, like so many popularity parades posted around the world, just loves to enter them where concrete evidence is merely based on perception. Now we are desperately re-engineering ourselves to be in the top of World Bank Indices; many of which can only provide indices but may have no real impact on FDI into the country. For example, Port Klang is posted as the 13th largest port based on TEU counts including over 50% of empty transshipment boxes but based on tonnage throughput it is 25th the parade! We are running after useless popularity parade just like our sloganeering exercise. So long that we have the black gold flowing, we will still be afloat, but how long would that be? We have heard of complaints that Malaysian accountants have gone overseas to manage accounting centres which process accounts originated from MNCs located in Malaysia! Why? simple enough. your environment is just not conducive for reasons we all know! We have created a bunch of thieves who just refused to help to find ingredients for the cake!
    They wanted to take home the cake. If we cannot get ourselves from the basic fundamental process of creating the correct environment; all the talks and slogans will not move us anywhere. Given the present situation , it can only make sense if the PM has taken action to show that he is different from the standard perception of the Zakaria-type of mentally; but no, he is indeed part of the issue. The mindset could not be changed afet all these years! Since the nation need to be changed and you cannot change; What shall we do, Mr. PM? Surely you know both situations cannot exist at the same time!

  7. #7 by Jeffrey on Tuesday, 20 September 2011 - 8:19 am

    Although promises of reforms are empty unless vindicated by deed, the promise of the idea of liberal reform itself (sloganeering about ‘best democracy’) will serve the limited purpose of benchmarking the standard, and gimmick or no gimmick, that itself is not bad at all, though not incomparable to deed matching talk. Already his declaration has not only taken Perkasa & his No. 2 by surprise and made the right wing hardliners uncomfortable but also it has made his predecessors defensive: for eg Pak Lah was quick to defend by saying he would have done so had it not been for the trenchant resistance of reactionary right wing elements within and outside the ruling party – and in the case of Dr Mahathir, that during his time it was not done because then Malaysia was not such a matured society. What is so bad by such benchmarking? If fulfilled, it takes the country forward in field of civil liberties/human rights; if unfulfilled, being a PR gimmick, it would have raised general expectations of rakyat which, unmet, would only deal another blow on the ruling coalition/PM’s credibility and galvanise even greater opposition against the ruling coalition for not walking the talk!

  8. #8 by Jeffrey on Tuesday, 20 September 2011 - 8:21 am

    Sorry – “…..not comparable (not incomparable) to deed matching talk…”

  9. #9 by HJ Angus on Tuesday, 20 September 2011 - 8:34 am

    Fund managers are not really investors…they are simply money movers, always trying to make money via speculative trades.
    I would define investors as those who put money in the stock exchange for at least 12 months or those who actually bring in funds to construct a factory or other tangible asset.

  10. #10 by dagen on Tuesday, 20 September 2011 - 8:59 am

    Economy is in serious trouble and jib is still busy politicking away. Now this is real trouble.

    BTW, malaysia is a developing country. We were working hard to develop the country since merdeka. And we have been at it for 54yrs now. Yeah, developing the country. And today we are still at it. Worse, the target of finally achieving developed status seems to move all the time – in the direction away from our reach mainly. How could that be? 54yrs is a long time. And we have land in abundance. We have natural resources. We have petroleum. After 54 yrs we are still not a developed nation?

    Hoi cintanegara heard what jib said. From now on I can demand for payment everytime I serve you ice blended rambutan I. It will be 25ringgit a glass, with grounded peanut and choco chips topping – spasia punya. Ho ho ho ho, best democracy.

  11. #11 by Loh on Tuesday, 20 September 2011 - 5:00 pm

    /// It added that foreign funds would continue to withdraw from emerging markets across the region if risk-averse investors believe the unstable economic and monetary conditions in the United States and Europe was poised to deteriorate further.///

    Among the markets across every region, risk -adverse investors would choose to withdraw from the place where they least likely to invest in the first place. Najib might say to himself that luckily not much foreign investments came in. But he should now realize that whatever little that came in would be the first to move out.

    Najib might even claim that it is good that Malaysia is an economic island with ringgit remains a localized currency. Further, it was good that Malaysia did not subscribe fully to globalization and that Malaysians are used to low income experience that what happened outside do not affect Malaysians as much as other countries. Najib might even claim that UMNO had the prescient that the prosperity outside the country could not last forever and that was why UMNO only allowed some Putras to get rich and the remaining Malaysians to stay poor and get used to being poor.

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