Lim Kit Siang

Investors shun Malaysia as emerging market outlook cools

By Yow Hong Chieh
The Malaysian Insider
January 20, 2011

KUALA LUMPUR, Jan 20 — Global investors are continuing to avoid Malaysia as fund managers trim investments in emerging markets over concerns that China’s economy will slow this year.

Bank of America Merrill Lynch said in a note this week that Malaysia remained a “big underweight” for investors in emerging markets, with its underweight rating increasing from 46 per cent in December to 55 per cent in the first month of 2011.

An underweight call is a recommendation for investors to reduce their investments in a particular security, asset class or, in this case, country.

Malaysia slipped from 14th place in December to dead last this month among the 15 countries studied by the investment bank, despite the roll out of big ticket Economic Transformation Programme (ETP) projects and speculation that snap polls will be held later this year.

Topping the list was strongly overweight Russia, followed by Thailand, Brazil, Turkey, South Korea, China, Indonesia and Mexico. Other emerging market underweights were Poland, Taiwan, Colombia, India, South Africa and Chile.

Malaysia’s underweight call also comes at a time when fewer investors are looking to increase investments in emerging markets due to worries that China’s “eroding” economy will have a knock-on effect on the market in Asia.

In its January 2011 Fund Manager Survey, Merrill Lynch said while support for emerging markets remained high, the number of investors overweight on such markets was continuing to decline.

The investment bank reported only 43 per cent of fund managers surveyed said they were overweight on emerging markets, down from 56 per cent two months ago.

The proportion of investors wanting to increase investments in emerging market equities more than any other region similarly fell from 31 per cent in December to 20 per cent.

“These lower readings come as belief in China’s economic prospects has eroded,” Merrill Lynch said in a press statement yesterday.

A Reuters poll released yesterday showed that economists expect China’s economy to expand by 9.3 per cent this year, throttling back from double-digit growth in 2010.

Inflation in China was also tipped to quicken to 4.3 per cent, a “much faster build-up” of price pressures than predicted.

“Later this year, Asian policymakers are going to have to be much more aggressive to get inflation under control and the consequence of that will be weaker growth,” Nomura Chief Economist Asia Robert Subbaraman told Reuters.

“For Asia, the challenging part is how to deal with inflation at the time when there is still capital inflows to the region. The risk in Asia is policy is either too slow to respond or the micro — or piecemeal —measures that have been introduced… are going to lose their effectiveness overtime.”

Investors have so far greeted Prime Minister Datuk Seri Najib Razak’s New Economic Model (NEM) with disinterest, owing to lack of detailed policies, timelines and the apparent rollback of ambitious Bumiputera quota reforms detailed in the first half of last year.

The bold recommendations set out in the first part of the NEM to boost competitiveness by reducing quotas appear to have been sidelined in the second part launched last month.

Observers attribute this to stiff resistance from Malay rights groups concerned that such moves will erode the community’s interests.

Share it with others Close Forgot password?Please put in your email: Send me my password! Close message

Login This blog postAll blog postsSubscribe to this blog post’s comments through…
RSS Feed
Subscribe via email
Subscribe Subscribe to this blog’s comments through…
RSS Feed
Subscribe via email
Subscribe
Follow the discussion Comments

Logging you in…
Close Login to IntenseDebate
Or create an account
Username or Email: Password: Forgot login?
OpenID Cancel Login
Close WordPress.com Username or Email: Password: Lost your password?
Cancel Login
Close Login with your OpenID
Or create an account using OpenID
OpenID URL: Back Cancel Login
Dashboard | Edit profile | Logout Logged in as Admin Options
Disable comments for this page
Save Settings

There are no comments posted yet. Be the first one! Post a new comment
Enter text right here! Comment as a Guest, or login:
Login to IntenseDebateLogin to WordPress.comLogin to TwitterLogin to OpenIDGo back
Go back
Share on Facebook
Connected as (Logout)
Email (optional)
Not displayed publicly.

Tweet this comment
Connected as (Logout)
Email (optional)
Not displayed publicly.

Name Email Website (optional)

Displayed next to your comments.

Not displayed publicly.
If you have a website, link to it here.
OpenID URL Comment as a Guest or login using OpenID

Posting anonymously.

Tweet this comment

Submit Comment Subscribe to None Replies All new comments
Please refrain from comments of a racist, sexist, vulgar or derogatory nature and note that comments can be edited, rewritten for clarity or to avoid questionable issues. We also reserve the right to delete off-topic comments. Comments by IntenseDebate

Enter text right here! Reply as a Guest, or login:
Login to IntenseDebateLogin to WordPress.comLogin to TwitterLogin to OpenIDGo back Go back
Share on Facebook
Connected as (Logout)
Email (optional) Not displayed publicly.
Tweet this comment
Connected as (Logout)
Email (optional) Not displayed publicly.
Name Email Website (optional) Displayed next to your comments.
Not displayed publicly.
If you have a website, link to it here.
OpenID URL Comment as a Guest or login using OpenID
Posting anonymously.
Tweet this comment
Cancel Submit Comment Subscribe to None Replies All new comments
MalaysiaBahasaBusinessRidhuan Tee: Singapore’s might will ‘eat’ us up
Temple chairman calls Najib ‘elephant’
Reject racists, urges Guan Eng
Taib to raise concurrent polls idea with Najib
Palanivel wants NS apology over haircut prank
Shahidan pertahan jawatan presiden KOAM tanpa cabaran
Calon BN: Isu tanah antara masalah utama di Labis
Taib mahu runding adakan pilihan raya serentak Sarawak, Parlimen
Pelabuhan Klang: Speaker berhak isytihar kosong, Adun boleh cabar
KDN akan gerakkan gelombang kesukarelaan lebih besar
China’s sizzling end to 2010 calls for more tightening
Marc affirms Mulpha’s Islamic debt ratings
BHP quarterly iron ore hits record, floods knock coal
Investors shun Malaysia as emerging market outlook cools
EBay revenue up 5 per cent, net income down

Changes to Selangor law to empower Sultan, says MB
Attend emergency sitting, Pakatan tells BN
Groups want Khusrin’s appointment made void
Selangor PAS denies supporting Khusrin pick
Emergency assembly sitting is Selangor’s ‘statement’ to reclaim power, says Khalid
Breaking Views
Bernama’s credibility — The Malaysian Insider
Malay history: What’s missing from the textbooks — John Doe
Why it pays to let staff work for free for others — Steve Bertamini
Elok Najib tidak layan cabaran debat Anwar — Utusan Malaysia
Dengar, hayati dan sahutlah seruan Azan — Nasrudin Hassan Al-Tantawi
24 Hours1 WeekMalays given enough privileges to excel, says Zaid
Badrul says he’s victim of PKR revenge
Ku Li tells cops his palace remark ‘misinterpreted’
Don’t misconstrue decision, says Selangor Sultan
High-income job bar set at RM3,000
Groups want Khusrin’s appointment made void
Group marches in support of Selangor MB
Selangor PAS denies supporting Khusrin pick
Emergency assembly sitting is Selangor’s “statement” to reclaim power, says Khalid
Umno dares Khalid to prove treason claims
Top NewsMalaysiaBusinessWorldShowbizSportsFeaturesOpinionBahasaFoodBooksGalleryTravelAbout Us
Copyright © 2011 The Malaysian Insider. Designed for 1024 x 768 resolution. This site is best viewed with Firefox.

Investor concern of cool-off in China has weighed on other emerging markets. — Reuters picKUALA LUMPUR, Jan 20 — Global investors are continuing to avoid Malaysia as fund managers trim investments in emerging markets over concerns that China’s economy will slow this year.

Bank of America Merrill Lynch said in a note this week that Malaysia remained a “big underweight” for investors in emerging markets, with its underweight rating increasing from 46 per cent in December to 55 per cent in the first month of 2011.

An underweight call is a recommendation for investors to reduce their investments in a particular security, asset class or, in this case, country.

Malaysia slipped from 14th place in December to dead last this month among the 15 countries studied by the investment bank, despite the roll out of big ticket Economic Transformation Programme (ETP) projects and speculation that snap polls will be held later this year.

Topping the list was strongly overweight Russia, followed by Thailand, Brazil, Turkey, South Korea, China, Indonesia and Mexico. Other emerging market underweights were Poland, Taiwan, Colombia, India, South Africa and Chile.

Malaysia’s underweight call also comes at a time when fewer investors are looking to increase investments in emerging markets due to worries that China’s “eroding” economy will have a knock-on effect on the market in Asia.

Najib’s NEM has been hampered by a scarcity of details. — file picIn its January 2011 Fund Manager Survey, Merrill Lynch said while support for emerging markets remained high, the number of investors overweight on such markets was continuing to decline.

The investment bank reported only 43 per cent of fund managers surveyed said they were overweight on emerging markets, down from 56 per cent two months ago.

The proportion of investors wanting to increase investments in emerging market equities more than any other region similarly fell from 31 per cent in December to 20 per cent.

“These lower readings come as belief in China’s economic prospects has eroded,” Merrill Lynch said in a press statement yesterday.

A Reuters poll released yesterday showed that economists expect China’s economy to expand by 9.3 per cent this year, throttling back from double-digit growth in 2010.

Inflation in China was also tipped to quicken to 4.3 per cent, a “much faster build-up” of price pressures than predicted.

“Later this year, Asian policymakers are going to have to be much more aggressive to get inflation under control and the consequence of that will be weaker growth,” Nomura Chief Economist Asia Robert Subbaraman told Reuters.

“For Asia, the challenging part is how to deal with inflation at the time when there is still capital inflows to the region. The risk in Asia is policy is either too slow to respond or the micro — or piecemeal —measures that have been introduced… are going to lose their effectiveness overtime.”

Investors have so far greeted Prime Minister Datuk Seri Najib Razak’s New Economic Model (NEM) with disinterest, owing to lack of detailed policies, timelines and the apparent rollback of ambitious Bumiputera quota reforms detailed in the first half of last year.

The bold recommendations set out in the first part of the NEM to boost competitiveness by reducing quotas appear to have been sidelined in the second part launched last month.

Observers attribute this to stiff resistance from Malay rights groups concerned that such moves will erode the community’s interests.