KUALA LUMPUR, Sept 16 — Despite the gloomy global economic outlook, foreign investors still view Malaysia as a lucrative investment destination, owing to the country’s stable political landscape and steady energy prices.
Rakuten Trade Sdn Bhd head of research Kenny Yee said this positive sentiment has resurfaced as trade tension between the United States and China have subsided.
Investors are now more hopeful that both powerhouses would resolve tariff issues, following renewed trade negotiations between both parties.
“Not only is this obvious in our local stock market but it is also visible through the positive Wall Street and regional stock market performance,” he told Bernama.
On Thursday, foreign investors accounted for 31.9 per cent of the total trading participation, while institutions took up 49.7 per cent and retail investors accounted for the remainder.
The day’s trading saw net foreign inflow of RM174.7 million while buying stood at RM907.5 million and selling at RM732.8 million.
Compared with last Thursday, foreign buying amounted at RM616.6 million while selling totalled RM406.9 million, giving a net of RM209.7 million to the market.
On the local front, Yee was supportive of recent comments made by Finance Minister Lim Guan Eng who said Malaysia could sustain a five per cent annual economic growth despite challenges.
“This should boost investors’ confidence into coming back and continue investing in the country,” he said.
Meanwhile, Hermana Capital Bhd Chief Executive Officer and Chief Investment Officer Datuk Dr Nazri Khan Adam Khan said foreign fund outflows year-to-date was recorded at RM9 billion.
“Although the foreign participation in the local equity market is relatively small at 31.9 per cent, we hope selling (of equities) will continue to reduce as our economic and political foundation remains firm.
“Let us hope that the third round of tariffs to be imposed on an additional US$200 billion worth of Chinese goods by the United States will not take place as this would cause countries which have direct trade such as South Korea, Taiwan and Malaysia to be negatively impacted, hence hindering the economic growth.
“However, if an unfavourable decision is made, our currency and other emerging markets will take a hit,” he said.
Moving forward, Nazri Khan expected the fund flow from foreign investors to continue increasing next week against a backdrop of stable economic outlook and steadier oil prices.
“The ringgit will also appreciate backed by higher oil prices,” he said.
Another analyst, MIDF Head of Research Mohd Redza Abdul Rahman said major currencies including the ringgit strengthened on Friday while the dollar index retreated.
He said recent global developments would certainly influence currency movements such as the monetary policy decisions by the European Central Bank, Bank of England and most notably the Central Bank of Turkey.
“Comparing against major regional currencies, it is indeed true that despite the weakening of major currencies against the greenback, the ringgit depreciated the least by a magnitude of -1.8 per cent, vis-à-vis other currencies such as rupiah (-8.0 per cent), Renminbi (-6.0 per cent) and Singapore dollar (-3.0 per cent).
“This is owing to the smooth transition of the government post elections, coupled with decent economic performance,” he said.
Mohd Redza said the ringgit might test the 4.12 level next week, aided by strengthening commodities prices and macro indicators such as the Consumer Price Index for August which would be released next week.
On Friday, Prime Minister Tun Dr Mahathir said the ringgit was currently undervalued, blaming various external factors, among others, the US-China trade war which had resulted in poor economic performance for some countries.
“All the currencies around the world are experiencing depreciation,” he said, adding that the Argentina peso and Turkey Lira also took a hit.
Lim Guan Eng said the ringgit’s performance against the US dollar was among the best vis-a-vis the world’s major currencies despite the recent transfer of power and weak external factors.
He said since end-2017, the ringgit’s value versus the greenback had only slid 2.2 per cent as of Sept 11.
On corporate development, Malaysian plantation company FGV Holdings Bhd was put on the spotlight during the week, as Group President and Chief Executive Officer Datuk Zakaria Arshad, was unexpectedly suspended from his posts on Sept 12, 2018.
FGV, in an announcement to Bursa Malaysia, said that a notice of inquiry had been issued to Zakaria following the conclusion of internal investigations into 10 critical issues that had resulted in financial loss for FGV and its shareholders.
It was reported that up to seven of these issues were related to FGV’s unit, Delima Oil Products Sdn Bhd, over delayed payment and delivery of goods involving Afghanistan-based customer, Safitex Trading LLC.
Zakaria’s suspension came right after the Ministry of Finance Inc (MoF Inc) withdrew his nomination as a government-appointed director at the world’s largest crude palm oil producer.
In a filing with the local bourse, FGV said the cessation as director takes effect upon the company receiving a letter from the MoF Inc, FGV’s special shareholder, on Sept 12, 2018, withdrawing its nomination of Zakaria as a government-appointed director in implementing FGV’s new constitution, which was approved by its shareholders on June 28, 2018.
“The cessation is in accordance withClause 89(3) of FGV’s new constitution,” it said.
Commenting on this, a plantation analyst from Public Investment Bank, Chong Hoe Leong, said it would be good to hear if the company can clear the issue as soon as possible.
“I think there will not be much impact on the company’s operations. It is a government-linked company so any change in the political landscape would have some impact on the company itself,” he said.
On Friday, FGV’s share price ended at RM1.55 with 2.49 million shares transacted. — Bernama