Global fund managers look to trim Malaysia holdings

By Lee Wei Lian

July 16, 2010

Datuk Seri Najib Razak’s administration has been trying to raise Malaysia’s profile as an investment hotspot. — file pic

KUALA LUMPUR, July 16 — Malaysia was the second-least-favoured destination among global emerging market (GEM) fund managers, according to a poll by Bank of America Merrill Lynch Global Research released this week.
The July survey had Taiwan, Malaysia and Chile as the most underweight markets for GEM investors. They were also slightly underweight on China due to slower growth prospects.
In financial markets, the term underweight is used by analysts to advise investors to reduce their holdings.
The findings of the survey could potentially signify a setback for Malaysia’s bid to become a more competitive destination for global portfolio investment.
The Najib administration has been trying to lift Malaysia’s profile as a destination for foreign investment to help the country achieve an average gross domestic product growth of at least six per cent per annum over the next five years, in an effort to become a high-income nation.
The country’s foreign direct investment rates have fallen faster than other regional players like Singapore and China, and at the same time, capital outflows have dampened private domestic investments. Net portfolio and direct investment outflows had reached US$61 billion (RM197 billion) in 2008 and 2009 according to official data.
Asia-Pacific fund managers that were surveyed, though slightly underweight on Malaysia, held a more favourable view of the country and were looking to cut back the most in Korea, India and Australia instead, while China, Indonesia and Taiwan were the most-favoured markets.
There was an increased pessimism among the fund managers overall on the economic outlook, with a net 12 per cent expecting weaker economic conditions over the next 12 months, as compared with a net 42 per cent expecting a stronger global economy in a survey two months ago.
The fund managers also expect China’s prospects to worsen, with a net 39 per cent expecting weaker growth, as compared with 60 per cent seeing stronger growth in January of this year.
Malaysia’s economy grew by an impressive 10.1 per cent in the first quarter of this year but the prime minister had on July 6 cautioned that growth in the second quarter could be slower due to deteriorating external circumstances.
The local stock market had been on a seven-day winning streak and neared a two-year peak before succumbing to profit-taking yesterday.
About 200 global fund managers with portfolios worth from US$250 million to over US$10 billion had participated in the Bank of America Merrill Lynch survey.