SHAH ALAM, Jan 16 — Malaysia’s capital market has gained an influx of RM20 billion in bonds last year, in contrast to the RM11 billion in foreign money that had left the stock market post-GE14.
The Straits Times (ST) Singapore reported today that according to economists, the return of foreign funds reflects well on market reforms under the Pakatan Harapan government.
The foreign funds channelled into government bonds — which makes up most of the trade-in ringgit-denominated securities — had shown that the reforms of the Federal government are building confidence in the Malaysian economy, despite the ongoing political uncertainty.
Executive director of Socio-Economic Research Centre Lee Heng Guie told the Singapore daily that this shows “the government is continuing to reform public finance and controlling its debt.”
However, he said the Kuala Lumpur stock market has been hit as Malaysians adjust to the “negative surprises” in terms of new policies or regulations, such as price reductions in telecommunications and the revamp of the power production sector.
Lee added that he was also optimistic about the upside in “a year of reversal” on Bursa Malaysia if there are no new policy shocks.
Economist Hafiz Noor Shams, who works in the Finance Minister’s Office, had on his personal Twitter account wrote that “public finance reforms proceeded quickly, led to increased confidence in bonds”.
“This is why many previous equities people benefiting from the status quo hate reforms. It means they have to work harder for returns. Less rent-seeking opportunities,” he added.
Singapore Institute of International Affairs senior fellow Oh Ei Sun said investors are still on a “learning curve” after the historic 2018 election.
“The old regime’s long-running cronyism is no longer the mainstay of the economy, and there is a need to understand the new, more open and fair realities to discover value in the market,” he was quoted by ST.
Meanwhile, risk consultancy Eurasia Group’s Asia director Peter Mumford said the market would continue to be jittery as long as doubts remain over the issue of the power transition.
“While Dr Mahathir’s position is secure in the near term, there remains considerable uncertainty over when exactly, and to whom, he will hand over power. This creates an underlying level of uncertainty for investors,” Mumford said, in reference to Prime Minister Tun Dr Mahathir Mohamad.
On the strengthening of ringgit against the US dollar, with US$ 1 trading for RM4.06 this week in comparison to RM4.20 last October, the report cited many analysts say the RM4 level could be breached by the end of 2020, if the strengthening of oil prices continues and the US-China trade tensions ease.
The ST report cited analysts to have said that the truce in the trade war was a reason that export-oriented economies such as Malaysia, which are reliant on Chinese business, have seen their bonds become attractive again.
