MIA: Hope for the economy in Year of the Rooster

Assistant medical officer K Sasikala examines a patient with the Jenderata Group Hospital X-ray machine.

KUALA LUMPUR: The recovery in oil prices and investment inflows will bring some hope for the Malaysian economy in the Year of the Rooster despite the various challenges faced by the country, according to the Malaysian Investors’ Association (MIA).

Its president Datin Ho Choy Meng said global challenges in the likes of the US rate hikes, outcome of the US presidential election and Brexit, had affected the performance of the ringgit and stock market.

“As an oil exporting country, Malaysia was also hit by the declining oil prices...however since the last six months, the price has been on an uptrend from US$45 per barrel to US$55 per barrel.

“We hope that it will hover between US$55 and US$65 per barrel and translate into positive momentum to the economy and grow our gross domestic product (GDP),” she said in an interview with Bernama.

Having said this, Ho pointed out that the Malaysian economy would slowly recover and remain as the preferred destination for foreign direct investments especially in new segments like education and medical, on top of construction, infrastructure and property.

“We can ride on this advantage and provide more inflows into the economy. 

“With the oil price to recover soon, coupled with improvement in the global economy, this will be beneficial to Malaysia’s revenue besides the income from the goods and services tax,” she added.

Asked on the performance of the local stock market, she said currently there were inflows and outflows of foreign funds.

There are net money inflows amid retreating share prices and this may indicate a buy-on-weakness stance among some investors. 

Similarly, net money outflows amid advancing share prices indicated a sell-on-strength stance, Ho elaborated.

“Malaysia needs foreign investors’ participation in Bursa Malaysia. Their presence adds excitement to our stock market; otherwise, our pool of players may be too small to sustain its operations.

“But foreign money does not show mercy, hot money comes and goes as the foreign fund managers keep very fluid investment decisions...yet we cannot stop the manoeuvrability of such funds, sometimes occurring to the detriment of our market,” she said.

Currently, there are 747 companies listed on the local exchange with a market capitalisation of less than RM1bil, while 111 companies are valued from RM500mil to RM1bil.

At present, most government-linked investment companies have already invested in small- and medium-capitalised (cap) companies, although the stakes held are relatively small compared to their investments in large caps stocks.

Generally, small-cap stocks with the right niche offered relatively higher earnings growth potential compared to large cap stocks, which see slower but steadier growth potential, she said.

Meanwhile, the market barometer FTSE Bursa Malaysia KLCI ended 2016 at 1,641.73, down 3% from 1,692.51 points in 2015. - Bernama