Scott Lim, the managing partner/chief executive officer of private equity and venture capital firm Sino RH Capital (M) Sdn Bhd, thinks that Budget 2017 does not alter the long-term direction of the market.
With the country’s gross domestic product projected at 4% to 4.5% in 2016 and productivity seen to be slowing down, he says long-term investors are concerned about the serious leakages that Malaysia has to tackle, as it will affect the reinvestment in the country.
“With underlying problems such as corruption, less productivity and efficiency, as well as money not being locked in the system, foreign investors will choose to invest in other countries,” says Lim, adding that the budget does not excite investors and they have put their money elsewhere.
Until Malaysia is clear on its policy issues, Lim doesn’t think there will be immediate inflows from foreign investors.
Lim says the Prime Minister’s trip to China will most probably be to lobby for fund allocations from the republic and invite the government-linked companies, and small and medium enterprises to invest in Malaysia.
On what kind of sectors China will be interested in, Lim says the world’s second-biggest economy will likely bring high-end value-added industries, taking into account the infrastructure here.
But he doesn’t think that Chinese technology firms will choose Malaysia as their operation base.
Meanwhile, he says structural weaknesses are evident, given the fact that Malaysia has a weak currency and there hasn’t been any significant increase in the current account surplus or exports.
“With the ringgit weakening and still not competitive, there is something wrong,” he says.
On the 1Malaysia People’s Aid or BR1M, he says: “Taking away subsidies from the B40 income group is hurting them, but replacing them with BR1M is not helpful in the long-term,” he notes.
Lim says the market will remain muted except for the encouragement in fund allocation for small- and mid-cap listed firms.
“It is best to segregate the small, medium and big-cap firms so that each will have its own strategy and this will further drive fund managers to focus on each of their strengths,” he notes.
