FILE PHOTO: A sign outside the headquarters of JP Morgan Chase & Co in New York
KUALA LUMPUR: Global investors are looking for places to put money in Asean, due in large part to the geopolitical situation between the United States and China, and Malaysia has a very interesting opportunity to attract investments, according to JPMorgan head of Asia-Pacific equity research James Sullivan.
“If we look at it from an asset allocation perspective, what we’ve seen are dramatic shifts of capital out of China, and partially into the rest of the region (Asia).
“The primary beneficiaries of that have largely been India and some of the larger Asean economies inclusive of Indonesia. We’ve seen rising interest in markets like Vietnam,” said Sullivan during a dialogue session entitled Malaysia’s economic sustainability: Addressing new challenges at the Invest Malaysia: Pivoting for the future conference at Bursa Malaysia here yesterday.
“We’re at a moment in time where we are seeing significant change in investor perspective. Investors are very, very thirsty for growth in Asia. Malaysia has a very unique opportunity to step up – provide regulatory certainty, and a reduction in the perceived risk profile of investing in Asean and in Malaysia itself,” he added.
The dialogue session was moderated by JPMorgan chief economist (for Asean) Ong Sin Beng, with other participants included Bank Negara assistant governor Fraziali Ismail and Socio-Economic Research Centre executive director Lee Heng Guie.
Fraziali pointed out that there is an urgent need for Malaysia to take heed of global developments especially the increasingly interventionist approaches by governments in the configuration of value chains.
He cited the recent US$52bil (RM235.38bil) US CHIPS Act which aimed to strengthen domestic semiconductor manufacturing, design and research.
“Malaysia is the sixth largest producer of semiconductors and we are the 11th largest exporter of electrical and electronic products (E&E).
“So, the push forward towards reshoring with such highly interventionist approach will surely have an impact on Malaysia,” said Fraziali.
Reshoring is the process of moving the manufacturing of goods back to the company’s original country.
However, Fraziali noted that in some circumstances, Malaysia is a beneficiary of the trade war between China and the United States.
“We have comparative advantage and strong ancillary support, in terms of the E&E industry. Granted, the research and development happens in Silicon Valley and other parts of the world.
“Where we come in is our manufacturing prowess – we have a relative degree of adaptability and production optimisation.
“So while I am relatively optimistic that we can navigate our way (through global developments), we can’t lie down and hope for the best,” he said.
Meanwhile, Lee called for structural reforms by the government, to make the country more competitive.
He said among the needed structural reforms is a reintroduction of the goods and services tax (GST), which is favoured by the majority of respondents in a recent survey done by the Federation of Malaysian Manufacturers.
“Industries favour GST but perhaps, the government can start at a lower rate of 4% and move on as the economy continues to strengthen.
“We hope that there will be an announcement in Budget 2023 but the government should give a grace period of six to 12 months, or by January 1, 2024 for the implementation,” he said.
Bursa Malaysia chairman Tan Sri Abdul Wahid Omar said despite global developments that may cause economic slowdown and potentially recession in some countries in 2023, Malaysia’s economy is not likely to dip into recession.
“Apart from the benefit of pragmatic and responsive policies, Malaysia has over the years diversified the structure of our economy to be less dependent on commodities.
“The agriculture and mining sectors now contribute only 14% to gross domestic product, with the services sector contributing 57% and manufacturing sector contributing 24.3%.
“The diversity of our trading partners where we are not overly dependent on any particular country or market, would add to our economic resilience,” Abdul Wahid said in his opening address at the event.
He also pointed out that Malaysia banks are well capitalised, liquid, better managed and effectively regulated as well as supervised by the central bank.
“A very important factor contributing to Malaysia’s resilience is the strength and stability of our financial system.
“Banks also continue to fulfil their intermediation role by mobilising funds to be channelled to productive sectors of the economy,” he said.
The seven banking stocks – Malayan Banking Bhd
, Public Bank Bhd, CIMB Group Holdings Bhd, Hong Leong Bank Bhd, RHB Bank Bhd, AMMB Holdings Bhd and Alliance Bank Malaysia Bhd – have a combined market capitalisation of RM325bil or about 20% of total market capitalisation of RM1.65 trillion as of end-June.
“The Malaysian banks and financial services companies have significant weighting in both the FBM KLCI and the FTSE4GOOD Bursa Malaysia sustainability index,” he said.
Also, the financial system is complemented by well-functioning debt and equity capital markets totalling RM3.5 trillion as of Dec 31, 2021, made up of RM1.7 trillion in the debt capital market and RM1.8 trillion in the equity capital market, according to Abdul Wahid.
“Malaysia is home to the world’s leading Islamic capital markets, totalling RM2.3 trillion – representing almost two-thirds of the total capital market,” he added.
“On the resilience of the corporate sector, resilience should be redefined as the outcome of a process of transformation or of reinvention – so that we can sustain and ‘bounce back’, but in a much-improved form than before.
“This process of ‘reinvention’, of finding our competitive position within that future, is not only an academic or data-driven exercise, but it will require talent too.
“It is critical that the next generation of leaders not only step up to the plate, but bring in a fresh perspective that serves to change the game.
“Today’s leaders must share their skills and experience with those who possess the youthful energy and will to make this change happen,” Abdul Wahid added.
