THIS year is expected to be a tough one for Malaysians. Inflation is on the rise and many will be looking to stretch their ringgit.
The Government has increased petrol and sugar prices, cigarette excise duties and electricity tariffs and we can expect another round of petrol subsidy reductions and toll rate adjustments, aiming to reduce the country’s financial burden.
Small and medium enterprises (SME) will also have to deal with a landscape where prices of raw materials continue to escalate.
Given the economic headwinds, it’s not surprising if many ordinary Malaysians are wondering what to do with their money in terms of investments.
On the global front, there is light at the end of the tunnel.
The online unit trust distribution arm of iFAST Capital Sdn Bhd told MetroBiz that SMEs in Malaysia stand to benefit as the global economy continues to strengthen.
“With US economic growth accelerating and Europe out of recession, a large proportion of the global economy is on course for stronger growth this year,” said Fundsupermart.com general manager Wong Weiyi.
Recovering from the doldrums of 2008 to 2009, the US economy has seen more momentum building in hiring, residential construction, consumption spending and business confidence last year.
“For an investment community that has gotten used to the ‘new normal’ of global growth, this confluence of positives should bring about a sea of change in investor mindsets, which have been previously geared towards capital preservation and income,” he added.
This would be the perfect time for SMEs that are looking to take the next step. Strong conditions in US and Europe will enable Malaysian companies to market their products there.
SMEs that export their goods abroad are likely to benefit from the improved overseas demand and likely to see better earnings, offsetting the tightening in the domestic market.
This is good news for companies such as Dexsim (M) Sdn Bhd, a Malaysian-owned company that has a footing in the China market as one of the pioneers in manufacturing thermo-sensitive colour-changing ceramic mugs.
The company also serves clients from the Americas, Europe and the Middle East.
Another Malaysian SME that will be able to capitalise on this is Ceriatone Amplification Sdn Bhd. It supplies amplifiers (hand-wired tube guitar amplifiers) globally.
Ceriatone Amplification has clients in 72 different countries across six continents and with US and Europe going strong this year, business may grow beyond expectations.
Wong also said savers need to change their mindsets and look at investments as a form of savings. This, he said, is to protect their purchasing power.
Corporate revenues and earnings are expected to be positive this year as companies build on last year to achieve new highs, aided by better earnings.
“Asia ex-Japan companies are set to see another year of record-high earnings , although the benchmark index still remains 20% off its 2007 all-time high, yet earnings for 2013 are forecast to be 26% higher than what they were seven years ago,” said Wong.
He added stronger growth in developed economies will provide a near-term boost for Asian exports.
Besides this, earnings for China companies are expected to grow despite concerns about economic growth.
“This means valuation will get cheaper if investors remain unmoved,” explained Wong.
North Asian markets like China, Hong Kong and South Korea are extremely attractive and are expected to grow.
However, companies or investors looking at South-East Asian markets should exercise caution.
Companies that are venturing into Indonesia and Thailand markets should keep an eye on growth concerns and renewed political instability.
“Rate hikes in Indonesia are likely to temper growth and Thailand’s political uncertainty has reared its ugly head again. We eagerly await an opportunity to upgrade our market ratings should valuations improve as investors become less enamoured with these former market darlings”, said Wong.
Malaysia, blessed with political stability and sustainable growth, has been attracting SMEs from Asean.
MetroBiz earlier reported that a Singaporean celebrity couple is setting up a chain of cupcake outlets in the Klang Valley.
Jaime Teo and Daniel Ong the founders of Twelve Cupcakes Singapore already have three cupcake outlets in Petaling Jaya and Kuala Lumpur.
Malaysia is the fourth country in the region where the company has a presence.
In terms of other investment classes, gold over the years has been considered a safe investment. However, gold finished the year as one of the worst performing asset classes, bringing to an end a decade-long rally in the precious metal. It suffered its sharpest fall in 30 years.
“Investors who have been seeking to acquire some of the precious metal might find current prices more acceptable compared to where it was earlier in the year,” said Wong.
“One should be reminded that in an era of rising interest rates and yields, the opportunity cost of holding on to the shiny metal is not insignificant and will increase as yields normalise and economic growth continues to firm,” he added.