KUALA LUMPUR: Malaysia is still the favourite emerging market choice of investors despite the current slow pace of foreign net inflow, says an academician.
Universiti Teknologi Malaysia geostrategist professor Dr Azmi Hassan said going into 2019, it was encouraging to note that Malaysia was considered the second lowest in terms of funds outflow, year to date, as observed by MIDF Amanah Investment Bank Bhd Research which monitors the performance of seven Asian nations.
“I am quite upbeat about the Malaysian economy compared with the less encouraging inflow of foreign investors for the six other nations,” he told Bernama.
Dr Azmi also said the current persistent outflow was closely linked to the level of confidence among foreign investors who were perturbed by current negative external developments.
“I believe domestic factors such as the fiscal policy of the Pakatan Harapan government coupled with Tabung Haji and Felda’s financial fiasco played a part in adding to the already sluggish sentiment among foreign investors but external factors assumed a greater role in swaying foreign investors decision to invest in Malaysia,” said
Azmi.
He referred to the issue of Britain’s exit from the European Union, the lingering United States (US)-China trade war and contraction in Japan’s gross domestic product growth as ‘casting a dark cloud’ worldwide and Malaysia was not spared the effect.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the main driver for this week was none other than the US Federal Reserve (Fed) ’s announcement of impending rates cuts, at least two more, in 2019.
“That would mean the Federal Fund Rate is nearing its neutral rate – a rate which is neither contractionary nor expansionary. So, again it is about the prospect of slower growth in the US as there is a lag time for monetary tightening to have an impact on the economy,” he said.
Mohd Afzanizam also said there was the probability that the US Treasury yield curve would invert at some point in the near
future.
“It would not be any different next week as the market will be very much data dependent. Perhaps some window dressing could happen that may help support markets as 2018 draws to an end,” he added.
Meanwhile, Putra Business School Senior Lecturer and Manager for Business Development Dr Ahmed Razman Abdul Latiff said market sentiment remained subdued as he Fed decided to raise interest rates on Wednesday and hinted of an additional increases in the next two years.
“Crude oil’s price also fell and hit its lowest in more than a year due to concerns about oversupply and the outlook for energy demand.
“The ringgit remains weak and is hovering around 4.20. Local market sentiment will remain subdued until the end of the year as people are already in a holiday mood,” said Ahmed Razman.
Meanwhile, OANDA head of trading Asia-Pacific Stephen Innes said foreign fund inflow was expected to be slower next week as investors are currently staying on the sidelines awaiting fresh developments in the new year.
“With oil prices weakening coupled with the 0.25 basis point hike by the Fed led US equity markets to weaken which in turn saw Asian stocks taking a dip as
well.
Innes said the over the week, the ringgit’s performance was affected by falling oil prices, as well as, regional risk sentiment.
The heightening of trade tension between the Trump administration and China and the performance of palm oil and rubber export continuously affected sentiment for the ringgit.
“The ringgit is heavily reliant on oil and commodity exports. If sentiment for both these items is positive, the ringgit could have a positive push,” he added. -Bernama
