March 28 — Credit Suisse group is forecasting a more bullish outlook for Malaysia with a gross domestic product of 6.0 per cent this year compared with Bank Negara Malaysia’s (BNM) estimate of 5.5 per cent.
It also expects more senior investors to come to Malaysia for in-depth research on local listed companies following Prime Minister Datuk Seri Najib Razak’s address at the Asian Investment Conference in Hong Kong last week.
“They now better appreciate that he is a prime minister who means business, but also respects the fact that he faces a Herculean task in reforming Malaysia,” said Stephen Hagger, country manager & head of equities for Credit Suisse in Malaysia.
He said that a key takeaway was that Prime Minister Najib understood what the market wanted, but has to balance that with socio-political considerations and getting elected.
“PM Najib’s visit to Hong Kong served as a timely reminder to many investors not to forget about Malaysia,” he told Bernama in response to questions sent via e-mail.
Credit Suisse is the number one institutional investor research company globally.
In Hong Kong, Hagger said he met several senior investors keen to come to Malaysia to “kick the tyres” or go the extra mile in doing company research after hearing Najib and realising that Malaysia was becoming “under-researched.”
Najib last week met top-notch fund managers besides delivering a keynote address on Malaysia’s attributes as an investment destination for equity and capital market investments and its ground-breaking economic reforms.
He also met Credit Suisse special adviser, Sir John Major, who moderated the luncheon address where Najib discussed Malaysia’s economic transformation efforts and emerge as a high-income economy by 2020 and the soon-to-be unveiled New Economic Model.
Hagger said those who met the prime minister were surprised on the upside, particularly with regards to his openness and frank answers to questions.
Asked about concerns about investing in Malaysia, he said there were only a few well-capitalised stocks on Bursa Malaysia, while fund managers needed large and liquid stocks, so that they could buy or sell a position in one day.
“Malaysia has few such stocks and is competing for capital and ‘air time’ with the larger more liquid North Asian markets,” he said.
Fund managers are also looking for well-managed companies, he said.
However, he said the government has achieved considerable success with the government-linked companies’ reform programme in scaling down equity in listed entities, particularly at Khazanah Nasional Bhd, the government’s investment arm.
This has been followed up by the beginnings of a ‘sell down’ by Khazanah, which should improve the liquidity of those stocks.
“We believe the government can best protect the interests of its people by forming regulators rather than direct equity ownership.
“For instance, look at how successful Malaysia’s banking system is. This is due to excellent regulation by BNM, not due to government ownership of the banks,” said Hagger.
He cited how there was clearly a potential conflict of interest in the government owning controlling stakes in both Malaysia Airlines and Malaysia Airports Holdings, when there was no regulator to ensure ‘fair play’ with other airline operators.
Hagger said Malaysia was struggling to stay relevant as an investment destination for global fund managers primarily due to size and liquidity, but also of course, valuation.
“We notice that the foreign ownership of the Malaysian market has fallen significantly and the number of visits by foreign fund managers has dwindled.
“Events like Invest Malaysia — which starts next week are great, but very often, you have to go overseas to see fund managers,” he said.
He said the annual Credit Suisse Asian Investment Conference was a great forum for companies, governments and investors to meet, whereby there were about 270 companies from around Asia, including 16 companies from Malaysia, meeting some 2,000 fund managers from around the world, including several from Malaysia.
In addition, working with CIMB, “we are proud to have ‘showcased’ PM Najib and several Malaysian companies in New York last year.”
“We have also assisted the three regulators — Securities Commission, Bursa Malaysia & Bank Negara Malaysia — to meet fund managers overseas.
“Unfortunately, some company chief executive officers take investor relations more seriously than others,” said Hagger.
Hagger said Malaysia’s problems looked very easy to fix “when you are sitting behind a desk in Boston.”
The reform of the “30 per cent Bumi listing rule” would have been perceived as a ‘no brainer’ by many foreign fund managers, who probably failed to appreciate that it was an incredibly brave step by PM Najib, he said.
“I believe that is why PM Najib took such pains to explain that ... he understands what the market wants, but he has to balance that with getting his party re-elected,” he said.
He also said PM Najib was probably considering a sovereign dollar bond issue to showcase the strength of Malaysia’s economy and the banking system.
“The Malaysian banking system has come through the credit crisis with flying colours, with a large part of the credit going to the central bank’s policies,” he said.
Credit Suisse, the first foreign stockbroker to open shop in Malaysia, has consistently maintained a number one market share position versus foreign competitors, as measured by Bursa Malaysia.
“We have positioned ourselves as a gateway for both foreign institutional investors investing in Malaysia and domestic institutions investing overseas.
“We have maintained a commitment to our Malaysian equity research product at a time when many firms have either cut back or pulled out completely, as evidenced by our number one institutional investor research ranking.
“We have helped companies like Maxis, Maybank, Air Asia & more recently YTL to raise capital from overseas,”
I do hope all these motherhood statements will lead to something more substantive.
