‘Flood of money leaving Malaysia to reverse after BN wins polls’
(TMI) – Money flowing out of Malaysia should reverse course after an expected Barisan Nasional (BN) win in Election 2013, according to fund managers and market analysts in the region.
This comes as foreign funds pulled RM10.7 billion out of Malaysia in February due to election jitters, while at the same time pushing RM29.4 billion into neighbouring Thailand.
“Elections are probably going to be held before the end of April and we expect to see funds coming back,” Wee-Khoon Chong, a rates strategist in Hong Kong at Societe Generale, told financial wire Bloomberg in a report published today.
“The risk-reward is still favoring the incumbent to continue another term.”
Investors have stayed cautious in the past few months, over the uncertain date of the next polls, and worry that a loss by long-ruling coalition BN might postpone economic reforms.
Bloomberg reported that Citigroup Inc analysts Kit Wei Zheng and Brian Tan noted that a narrower win for BN compared to 2008 would raise the risk of delaying some fiscal reforms that will affect inflation, although the policy direction would stay unchanged.
“If there’s status quo and Barisan Nasional stays in power, there’ll be a lot of pent-up demand for Malaysian ringgit assets and funds will probably find their way back onshore,” said Lum Choong Kuan, CIMB Investment Bank Bhd’s head of regional fixed-income research told Bloomberg.
Foreign funds have preferred Thailand because of Malaysia’s political uncertainties and Indonesia’s current-account deficit, but they are expected to return to Malaysia where there has not been any major civil conflicts like the 2008 and 2010 Bangkok protests.
“On a historical basis, the political situation in Thailand has been more volatile compared to Malaysia. In terms of stability, investors still prefer Malaysia rather than Thailand,” said Lam Chee Mun, a fund manager at TA Investment Management Bhd.
Maybank Investment Bank (IB) Research came up with three possible outcomes for Election 2013 in its daily report yesterday, and a win by opposition pact Pakatan Rakyat (PR) was in none of them.
Maybank IB put a BN win with a smaller majority as its baseline scenario, while keeping the status quo would be the best-case scenario. The third scenario would be a hung parliament.
