Thursday, April 18, 2013

Healthy Market, Stronger Ringgit And Brighter Future

PETALING JAYA: The local stock market continued its stellar performance, with the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) scaling another new high, ending the day up 10.44 points at 1,710.97.

The ringgit had also strengthened against the greenback in recent weeks on a combination of clarity on the general election date as well as institutional buying of Malaysian Government Securities.

Furthermore, analysts have pointed out that outside of domestic factors, a brighter outlook for the developed economies usually spurred investors to make riskier bets on emerging market currencies.

And while yesterday's stock market close was attributed by dealers to situational plays led by Tenaga Nasional Bhd and IOI Corp Bhd, commentators reiterated the fact that government policies such as the Economic Transformation Pro-gramme (ETP) had had a positive impact on the equity market.

Aberdeen Asset Management Sdn Bhd managing director Gerald Ambrose said foreign investors had deemed the ETP as particularly successful, as reflected by the surge in private investments over time.

“Notwithstanding the nosedive of the economy in 2011 following the eurozone financial crisis, the Malaysian economy has picked up significantly due to the ETP, fuelling investment opportunities for the private sector,” Ambrose told StarBiz.

He also pointed out that the ETP was more effective compared with some of the previous policies due to its transparency, as seen through the setting up of an independent audit.

“The plan is also being carried out according to the timeline and (the committee) has even identified what the shortfalls are,” he said, adding that all these yardsticks had provided measurable effectiveness of the programme.

He further said that the Government's pro-business policies like liberalisation had enabled foreign players to enter the Malaysian financial market.

CIMB Investment Bank Bhd economic research head Lee Heng Guie said: “The most visible ETP impact was the 24.8% jump in nominal private investments to RM139.5bil (14.9% of gross domestic product), exceeding the target by 9.1%.”

He added that the slew of strategic reform initiatives rolled out under the ETP from time to time had also enhanced and sustained Malaysia's competitiveness.

Other notable efforts to improve the country's competitiveness included the enforcement of the Competition Act in January 2012 to remove anti-competitive agreements and the abuse of dominant positions; the full liberalisation of 15 out of 17 service sub-sectors, where up to 100% foreign equity participation was now permitted, in healthcare, education, professional services (accounting and legal) as well as other services; and the streamlining of the public service delivery to ease the cost of doing business, he elaborated.

Areca Capital chief executive officer Danny Wong, meanwhile, concurred that the ETP had had a direct positive impact on the country's economy.

“After the financial crises like the one that happened in 2008, exports had been affected. Through the recovery period, countries can no longer rely solely on exports for economic growth.

“The ETP, which has led to higher domestic consumption, has been deemed as an important element in driving the country's economy. For the past two years, the economy has grown and this is reflected in the growing composite index,” he said.

He also said that not only did the ETP-related projects spur domestic spending, but they had also boosted private investments through efforts like private-public partnerships.

The ETP initiatives were also the main drivers of private consumption that had a multiplying effect on auxiliary businesses, he told StarBiz.

Meanwhile, Datuk Seri Najib Tun Razak told Bloomberg in an interview that stocks and the ringgit would plunge if he lost next month's general election, contrasting his Government's pursuit of stable change with the upheaval that has engulfed the Middle East.

“It's better for us to manage change, rather than a change that is unleashed in an uncontrolled manner,” Najib said in the interview in Putrajaya.

“In the countries that have been involved in the so-called Arab Spring, many people are calling it the Arab Winter now.

“We are strong believers in the democratic process and it's the will of the people that decides,” he said. “Whatever the outcome, we have to respect the choice of the people.”

Najib said he wanted a mandate to complete the Government and economic transformation programmes he started three years ago, overseen by Datuk Seri Idris Jala, a former Malaysian Airline System Bhd chief executive officer, the Bloomberg report stated.

Private investments had since tripled, rising 25% last year to RM139.5bil (US$46.06bil), according to government data.

“The market, the currency, would take a very sharp decline” if the opposition won, he said.


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