Malaysia's capital market to remain resilient despite uncertainties in eurozone and US

PETALING JAYA: Despite the raging economic uncertainties in the eurozone and the United States, Malaysia's capital market is expected to remain resilient and perform reasonably well and better than its peers in the Asian region in the second half of this year.

The bullish outlook for Malaysia's capital market, according to Mayban Investment Management Sdn Bhd (MIM) managing director and CEO Nor Azamin Salleh, is on the back of several factors that work in its favour.

These include a better economic performance in the second half that would translate into better corporate earnings, improving investor perception towards the nation's Economic Transformation Programme (ETP), and the rising risks in developed Western markets, rendering emerging markets like Malaysia's increasingly attractive.

“Economic leading indicators seem to suggest that growth for the next half of the year should rebound from a potentially weak second quarter. Domestic consumption is expected to pick up from the ETP execution, resilient commodity prices and Malaysia's relatively lower inflation pressure,” Nor Azamin said.

“Stronger economic growth in the second half should translate into better corporate earnings, which would also support a reasonably buoyant stock market,” he explained, adding that he foresaw the FBM Kuala Lumpur Composite Index hitting 1,660 points by the end of 2011.

While Nor Azamin subscribed to the consensus view that Asian markets would perform better than developed Western markets, he believed Malaysia's market would outperform the regional markets.

“We believe the Malaysian market will perform relatively better than the region against the backdrop of volatile global market conditions due to the ongoing problems in the US and Europe,” he said, pointing to Malaysia's track record of being resilient and a relatively defensive market through the global economic crisis as an example.

“No doubt, the presence of foreign liquidity (or hot money') in the Malaysian market suggest that the country would not be immune to potential liquidity outflows due to external shocks, but the impact should be less than most other markets,” he reckoned.

Nor Azamin said he believed foreign investors were increasingly paying attention to Malaysia's market as a result of ETP gaining traction, and other proactive Government policies aimed at driving domestic consumption. The Government's strong foreign currency reserves were another plus point in foreign investors' assessment.

In addition, as a resource-rich economy, many viewed Malaysia as a beneficiary of a likely prolonged commodity boom. Malaysia definitely had a clear advantage in that sense, Nor Azamin said.