Investor confidence in Malaysia's economy still strong, says OCBC Research

KUALA LUMPUR: Investor confidence in the Malaysian economy is still strong despite concerns over the global economic slowdown and Europe's prolonged euro zone debt crisis.

Selena Ling, Oversea-Chinese Banking Corporation Ltd (OCBC Bank) Global Treasury Research and Strategy Head, said the strong investor confidence was evident from the continuous inflow of foreign direct investments (FDIs) and resilient domestic demand.

"In terms of domestic economy, investment growth has picked up and domestic consumption is fairly resilient. "(While) in terms of FDIs, the country's policy in attracting FDIs is a big plus to the economy," she told reporters after presenting the Malaysian market Outlook.

Ling said unlike the 1997 financial crisis which exposed structural weaknesses in the Asian economy, the region's economy has now grown stronger and a lot of Asian governments, including Malaysia, has strengthened their fiscal and monetary policy framework over the last decade.

She said key projects such as Iskandar Malaysia would further drive FDIs into the country and could become the medium-term growth engine for the Malaysian economy.

The Singapore-based banking group however maintained Malaysia's gross domestic product growth at 4.2 per cent this year as it was conservative over deteriorating conditions in the western economies affecting regional economies.

Lim said eventhough the country's GDP growth in the first quarter was better-than-expected, domestic consumer spending, a key factor to the growth, might not be sustained.

"We are a bit hesitant to upgrade our growth forecast simply because of the external headwinds that we see and we want to watch whether domestic demand resilience is sustainable," she said.

On the overnight policy rate, she said, there was no sign in the immediate term that Bank Negara would reduce the rate unless the situation in the euro zone deteriorated further.

"Even if Bank Negara cuts by 25 basis points, it will send a very strong signal to the market," she added. - Bernama

+1 :D