One phrase that investors are using more often when referring to Malaysia “Saya suka berada di sini”—or “I like it here”. A strong economy, a welcoming administration, a well-educated workforce, and well-developed infrastructure have quietly converted the Asia-Pacific country into a desirable investment destination for international investors.
We’ll look at the advantages and hazards of investing in Malaysia, as well as how to invest in the country’s stock market, and then take a look at the partnership deal between the Bank Islam and MIDA to provide financial services to investors.
Important Points to Remember
Malaysia has a strong economy and a government that is pro-business, making it a more appealing investment location for international investors.
Following Malaysia’s political turmoil and budget problems in 2008, some international investors are treading more cautiously than before.
For most overseas investors, ETFs are the most convenient option to invest in Malaysia, although investors can also look at the local stock exchange.
Malaysian real estate could potentially be a viable investment choice, but you should be aware of the risks before investing any funds.
The Benefits and Risks of Investing in Malaysia
Malaysia has a market economy that is open, state-centric, and freshly industrialized. Between 1957 and 2005, the country’s gross domestic product (GDP) increased by 6.5% on average, making it one of the region’s best-performing economies. However, as the economy matured, these growth rates decreased to just 1.29% between 2000 and 2015.
According to the IMD Competitiveness Index, Malaysia’s economy was the 14th most competitive in the world and the fifth most competitive among nations with populations of more than 20 million people, placing it ahead of Japan, Australia, and the United Kingdom. It was also named the sixth easiest country in the world to do business in by the World Bank, as well as the sixth most active country for foreign investment by FPM.
Investing in Malaysia has some geopolitical and monetary policy risk, as does investing in most emerging or frontier markets. Political concerns in the country weighed on the country in 2008, and the country had previously run enormous deficits that drew investor scrutiny. Political and electoral difficulties continue to wreak havoc on the country, causing instability.
What to Know About Investing in the Malaysia Stock Markets
Exchange-traded funds (ETFs) are the simplest way to participate in Malaysia’s stock market. These securities provide instant diversification by owning a wide basket of stocks and are easily bought and traded on U.S. stock markets. The iShares MSCI Malaysia Index Fund (NYSE: EWM), which matches the MSCI Malaysia Index, is the most popular ETF used to invest in Malaysia.
For international investors wishing to avoid foreign currency fees, American Depository Receipts (ADRs) are another option. These companies could be purchased individually or as part of a larger portfolio. However, investors should be mindful that many of these ADRs are illiquid, making it difficult to buy and sell at reasonable prices.
Here is a list of some of the most popular Malaysian ADRs:
- Malayan Banking Berhad (MLYBY)
- Genting Berhad (GEBHY)
- Genting Malaysia Bhd (GMALY)
- MBf Holdings Berhad (MBFBY)
- Tenaga Nasion Berhad (TNABY)
Finally, international investors can invest in the Bursa Malaysia stock exchange. The exchange is one of Asia’s largest, with slightly under 1,000 listed businesses and a diverse range of investment opportunities. The disadvantage is that U.S. investors will be required to open international brokerage accounts and may be liable to foreign capital gains taxes on any profits.
Investing in Malaysian Real Estate
Malaysia has made tourism its third-largest source of revenue after refocusing its efforts several years ago. For many international investors, this has made real estate investment a very attractive alternative type of investment. According to the Global Property Guide, average property prices increased by approximately 50% between 2002 and 2012, despite the fact that the market remains extremely competitive.
Despite these positive outcomes, there are a number of hazards that investors should be aware of. Government efforts to make housing more affordable have resulted in an oversupply, while new limitations on foreign purchase were imposed following the 2008 economic crisis. In comparison to the United States, the rental market is also quite modest.
Investors may not have as many publicly traded real estate trusts to choose from as they have in the United States, but they can buy property directly or invest in various property management companies.
Bank Islam and MIDA: Partnering to Provide Financial Services to Investors
The Malaysian Investment Development Authority and Bank Islam Berhad have signed a memorandum of understanding to develop a partnership to provide financial services to new and existing domestic and international investors in Malaysia.
According to Datuk Arham Abdul Rahman, CEO of MIDA “In response to the changing global business landscape, the Government, through MIDA, not only strives to promote the development of industrial ecosystems, but also seeks to cross-collaborate with relevant and supportive partners to maintain our robust ecosystem, which allows businesses, including small and medium-sized enterprises (SMEs), to thrive.” Malaysia’s SMEs are vital to the country’s economy, accounting for more than a third of the country’s GDP and employing over four million people.
MIDA wants to use this relationship to promote various fundraising opportunities in order to empower and finance commercial growth, successful ideas, and businesses, allowing entrepreneurs and business owners to raise funds from both the public and private sectors.
In the words of Mr. Mohd Muazzam Mohamed, BIMB GCEO, “through our comprehensive suite of Shariah-compliant product offerings, we will allow foreign SME investors to venture and fortify their market presence in Malaysia, contributing to the country’s economic recovery post-COVID-19 pandemic. This partnership between MIDA and BIMB would provide a platform to over 3,000 SME customers within our portfolio the access and opportunity they need to expand their offerings to markets beyond our shores.”
The partnership will also look into additional options for Bank Islam, including as the Domestic Investment Strategic Fund (DISF) and other MIDA awards. The Bank will provide financial counseling and accessibility through its SMEXpert mobile application, in addition to providing personalised financing package agreements for new and existing foreign SME investors.
In conclusion, this cooperation is considered as timely in terms of providing enough financial support to industry players, particularly domestic investors, as the government expands its efforts to enable investment in Malaysia.