Malaysia: Turning Chinese
Our first country report as Chief Economist at CLSA was published on 14 November 1991. It was called The Malaysian Economy: Building on success. In the three previous years Malaysia had turned in real economic growth rates of 9.5%, 8.6% and 11.5%. The country was on the crest of a wave and fast establishing itself as the front runner in the new Asian Tiger group of powerhouse exporters. Turnover on the KLCI - through its two bourses in Kuala Lumpur and Singapore - was regularly the third largest in Asia behind Tokyo and Hong Kong. On some exceptional days it even exceeded Hong Kong. Then came the Asian Crisis.Since 1998 and the introduction of capital controls that froze assets in Malaysia, the attraction of the KLCI has steadily waned. The rise of China has obviously had a lot to do with that as well but political scandals, moderating economic growth and few new, inspiring issues have left Malaysia out in the cold. Yet it is still a major Asean economy.
More. It increasingly looks like the Asean economy that China will use to launch its Belt and Road Initiative in Southeast Asia. Putrajaya and Beijing are growing closer and, judging from the Chinese names on the building sites around Kuala Lumpur, Chinese developers are happy to flock to the country too. Proton, once the name synonymous with Malaysia's global ambitions, is now 49% owned by China's Geely Motors and its CEO is a Mainland Chinese.
Leaving aside what will be a structural positive for the next decade Malaysia, like the rest of the region, is also enjoying a cyclical upturn. That is why investors should take the plunge and go overweight the Malaysian market this year. Add to that a currency with only upside and it is an attractive proposition for 2018. Buy the KLCI.
Asianomics, founded by Dr Jim Walker in 2007 and based in Hong Kong, specialises in economic analysis research, cross-referencing their work with credit cycles, profit cycles and cash flows. Asianomics focus is on developments in the Asia-Pacific region, and they also cover developed markets like the US and Europe.
The Austrian Economics model provides a framework for the economic research. The basis of the School of Austrian Economics is that economies work more efficiently and effectively when companies and individuals are free from excessive interference by government and special interest groups. The Asianomics economic research team includes Deputy Chief Economist Sharmila Whelan who is recognised for non-consensus thinking and her depth and quality of primary research, and Chief Economist Dr. Jim Walker.
Asianomics’ subscribers have access to regular economic commentary, stand-alone Country Reports, Special Reports and Investment Strategy Reports. Dr. Jim Walker also provides weekly webcasts.
Dr. Jim Walker is regarded as one of Asia’s leading economists. Prior to setting up Asianomics, he was the Chief Economist at CLSA Asia-Pacific Markets, where he worked for more than 16 years. He has achieved numerous ‘Best Economist’ rankings in the Asiamoney, Institutional Investor and Greenwich surveys of fund managers.
Previous successful calls include:
- In 1995 Dr. Jim Walker wrote about the prospect of Asia being forced off its de facto dollar peg “within the next two-three years”. The Asian Crisis, precipitated by the Thai baht devaluation, began in July 1997.
- Forecasted the US 2007 downturn and financial sector meltdown in series of ‘Apocalypse’ reports.
- Called early the upswing in the Indian stock market in the final quarter of 2013.
Recent Recommendations:
- Overweight China - We are overweight Chinese equities with momentum improvement in the economy.
- Short Sterling, Long Renminbi - China’s currency offers good upside with a positive carry.
- Short European Financials, Long Indian Financials - This is the simplest pair trade to play superior demographics and growth in Asia relative to the region with the biggest problems.
- Long EM Asia, Short Developed countries - South and SE Asia, and direct investors from North Asia, are ‘buy and hold’ investment bets.
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