Malaysia Bigfoots Thailand As Foreign Investors Return
Malaysia is rapidly dominating Southeast Asia as investors re-evaluate their options and chose to return, Reuters observed.
Its stable government and rising currency gives the country an edge that entices foreign investments. While other Southeast Asian nations grapple with political challenges, Malaysia is actively soaking up foreigners — having received US$1.75billion for its debts. Kuala Lumpur’s stock market is gunning for its strongest yearly performance in well over a decade.
Analysts say the ringgit has been the instrumental in this outperformance, and Asia’s best-performing currency thus far in 2024 should do even better as the Federal Reserve starts cutting rates, increasing the appeal of Malaysian bonds.
“It’s been a fairly startling outperformance for the currency,” said Leonard Kwan, portfolio manager of T. Rowe Price’s dynamic emerging markets bond strategy. “I think most of the returns of the performance have come from the currency, rather than on the bond side.”
The comeback story for Malaysia is underpinned by an economy that expanded at its fastest in 18 months in the Q2 2024 and a stable political environment since Anwar Ibrahim became Prime Minister in 2022 after years of turbulence.
The relative underperformance of Malaysia’s rivals in the region has helped, with political turmoil in Thailand and concerns around the incoming Indonesian government rattling investors. The ringgit touched an 18-month high against the dollar on 22 August 2024, taking its gains for the year to more than 5%, a far cry from earlier this year when it languished near 26-year lows.
Image credit – Reuters Graphics
Ben Luk, Senior Multi Asset Strategist at State Street Global Markets, said the ringgit benefited from the yen’s strength in recent weeks as investors unwound the popular carry trade and rotated into currencies that were “under-owned and under-valued”.
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