Foreigners still find good values in M’sia

By DANNY YAP

FOREIGNERS still see good valuations in Malaysian properties and other assets despite the current political uncertainties.

When the ruling coalition Barisan National lost its two-thirds majority in Parliament in March, there was initial fear that foreign investors would reduce their investments in the country.

But this has been proven wrong given the high level of foreign interest and investments since the election results.

In fact, many sectors are benefiting from foreign investments and the number has grown steadily over the years.

According to the Malaysian Industrial Development Authority (Mida), the country's foreign direct investment (FDI) inflows this year is expected to surpass last year's RM33.4bil.

Outgoing Mida director-general Datuk R. Karunakaran was quoted as saying that the first four months of 2008 saw RM23.9bil investments approved, of which RM16.6bil was FDIs.

He said the amount (RM23.9bil) did not include newly announced projects by Ibiden Co Ltd, Q-Cell, SunPower Corp and Honeywell International Inc.

The combined investment by the three foreign companies is expected to hit RM9bil, bringing total FDIs to over RM20bil.

Sectors benefiting from foreign investment

Foreign investments are flowing into a host of sectors from high-end manufacturing, property development, information technology, banking and biotechnology, among others.

Japanese printed circuit-board maker Ibiden said it would invest RM1.2bil in the first phase of its printed wiring board plant at Penang Science Park.

Germany’s Q-Cells AG, the world's largest independent solar cell manufacturer had picked Malaysia to be its first manufacturing plant in Asia for photovoltaic products with an investment of over RM1bil for Phase 1.

US-based company SunPower plans to build an RM2.2bil solar cell fabrication plant in Malaysia in two phases, with the first phase comprising 14 solar cell production lines.

While another US-based company Honeywell International Corp, via its business group Honeywell Aerospace plans to invest RM115.2mil in a 220,000 sq ft avionics manufacturing plant in Penang.

Biotechnology

Malacca Chief Minister Datuk Seri Ali Rustam said the state had secured foreign investments worth RM6.5bil this year, which is about half the amount received over the last seven years.

Ali said Malacca had attracted foreign biotechnology and manufacturing companies.

“From 2000 to 2007, we attracted RM15.6bil of foreign direct investment,” he said, adding that Malacca's yearly foreign investment target was RM3bil.

Vivo Bio Malaysia Sdn Bhd, a subsidiary of India's Vivo Bio Tech Ltd, plans to invest RM450mil by year-end to build a research and manufacturing plant in Malacca for treatment of diseases.

Property development and banking sectors

Meanwhile, the Prime Minister's Department senator Tan Sri Amirsham A. Aziz said current total investment projects recorded in Iskandar Malaysia was about RM33bil, representing 70% of total targeted investment of RM47bil.

He said so far, the total number of investors for Iskandar was 160, Sabah Development Corridor (34) and Sarawak Corridor of Renewable Energy (31) respectively.

The number of investors for the Northern Corridor Economic Region and East Coast Economic Region is yet unclear.

Malaysia also attracted a fair number of foreign investors from the Gulf Cooperation Council (GCC) countries comprising Saudi Arabia, Bahrain, Qatar, Kuwait, Oman and the United Arab Emirates.

Currently, six foreign companies from UAE, Kuwait, Saudi Arabia and Lebanon have invested in Iskandar Malaysia, while some had ventured into Islamic banking and properties.

They are Kuwait Finance House, Aldar Properties PJSC, Mubadala Development Company, Millennium Development Company, Damac and Limitless Dubai.

Kuwait Finance House (M) Bhd, (KFH) a wholly-owned subsidiary of Kuwait Finance House, GCC's second-largest Islamic lender by market value, plans to expand its capital base here by another US$100mil (RM325.48mil) this year.

KFH Malaysia managing director Datuk K. Salman Younis said the bank would still commit to invest in Malaysia despite the tougher operating conditions and political uncertainty.

Other GCC companies such as Middle East lender Al Rajhi Bank Malaysia is waiting for its international Islamic banking licence, while Abu Dhabi Commercial Bank (ADCB) recently acquired a 25% stake in RHB Capital Bhd.

The acquisition was to enable ADCB to use RHB Cap as a springboard into Asean countries such as Thailand, Brunei and Vietnam for its Islamic banking operations, while RHB Cap could capture ADCB's network for sukuk issuance in Abu Dhabi.

It is interesting to note that in a recently released Global Competitiveness Report 2007-2008, Malaysia's competitiveness had moved up to 19th position from 23rd in 2007.

Also, Kearney's 2007 Global Services Location Index (GLSI) indicated that Malaysia was among the top three best destinations in the world for outsourcing activities.

Judging by some of the foreign investments, Malaysia remained a favoured destination to do business but of course, the number can be improved and the sky is the limit.

Malaysian government launches Asia's first Islamic exchange-traded fund(ETF)

KUALA LUMPUR (Thomson Financial) - The Malaysian government launched Monday Asia's first Islamic exchange-traded fund (ETF) in a bid to cement its position as the regional hub for the Sharia-compliant market, the fund's manager said.

The MyETF Dow Jones Islamic Market Malaysia Titans 25 (MyETF-DJIM 25), owned by state-controlled fund management firm Valuecap Sdn Bhd, is also Malaysia's first national ETF.

ETFs are index funds that can be traded, like stocks, on exchanges.

Government-linked investment companies (GLICs), including Khazanah Nasional Bhd and the Employees Provident Fund, will be selling a portion of their respective stakes in some state-linked companies in exchange for units in the ETF, which will have an initial size of 10 billion units, said Zainal Izlan, chief executive of i-VCAP Management Sdn Bhd, the manager of the fund.

Investors will gain immediate exposure to 25 leading Sharia-compliant companies listed on the Malaysian stock exchange through the fund, he said.

Zainal Izlan said the introduction of the national ETF is in response to the government's call to widen the array of Sharia-compliant products, in line with efforts to strengthen Malaysia's position as an Islamic financial hub.

The ETF is also aimed at increasing the free float of stocks covered by the fund by releasing some shares held by government-linked investment companies and at the same time boosting liquidity and promoting greater retail participation in the stock market, Zainal Izlan said.

'MyETF-DJIM 25 is designed to be a liquid, low-cost financial instrument for investors seeking a performance generally similar to the benchmark index,' he said.

The initial subscription price will be 1.00 ringgit per unit and the fund is scheduled to be listed on the main board of the stock exchange on January 31.

The top five stocks that make up the index are Sime Darby, IOI Corp, DiGi.com, Kuala Lumpur Kepong and MISC Bhd.

Malaysia's second finance minister, Nor Mohamed Yakcop, said the launch of the fund is in line with the government's plan to enhance Malaysia's leading position in Islamic finance, as well as to boost liquidity in the local stock market by gradually cutting its stakes in government-linked companies.

'With greater liquidity, investors will be able to buy and sell a large amount of shares, one or two million shares for example, without any major movements in the prices (of stocks being traded),'' he told reporters after launching the fund.

Nor Mohamed said seven GLICs will buy a total of 700 million units of the first national ETF, with the goverment planning to launch more national ETFs in the future.

On the performance of the economy, the second finance minister said the government is confident of overcoming the impact of a mild recession in the US as regional economies have shown signs of 'semi-decoupling.''

A mild recession in the US will not affect robust growth in China and India, thereby allowing the two Asian giants to continue to drive growth in regional economies

'Lights are coming out in Asia (and driving growth in the region),'' he said, referring to what he sees as the ability of Asian economies being able to partially decouple from the US.

'We should do all right (in the event of a mild recession in the US),'' he said, adding that the government has no plans to introduce new fiscal policies to offset the impact of a mild recession in the US.

The second finance minister also praised the performance of Valuecap Sdn Bhd, saying the state-linked investment fund has registered a strong growth of over 75 percent since it was set up four years ago.

The fund generated 2.5 billion ringgit of revenue last year, compared to 1.4 billion ringgit in 2006, Nor Mohamed said.

Malaysia lures foreign investors

KUWAIT (KUNA): Board chairman of the Kuwait Finance House (Malaysia branch) Shaheen Al-Ghanim said Tuesday that there are many factors that make Malaysia an important destination for foreign investors. He explained in a work paper presented today to a symposium on investment opportunities in Malaysia that Kuwait Finance House (KFH) has strengthened its strategy in tapping investment opportunities in Muslim countries by inaugurating a branch in Malaysia as an example of the growing capabilities of Islamic financial services all over the world. He said that in the light of economic indicators and positive social and economic benefits Malaysia has become a major player in the sector of innovative financing in the Islamic world. The Malaysian government, he said, has had a key role developing distinct monetary and financial systems integrated to provide key elements of Islamic banking services and products responsive to world money markets and capital markets conditions.

He added: “The interest that we have seen here in Islamic banking services in Malaysia is one of the main factors that encouraged us to enter into this market here where KFH gets clear support of the Malaysian Government and the Central Bank of Malaysia, both of whom encourage financial product innovation. “Al-Ghanim said that the preparations are in full swing now for the opening of the largest commercial complex in Kuala Lumpur (named Pavilion) which has been developed and financed through Kuwait Finance House and is considered the latest milestone in real estate projects in Malaysia.

Clinched

Moreover, the latest deal clinched by KFH in Malaysia involves the development of the city of Iskandar which is an international project to develop an integrated city in the southern part of Malaysia. This investment represents the largest foreign real estate development project in Malaysia and is also one of the largest real estate development projects in the region in which Kuwait Finance House (Malaysia branch) is investing about $330 million.

Al-Ghanim said that the figures show that the Malaysian economy has achieved a growth rate of six percent in 2007 driven by the growth of domestic consumption and the remarkable increase in the volume of private investment and outstanding performance in investment activities in the sectors of services, real estate, oil and gas.

He added that efforts at further enhancing Malaysia’s economic development and competitiveness involved launching the International Islamic Center of Malaysia in 2006 to serve Malaysia as a financial center for Islamic finance. Malaysia occupies a strategic center serving the East Asian region and facilitating the expansion of investment and trade between the region and the Middle East, West Asia, North Africa and strengthens relations among Islamic international financial markets.

In a related development, Kuwait is a top Malaysian trade partner in the region, said Malaysia’s Trade Minister Rafidah Aziz on Tuesday, adding that the bilateral trade had seen remarkable rise over the past few years. Addressing a forum on investment opportunities between the two countries, Aziz said bilateral trade had jumped from $79.3 in 1996 to $507 million in 2006.

Expected

She expected trade exchange for 2007 to see more hike since it hit $672 million that until November; $145 million for Malaysian exports to the Kuwait. Foodstuffs form 21 percent of Kuwait’s imports from Malaysia, equipment and machines 15.6 percent, wooden industries 15.5 percent and electric and electronic appliances 12.2 percent. Oil constitutes up to 87.5 percent of Kuwait’s exports to Malaysia in addition to other chemicals and petrochemicals. Addressing the investment climate at home, Aziz termed Malaysia as “the most attractive” among Asian markets, most of whose economies witness rapid growth, accompanied by developments of legislations and systems to attract more foreign capital.

The total foreign investment approved in Malaysia in 2006 according to the country’s Trade Minister hit $12.5 billion, pumped into 1,077 enterprises, compared to $8.26 billion for 1,027 enterprises in 2005. Malaysia invites the Kuwaiti businessmen and investors to enhance their investments in fields of real estate and Islamic financial services besides development projects for parts of the country, Aziz said.