JP Morgan upgrades Malaysia on economic reforms, restored investor confidence and data-driven investments — Interview

KUALA LUMPUR (July 11): After maintaining its “underweight” rating on Malaysia for almost six years, JPMorgan has upgraded its stance on the country to “neutral” in a recent survey. CNBC An interview with Rajiv Batra, Head of Asia Pacific (ex-Japan/China) Equity Strategy at JP Morgan.

The decision was driven by several key factors, including policy reforms, data-centric investments and large-scale infrastructure build-out.

“What made it even more exciting for us were all the signs that were being made last year,” Rajiv said. CNBC.

He said Malaysia’s pace of progress has been impressive, with gross domestic product (GDP) growth recorded at 4.2 percent in the first quarter of this year and profit growth hovering around 10 percent to 11 percent.

This positive economic performance justified a revaluation and subsequent upgrade.

“We need to bring honour to the country,” Rajiv added.

One of the bold measures taken by the Malaysian government has been to reduce subsidies, which is often seen as a controversial and sensitive issue.

Rajiv pointed out that the savings from the reduction in subsidies would be put to productive use in the economy, to improve literacy rates, retrain people and implement progressive wage policy.

He added that Malaysia has taken inspiration from Singapore in this regard.

“This money will be put to productive use in the economy,” Rajiv said.

Malaysia’s rating upgrade reflects the restructuring of governance following the 1Malaysia Development Berhad (1MDB) scandal.

The government has made great strides in passing crucial policies and reforms, including the National Energy (NE) Transition and the Madani Economic Budget.

The government remains committed to fiscal consolidation without sacrificing growth and is targeting a 5% growth rate.

Foreign funds coming back to Malaysia

In Malaysia, foreign investors are returning after an initial exodus, and it is clear that perceptions are changing among international investors.

“Asean stock markets have seen outflows of $7 billion this year. Malaysia started the first quarter with outflows of about $150 million to $160 million but saw inflows of $200 million in the second quarter,” Rajiv said.

Notably, the benchmark index FBMKLCI is up 11% and the FBM70 is up 28% year to date.

Meanwhile, the ringgit has strengthened more than 2 percent against the US dollar from its lowest level in more than two decades in February.

The growing interest is further substantiated by Rajiv’s own observations during a recent trip.

“People are curious about Malaysia and asking where they should invest,” he added.

Malaysia, which had fallen off the radar of many foreign investors, is now attracting attention again.

One reason for this renewed interest is Malaysia’s potential as a technology hub.

“Foreign capital is starting to return to Malaysia,” Rajiv said, pointing to interest in sectors such as semiconductor packaging, data centres, electric vehicles (EVs), green energy and solar power projects in Penang.

Foreign investors are aware of the diverse themes and sectors Malaysia has to offer.

Malaysia’s market capitalization is now comparable with Singapore, Indonesia and Thailand, making it an increasingly attractive destination for foreign investment.

“Foreign investors are taking baby steps and putting money into the country,” he said, but foreign ownership remains at just 19 percent, still below peak levels of 35 percent to 40 percent.

Rajiv said JPMorgan’s upgrade reflects economic growth, effective policy implementation and improved governance, making Malaysia a more promising investment destination.

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