Malaysia’s Doctor Order Dismissal
Malaysian shares tried to preserve modest gains as thousands poured into Kuala Lumpur’s central square to call for an end to political detentions and demand a fair contest between opposition parties and the long-dominant BN, which hopes to regain a two-thirds majority in elections likely to be called soon by Prime Minister Najib. His predecessor Mahathir continues to be an active influence and has urged “new blood” to limit government abuses he claims subverted the original intent of pro-Malay economic preferences. The minority Chinese and Indian communities have protested discrimination and rival groups led by Anwar Ibrahim, who has twice been acquitted of criminal charges, have seized on popular anger to insist on the removal of post-independence business and security provisions. GDP growth has revived on a combination of better electronics exports and domestic demand, but the former depends on the global end-user and supply chain cycle while the latter may waver with near-term energy subsidy reductions to narrow the persistent budget deficit. Banks have also been instructed by regulators to slow breakneck housing lending as prices jumped 10 percent the past year. With inflation again on the agenda from rising utility costs and credit, the central bank has recently allowed the currency to appreciate slightly without intervention, as foreign inflows into local bonds remain at 5 billion ringitt monthly. It has also encouraged Islamic sukuk placement from the region and Middle East targeting domestic buyers as the financial standards board housed in its building further promotes common instruments and oversight worldwide. Officials point out that food and fuel prices are unlikely to spurt with the peninsula’s rich commodities endowments, although plantation company listings have lost favor with a pause in palm oil values.
Indian cultural and corporate ties remain close as growth there slowed to 6 percent in the last quarter and the benchmark interest rate was slashed 50 basis points on a settled inflation reading. The fiscal and current account gaps continue to deteriorate as the budget statement raised the specter of additional retroactive foreign investor taxation, spurring a sovereign ratings outlook shift to negative. Portfolio equity outflows have resurfaced in part because of difficulties in mutual fund joint ventures with Fidelity deciding after asset and distribution limits to exit altogether. A long-awaited new pension scheme will fix management fees and prohibit insurance company clients that are a logical fit elsewhere. T. Rowe Price has been embroiled in disputes over personnel and advertising since taking a stake in the former UTI monopoly. Stock exchange relations with overseas institutions will be tested by the promise of direct individual entry and an activist holder fight against the Coal India selloff that favored state bidders in an operation underscoring the patient’s tentative health.
