Seize EM Opportunity With Reforms, Investment Push - Maybank IB

KUALA LUMPUR, March 25 (Bernama) -- Malaysia should seize the opportunity to differentiate itself positively in political and policy stability among emerging markets (EMs) by accelerating foreign and domestic direct investment, leveraging a broadly favourable global backdrop.  

Maybank Investment Bank Bhd (Maybank IB) said the country should strengthen initiatives such as the Johor-Singapore Special Economic Zone (JS-SEZ) and the National Investment Incentive Framework (NIIF), while fast-tracking reforms to cut red tape, inefficiencies, and corruption.  

The investment bank noted that while major EM peers Indonesia and Turkey experienced sharp sell-offs last week, weighing on sentiment across the asset class, broader fallout for Malaysia should be limited.

It said the underlying drivers of the sell-offs were domestic political and policy issues, which do not alter the generally positive global outlook for most EMs.  

“Factors such as peaking US market and dollar exceptionalism, declining US interest rates as reaffirmed by the Federal Reserve, falling oil and energy prices, and favourable supply chain and trade reorientations are positive for EMs,” it said in a statement.

On potential spillover effects, Maybank IB said Malaysian corporates have only limited direct exposure to Indonesia and Turkey.  

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“We note potential drag on banks such as CIMB, where its Indonesian subsidiary CIMB Niaga contributes 25 per cent of group earnings, and non-coverage Maybank, which derives about three to five per cent of group earnings from Indonesia. In the telco sector, Axiata generates 20 per cent of total operating net profits from Indonesia.  

“Turkey is the second-largest operating footprint for hospital operator IHH Healthcare, contributing between 27 per cent and 30 per cent of group financial year 2024 revenue and earnings before interest, taxes, depreciation and amortisation,” it added.  

Maybank IB also proposed regulatory measures such as linking higher market free float to lower corporate tax, removing all remaining foreign ownership limits in sectors like banking and telecommunications, and introducing a second government-linked companies transformation programme (GLCT 2.0) to prioritise shareholder diversification and asset spin-offs.  

Last week, Indonesia’s stock exchange temporarily halted trading after the benchmark Jakarta Composite Index (JCI) plunged five per cent amid mounting concerns over economic growth. 

Meanwhile, Turkey’s lira-denominated assets slumped after Istanbul Mayor Ekrem Imamoglu, a key opposition leader, was detained, sending the BIST100 benchmark down seven per cent and pushing the currency to a record low against the US dollar.  

-- BERNAMA