Malaysia in for a very challenging year

thestar Online

Kuala lumpur: Although Malaysia’s economy is holding up pretty well this year, 2009 is bound to be a very challenging year, given that all countries are interconnected via the global economy.

Prudential Fund Management Bhd chief investment officer Yoon Mun Thim expects the first half of 2009 to be a very “tough period” for Malaysia and the Government should announce more stimulus measures.

He said the impact on Malaysia this year had somehow been cushioned but many were beginning to feel the economic downturn towards the year-end.

“In Hong Kong, people were queuing at the banks to withdraw their money but it is not happening here. The authorities have been very proactive to address the economic slowdown. Bank Negara has stepped forward to guarantee deposits and the Government introduced the RM7bil stimulus package,” Yoon said in a briefing yesterday.

Yoon Mun Thim: "Malaysia has come a long way since the Asian financial crisis in 1997/98".

“Malaysia has come a long way since the Asian financial crisis in 1997/98. We are different from 10 years ago - economy, corporates and even politically. We learnt our lessons during the Asian crisis,” Yoon said, adding that Malaysia banks were defensive.

He said Malaysian banks were deposit-funded and lowly geared. The banks also had sufficient reserves to buffer any credit crunch shocks.

As at Nov 14, Malaysia’s external reserves of US$99.7bil could support 8.1 months of retained imports and 3.7 times short-term external debt.

Yoon said if needed, Malaysia had the ability for further pump-priming to stimulate the economy with its current external reserves and account surplus.

“However, it is also important that consumers continue to spend. The cycle has to continue to stimulate the economy. Those who can afford it should continue spending as we are facing a serious slowdown next year,” he said, adding that it was still too early to tell if consumer confidence had been restored.

He said inflation would not be a concern in 2009 as soaring inflation was likely to ease next year.

Corporate profit forecasts are likely to fall significantly further next year. Yoon said he was not too concerned with the 2009 earnings as they were expected to be poor, probably charting low single digit growth. He also expected the unemployment rate to remain high as corporate could bedownsizing.

On foreign funds inflow, he said during this time, a lot of countries would be competing for the same foreign fund inflows so Malaysia should continue to be competitive and make sure that it had reasons for investors to come in.

Yoon said although things were not looking very rosy, there were still opportunities to be tapped during this time of market uncertainty.

“Investors have to do their homework and understand their risk tolerance level before moving into the market at this time.”