Malaysia scraps property tax in investment drive

By Mark Bendeich

KUALA LUMPUR (Reuters) - Malaysia moved on Thursday to scrap capital-gains tax on property and said it would boost share trading in an effort to stimulate local and foreign investment.

The initiatives helped boost the stock market which, along with the local currency, was already riding higher on signs that the country favored a slowly appreciating ringgit.

Prime Minister Abdullah Ahmad Badawi told an annual investor conference the government would scrap the 30 percent capital gains tax on property and also announced additional tax breaks for investors in a new southern development zone.

"This is long-awaited news for developers and investors alike and I hope that it will inject more excitement and dynamism into both the property and the financial sectors," he said.

Property values in the capital, Kuala Lumpur, fetch about a third of the values in cities like Hong Kong and Singapore, but regional property fund manager Peter Churchouse said abolition of the tax was unlikely to cause much excitement among foreigners.

Foreign investors still face heavy legal restrictions on land ownership in Malaysia, said Churchouse, who manages the $110 million Lim Asia Property Fund in Hong Kong.

"At the margin it's positive, but foreigners have problems investing in Malaysia anyway," he said.

Malaysia's property index jumped 2.2 percent after the premier's statement, beating a 1.3 percent gain in the wider market and led by AMDB and Land and General.