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Foreign investors returning as Malaysia's growth picks up, CIMB chairman says
August 30, 2017 / 12:23 PM / 21 days ago

Foreign investors returning as Malaysia's growth picks up, CIMB chairman says

KUALA LUMPUR, Aug 30 (Reuters) - Malaysia’s robust economic recovery is drawing foreign investors back to its markets but investment activity may only gain momentum after the general election, the chairman of Malaysia’s second largest CIMB Bank said on Wednesday.

Nazir Razak, a prominent industry figure and the younger brother of Malaysia’s Prime Minster, said exports to China, recovery in commodity markets and the uptick in the global economy have helped Malaysia grow faster. But foreign investors are holding off due to uncertainties created by the impending election.

“Investors generally don’t like uncertainty,” Nazir said in an interview with Reuters.

“The general election does bring an element of uncertainty. So the earlier election takes place, the better in terms of the overall operating environment,” he said.

“I‘m sure after elections, there will be greater momentum on deal front,” he said.

His older brother, Prime Minister Najib Razak, is looking to call elections as early as this year, government sources have said, to take advantage of the economic recovery and a weak opposition.

Speculation about an early election increased last week when Malaysia recorded its fastest growth in more than two years.

Nazir declined to comment on when he thought the election would be held.

Southeast Asia’s third-largest economy has been weighed down for the last two years by plunging oil prices and fallout from the graft scandal at 1Malaysia Development Berhad (1MDB), a state fund founded by Najib in 2009.

Nazir said investor interest in Malaysia had improved because of the economic comeback, and also as investors became less judgmental about non-economic matters.

“When you compare Malaysia and other countries like Turkey, Philippines and even the U.S., there is a sense that countries have their own domestic political dynamics which is very difficult for investors to understand,” Nazir said.

“There is a feeling now (among investors) that every country needs to make up its own political processes and deal with its own domestic issues.”

FLOPPED DEALS

On the country’s banking sector, Nazir said further consolidation would be good, but the economics of such deals must change.

A $9 billion deal to merge two big Malaysian banks RHB Bank and AMMB Holdings was dropped earlier this month as the banks could not agree on the terms.

“The real issue is the economics of banking has changed tremendously and I think until the sellers recognise that in reality its quite difficult to make it work,” Nazir said.

“The reality of the human cost of a merger is a great deal more painful ... What do we do with excess people? What do we do with displaced people?”

CIMB was in talks few years ago to merge with RHB Bank and Malaysia Building Society Bhd but the deal was eventually scrapped.

When asked if the bank would still consider a merger in the future, he said: “As it stands now, its not a path we would bother with.” (Editing by Jane Merriman)

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