Malaysia shrugs off 1MDB scandal to become 2Q17 star – 29 Jun 2017

  • Malaysian assets are back in favor as investors focus on encouraging signs of an economic turnaround. The shift means that Prime Minister Najib Razak, who has weathered political attacks and protests going back to 2015, may call an early election to cement his hold on power.
  • The ringgit is easily the strongest major Asian currency in 3Q17, climbing more than twice as much as the next best, the Chinese yuan. Malaysia has been rocked by far-reaching investigations into investment fund 1MDB, yet double-digit acceleration in the country’s exports has lifted the economy, which grew 5.6% y/y in the 1Q17, the most since early 2015.
  • Overseas investors have purchased USD2.48bn of Malaysian equities in 2017, the biggest stock inflow in Southeast Asia. The FTSE Bursa Malaysia index hit its highest in two years on 16 Jun 17 as technology, banks and construction shares soared.
  • The stock market’s gains came as the ringgit rebounded from a 19-year low. After missing out on an earlier rally in regional currencies, it strengthened as growth quickened and concerns eased over an earlier move by the central bank to deter currency speculators.
  • Bond investors have also returned. Malaysian debt securities drew more than MYR16bn in Apr 17 and May 17 after recording the longest stretch of outflows in two years.
  • A general election isn’t due until mid-2018, but there’s growing speculation that Najib will call for polls in 2017 with growth holding up and the opposition parties racked by infighting.

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