Nomura Global Research has just downgraded Malaysia again. Nomura Global Research advises its clients to ‘underweight’ on Malaysian equities. (In brief, they are asking investors to sell Malaysia and look elsewhere) It said, “Our economists believe there is a high risk of fiscal slippage and the possibility of a sovereign ratings downgrade that could trigger more capital outflows.” Full article in TheEdgeMarkets.com here.
I disagree with Nomura Global Research definitely but I am just a normal Malaysian. Let’s hear what our Finance Minister Lim Guan Eng said. He disagreed with Nomura’s views about Malaysia’s worsening budget deficit from 3.7% to 3.9% for 2018. In fact he said the budget deficit of 3.7% for 2018 and 3.4% for 2019 is achievable. He pointed out that it’s true that abolition of GST has left a deficit of RM20 billion for the government. However, SST collections had exceeded projections. Instead of RM4 billion for the period of 1st September to 31st December 2018, the collection was RM5.4 billion instead. Article in FreeMalaysiaToday.com here.
Lim then reminded Nomura that even international rating agencies such Moody’s, Standard & Poors and Fitch are still maintaining Malaysia’s Investment Grade rating of A3 or A-. (Yes, I said the same thing many times too. Earlier article here.) Beyond just the deficit, Nomura also mentioned that Malaysia was too dependent on Petronas’s revenues to bankroll its budget. Answering this, Lim said that in 2009, Malaysia’s reliance on Petronas was 41.3% of its income. However, this has been reduced to just 10.5% currently. Please refer to the full article here.
Really thinking of following Nomura’s recommendations? As long as we have found a much better market to invest in, why not? Else, buy where we are more familiar instead. Just a reminder, the stock market rout did not happen just in Malaysia and did not even start from Malaysia… However, a look around the stock market will reveal that many counters have already lost a lot of its market capitalisation and some are becoming attractive when compared to its historical PER. Happy investing yeah.
written on 11 Jan 2019
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