Magazine article Business Asia

Investors Yawn as Anwar Falls

Magazine article Business Asia

Investors Yawn as Anwar Falls

Article excerpt

Foreign investors have reacted with a shrug to the conviction of former Malaysian Deputy Prime Minister Anwar Ibrahim on corruption charges.

The six-year jail sentence, viewed by many as unduly harsh, has probably heightened political risk attached to Malaysian investment, fund managers said.

However, Malaysia already offers too many powerful disincentives for the Anwar verdict to have much influence on investment decision-making.

"Investors will be unpleasantly surprised by this, but there's just not very much interest in being in Malaysia until capital controls are lifted and Malaysia is back in the indexes," said Ms Sandra Lawson, a political analyst at Goldman Sachs.

Restrictions on the movement of foreign money, along with profits taxes and unease about sudden policy shifts, remain foremost in investors' minds, she said.

For as long as benchmark indexes such as Morgan Stanley Capital International ignore the country because of its difficult investment environment, foreign investors will remain without any incentive to return. Existing obstacles easily counter Malaysia's solid progress on bank reform, strong exports and an improved growth outlook.

"Whether Malaysia is re-entered into the Morgan Stanley index, capital controls and taxes -- people will focus on these factors," said Mr Robert Rountree, research head at Prudential-Bache Securities in Hong Kong.

The effect of the Anwar verdict on political risk attached to Malaysian investment is difficult to establish, fund managers said, but they do believe it will have a negative influence. …

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