How can you harness calmer times to make good investments? Are bonds worth looking at? What other investment areas should you be looking at?
The dust on the 1MDB scandal is finally settling and with that comes signs of peace and quiet. Finance minister Lim Guan Eng was reported in News Asia as hoping for a ‘boring democracy’ to deploy the US$7.5bn reparations packet bound for the country. This is excellent news for would-be investors coming back to a level playing field and less uncertainty. Now is the time to strike the hammer on investments. The question is, what do some of these investment considerations look like?
Trusting Government Bonds
With Malaysia’s finance minister hoping for a boring state of affairs, it makes sense to look at the bonds market. There are a hugely diverse number of bonds available now, and the Islamic green bond (or sukuk) has proved fruitful, raising US$1.42bn in funds already. While some investors may balk at the idea of tying up funds for many years, the returns are lucrative. According to some money experts, bonds can pay as high as 9%.
Strong fundamentals and the easing of economic uncertainties makes bonds attractive to investors. This is further supported by ample domestic liquidity and real money demand. For individuals, if you do require extra funds in the interim for valid reasons, personal loans and other credit options are an option. Risks will be on global oil price movements due to Malaysia’s reliance on oil revenue, and a potential higher net supply of government bonds in 1H19.
The Construction Industry
Construction and real estate is one of the biggest investment markets globally. For the past year, this wouldn’t be the case in Malaysia as the new ruling administration reviewed mega projects and budget 2019 sees a cut in development expenditure. Overall, the construction sector in Malaysia is expected to continue to contribute positively to Malaysia’s GDP.
Across the causeway, EdgeProp.sg notes that construction firms had the lowest profits in a decade. While startling, this should be encouraging to a would-be investor. There is likely to be bounce back this year as a third Singapore link is developed, and as housing demand increases; while slowing, the population growth rate remains at 1.4%. Total construction demand in 2019 is expected to range between $27b – $32b according to Singapore’s Building and Construction Authority (BCA) with 60% contribution from public sector construction and the remaining 40% from private sector construction.
Seizing the Fintech Industry Saplings
Malaysia has long been a leader in regional finance and especially Muslim finance. This has not led to a similarly strong showing in the fintech arena. The lack of recent growth can make this an attractive proposition to investors. Fintechnews.my note that there are now a few dozen fintech start-ups catered directly to Islamic finance, with strong attention being drawn from industry leaders drawn from the UAE. It’s a case of when, rather than if, the fintech wave starts to grow; it makes sense to get ahead of the tide.
Financial institutions will continue to innovate for costs savings and efficiency gains. Traditional financial services will continue to be disrupted. Malaysia as a leading hub for global Islamic finance is poised to drive innovative developments in Islamic finance in a sustainable manner. With a sense of relative calm, now is the time to start investing in Malaysia. Growth in multiple industries is on the horizon, and as a result a smart investor stands to make gains.