Business

Tuesday August 11, 2009

Mobius: Illiquidity is least of challenges


Reform agenda of the current administration is the main problem, he says

THE illiquid nature of the local stock market continues to be a problem for foreign investors as they prefer more robust markets, but the bigger challenge is the Government’s reform agenda.

Templeton Asset Management Ltd executive chairman Dr Mark Mobius said the Malaysian stock market was not the only market facing the illiquidity problem; other markets in the region, except Hong Kong, did too.

“The big question or challenge is the reform agenda of the current administration and it is very encouraging that Prime Minister Datuk Seri Najib Razak has called for the formation of regional markets but for that to happen we need reform in the foreign exchange mechanism,” he said at an investment seminar yesterday. Mobius said the Malaysian economy had several strengths, among them the rising ringgit, the uptrend in commodity prices, good governance and sound central bank policies.

Dr Mark Mobius ... ‘Growth will be flat this year but will be around 4% next year.’

He said for industrial development to move forward, the Government should support small and medium industries and make the country a more attractive destination for foreign investors by having lower taxes, making it easier to start up businesses as well as upgrading the manpower skills of the local population.

Mobius said policies supporting the agriculture sector should be emphasised while the liberalisation of the services sector was good for the tourism industry.

On the global level, he said the two factors impacting the capital markets were money supply and the derivatives market.

Mobius said these two factors would make markets more volatile with derivatives instruments alone already valued at US$600 trillion currently.

On the other hand, he said the emerging markets were still growing even though the trend was slower.

“Growth will be flat this year but will be around 4% next year while developed economies will contract 1.5% this year and see flat growth next year,” Mobius said.

He said China and India would continue to see growth because of domestic demand, huge foreign currency reserves, low external debt and low inflation environment.

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