Dr M & Forest City: mixed views on investor impact

Singapore

IT's certainly not what investors want to hear, but views are mixed on the impact of Malaysian Prime Minister Mahathir Mohamad's comments that foreigners will not be allowed to buy property in the China-led Forest City mega project.

While some economists say such abrupt and random remarks unaccompanied by official policy statements can affect the broader market sentiment, others argue that they do not always translate to policy changes, nor alter the longer-term horizons of investors.

Maybank Kim Eng economist Chua Hak Bin said: "Such ad hoc remarks from PM Mahathir, without an official policy statement, can create confusion and dent investor confidence."

He also wonders if other projects, including non-China projects, would face the same fate. "Discriminating against any single property project appears rather arbitrary."

"It is also not clear whether the anti-China buyer measure is for the whole country or just Johor," he said, adding that a foreigner buyer stamp duty might be a more acceptable measure.

SIM Global Education senior lecturer Tan Khay Boon believes that with... "inconsistent policies and flip-flop decisions, investors' confidence in Malaysia" will be affected.

Dr Mahathir's comment follows other unilateral moves such as the deferment of the High-Speed Rail (HSR) and the China-financed East Coast Rail Link.

"PM Mahathir's comments will be detrimental not only to foreign investor sentiment towards Malaysia's property sector but also about the economy in general," said ING's Asia economist Prakash Sakpal.

However, economists noted that Dr Mahathir's comment has not been formalised in policy, as clarified subsequently by Malaysian officials.

DBS economist Irvin Seah said: "Most people will probably take a wait-and-see approach." More broadly, Malaysia-watchers will be paying close attention to the country's upcoming budget in October "to get more clarity on the policy direction going forward", he said.

While Dr Mahathir's latest statement may cause some uncertainty, it does not mean investors will take flight: "Investors who are already in the market would make their decisions based on the country's longer-term economic outlook."

Other economists also dismiss the danger of spillover impact. CIMB Private Bank economist Song Seng Wun noted that the remarks have so far been relatively "project-specific" and he does not expect Singapore-Malaysia private investment to take a hit. Outside the two areas of water and the High-Speed Rail, "it looks like it is still business as usual" for the two countries, he said.

Independent economist Prasenjit K Basu too said there should be "little lasting impact on sentiment toward the broader property market in Malaysia". Nor are policy changes necessarily cause for alarm after a change in government, he added. "Investors should feel more confident about investing in a less corrupt, multi-racial and competent Malaysia."

Centennial Asia Advisors chief executive Manu Bhaskaran added: "Investors can distinguish between property market dynamics with its political sensitivities and direct investment dynamics which are very different."

Malaysia remains "quite attractive" to investment for reasons such as costs, availability of land and labour, supporting component manufacturers and service providers, and a supportive policy environment, he said.

While some firms are waiting for a clearer picture to emerge, the business relationship between both countries remains strong, said Singapore Business Federation (SBF) chief executive officer Ho Meng Kit.

"SBF continues to follow the latest developments in Malaysia and is confident of our warm bilateral ties and close business relationship," he said. "We have not received any feedback from our members to the contrary."