Malaysian pensions to stay the course investing overseas
21 Sep 2012
Malaysian corporates and pension funds are likely to continue to seek investments overseas and the country's financial system is strong enough to withstand any market volatilities from the latest round of US quantitative easing, according Bank Negara Governor Zeti Akhtar Aziz.
Malaysia has over the past decade developed its bond market, consolidated the banking sector and increased their capabilities, liberalised its foreign exchange administration rules as well as moved towards greater market orientation and more flexible exchange rates, the central bank governor told reporters at the Global Islamic Finance Forum in Kuala Lumpur.
"These (measures) are sufficient now to deal with the kind of volatility and most of all because we've also liberalised, we're seeing outflows and inflows by our own corporate sector, by funds including pension funds and because of this, we are seeing two-way flows so that also mitigate some of the inflows and outflows that are generated by external developments.
"Previously we would be destabilised like we were more than 10 years ago but in the current environment, we have progressed so far and advanced significantly that has enabled us to mediate these volatile financial flows."
Malaysia's largest pension fund, the Employees Provident Fund, said in June it formed a joint venture with Goodman Group to buy a portfolio of prime logistics assets in Australia. The acquisition of a AUD400m ($416m) seed portfolio, comprising of six assets already owned by Goodman or its unlisted Industrial Australian Fund, is intended to be the first phase in the creation of what will eventually be a global portfolio.
Zeti says such investments by the pension funds will likely continue. "We have a liberalised environment so they look at what opportunities there are and they should be able to (continue the outflows). Here we are promoting the internationalisation of Islamic finance and that is what it's all about, flows, but in this case for Islamic finance, it's flows that relate to the real economy, for trade and investment."
Malaysian retirement fund Kumpulan Wang Persaraan (KWAP) has said it is looking into Syariah-compliant investments and is fast-tracking investments in the Islamic space. In June, KWAP invested RM1bn ($317m) in Malaysian Airline System's RM2.5bn Perpetual Junior Sukuk Programme. MAS this week issued the second tranche of the junior Sukuk of about RM500m, to be used as working capital and the refinancing of existing borrowings.
Zeti added the increased number of initial public offerings by Malaysian companies is also an encouraging trend. "This reflects the growing investment activities that are taking place in our country and this is very encouraging when these fund raising for real investment activities, this really enhances the prospect for our future growth."
Author: Wing-Gar Cheng