Are Malaysia High-End Property Prices Rising?

Based on recent statistics, prices of high-end properties in Kuala Lumpur have definitely risen! Not too long ago, people were grousing about how "ridiculous" it was that high-end residential properties around the vicinity of Kuala Lumpur City Center (KLCC Twin Tower) being sold at RM1,000 per sq feet! Guess what....a recent "low profile" launch of another high-end residential condominium near KLCC was priced at average RM1,600 per sq feet! At say 3,000 sq feet, each unit will cost around RM4.8 million!! This project was owned by a prominent Malaysian investor, Chua Ma Yu. Apparently 92% of the buyers are local, and only 8% owned by foreigners. This is contrary to the common believes that only foreigners were buying these high-end properties! Best of all the sales were done without advertising but merely through word-of-mouth! It was also reported that units were 100% sold!

Another project (Sunway Palazzio condominium) recently launched in Sri Hartamas was priced at RM846 per sq feet. This sets a benchmark for the area. The smallest unit would sell for RM2.5 million!

In Bangsar (an expatriate favourite area), one recent project (One Menerung condominium) was priced at RM700 per sq feet, which was also a record for the area!

The bad news....Malaysia is still considered a laggard in valuation compared to the regional peers such as Bangkok and Singapore!

A Matter of Balancing Act

From my conversations with a number of investors and observations, I notice that many of them either do not practice diversification of investments or do not have a clear strategy how to do it. Some of them invest only in one class of assets, most prominently stocks, or in some cases, only in ONE STOCK! What happens when market takes a downturn or the only stock that you bought doesn't fulfill its "potential"? You simply lose your money!

NEVER PUT ALL YOUR MONEY IN ONE BASKET! A better approach will be to diversify your portfolio, ie., invest in different categories of assets, in order to leverage or manage your risk. This is what we term as Portfolio investment allocation. e.g, you can consider combination of stocks, unit trust (mutual funds), bonds, real estate investment trusts (REITs), property funds and other fixed income instruments, and assign a percentage holding in each of them. The percentage of allocation will depend on your risk profile and the current climate of investment. eg., 60% in stocks, 15% in property funds, 15% in mutual funds, 10% in bonds, etc. The advantage of this asset allocation is to reduce your risk of particular choice of investment going the wrong way. Afterall, it is imperative that any kind of investments will go through the triumphs and plunges in a different moment, given the change in economic factors, politics and environment. Economics is such a complex animal that almost every country will experience the economic booms and recessions at a certain point in time!

There are other considerations in portfolio diversifications, such as within the stockmarket itself, consider allocation of defensive stocks (eg., blue chips, high dividend yield stocks) vs aggressive and high growth stocks. In a bull market, it is wise to pick some aggressive or growth stocks in order to ride on their strengths, but include a smaller portion for defensive stocks so that you will not be caught completely flat-footed in the event of an unexpected downfall.

Is Malaysia Making A Return To The Global Investment Radar? (Part 3)

With the upcoming General Election, the Malaysia Government will also have added interest to make sure the country's economy continue to be robust, supported by good GDP growth!

There are many more positive factors that have been rolled out as we speak and it is not possible for me to cover all of them. Nevertheless, the above factors will give an excellent flavour of what the positive stimulus are. To be honest, it has been in fact been a long time since I feel so positive about the country and Government's economic policies! Having said that, I believe there are still a lot more the Government could potentially do, such as raising standard and method of education, improved execution, revamping National Economic Policy, overcoming corruptions, etc.

Barring any unforseen circumstances such as a US economic hard landing or recession, I certainly carry the view that what Malaysia has to offer is certainly the beginning of better times ahead. There are certainly ample opportunities for both local and foreign investors looking to make sound financial returns. The key is to take action NOW and not PROCRASTINATE!

Is Malaysia Making A Return To The Global Investment Radar? (Part 2)

Judging by the KLCI performance, Malaysia has certainly once again returned to the global investment radar! The index grew more than 13% in the first quarter of 2007, despite suffering a major crash in Feb and March! This has made Malaysia among the best performing market in Asia, a far cry from the not too distant days where Malaysia stocks were least favoured! A major portion of this performance is due to the inflow of foreign funds, as supported by Malaysia's increased Foreign Exchange Reserves from the end December 2006 figure (USD82.5b) to mid March 2007 (USD87.3b). In fact, foreign funds started to return to Malaysia in a big way starting from the 4th quarter of 2006, as indicated by another 13% rise in the index during the same period. So, what caused Malaysia's capital markets suddenly become so highly sought? Here are some of my views and factors contributing to the course:

1. Improved corporate earnings - upside bias on the number of corporate financial results meeting or outperforming expectations. This trend has started in 2006.
   
2. Government's stimulus for private sector growth, by reducing corporate tax from 28% to 26% within 2 years.
   
3. A series of major Mergers & Acquisitions activities such as AMMB, RHB, mega plantation merger through Synergy Drive, Malaysia Oxygen takeover, Malakoff takeover, etc. This makes the Malaysia market more vibrant and exciting, and foreigner investors favor these developments instead of sleepy old yard! Indeed SIZE matters!
4. Improved performance of major Government-linked Corporations. eg., Malaysia Airlines, Maybank, Bumiputera Commerce Bank, Tenaga, MRCB, Telekom, etc
   
5. Moderate inflation rate (between 2 to 3% for 2007)
   
6. rising trend of Malaysia currency, Ringgit, and Government's support for a stronger currency
   
7. Increasing trade liberalisations and open economy as initiated by the Government
   
8. Government's pump priming initiatives through a series of construction activities under the 9th Malaysia Plan (five-year economic plan)
   
9. Malaysia's new major development area for next frontier economic growth - Iskandar Development Region (IDR), providing abundant opportunities for both local and foreign investors
10. Government's drive and incentives to make IDR a major success. eg., 100% foreign ownership, 100% foreign capital, freedom to source 100% foreign human capital, tax exemption for key services industry, etc
11. Stimulus for property markets through abolishment of Real Capital Gains Tax (RPGT)
12. Government reforms over public service delivery improvement - improve public service efficiency and effectiveness, and create a truly business-friendly environment

To continue next post....

Best Quarterly Performance For KLCI !

Malaysia's Kuala Lumpur Stock Exchange had its best quarterly performance in seven years, rising 13.7% in the first quarter of 2007! This is a sustained performance after the fine 13.3% rise in the fourth and final quarter of 2006. The rise was achieved admidst the 100+ point market plunge during end Feb and mid March following global stockmarket crash! This in fact make Kuala Lumpur Composite Index (KLCI) among the best performer in Asia after China and Vietnam. Not bad indeed, considering it was only about six months ago, Malaysia stockmarket was still under-performing the regional markets and was in fact one of the worst performing markets in Asia! Many people have actually written Malaysia off and had painted gloomy future for the country. What caused this sudden change in momentum and market perception? Is Malaysia truly back in the hot seat and close radar for foreign investors?