Malaysia- In the global limelight

As the US Fed keeps printing paper monies, Malaysia is receiving global limelight like the recent price of gold keeps galloping higher...
I am not a savvy investor of the other regions but I do subscribe to international economic news for references, and this was the first time ever I received such good comments on Malaysia economic growth. The following is written by an US Fund. I will stay alert for my next profolio to grab this dynamic economic. Let see!

Five Reasons to Invest in Fast-Growing Malaysia

by Carl Delfeld, Contributing Editor

You ready for the next leg of the "Carl Delfeld World Tour?"

In previous columns, I've profiled the investment prospects in countries like Argentina, Indonesia and two weeks ago, we hit Singapore.

Today, we head north from Singapore to another promising emerging market nation - Malaysia. The Southeast Asian country boasts many attributes similar to Singapore. In fact, the two countries' relationship goes deeper than just being excellent places to send your investment dollars.

Having once had a checkered relationship (Singapore split from Malaysia and gained its independence in 1965), there are now several overlapping traits between the two - a kind of "Malaysiapore," if you will.

With a surface area of just over 127,000 square miles, Malaysia is home to about 24.8 million people and is rich in natural resources. It exports both natural gas and oil and has low inflation and debt.

So let me show you why I see Malaysia as a "middle way" for investors and why you should add this strong emerging market to your global portfolio...

A Fistful of Benefits: Five Reasons Why You Should Invest Your Money in Malaysia

What is this "middle way?"

Simply put, instead of the 8% to 9% GDP growth seen in markets like China, Indonesia and India (which is largely driven by low wage rates), Malaysia will grow at a more modest, but more consistent and well-rounded 5% to 6% clip.

Plus, it's a solidly middle-income country, with a per capita income north of $10,000. And more investors have begun to look beyond the headline-grabbing emerging markets towards places like Malaysia instead. Why should you join them? Five reasons...

~ Strong Diversification:
Although palm oil, tin, petroleum, copper, iron ore and other commodities are an important part of the Malaysian story, its economy is well diversified. A full 50% of GDP comes from the services sector, with 40% coming from industry and 10% from agriculture.

~ Attractive Demographics:
With 32% of Malaysia's population under 15 years of age, 58% of people under 30, and just 8% over 60, the country boasts attractive demographics and a very strong foundation for future growth.

By contrast, just 15% of Japan's population is under the age of 15.

~ Forward-Looking Economic Plan:
Malaysian economic growth rolled in at a respectable 6% last year, which has resulted in a solid upward move alongside the middle-income nations.

But Malaysia needs reforms to move to the next level. In particular, it needs to end preferences for some ethnic groups in order to keep talent in the country. In this regard, the government hopes that its New Economic Model (NEM) will increase per capita income to $15,000. To meet this goal, however, the country's GDP will have to grow by an average of 6% per year over the next five years.

~ Strong Currency:
With U.S. interest rates at record lows and more money consequently pouring into fast-growing Asian markets, currencies are gaining strength. The Malaysian ringgit is one of them, having recently climbed to a 13-year high.

~ Valuations in the Middle:
To some degree, the markets already reflect the changing perception of Malaysian risk and potential return. According to data from Thomson Datastream and Reuters, the overall price-to-earnings ratio for the Malaysian market is 15, while Singapore's is 16.5. Other Asian markets like Indonesia trade for 21 times earnings, while India's Sensex index is trading at a vulnerable-looking all-time high of 24.

But remember how I said earlier that Malaysia and Singapore share a deep relationship and similar traits? The increasing economic integration between the two countries essentially acts as a "dividend" to investors, as it fosters higher economic growth and political stability.

Jump on the "Profit Causeway"

Malaysia and Singapore have agreed to set up a Joint Ministerial Committee, which will oversee economic cooperation in the Iskandar Development Region (IDR) in Johor, Malaysia and will have a causeway linking it to Singapore.

The region spans an area of 850 square miles, which is roughly three times Singapore's size, and smart cards will facilitate the two-way traffic of Malaysians and Singaporeans to the IDR.

It's estimated that on a regular workday, more than 150,000 workers commute over the Johor-Singapore causeway to earn a better living.

So how can you earn some money from this, plus Malaysia's other broad economic and market benefits and the expectation of continued growth?

Grab a Southeastern Asian Double

The most direct way to gain from this joint project would be to jump on a plane and take a grubstake in Johor real estate.

But since that's not really practical, check out the iShares MSCI Malaysia Index (NYSE: EWM) - a basket of leading Malaysian companies. Breaking the fund down, one-third of the stocks are financials, while consumer staples and discretionary companies make up an additional 29%. Industrial firms account for a further 18% of the portfolio. The fund has an annual expense ratio of only 0.54%.

Essentially, investing in Malaysia is also a back-door strategy to investing in Singapore and capturing the dynamic economic growth within the region. So put both Malaysia and Singapore in your global portfolio and grab the twin growth of "Malaysiapore."

Good investing,

Carl Delfeld

Karambunai in the limelight after budget

U.S. stocks declined on Tuesday as financial results from Apple and IBM disappointed investors after the recent run-up in technology shares. And I think our Bursa will take heavy profit taking before it next move. I have sold off my babe Kbunai after the outgoing PKR vice-president Jeffrey Kitingan asked how the federal government could make such an allocation on a contentious property that was at the centre of a legal tussle. He said the legal controversy over the property would render it impossible to implement the project in Karambunai which is in the outskirt of Kota Kinabalu, nonetheless since it is a speculative stock, I might enter when time arrives. Thanks babe Kbunai for adding into my profolio.

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PETALING JAYA: Sabah-based Karambunai Corp seems to have received more than its fair share of attention in the past month.

More recently, it hit the limelight when recently-revealed Budget 2011 stated that Nexus Karambunai – a renowned resort in Sabah – had committed to develop an integrated RM3bil eco-nature resort.

Under the Karambunai integrated resort plan, there are plans to develop a 150ha eco-nature resort at Karambunai alongside a mangrove centre, water theme park and waterfront properties to push for higher return on investments. It is understood that the RM3bil investment will be privately funded, although there are yet to be any concrete details on how this funding will be raised and by whom.

The budget stated that the project would commence next year. In the same paragraph on the Karambunai initiative, the budget proposed that “to support the tourism industry, the Government will allocate RM100mil.” However, it is not clear if this means that the Government will actually invest that money directly into the Karambunai project.

The major shareholder of Karambunai is its president, Tan Sri Chen Lip Keong, who owns 43.9% stake in the company. The 62-year old also owns gaming company NagaCorp, which is listed in Hong Kong and operates a casino in Cambodia.

Having long languished as a penny stock, Karambunai Corp’s shares have been on an uptrend in recent weeks, recording its 52-week high yesterday at 26.5 sen. This stands in stark contrast to four months ago, when the stock price was hovering at a meagre 5 sen.

Still, scepticism abounds on Karambunai’s ability to execute this grand plan, not least because of its weak financial status. The company has been in the red for the past three financial years.

For the quarter ended June 2010, the company continued to remain in poor financial health, suffering losses of RM14.39mil from a previous loss of RM14.62mil. Revenue was up 7.78% to RM24.03mil. As of the period, the company had cash amounting to RM7.29mil. In addition, it has piled on huge debts with short-term borrowings of RM192.07mil and long-term borrowings of RM283.77mil.

This is not the first time the counter has witnessed such exuberance in the absence of any fundamental development. A month ago, the company made headlines when it was speculated that it would start a casino operation in Sabah.

The speculation came about from a proposal of the 500-acre “eco-nature” resort in Sabah by the Performance Management and Delivery Unit (Pemandu) at the Economic Transformation Plan (ETP) open day a month ago.

This piece of speculation drove the share price from 5.5 sen on Sept 21 to 18 sen in a matter of three days.

On Sept 24, Karambunai informed the stock exchange that it has not submitted any official proposal to the Government, nor had it penned any written documents with any other third parties in respect of any plan to build a casino in Karambunai.

So for now, the company has yet to come up with any concrete plans for the eco-nature resort.

Again this week, on Monday, the company had to clarify to Bursa that it had not signed any understating or agreement with any parties and does not have any corporate developments which merit public disclosure.

The company said its controlling shareholder, in his private capacity, had acted as a promoter to invite interested parties to invest in Karambunai.

Karambunai said its property was included in the Budget 2011 speech after its Nexus Karambunai Hotel general manager attended the Performance Management and Delivery Unit-driven national key economic areas tourism lab together with other members of the private and public sectors.

Incorporated in 1965 as Electrical and Allied Industries Ltd, Karambunai Corp is mainly in leisure and tourism, infrastructure and property development

In 1984, the company announced that it would go into the leisure and tourism market as well as property and construction, manufacturing, trading, infrastructure development, and even aerospace and information technology.

On Sept 13, 1993, the company changed its name to FACB Bhd and later to FACB Resorts Bhd on Sept 30, 1999.

It assumed its present name of Karambunai on Sept 30, 2004. It is now mainly in leisure and tourism, infrastructure and property development

Currently, Karambunai owns about 1,500 acres in Karambunai, a peninsula which lies some 27km north of Kota Kinabalu airport.

Its flagship asset is the Nexus Resort & Spa Karambunai, a luxury 5-star 485 room international-class resort hotel with a world-class 18-hole golf course, combining elements of modern architecture with Borneo design and style.

Its latest development in the area are the beachfront Nexus Residences Karambunai (NRK), which features upmarket beachfront resort villas and will comprise about 2,000 units when completed.

By TEE LIN SAY
linsay@thestar.com.my