Taking a stroll down memory lane, I remember the KLIA (Kuala Lumpur International Airport), which had just opened back in 1998. While I have not been to Malaysia recently, I still remember my many trips and have been following this Asian tiger very closely.
The KLIA is the 13th busiest airport in the world. This should give you an idea of how busy this tiny Asian nation is. One of the key countries that control the Straits of Malacca, international trade is obviously a large part of the country’s economy.
Malaysia is also a regional leader in Industrial output and services. Malaysian banks did not experience the significant write-down that Western banks have seen.
The banking sector plays a large part in the regional growth story there. The top three banks have a cumulative market cap of more than $40 billion and one of them even figures in the Fortune 500 list worldwide.
On the industry side, Malaysian food is phenomenal. This sector is rapidly growing and Malay cuisine is spreading fast across the globe. Just to give you an example of how popular the food is getting, Anchorage, Alaska, has four Malay restaurants.
Then biggest currency earner outside banking is oil and gas. Petronas is a regional name to reckon with in this sector and is gaining strength steadily.
Malaysia is full of shining examples of hard work and strategic-growth companies.
What has me excited about this country is the recent economic data out of Malaysia.
Malaysia’s second-quarter GDP growth came in at 8.9 percent, higher than global expectations of 8.4 percent and compared with 10.1 percent in the first quarter.
Exports have seen a significant recovery in recent quarters. And this steady export recovery will continue to support domestic investments.
On the domestic front, growth rates in private and government consumption, as well as private investment, all ticked up, with aggregate domestic demand growing by 9.0 percent in the second quarter (compared with 5.3 percent in the first quarter).
I would forecast GDP growth of 7.3 percent for the whole year. This is based on a slight cooling off of the economy and weaker growth in the second half of the year, based on the global slowdown we will experience.
However, I expect domestic demand growth to remain strong in the second half of 2010 and well into 2011, as evident in the steady momentum in domestic consumption and investment growth so far, on the back of the strong fiscal stimulus introduced during the latest global downturn.
Looking forward, the latest recovery in exports, which also drove their capacity-utilization rates in the manufacturing sector back to near pre-crisis highs, is an important catalyst in the initial stage of the recovery of Malaysia’s capital spending cycle, which is critical for long-term sustainable growth.
As the Malaysian Central Bank stated: “At the new level of 2.75 percent, the Overnight Policy Rate (OPR) remains accommodative and is considered to be appropriate and consistent with the assessment of growth and inflation.”
This, in my view, clearly implies that the central bank views the 75 basis points in hikes it has delivered during the last three meetings this year as a process of normalization. I do not expect any significant tightening for the rest of this year, leaving growth to continue to surge.
As Asian growth continues, we will see Malaysia continue to ramp up its strength and output. I expect some great performances out of global companies based here.
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