regional focus sg6 6b pep pill for malaysian stocks 1303422015

Taking a leaf out of China’s stock market playbook,  Malaysian Prime Minister Najib Razak announced Monday a RM20 billion (SG$6.6 billion) rescue package to help boost the country’s stock market, which is tottering from a mass exodus by foreign investors over the past year.

The money will be funnelled into Malaysian stocks through ValueCap, the state equity investment arm.

Mr. Najib, who also holds the portfolio of Finance Minister, said: "There are signs of moderation in global economic growth in 2015 and 2016. To protect the real economy from these risks and to maintain the growth momentum as targeted, the government has decided to introduce pro-active measures."

Other stimulus and reform measures, formulated by the Special Economic Committee, were also announced the same day.

These included import duty relief to Malaysia’s manufacturing industry by way of exemption of import taxes on spare parts and research equipment, as well as RM6 billion in funding for projects in the tourism industry.

Couples under the age of 40 are being encouraged to invest in their first home through a monthly incentive worth RM200.

The Malaysian economy has been plagued by a substantial slump in the value of its ringgit currency following the commodities price slump that has reduced the revenue realisation from its exports, particularly oil. The strength in the US dollar and the economic slowdown in China have both taken a severe toll on the domestic currency.

The depreciation in the currency has triggered massive exchange outflows as foreign investors withdrew from the country’s financial markets. This year, the ringgit has slumped 19 per cent while the stock market is down nearly 9 per cent. Since the beginning of last year Malaysia has suffered a net outflow of RM23 billion, of which RN16 billion has exited this year.

The political fabric of the country has also been torn apart by the ongoing scandal relating to 1Malaysia Development Bhd (1MDB) in which investigators allegedly found that nearly US$700 million of deposits allegedly found their way into Mr. Najib’s personal bank accounts. 1MDB is also under the glare of alleged mismanagement because it accumulated 42 billion ringgit in debt since its formation in 2009, a mere six years.

Mr. Najib said Monday that his government “remains committed to helping solve investigations in relation to the investments of 1MDB transparently,” and that all 1MDB’s dealings would be “transparent and market-friendly.”

He also confirmed, according to DW.com, that Malaysia would not impose capital controls because the economy was stronger than during the 1997/98 Asian financial crisis.