25 September, 2008

Inflow? Outflow? Economic downturn?

Foreign Direct Investments are escaping to other countries. What does this mean? It could mean 2 things~ One foreign investors are pulling out or local investors are actually diversifying abroad. But do our local investors have really that much to plonk into overseas markets to actually exceed the inflow by foreign investors? I don't think so.

Indeed Malaysians are investing abroad but their investments are mostly in property that will only bring in returns in the next 10 years. Perhaps only some are seeing returns now but it is not substantial enough to make the swing back home.

What must be in the minds of foreign investors? If I were them, the political instability of late would not be the cause of worry but more to the fact that the Malaysian economy thrives on the performance of foreign markets especially the US.
I suspect we wont the that hard hit as the 1997 recession. But the lower income bracket will most likely suffer as inflation causes them to tie their stomach in.

It is well known that many stockholders are indeed politicians or have political connections. This the other investors need to take careful notes. Malaysian politics are in fact the fulcrum of the economy. Once they stop stuffing in that means they might be pulling out. Manipulation of stock prices of certain bluechip counters make it seem that these counters are active but it fact they are not. For speculators they are the worst lot.

What can we do to protect our investments? Well to those few who can afford it keep your money safe in the form of gold. Gold does not depreciate thus it is the one most stable form of investment that any money can buy. Land, this also does not depreciate but might suffer if the location is not what the market wants.

What can be said about foreign investors? Well for one thing it is the flip flopping government that is not giving any confidence boost. So what Anwar is poking into everything?, but that does not mean that the government cant do their job right. Economic policies such as pegging the Ringgit and credit control at the corporate level might be the only sound solution so far but for as long the drama continues in the political front there will be just fairy tales of what the Malaysian Economy was once was.

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