The Malaysian exchange-traded fund (EWM) has been on a hot streak rising 24 per cent in dollar terms on the back of an appreciating currency and a prolonged palm oil boom. Foreign investors have noticed the opportunity pouring $438m into Malaysia funds and ETFs this year, according to Citigroup report.
But the Malyasian market and ETF is dominated by a few state-owned firms centered on banks, utilities and resources leading to concentrated risk in a rather shallow market. Share prices which previously were attractive due to the Malaysian market underperming its peers for a couple of years straight now look fully priced or at a premium.
The government predicts that gross domestic product this year will reach 6 per cent, although some economists have forecast that growth might slow later this year amid softening global demand for electronics, Malaysia’s biggest industry.
By Carl Delfeld of the Chartwell ETF Advisor
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