Thursday, September 12, 2013

Faber favours stable Malaysian equities

Faber favours stable Malaysian equities
Business & Markets 2013
Written by Kamarul Anwar of    
Wednesday, 11 September 2013 09:15

KUALA LUMPUR: Renowned Swiss investor and author Dr Marc Faber, famous for correctly predicting many market falls in the past, has described Malaysian equities as “not gloomy” as they are stable despite the country’s “unexciting” economy.

“If you want to sleep at night, just own some Malaysian stocks,” he told an audience attending a seminar organised by MIDF Amanah Investment Bank Bhd in Kuala Lumpur yesterday.

Presenting a paper entitled Investment Strategy Where’s the Money?, he said while Malaysia is not spared from the current withdrawals of investments by US investors, this country is far better off than many of its peers in the emerging markets.

“Countries like Turkey, South Africa, Brazil and Indonesia have large current account deficits. So they had major sell-offs in the markets lately.

“But other (emerging countries) are not in such bad positions, like Malaysia. It is not an exciting economy and the stock market is not particularly cheap, but it is stable,” said Faber.

In the second quarter of this year (2Q13), Malaysia recorded a much smaller surplus of RM2.6 billion in its current account, from RM8.7 billion recorded in the first three months of the year.

Although the country managed to keep its streak of current account surpluses since 1998, the 2Q13 amount was the smallest since 1999.

Faber, who admitted to having invested in Malaysia’s brewery and tobacco stocks as well as MALAYAN BANKING BHD [] and PUBLIC BANK BHD [] shares for years, said there has not been a dramatic and widespread speculation in Malaysia which could cause the country’s economy to fall further than it has now.

“If the US market goes down and others around the world drop, then obviously emerging markets as well as Malaysia will also drop. But there hasn’t been a dramatic widespread speculation in Malaysia,” he noted.

Faber also credited Malaysia’s financial institutions as being some of the most solid in the world as they are less indebted than banking giants in the US.

They (Malaysian banks) don’t gamble on derivatives and so forth to the extent that their leverage is really high.” Nevertheless, Faber said Malaysian equities are not as cheap as they used to be.

“I don’t think people who buy shares (in Malaysia) today will make a lot of money. Maybe they will gain 10% or lose 10%. But it’s not like in 2009 where you could make the case that stocks were very cheap on any valuation measure. I don’t see that today.”

Faber also said he would not be concerned if his investments in Malaysia’s tobacco and brewery stocks go down by as much as 20%, unless he invests all of his money in the stock market.

He advocated taking a balanced approach in allocating investments in different asset classes, explaining that prices of different asset classes inflate and deflate at different times with different intensity.

Faber, who has been a strong proponent of gold investment, said prices of the precious metal could drop again in the future. However, he pointed out that gold prices will continue to grow in the long term.

“The people who talk about the end of the gold bull run are the people who’ve never owned a single ounce of gold in their lives.”

Faber, who authored several books and monthly investment newsletter The Gloom Boom & Doom Report, had correctly predicted the US stock market crash in 1987 and the rise of emerging markets in the early 2000s. Based in Hong Kong, he is the managing director of his own investment advisory firm, Marc Faber Ltd.

This article first appeared in The Edge Financial Daily, on September 11, 2013.

Publish date: 11/09/13

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