Malaysia has an open state-centric and newly industrialized market economy. Between 1957 and 2005, the country reported gross domestic product (GDP) growth of 6.5% on average, which has made it one of the best performing economies in the region. And the government has been reducing its role in the economy, while implementing many business-friendly reforms.
However as with most emerging or frontier markets, there is an element of geopolitical risk and monetary policy risk. The country's political tensions in 2008 weighed on the country, while the country has run ballooning deficits in the past that have drawn investor scrutiny. And finally, corruption has started to become a problem after years of reliability and stability.
Invest in Malaysia's Stock Market
Exchange-traded funds (ETFs) represent the easiest way to invest in Malaysia. By holding a diverse basket of stocks, these securities offer instant diversification and are easily bought and sold on U.S. stock exchanges. The most popular Exchange-traded funds (ETFs) used to invest in Malaysia is the iShares MSCI Malaysia Index Fund (NYSE: EWM), which mimics the MSCI Malaysia index.
American Depository Receipts (ADRs) represent another option for international investors looking to avoid foreign exchanges. These individual companies could be purchased as a small part of a larger portfolio. But investors should be aware that many of these ADRs are relatively illiquid and may be difficult to buy and sell at attractive prices.
Here are some of the most popular Malaysian ADRs:
- Malayan Banking Berhad (MLYBY)
- Genting Berhad (GEBHY)
- Genting Malaysia Bhd (GMALY)
- MBf Holdings Berhad (MBFBY)
- Tenaga Nasion Berhad (TNABY)
Finally, international investors can invest in the country's stock exchange – the Bursa Malaysia. With just under 1,000 listed companies, the exchange is one of the largest in Asia and offers a wide variety of investment choices.
Malaysia Real Estate Investment
After refocusing its efforts many years ago, Malaysia has made tourism its third largest revenue contributor. This has made real estate investment a very popular alternative form of investment for many international investors. According to the Global Property Guide, average home prices have risen nearly 50% between 2002 and 2012, while the market remains highly competitive.
Despite these favourable outcomes, there are several risks that investors should carefully consider. Government attempts to make housing more affordable has led to an oversupply at times, while there were new restrictions on foreign buying put in place during the economic crisis that began in 2008. And finally, the rental market remains very small relative to the U.S.
Key take away to Invest in Malaysia
Malaysia has a very robust economy and a pro-business government that has made it an increasingly attractive investment destination for international investors.
Malaysia's political struggles and deficits in 2008 have made some international investors tread a bit more cautiously than before.
Exchange-Traded Funds (ETFs) represent the easiest way to invest in Malaysia for most international investors, but investors can also take a look at the domestic stock exchange.
Malaysia real estate may also be an investment option to consider, but be wary of the drawbacks before committing any capital.
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