Given these outcomes, why are we pursuing the same and similar strategies? Will it work this time? What is the difference from the past? If anything, growing and improving manufacturing in Malaysia will be even more challenging this time. Why?
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One, we are still relying heavily on foreign tech. In fact, even more so in digital tech. Two, Malaysia has limited proprietary intellectual property (IP) — therefore, no pricing power, low profits, low wages and the blue-collar jobs in manufacturing assembly will be automated and/or replaced by robots. Three, Malaysia has no market scale. New tech-driven manufacturing requires huge capital and scale to be competitive. Last but not least, China’s manufacturing domination, evidenced even in our domestic market — their superior skills, price, scale and capital. Malaysia is losing competitiveness in the global market, including against newer developing economies like Vietnam (see Chart 4).
So, how are these challenges being addressed? Capital investments for tech are large and extremely risky — requiring “risk equity capital” financing, not bank loans. A deep capital market that Bursa is not able to fulfil.
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To be fair, Malaysians and Malaysian companies are not short on savings to invest. S-I=X-M. And Malaysia has consistently registered a current account surplus of more than 2% of GDP (see Chart 5). Yet domestic investments continue to depend heavily on foreign direct investments (FDI). The problem with FDI is that it does not translate into domestic economic integration, lacks depth and results in limited research and development (R&D), technological transfer and IP. Instead, we see Malaysian companies investing abroad. The same is true of Malaysian talent — the brain drain out of the country. Why the leakage of local talent and money? Is it due to a lack of opportunities, a domestic environment that is not conducive for locals to invest or the crowding out by government-linked investment companies (GLICs) and favouritism? But sectors where the public providers are not efficient and not pervasive, and the private sector is left to fill the gap, have thrived — becoming regionally competitive. Less government has proven to be better, as seen in private education, private healthcare and private tourism.
A rising middle class in Asia will continue to fuel demand for travel, leisure and diversified experiences. So will the “future of work” where a trade-off between work life and leisure will shift increasingly in favour of the latter. Malaysia has been gaining popularity as a holiday destination in the region with visitor numbers exceeding pre-pandemic highs. We are a multicultural, multilingual country with familiar similarities with our closest neighbours, boast a diversified natural beauty, heritage and culinary offerings, good infrastructure, a low cost of living, a relatively safe, geopolitically neutral environment and no natural calamities. Indeed, Malaysia offers relative stability, security and personal safety amid the shifting political landscape in the region — the long history of political turmoil in Thailand and the Philippines; Indonesia’s remilitarisation and increasing nationalism, including seizure of private assets; military conflicts in Indochina that have also led to rampant criminal networks and scam factories as oversight weakens — making the nation attractive not just to tourists but also longer-term investors. All the government needs to do is maintain the conducive environment that is welcoming to visitors and investors. Medical tourism and education tourism have seen rapid expansion and possess significant growth potential, thanks to healthcare demand with ageing populations in major Asean countries such as Singapore, Thailand, Vietnam and Indonesia, and demand for education with rising incomes and prioritisation of higher learning. We will explore each of these sub-sectors in greater depth over the coming weeks.
Portfolio commentary
The Malaysian Portfolio gained 0.3% for the week ended Feb 10, broadly in line with the broader market gains. Hong Leong Industries (+2.3%), United Plantations (+0.7%) and Maybank (+0.5%) were the biggest winners, while the only loser was Kim Loong Resources (-0.8%). Insas – Bhd WC ceased trading ahead of its expiry, and we have marked our investment down to zero (100% loss). Total portfolio returns now stand at 210.3% since inception. This portfolio is outperforming the benchmark FBM KLCI, which is down 4.5% over the same period, by a long, long way.
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The Absolute Returns Portfolio gained 1.0% for the week, lifting total portfolio returns to 46.9% since inception. The top gainers were ChinaAMC Hang Seng Biotech ETF (+5.1%), SPDR Gold Minishares Trust (+1.9%) and Ping An Insurance - H (+1.9%). The sole loser was Berkshire Hathaway (-0.7%).
The AI portfolio also gained, up 2.4%, as tech stocks recovered partially from last week’s selloff. The gains pared total portfolio loss since inception to 3.7%. The top gainers were Datadog (+12.1%), Marvell Technology (+11.2%) and Cadence Design (+10.2%) while the top losers were Amazon (-11.2%), Unusual Machines (-8.4%) and Minth (-1.3%). We made several changes to the portfolio, and we will elaborate on the switches in an upcoming article.
Disclaimer: This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks, including the particular stocks mentioned herein. It does not take into account an individual investor’s particular financial situation, investment objectives, investment horizon, risk profile and/or risk preference. Our shareholders, directors and employees may have positions in or may be materially interested in any of the stocks. We may also have or have had dealings with or may provide or have provided content services to the companies mentioned in the reports.
