China's Growth Story is Good News for the Malaysian Market

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Malaysia stands in a very favourable position among the Asean countries to benefit from China’s growth story, according to real estate investment house Pacific Star’s regional economist Lam Chern Woon.

“For one, Malaysia has been China’slargest trading partner within the Asean bloc since 2008, not least due to the improvement in bilateral ties. Malaysia has natural resources that benefit from China’s growing demand. The country also enjoys political stability, religious tolerance and contains a vibrant Chinese community,” Lam says.

He expects the clamping down of credit and speculative investments in China to direct capital to the other property markets in the region such as Malaysia – where housing policies are relatively loose.

“Chinese investors are already contributing to the bulk of private property purchases by foreigners in Singapore. Promotion of the Malaysia My Second Home (MM2H) programme will allow Malaysia to stand out as an attractive and least costly alternative to Singapore for quality living. As a result, we are seeing greater interest in Malaysian properties by Chinese investors. We recently saw the Chinese Zhuoda Real Estate Group’s commitment in a mixed-use development at Iskandar Malaysia, Johor.”

“Although supply issues are weighing on the high-end condominium market presently, the long-term outlook is positive and underpinned by favourable demographics.” He elaborates that domestic spending in Malaysia is strong on the back of healthy wage growth and sentiment.

Also, the outlook for tourism spending is buoyant as a result of growing vibrancy on the Kuala Lumpur retail scene. There are a number of malls in the city that are dated and will benefit from asset enhancement initiatives and enhancement of tenant mix. The government can accelerate the retail sector’s transformation by offering incentives to attract overseas investors, Lam says, adding that adequate exit opportunities for investors are made available by the rising number of real estate investment trusts. On the same note, he continues, Kuala Lumpur is also populated with new and modern office towers amidst much older office buildings. However, he points out that the scope for foreign investment in the office segment is more limited given the current supply overhang.

On the regional front, Lam says Asia’s economic future will increasingly be driven by China, India and Asean. “We think the wheel is set in motion for greater synergy and complementarity between China and Asean in terms of trade, tourism and investment. Given Malaysia’s sound economic prospects and fundamentals, we are optimistic on the trend for greater Chinese investments in Malaysia going forward.”

His views on China and Asean? Asia’s rise has traditionally been associated with the “Chindia effect”, that is the exponential growth of China and India, he observes. However, he says investors of late are starting to sit up and notice the Asean community comprising 10 nations with a combined economy of US$2 trillion and population of 600 million. “We have argued that Asean possesses the necessary fundamentals or attributes to help drive Asia’s growth.

Favourable demographics, urban migration, a booming middle class and improving institutions are all ingredients for a successful Asean economic story,” Lam says. According to him, it comes as no surprise that China has been engaging Asean actively and spurring the relationship to greater levels of trust, stability and prosperity.

Over the past two decades, trade between the two economic powerhouses has grown at an annual rate of more than 20 per cent, resulting in China emerging as Asean’s most important trading partner.


The rising economic clout of the Chinese consumer has implications for overseas tourism markets too, Lam adds. He points to hordes of Chinese joining the middle-class bracket using their newfound purchasing power to visit overseas destinations. He says Asean is also benefiting from waves of Chinese visitors, citing the more than five million Chinese tourists who visited Asean countries in 2010.

Source: The Expat April 2012 
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