Global funds look to Malaysia as Iran war shakes up Asian assets

Its stock benchmark has beaten regional peers in March as the war in Iran upended markets globally. Read more at straitstimes.com.

KUALA LUMPUR – Even before the war in Iran sparked a surge in energy prices, Malaysia stood out from its South-east Asian peers as the newfound darling of global investors.

A rare stretch of political stability and investments in higher-value manufacturing and data centres lifted the country’s appeal as some of its neighbours grappled with leadership changes and fiscal strains. The conflict in the Middle East further burnished the country’s advantage as investors looked for markets better placed to weather volatility.

The country’s stock benchmark has beaten regional peers in March as the war in Iran upended markets globally, helped by its status as one of Asia’s few net energy exporters. Foreign outflows from local equities have been relatively muted in March despite heavy selling in most other emerging Asian markets. The ringgit has maintained this year’s gains against the US dollar, outperforming peers. 

“It’s where you go when things are going badly elsewhere,” said Mr Alexander Redman, chief equity strategist at CLSA in Singapore, who upgraded the market to neutral from underweight for as long as the war in Iran persists. “Malaysia’s in a relatively good position because it runs a current account surplus, is a net exporter of oil and gas, and the proportion of energy in Malaysia’s CPI basket is not as high as others.”

The rally in crude oil prices spurred by the Middle East conflict could potentially boost revenues for Malaysia, which has offshore oil and gas resources in the Borneo states and Terengganu, even as other countries struggle with the rising cost of energy. Petroleum-related income is projected to account for 12.5 per cent of government revenue in 2026. 

That’s helped the country avoid the heavy outflows seen in other markets. Global funds sold about US$80 million (S$102 million) of local shares on a net basis so far this month through March 13, while the FTSE Bursa Malaysia KLCI Index has lost only 1.2 per cent. Foreign stock flows remained positive this quarter.