Riding the tiger

In his latest look at overseas investments, Liam Robb ponders the wisdom of a stake in Malaysia or Mexico

Malaysia

The country was one of the first in South East Asia to initiate privatisation of state-owned industries. It is the world's biggest producer of computer disk drives and boasts important steel and rubber industries, as well as being the largest palm oil producer and a significant exporter of oil and gas, and accounts for nearly half of world timber exports. But skilled labour is scarce, and high interest rates deter private investors. The government has also kept large shareholdings in privatised industries such as Tenaga and Telekom , empowering it to veto board decisions and block hostile takeovers. Many analysts believe that this sort of intervention needs to be kept in check if the country is to attract further investment.

None the less, foreign interest in the Kuala Lumpur Stock Exchange remains buoyant. Approximately 20 per cent of the share capitalisation is held by foreign investors. Around 500 companies are listed, the largest of which include Telekom, Maybank, and Proton, the motor manufacturer whose cars are now a common sight on British roads. Property is one of the most dynamic sectors: Kuala Lumpur's twin Petronas towers, currently the tallest buildings in the world, reflect prime minister Dr Mahatir's determination for to be in the vanguard of the Asian tiger economies.

The market showed a lacklustre 11 per cent sterling return over the 12 months, however. The n ringgit is closely tied to the dollar, and with US interest rates likely to increase, the outlook in 1997 could be even less promising.

Mexico

In December, 1994, Ernesto Zedillo's new administration was plunged into crisis by the devaluation of the Mexican peso. His austerity plan (cutting spending and raising taxes) failed to prevent a massive slide in stock market value at the beginning of 1995. The crisis, known as the "tequila effect" undermined international confidence throughout the Latin American region and its effects were felt in countries as diverse as Poland and Thailand, as foreign investors re-examined their attitude to risk and to emerging markets in general.

A severe recession in Mexico followed the crisis, with a sharp drop in gross domestic product and in the living standards of its 94 million population. The country is still suffering from the aftermath, but thanks to the backing of the Clinton administration in Washington and from the international financial community in general, it is again on the road to recovery. News that the economy grew by more than 5 per cent in 1996 surprised many economists. Inflation fell from 52 to 28 per cent, and the early repayment of a pounds 17bn bridging loan from the US has bolstered fund managers' confidence.

There are 186 domestic stocks listed on the Mexico stock exchange and many companies got off to a strong start this year, helped by declining interest rates and a peso which continues to be competitive internationally. Privatisation continues apace and, as of February, Mexicans can for the first time sign up with private pension funds. This should help to diminish the country's reliance on foreign capital and will allow many workers to participate in financial markets for the first time. In addition, Mexico's bruised media industry can expect more than $70m in advertising revenues this year as the private pensions providers battle it out for business.

Private stock market investment overall could top $18bn in 1997. Paul Luke, Head of Emerging Markets at Deutsche Morgan Grenfell, expects a 20 per cent rise in the Mexican market between now and the end of the year. "With the peso a reasonably competitive currency, in the near term we expect companies which have export earnings to do better," he says. Thanks to holiday resorts such as Acapulco on the Pacific and the unspoilt beaches of the Yucatan peninsula, tourism is the largest employment sector in Mexico. Accordingly, Mr Luke has high hopes for Grupo Posadas, the hotel company.

The 48-year-old monopoly of Telefonos de Mexico (Telmex) has recently ended, with the telecoms market being opened up to competition from the US, but the company should retain a substantial market share, Mr Luke believes. Telecoms are an important sector - 6 million Mexicans are estimated to work in the US and most have families at home. Peak user time is on Sundays, when families in Mexico's villages queue outside phone booths to call absent sons, daughters and husbands

Performance Statistics: Datastream. Numerous regional unit and investment trusts have exposure to and Mexico, although HSBC's Singapore and n Growth fund is one of the few country-specific vehicles.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
The clocks go forward an hour at 1am on Sunday 30 March
news
Arts and Entertainment
The Doctor finds himself in a forest version of London in Doctor Who episode 'In the Forest of the Night'
TVReview: Is the Doctor ever going stop frowning? Apparently not.
Sport
footballMatch report: Real fight back to ruin Argentinian's debut
News
Bruce, left, with Cream bandmates Ginger Rogers, centre, and Eric Clapton in 1967
people
PROMOTED VIDEO
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
News
i100
News
people
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
arts + entsSam Smith’s Mobo triumph is just the latest example of a trend
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Data Analyst/Planning and Performance – Surrey – Up to £35k

    £30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker