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AWSJ: Investors Try To Gauge Daim's Exit
By Cris Prystay

13/6/2001 4:45 pm Wed

[Penganalisis sedang memerhati siapakah nanti yang bakal dilantik sebagai Menteri Kewangan. Kalaulah Daim yang dijanjikan bebas mengemudi ekonomi dulu dicampuri apakah orang baru nanti akan bebas bertindak lagi? Kata-kata dan janji yang molok-molok sudah tidak diperduli lagi tetapi bukti kesungguhan dan ketelusan yang lebih diperhati. Mahathir diramalkan akan memilih seseorang yang boleh menaikkan imej politiknya kerana inilah yang menentukan hidup matinya kariernya. Pemesatan ekonomi akan membuat ramai lupa mereka yang teraniaya - khususnya masyarakat peniaga. Kita meramalkan yang terlantik adalah robot yang dikawal juga akhirnya jika tidak Mahathir sendiri yang menjawatnya.
- Editor
] pi_news_id=735630&pi_ctry=my&pi_lang=en

AWSJ: Heard In Malaysia: Investors Try To Gauge Daim's Exit

By Cris Prystay
Staff Reporter

KUALA LUMPUR -- The resignation of finance minister Daim Zainuddin has caused international investors who avoided Malaysia for months to sit up and take notice. But fund managers said they want to know who the new finance minister will be and whether that person will effect real change before they'll take a closer look at Kuala Lumpur's stock market. Tun Daim resigned on June 1 after weeks of speculation that a growing rift with Prime Minister Mahathir Mohamad would force him from the finance portfolio. Dr. Mahathir said he would assume the finance post until a successor is found for Tun Daim, who also resigned as treasurer of the Dr. Mahathir's United Malays National Organization party.

It could be a pivotal political event in a market that is plagued by a weakening economy, concerns over poor corporate governance, and a series of state-backed rescues of debt-ridden and listed companies run by well-connected businessmen. People close to the two politicians said several controversial Daim-endorsed corporate bailouts helped sour the relationship between the former finance minister and Dr. Mahathir, who faces growing discontent with his 20-year rule from both the opposition and within his own party.

Investors said Tun Daim's exit could indicate the government will push ahead with economic reforms and stop state-backed rescues within Malaysia's debt-heavy corporate sector. But they said they need tangible evidence of change before they'll beef up anemic Malaysia weightings in their investment portfolios.

"Seeing is believing in Malaysia," Christopher Wood, Asian equities strategist of ABN Amro, said in a recent report. The stock market barely budged on news of Tun Daim's resignation, which "shows that foreign investors are almost completely out of the market and will want to see positive proof of change before they return," he said.

Investors are watching closely to see who is named finance minister - something the prime minister appears to be in no rush to do. On June 11, Dr. Mahathir told reporters he needed time to select a candidate, and said that any new minister must be "clean" without being controversial.

"At the end of the day, who it is and how that person is perceived is the most important thing," said Winnie Lee, chief investment officer at Parvest Asset Management in Hong Kong. Ms. Lee said Malaysian investments comprises a steadily shrinking proportion of her regional funds' allocation, but said she's keeping close tabs on this issue. "If he continues with the sort of close, party-related business policies we've seen, then nothing is gained."

Some fund managers worry that Dr. Mahathir could hang onto the portfolio himself, a move that could indicate a bid to consolidate his hold on the country as he fights to shore up political power. But any attempt to centralize power could increase the country's political-risk rating, giving investors wary of this market even more pause.

"It's a combination of a higher level of political risk, deteriorating macro risk and the classic old problem in Malaysia that the majority of big index stocks are just unattractive," said Adrian Mowat, a director with Edinburgh-based Martin Currie Investment Management, which has no Malaysian holdings in any of its regional funds.

Dr. Mahathir has watched support for his government continue to wane since 1998 when he fired his former deputy prime minister, Anwar Ibrahim, who was later convicted and jailed on s###my and corruption charges. A spate of Finance Ministry-led rescue plans, including the 1.8 billion ringgit ($473.7 million) purchase of a controlling stake in Malaysian Airlines from a businessman close to Tun Daim, and the acquisition of shares in a telecommunications unit of Renong, a company with historical links to United Malays National Organization party, drew criticism from his own party members as well as opposition politicians and market investors.

A few weeks before Tun Daim resigned, Dr. Mahathir, who denies any fall-out with his former minister, said the government would "review" a 1.85 billion ringgit rescue plan for two privatized light-rail projects.

But many investors remain skeptical over whether Dr. Mahathir can edge away from the deals struck under Tun Daim.

"Mahathir is quite clearly fighting for his political life, trying to distance himself from some of these business problems," said William Pitman, a fund manager at Henderson Global Investors in Singapore. "But we all know that Daim and Mahathir have been very close for a long time. Whether they can be separated, I don't know."

Mr. Wood, at ABN Amro, said investors also worry that political priorities will continue to distract Dr. Mahathir from strategic economic problems, such as a loss of manufacturing competitiveness to China. "Investors are right to wait for evidence of change, not talk of it."

(END) Dow Jones Newswires 12-06-01