Mahathir addresses fund managers on market woes

Mahathir addresses fund managers on market woes

KUALA LUMPUR (Reuter): Malaysian Prime Minister Mahathir
Mohamad yesterday addressed foreign fund managers as part of his
government's efforts to reassure nervous investors about
Malaysia's economic policies.

But, unlike previous discussions between officials and fund
managers, the premier conceded Malaysia may have made mistakes in
attempts to stem a massive sell-off in its stock market.

"I think the fund managers were impressed by the humility
displayed by the prime minister," said James Alexandroff, who is
based in Singapore with Arisaig Partners.

Alexandroff, one of four fund managers who briefed reporters
about the late morning meeting, added, "He (Mahathir) admitted
that some of these recent actions have probably been misguided."

Specifically, Mahathir, who is known for his tough-talking,
shoot-from-the-hip pronouncements, admitted that a decision to
restrict trading in the key 100 blue-chip stocks was a mistake,
the fund manager said.

"He said it was a misunderstanding to do with the definition
of designated stocks," he said.

The "designated securities" label, which effectively blocked
short selling in the stocks and shortened trading settlement, was
lifted a week ago after being bitterly criticized by foreign
investors, some of whom found their trading positions trapped.

Mahathir also provoked consternation when he repeatedly blamed
foreign speculators for Malaysia's economic woes, charging a
"racist" plot to destroy his country's progress.

But in recent weeks, senior government officials have gone on
a mission to woo back alienated foreign investors.

Mahathir's deputy and Finance Minister Anwar Ibrahim held a
closed-door session with the same group of fund managers on
Friday, and government economic adviser Daim Zainuddin also spoke
with investors over the past week.

Freshly back from a trip to Mongolia and Kyrgyzstan, Mahathir
met for 90-minutes on Sunday with about 50 fund managers from the
U.S., Europe and Asia, who have been in town since the end of
last week for a PhileoAllied Securities conference to showcase
Malaysia and its companies.

This latest group of fund managers say that while pleased with
reforms Malaysia is making, they are not yet sold on its
fundamentals.

After seeing a 20 percent drop in its ringgit since early July
and a nearly-30 percent loss in share prices since the start of
the year, Malaysia has hastily abandoned not only the week-old
trading curb, but also several big projects like the US$6.2
billion Bakun dam.

Malaysia's biggest economic problem "is confidence", said
David Roche, of the London-based Independent Strategy. "It needs
foreign direct investor confidence and confidence from Malaysians
that things are going to get better and that they can invest
their money here," he told the news briefing.

The fund managers said they expect Malaysia's growth rate to
slow from its eight percent plus pace seen for almost a decade.
Roche said the long-term growth rate could be around 7.5 percent,
while Sean Chan, of TCW in Hong Kong, said he expects between 7
percent and 7.5 percent.

Malaysia has insisted it will see over eight percent growth in
1997 despite private economists' predictions that growth will
slip to slightly under 8 percent this year.

In interviews following the meeting with Mahathir, several
fund managers said they remain concerned over slowing earnings
growth, the stability of the ringgit, interest rates and the
valuations of the market.

Despite the stock market's steep decline, "it's not really
cheap", said one Singapore-based fund manager. "It's still
expensive by book value of 2.5 times."

The issue of foreign speculation has also not gone away even
if the prime minister has for now abandoned his harsh rhetoric on
the subject. Fund managers said Mahathir raised it at their
meeting.

"Yes, there was clarification by the prime minister on what he
viewed as speculation and manipulation," Chan of TCW said.

Asked if the fund managers agreed with Mahathir's assessment
that foreign speculators were at the crux of Malaysia's woes,
Roche quickly volunteered his opinion. "I can't resist answering
that," he said. "Personally, I think it is wrong to attribute
this to evil intentions, Machiavellian manipulation or anything
else."