Malaysia property sector not alarming, says Mobius

Malaysia property sector not alarming, says Mobius

KUALA LUMPUR (Reuter): The Malaysian economy should not be tarred with the same brush as those of other Southeast Asian countries, Mark Mobius, president of the Templeton Emerging Markets Fund, said yesterday.

"The situation in Thailand is quite different from Malaysia, because in my view the property market (in Thailand) got completely out of control, in terms of the funding of properties and the number of properties built," Mobius said in a telephone interview from London.

Southeast Asian financial markets were pounded by a speculative sell-off last week as regional fund managers took flight over fears an economic crisis in Thailand could be mirrored elsewhere in the region.

Malaysian share prices fell nearly 6 percent last week, while Thai stocks lost 7.3 percent.

On Monday, Malaysian stocks closed mixed with the key Composite Index finishing down 0.52 of a point to 1,041.39. In Thailand, the main index closed up 2.84 percent or 15.91 points at 577.10, boosted by bargain-hunting.

Malaysia's central bank, fearing that Malaysia could experience a speculative property bubble similar to Thailand's, imposed measures effective on April 1 to curb lending to the sector.

"There is that danger in Malaysia as well, but the macroeconomic situation (in Malaysia) is a heck of a lot better than in Thailand," Mobius said.

"I am not as alarmed by the situation as has been portrayed in the press, but it does not mean that I am wildly buying Malaysian stocks, as they are generally rather expensive compared to other Asian markets," he said.

Analysts say Malaysian stocks are currently trading at a price-to-earnings ratio of between 15 and 17 times based on prospective 1997 earnings.

Mobius said he was underweight on the Malaysian market and had been for some time.

Fund managers sometimes did not consider individual markets in the region on their own merits, he said.

"I've got people sitting in New York and London who sometimes make broad brush judgments because they can see the parallels in property prices, the tie between property and banks," said Mobius.

"But that's misleading because banks in Asia tend to take collateral, and the most common collateral is property. Usually they will lend 60-70 percent of the value of the property, so even if prices come down around 30 percent they are still in pretty good shape."

Mobius pointed to restrictions placed on foreign purchasers of property as a "safety valve for Malaysia" which the authorities could relax during any downturn in property prices.

Malaysia in 1995 announced that foreigners would have to pay a 100,000 ringgit surcharge on property purchases to discourage speculation.

The country's share prices had potential to correct about 30 percent from their peak earlier in the year, said Mobius.

"There has got to be a correction along the way. I expect the market to go down roughly equal to what it has gone down already, so a total of around 30 percent."

Asked about the significance of Malaysian Prime Minister Mahathir Mohamad taking a two-month sabbatical, which started on Sunday, Mobius said: "It gives you more confidence."

"The fact that he can leave and be comfortable with the administration is a good sign because it means that he can trust the people he is leaving behind."