KUALA LUMPUR: Swiss banking group UBS has admitted that the recent negative assessment of Malaysia’s economy by its regional chief investment officer Kelvin Tay, had contained errors.
According to a report in financial daily The Edge, the bank’s Singapore branch in a statement conceded that Tay, in an interview with Bloomberg TV on April 12, had erroneously claimed that Malaysia had a current account deficit.
Malaysia has had a current account surplus (value of total exports exceeding imports) for more than 20 years.
UBS Singapore’s corporate communications head Adeline Lee explained that Tay had mistakenly stated that Malaysia’s abolition of the Goods and Services Tax (GST) would lead to a greater dependence on oil revenue.
Lee said Tay had inadvertently used some wrong terms given the short duration of the “live” interview.
“He was referring to the Malaysian government’s projected “fiscal deficit” of 3.4 per cent, and not “current account deficit.
“He was also referring to the government’s revenue and not GDP, when he mentioned that cancelling GST would result in a higher dependence on oil prices. He used the term “oil” to loosely refer to sectors that are closely correlated to oil price movements.
“In context of that discussion, he was referring to the fiscal deficit,” the statement read.
She said UBS regretted any misunderstanding that had resulted from the interview.
Tay’s assessment, following news reports which noted that Malaysia’s stock market was faring poorly while its neighbours were experiencing a bull run. These were subsequently used by critics to lambast the government.
However, Deputy International Trade and Industry Minister Ong Kian Ming and Tony Pua, who is political secretary to the finance minister, had been vocal in highlighting the errors made by Tay.
UBS said it remained positive over Malaysia’s long-term economic prospects, and has forecast economic growth of between 4.6 per cent and 5 per cent next year.
The Malaysian economy, it said, should start seeing improvement in its exports alongside a stronger currency, since the Chinese economy is turning around.
“We have also recently upgraded our three-, six- and 12-month forecast on the MYR (versus the USD) to 4.05, from 4.15 previously,” UBS was quoted as saying.
UBS said its rating for Malaysia was relative to the rest of MSCI Asia ex-Japan.
“Malaysia is a highly defensive market and with global equity markets in the midst of the longest bull market in history, our preference is to be overweight the more cyclical markets in Asia, such as China.
“Should the global equity markets turn the corner as a result of the economic cycle coming to an end, a defensive market like Malaysia would be a more attractive investment proposition,” read the statement.