There are opportunities and risks when you look at Malaysian stocks.
I was born in Penang but now call Singapore home.
The first difference you’ll notice between both countries is the language.
Penang’s main dialect is a local variant of hokkien which is different from Singapore’s own hokkien. But you can quickly catch on to the local lingo. There are enough similar words between both hokkien versions to understand each other.
Likewise, the language of capital and business does not differ much, whether we are in Malaysia or Singapore.
The same language of business
If Abraham Maslow were alive today, he may have listed “internet connection” as a basic human need.
In Singapore, we would turn to Singtel (SGX: Z74), Keppel Corp’s (SGX: BN4) M1 and StarHub (SGX: CC3) for our mobile data needs.
Malaysia has its own dominant trio in Maxis Berhad (KLSE: 6012), CelcomDiGi and U Mobile.
There’s a reason why there are only a few major players.
Network infrastructure does not come cheap, whether you are in Singapore or Malaysia.
As such, we should expect telcos to be holding debt; a quick check of the financials of the publicly-listed Maxis confirms my suspicions.
In other words, these telcos operate under the same business considerations, regardless of which side of the causeway they are on.
Therefore, if you are looking to invest in Malaysia, you will be starting at the same base level of understanding.
Different country, familiar brands
Malaysians and Singaporeans greet each other the same way — by asking if you have eaten. In particular, street food can be a favourite topic of discussion whichever side of the causeway you are on.
For me, when it comes to food, Penang wins my heart, or rather, my stomach.
The available choices for Penang street food are seemingly endless, ranging from duck rice at a wet market in the wee hours of the morning or a fiery plate of Maggi goreng from a mamak store by the roadside.
For the investor in me, the power of the Maggi brand name is the most compelling.
Malaysian and Singaporean households alike have long referred to instant noodles as simply “Maggi mee.”
As an investor, you want to sit up and take notice when a brand name replaces the name of an entire category, the same the way 3M’s (NYSE: MMM) Scotch Tape has done to adhesive tapes or Google for online search.
Same, Same But Different
While Maggi instant noodles can be found on the kitchen shelves of Singaporean homes, you can’t invest in the maker of Maggi, Nestle, on the Singapore stock market.
But in Malaysia, you can buy shares of Nestle Malaysia (KLSE: 4707).
Interestingly, the Swiss food manufacturer has been in Malaysia for more than 100 years.
Today, Nestle’s Malaysian base is its main hub for halal products shipped to over 50 countries.
Another Chinese New Year favourite, Tiger Beer, is a commonality between the two neighbouring countries.
However, only in the Malaysian stock market can you invest in Heineken Malaysia Bhd (KLSE: 3255), the owner of the beer brand.
In simple terms, you are able to find familiar brands when you venture out across the causeway.
Different country, different risks
Many Singaporean investors are turned off by the risks.
For instance, investors are worried about the depreciation of the Malaysian ringgit.
With this headwind, the bar needs to be higher when searching for promising Malaysian stocks.
There is also a lingering feeling that the rules in Malaysia can change at a drop of a hat.
The biggest sore spot that continues to haunt Singaporean investors is the old saga of Malaysian CLOB shares. In 1998, Malaysia surprised investors when it called for the closure of CLOB share trading.
The announcement rattled Singaporean investors, sending CLOB shares into a deep discount compared to the comparable share prices on the KLSE. Many investors, stung by the on-paper plunge, decided to take their loss.
It is imperative that you know that the Singapore government will not be able to protect investors that venture outside of the city-state.
In other words, you should weigh the risk and reward and allocate accordingly.
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Disclosure: Chin Hui Leong owns shares of Alphabet.
