The recent policy changes mean that capital controls now exist only for Malaysians, though the peg remains and offshore ringgit trades are still banned. Kuala Lumpur hopes the policy reversals will entice foreigners to invest in its relatively cheap stock and property markets. If the strategy works, it could reverse capital outflows, increase foreign-exchange reserves and stabilize the ringgit peg. Economist R. Thillainathan, a finance director at Genting, a gaming, power and property conglomerate, says it makes far more sense to attract foreign funds than to stimulate the economy through extra spending. That could work.
Foreign investors have yet to respond with increased buying of Malaysian shares.
All my clients say they'll wait and see. They've all been burnt here before. Property analysts also note that the regulations keep changing. In 1995, the rules were tightened when prices soared, then were relaxed two years later. But the current relaxation in government policy comes after widespread calls across the industry for change, and is long overdue.