A recent study revealed a surprising statistic: only 2.7% of Malaysians invest in foreign assets outside their Employee Provident Fund. This tiny fraction is at odds with the country’s increasing global connectivity and awareness. The vast majority of Malaysian investors are missing out on significant opportunities beyond our borders. Investing overseas is no longer the exclusive domain of the wealthy elite but an accessible path to portfolio diversification, higher returns, and greater resilience against domestic economic shifts.
In this article, we’ll discuss four key reasons why Malaysian investors might benefit from allocating a portion of their assets internationally. Broadening investment horizons can offer various advantages, from accessing fast-growing global markets to benefiting from currency diversification. Whether you’re an experienced investor or just starting out, understanding these benefits could help enhance your financial growth and security. It’s an opportunity for Malaysians to explore the potential that global markets have to offer.
1. Tapping into global growth
In terms of investment returns, Malaysian investors often find greater opportunities in global markets than in the local landscape. The world’s most advanced and liquid stock exchanges, such as those in the United States, have historically generated substantial capital gains that outperform many Malaysian companies.
For instance, tech giants like Apple, Amazon, and Google have delivered exceptional returns, with the NASDAQ Composite surging over 40% even amid the 2020 pandemic. This demonstrates the remarkable growth potential that savvy Malaysian investors can access by looking beyond their borders.
Similarly, neighbouring Singapore has a strong and resilient economy, characterized by steady GDP growth and low inflation rates. The Singapore stock market spans a diverse range of sectors, including finance and real estate. Notably, its REIT market is one of the largest in Asia, providing investors with opportunities for stable returns through income-generating properties — an offering that is difficult to match in the Malaysian market.
2. Insulating against currency volatility
Investing in foreign assets can be a powerful strategy for Malaysian investors seeking to mitigate the risks associated with currency fluctuations. When restricting their portfolios solely to domestic assets, investors tie their fortunes to the Malaysian ringgit (MYR). While the MYR has appreciated against major currencies recently, it has also experienced prolonged periods of decline, particularly against the U.S. dollar (USD) and Singapore dollar (SGD).
By diversifying into assets denominated in stronger or more stable currencies, Malaysian investors can mitigate potential losses from local currency depreciation. For instance, if you hold investments in both Malaysia and the United States, a decline in the value of the MYR could mean that while your local assets lose value, your USD-denominated investments may maintain or even gain value when converted back to ringgit. This dual-currency exposure acts as a natural hedge, offering greater financial stability and protecting your wealth against exchange rate risks.
3. Risk mitigation through geographic spread
Investing overseas also offers Malaysian investors a strategic hedge against the inherent risks tied to the local economy. While Malaysia’s economic growth prospects are promising, the country’s markets remain susceptible to regional challenges and downturns. By spreading investments across various countries and economies, Malaysian investors can significantly lower their vulnerability to domestic economic volatility. This geographic diversification approach ensures that if one particular market underperforms or faces turbulence, the impact on the overall investment portfolio remains cushioned by gains or stability in other regions.
For instance, during the 1997 Asian Financial Crisis, markets closely connected to Malaysia tumbled dramatically. Still, investors who had diversified internationally could weather the storm better than those solely dependent on local assets.
Moreover, Malaysia has undergone significant political changes in recent decades, often translating into policy shifts impacting investor confidence and market stability. By investing in various global jurisdictions such as Singapore and the United States, many of which offer long-standing political predictability and favourable investment climates, Malaysians can shield themselves from abrupt national policy alterations that could erode asset values.
Ultimately, allocating resources internationally enables Malaysian investors to build a more robust financial safety net. It’s about creating a diversified portfolio that offers greater security and growth potential than a singular market focus. Therefore, expanding beyond national borders isn’t just an option—it’s a prudent strategy for safeguarding wealth against unpredictable economic shifts and political uncertainties.
4. Broader investment options
While Malaysia has a thriving palm oil and rubber industry, the local market often lacks exposure to rapidly evolving and potentially lucrative sectors like artificial intelligence, biotechnology, and renewable energy. By investing in markets such as the United States or China, Malaysian investors can access promising opportunities in tech giants like Nvidia or Tencent, offering substantial returns that are hard to achieve within the confines of local industries.
Moreover, global access opens doors to a wider array of asset classes. Whereas the Malaysian investment landscape typically spans basic options like local stocks or properties, foreign markets offer various financial products. Investors can put their money into stocks in the United States, REITs in Singapore, or specialised exchange-traded funds (ETFs) focused on global themes and niche opportunities elsewhere. Diversifying across different asset classes helps mitigate risk while maximising potential returns.
The fifth perspective
The evidence is clear — Malaysian investors have much to gain by venturing beyond domestic borders. Whether it’s the potential for higher returns, the safety net of currency diversification, the mitigation of regional risks, or access to a wider range of investment options, each of these compelling factors highlights the value of a globally diversified portfolio.
In today’s interconnected world, investing overseas has become more accessible, with online brokerages like Moomoo and Rakuten Trade providing Malaysian investors with low-cost, direct access to foreign markets.
By allocating a portion of their assets internationally, Malaysians can protect their wealth and take advantage of growth opportunities that may not be available in the local market. It’s a strategy that can enhance portfolio diversity, helping to reduce exposure to domestic economic fluctuations while providing access to a broader range of financial opportunities.
