This article first appeared in The Edge Financial Daily on May 2, 2019

SINGAPORE/KUALA LUMPUR: Malaysia’s stock market and currency are set for a rebound from their slump following the election almost a year ago, said Nazir Razak, former chairman of Malaysia’s second-largest bank.

The country’s benchmark stock index slipped 11%, the most among Asia’s most actively-trade stock markets, while the ringgit currency lost 4.5%. The sell-off came after Prime Minister Tun Dr Mahathir Mohamad defeated Nazir’s older brother Datuk Seri Najib Razak at the polls, which led to Malaysia’s first change in government since its independence.

Following the elections, Najib has been put on trial for charges linked to his role in the troubled state fund 1Malaysia Development Bhd, while the leadership of various ministries, central bank and government-owned companies were changed. Projects with foreign governments were also put on hold, though Dr Mahathir recently reinstated a number of infrastructure projects by Chinese companies.

“Investors don’t like short-term uncertainties,” Nazir, who started a private equity fund after a three-decade banking career, said in a Bloomberg Television interview on the sidelines on the Milken Institute global conference in Beverly Hills, California. “After this first year, the reality is setting in, the government is reviewing right and wrong decisions, and I’m quite hopeful that maybe the worst is over.”

‘Oversold’ ringgit

He also said the ringgit is “oversold,” though Malaysia still needs the confidence of rating agencies, along with sound decisions by the government for the currency to recover.

Nazir, 52, left CIMB Group Holdings Bhd last year after nearly three decades. He helped start private equity fund Ikhlas Capital with partners he says have a century of experience combined.

“We just had our first close,” he said of the fund, declining to provide details such as the amount raised. “For the moment, let’s just call it a start-up.”

He established the fund because there is a void in the private equity space in Southeast Asia, where the average annual deals are just starting to rise to the range of US$10 billion (RM41.4 billion) to US$12 billion, from US$4 billion to US$6 billion five years ago, he said.

“It’s an industry that’s about to take off,” he said. “Then you’ve got this frustration with public markets by a lot of entrepreneurs — they are not giving them the right valuations and there is a lot of compliance costs.”

Nazir’s partners at Ikhlas included Kenny Kim, who previously worked under him as chief financial officer of CIMB, and Gita Irawan Wirjawan, Indonesia’s former trade minister. Former Philippine finance secretary Cesar Purisima and David Heng, who resigned from his role as a senior managing director at Singapore’s Temasek Holdings Pte in 2017, were also set to be part of the fund.

“We feel we have the edge in terms of being indigenous,” Nazir said. “There aren’t many indigenous truly Asean funds.” — Bloomberg