From the Investing Front Lines of Malaysia ...

Sean Brodrick

The Australians call it a “walkabout,” an ancient rite of passage during which adolescent male Australian Aborigines would go on a journey in the Outback for as long as six months.

Today, a walkabout is just a short period of wandering in the Australian bush.

For me, a walkabout is a chance to learn more about the local economies and local companies while I am in Asia. That is exactly what I did during my recent trip. Even though it was more than 90% in the equatorial jungle of Malaysia, I also went on a five-hour walk around downtown Kuala Lumpur.

Kuala Lumpur is the capital and largest city in Malaysia with 7 million residents. The city is the economic and business center of the country. Kuala Lumpur is a center for finance, insurance, real estate and media. In fact, there are 14 companies in the Forbes 2000 that are based in Kuala Lumpur.

Malaysia itself is an amazing country. It is a beautiful Southeast Asian jewel with beautiful beaches, fantastic food and friendly people.

For investors, Malaysia is amazing for its vibrant, diverse and growing economy.

  • Thanks to 200 years of British rule, English is widely spoken and has thus attracted billions of dollars of western investment.
  • Malaysia is RICH in natural resources, both mineral — tin, oil, bauxite, coal, copper, natural gas — and renewal resources such as rubber, palm oil and timber.
  • Malaysia is the Islamic banking center of the world and has attracted BILLIONS of dollars from the oil rich Middle Eastern countries. Malaysian banks follow the principles of Islamic finance and take very low risks compared to banks in other countries. Plus, the easy access to capital is a key fuel behind Malaysia's economic growth.
  • The Malaysian workforce is young, educated, industrious and one of the most productive in the world.

Don't forget Malaysia's proximity to China, a key to its recent and future economic growth. Malaysia is simply one of the most fertile economic environments in the world and why I am making my third trip to this exciting country.

Here are a few of the nuggets of information that I uncovered on my walkabout in Kuala Lumpur.

Walkabout Finding #1: It wasn't in downtown Kuala Lumpur, but I was still shocked to see that a Starbucks didn't open until 10:00 a.m. Furthermore, I saw about a dozen Starbucks stores in Malaysia and none of them was packed with customers. Oh, they had customers but just not the crowds I'm used to seeing in the United States. So if someone tells you to bet on Starbucks' growth in Asia, I'd say ignore them.

Walkabout Finding #2: Kuala Lumpur, like every major Asian city, suffers from mind-numbing traffic congestion. The streets were packed with cars, but with two brands that you'll seldom find anywhere else. I'm talking about Proton and Perodua, two Malaysian car manufacturers.

But what really surprised me was the number of luxury cars. I saw Porsches, Bentleys, Mercedes Benz, but the vast majority was BMWs. Don't let anyone kid you. The consumer in Asia is spending!

Walkabout Finding #3: I checked out the gigantic Kuala Lumpur City Center Mall (which was SUPER crowded with free-spending shoppers by the way) and walked by a bookstore, Kinokuniya, and it was packed.

Not only was it filled with shoppers, I was surprised to see that the key high-volume shelves near the entrance were filled with books on business, investing, engineering, and self-help success instead of the usual Tom Clancy and Mary Higgins Clark. More evidence the consumer is spending in Asia. And, they are avidly educating themselves.

Walkabout Finding #4: You don't know hot and humid until you travel to Southeast Asia. I was dripping sweat from the 90-degree temperatures and 90% humidity. I was dying of thirst and a beer sounded very tasty. So I ducked into the Kuala Lumpur Shangri La hotel.

The friendly bartender sold me a beer for $12 (ouch!) and told me that the hotel was close to full almost every night. Shangri La hotels are gorgeous luxury hotels for high-end travelers and are found in most major Asian cities.

Shangri La Hotels is traded on the U.S. over-the-counter market under the ticker SHALF.PK, but it isn't the only Asian hotel company that is traded in the United States. Hint: Two WILDLY successful Chinese hotel chains are traded on the Nasdaq.

Walkabout Finding #5: That beer was satisfying, but it didn't take long before I was sweating up a storm again. I needed the relief of air conditioning, so I dodged into an Isetan Department store.

Isetan, one of Japan's oldest and largest department stores, known for its mix of high-end and affordable fashions, was so packed that I couldn't move. The place was wall-to-wall shoppers spending LOTS of money. Again, still more evidence the Asian consumer is spending!

Bottom line: The Malaysian economy is firing away on all cylinders, just like the rest of Asia. So don't believe the stuffed-shirt, armchair economists and analysts in the United States. They don't have a clue what they're talking about. Period.

You have to get down in the trenches, with your boots on the ground in Asia ... and talk to the local people to see what's really happening.

There are 3 billion consumers in Asia, almost ten-times the number in the United States. Always keep that in mind.

From Kuala Lumpur, best wishes ...

Tony


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Posted 07-22-2011 12:30 PM by Tony Sagami