Uptick in FDI flows
11 Nov 2024
Malaysia is receiving greater foreign interest and investments due to its stability and positive policy reforms, says Citigroup global co-head of corporate banking Jason Rekate.
“There is an influx of investments in high growth sectors such as technology, renewable energy, data centres and semiconductors, with companies from the United States being the largest investors.
“There is also heightened interest from European and Asian countries. We expect a pickup in more strategic merger and acquisition (M&A) activity,” he said in an interview.
US-based Citigroup, which Malaysian corporate banking business is one of the key markets for its Asian franchise, is capitalising on the rapid foreign investment inflows into the country to carve a stronger foothold in the corporate banking arena.
Elaborating on foreign direct investments (FDIs), Rekate said they reached RM85.4bil in the first half of 2024 as many of the corporates used Citigroup’s network when they enter the country or increase their existing investments.
“We have also seen an uptick in investments made in the semiconductor ecosystem, data centres, shared services centres and global billing centres.
“They will continue to increase and remain a focus area for us.
“With the China plus one strategy playing out, where we also see Chinese companies setting up manufacturing bases in new locations to support their Asian and international businesses, Citi Malaysia is well placed to capture the business flows as we support more companies entering the country.”
As Malaysia drives its own environmental, social and governance agenda in technological and green financing initiatives, it will open up new opportunities in green loans and sustainability-linked financing, according to Rekate.
Companies are looking at making incremental investments for manufacturing in other countries to diversify their business under the China plus one strategy.
On the focus areas in corporate banking, Rekate said: “We are deepening client engagement and growing our wallet share with our existing clients.
“Citi continues to work closely with foreign multinational companies who are clients of ours in other parts of the world, as they enter or expand their business presence in Malaysia.
“We will focus on key business corridors where we see maximum opportunity for growth and investment.
“For instance, our Asia-to-Asia corridor strategy has been a huge growth area and will continue to be a focus going forward.”
With the government’s emphasis on attracting FDIs in high-growth sectors, the bank is optimistic that the electrical and electronics ecosystem will grow at a steady pace driven by demand for consumer electronics, automotive and artificial intelligence.
This is a sector that it will focus on in Malaysia, and other parts of the world, as well as the entire supply chain.
The bank also expects opportunities for M&A and capital raising in the healthcare and data centre space as more companies look at Malaysia as a suitable option.
Looking ahead, Rekate said Citigroup saw immense growth opportunities for the country’s economy and multinationals planning to operating here.
The banking group is maintaining its gross domestic product (GDP) growth forecast of 5.2%, implying that the fourth quarter GDP growth is picking up to 5.5% for this year.
Based on official estimates, the economy is projected to grow between 4.5% and 5.5% in 2025, driven by strong domestic demand and strategic investments in critical sectors including technology, manufacturing and renewable energy.
The GDP is projected to be stronger at between 4.8% and 5.3% this year compared with between 4% and 5% previously.
UOB Malaysia acquired Citigroup’s consumer banking business in Malaysia in 2022, resulting in Citigroup’s retail banking and consumer credit card business being transferred to UOB Malaysia.
In terms of the contribution of corporate banking to Citigroup Malaysia’s overall business, Rekate said it formed the bulk of the bank’s business in the country.
“Client relationships are managed by our team of experienced bankers within the corporate banking team.
“They work with our product partners in services and markets who offer our corporate clients a range of sophisticated and innovative services tailored for their business needs, including payments solutions, cash and liquidity management, trade finance, custody and trustee services as well as markets solutions like hedging and foreign exchange.
“This is our annuity business which contributes a steady fee income.
“Then there is the episodic activity where we work with our investment banking partners to deliver capital markets financing and M&A advisory.
“As activity levels in Malaysia increase, and more companies require the services we provide, we expect our local franchise to benefit and grow as our clients grow,” he added.
Source: The Star
