Malaysia moved back onto international investors' radar screens after Morgan Stanley Capital International announced on August 12 that it would reinstate the country to its closely tracked indexes starting next February.
MSCI's decision to reinstate Malaysia to its indexes - used widely by global fund managers to allocate investments - comes 11 months after Kuala Lumpur was expelled following the imposition of sweeping capital controls on September 1, 1998. Those controls, which effectively locked foreign capital in the country for one year, were first loosened in February, when Kuala Lumpur imposed the 10% levy on repatriated portfolio investments. The levy was scheduled to end on September 1 of this year.
Still, the MSCI sounded a cautionary note in its announcement, saying Malaysia's reinstatement is contingent on the country's ongoing liberalization process.
"We have been monitoring the situation closely, and obviously on September 1 one could argue that Malaysia is as investable as India," MSCI spokesman John Fildes was quoted as saying by Reuters. "We still do have concerns about the openness of Malaysia. We will continue to monitor that," he said.