Singapore has been the largest source of inbound investments in Malaysia, with more investors having taken an interest in its economic growth, particularly that in the financial services and consumer sectors.
Amid a revving up in merger and acquisition (M&A) activity across the Causeway in the last few years, Singapore companies have led the way with 19 transactions completed since 2010, with six of those 19 deals sealed between July last year and the middle of this year alone.
The latest Spotlight Asia report produced by Kroll Advisory Solutions noted that nine transactions worth US$525 million were made in 2009; last year, 31 deals worth US$4.8 billion were completed.
In the first half of this year alone, 13 deals worth US$1.15 billion were completed, going by data from Mergermarket, indicating that interest was still strong despite investor caution over the country's general elections.
The financial services sector has been a standout in attracting interest from investors. Since 2010, 17 transactions worth slightly more than US$6 billion have been completed.
These deals included the UAE-based Aabar Investments' acquisition of a 25 per cent stake in RHB Capital Bhd for close to US$2 billion.
At the end of last year, Hong Kong's AIA Group bought ING Management Holdings' Malaysia branch for US$1.7 billion in an acquisition that created one of the largest life insurance companies in the country.
Smaller deals involving insurance companies are likely in progress, given that Malaysia's growing middle class will fan demand for financial and insurance-related services, said the report.
In the country's consumer space, there have been 19 deals worth US$940 million since 2010. The report said this sector is also likely to enjoy increased buzz from the growing middle class' demand for consumer and retail goods and services.
Based on trends, Malaysia looks set to play an important part in the investment strategies of fund managers and limited partners: it has accounted for nearly a quarter of private equity activity in South-east Asia, with 23 transactions worth US$5.5 billion.
Of the 23 deals, two accounted for the majority of the deal value: one was Maybank Ventures' US$1.9 billion buyout of energy producer Kencana Petroleum, and the other, a stake acquisition in Tradewinds Bhd by a consortium of investors.
Despite this, the level of private-equity transactions is gaining ground in a region in which only Singapore had more buyouts than Malaysia - 42. The total value of Malaysian private-equity activity, however, was almost the same as Singapore's.