KUALA LUMPUR, April 12 ― Fears are growing that Malaysia may be swallowed up by an economic bubble now enveloping ASEAN, even as the countries bask in the growth arising from “hot” money flowing in from developed economies.

Kuala Lumpur witnessed a net foreign inflow of US$63.45 million (RM192.5 million) yesterday, extending the year-to-date net offshore inflow to US$3.6 billion.

“If this growth continues, these economies will run into increasing signs of overheating or bubble characteristics and bust risks later on,” said a recent report by Robert Prior-Wandesforde, Head of India and Southeast Asia Economics for Credit Suisse.

Malaysia’s gross domestic product (GDP) is expected to grow by 5.6 per cent this year, according to Malaysian Institute of Economic Research (MIER), riding on the advantage of ASEAN and is well ahead of other parts of the world.

“In large part, the ASEAN Tiger Cubs present an ‘enjoy it while it lasts’ story,” the report added, referring to the combined economies of Indonesia, Thailand, Philippines and Malaysia that is worth US$2 trillion.

“Given what we hope to be pre-emptive policy making, we suggest these countries should all be raising interest rates,” he said, but conceded that it is unlikely for Malaysia to increase its rate until 2014.

In another report by business daily Financial Times, Prior-Wandesforde talked about a rapid rise of around 30 to 40 per cent annually in property prices, with some areas rising by 50 per cent.

“We felt this was evidence of a property bubble,” he told Financial Times.

Iskandar Malaysia, Kota Kinabalu, Kuala Lumpur and Penang are set to become hotspots for foreign property investors, after Hong Kong and Singapore moved to “cool” their respective overheated property sectors.

Malaysia has become a preferred country for foreign property investors and is now the main focus after Hong Kong and Singapore imposed 15 per cent levies to slow down foreign investments that had overheated their property markets.

But the inflows into its property sector may be double-edged for Malaysia, which has faced concerns of property glut as far back as 2010, after the government introduced mega projects such as the 100-storey Warisan Merdeka tower and the Kuala Lumpur International Financial District, under the Economic Transformation Programme (ETP).

Malaysia also risks being mired in a credit bubble now looming in Asia’s emerging economies, several new reports showed last month, after its household debt rose up to 80.5 per cent of GDP last year.

Credit insurance firm Coface Group included Malaysia among the emerging markets at risk, together with Thailand, Singapore, China and Taiwan.

Coface noted that expansionist monetary policies, which were put in place after the 2008-2009 crisis and failures in prudential controls, have caused a sustained growth in bank credit in these economies.