1) Actually increasing interest will bring in foreign investors for bonds and cash deposits. Foreign investors that come in to invest in industry tend not to borrow in Ringgit anyway, and will not be affected by domestic interest rates. Again though, I foresee any interest rate movements to be gradual instead of sudden.
2) Generally blue chips are less affected by fluctuations in the economy, but I was talking specifically about inflation and currency depreciation. If you throw in a recession in the mix, unemployment will leave condos untenanted and the entire property bubble will collapse as well, and the safest bet is foreign equities then.
3) You are correct that blue chip returns tend not be leveraged, but your risk is much smaller because you are not leveraged, and because entry/exit costs are lower. RM 60k in blue chips, if the market dips 10%, you lose RM 6k, RM 60k initial investment for a 400k property requires like RM 10-20k for closing costs and taxes. A depreciation of 10% (40k) will wipe out your entire RM 60k. God forbid you lose your job, or are forced to sell for some other reason. You will then have to incurr another RM 10-20k to sell it, and will have to wait a gawd awful long time to get your money. I do agree that rental yields can cover part of the costs, but that assumes optimistically that interest rates stay low, and that your property will remain tenanted. There's a precarious balance between interest rates, occupancy rates and rental rates whereby the cost of leverage can greatly outweigh the income from tenanting.

Here's a thought provoking calculation for you (all hypothetical numbers. Feel free to substitute your own)

Property price = RM 400,000
Downpayment = RM 60,000
Loan = RM 340,000 at a conservative average interest rate of 7% over 30 years (ARM interest ranges from 4.2% to ~10%)

Without counting your rental yield, you would have paid RM 60,000 upfront, and RM 2262 a month for 30 years.

Assuming property price appreciation of average 5% per annum for 30 years, your RM 400,000 property will be worth RM 1.7 mil at the end of 30 years.

Now let's look at investing in a sizable basket of blue chips using dollar cost averaging.

Initial investment = RM 60,000
Monthly investment = RM 2262 for 30 years.
Assuming capital gains of 5% per annum for 30 years (unless you have reason to believe equities will underperform property in the long term), and without counting your dividend yield, you will have equities worth RM 1.8 mil at the end of 30 years.

Consequently, there is no real long term advantage for owning property versus buying blue chips. The only reason to buy property over equities is if the rental yield (including periods of vacancy) minus all expenses (taxes, maintenance, vandalism, tenant damage, legal fees, agent fees, reno costs etc over 30 years) is greater than blue chip dividend yield (of a growing stock portfolio) during the same period. Note also that with blue chips you have high liquidity, and low entry-exit costs.

This much is obvious to the educated observer. If properties were really an absolute superior to equities as an investment, why hasn't all of the world's money poured into owning nothing but properties over the past 100 years? Why would anyone ever buy stocks or bonds? I think the equilibrium where buying property is superior to buying stocks is where prices are below historical price to income ratios and price to rental ratios. Both ratios are not making much sense at the moment, and will make even less sense if interest rates rise. In such cases, a portfolio readjustment will be in order.

For Fennel, capital outlay RM100k. 4.5 years later sell RM1.1m. Profit RM300k / 300%. Over 4.5 years = 60+% per year 

Any blue chip can give return of 60+% per year ?

Any blue chip invest RM100k, can make capital gain RM300k ?

Yup your wrong. I somehow get to know a fellow colleague who only invest in stock and never into property. His word of advise... prepare to pay a sum of tuition fee before you can start earning haha.

good sharing.
let's take a look at property as an example.
the zest.
launch circa 2008/2009.
launch price approx RM200psf.
say 1100sf apt at RM240k.
DP = RM24k
fast forward to now circa RM460psf. So approx RM506k.
take gross profit = approx rm266k / RM24k (vested capital)
1108% over 5 years
= 222% p.a.

not sure whether the above calculation is right or not.