It has been an exciting week for all Malaysian as the new government entered its third week of new ruling. Many things happened in this week, including a major market consolidation, formation of Malaysia Hope Fund, scrapping off some mega construction projects etc…
While Pakatan Harapan government has already revealed the shocking amount of debt for 1 Trillion last week, the administration began to scrap off a few mega construction projects, announcing 1st June as the official date tuning down the unpopular gst rate to 0%, subsidize fuel consumption etc, market took them good excuses to fall sharply while the broader Asian markets slid.
It is expected as an unavoidable short term pain while a change of regime took place after 60 years. The question now is how many more similar mega projects which were viewed as economically generative by previous administration are on the lists waiting to be cut off. Speculations are mostly focused on road and railway construction such as East Coast Rail Link project and Pan Borneo Highway etc.
Malaysia Market Expected to Fall Further
Markets observers are now discussing whether KLSE will fall further down beyond the current support of 1715 and reach next support at 1606 index level. According to news report today, there will possibly be many more projects to be discarded as more corrupted cases have been unearthed. The eventual handling of 1MDB scandal will be another dead blow to the market sentiment if misdeeds and losses have been concluded. As a reason, KLSE is expected to have its further downside risk from now on while the government continues its probes and investigations.
Prime Minister Mahathir has mentioned that the 100 days fulfillment of its campaign manifesto promises might not be able to deliver on time due to unforeseen seriousness of the mismanagement and corruption done by previous administration. Therefore, during these period, investors have to prepare many more uncertainties before the new government can roll out prospective plan to encourage market players.
Global Market Front
While on the international front, trade wars have been escalating and becoming eminent. There was no sign of agreement between any of the disputed parties. Neither was the peace talk between US-North Korea has been making any good progress at this moment. Fed interest rate is going to increase another notch this June. With this backdrop in mind, US and global markets are expected to have another fall next week or so. Overnight markets on US have showed positive break through last Friday market close, if the Asian markets on Monday and Tuesday reflect the US dancing party, investors are given another previous opportunity to adjust their portfolio for the next market correction probability. If this happens, Malaysia market will find another good excuse to have its deep dive again.
If the global recession has not arrived, While Malaysia market dips, investors should be delighted that a glimpse of opportunity for long term profit is showing. Just like the change of regime in other Asian countries such as India and Indonesia, a decent market run up happened right after their changes of regime. Malaysia market won’t have its run up before major consolidation. What we need to do now is to prepare ourselves when this happens even before market consolidation further and after it bottoms.
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The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions. This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to make up individual investment decision.