While most global markets cheerfully turned bullish last week, Kuala Lumpur Composite index is the only market that turned bearish. It has totally missed the best market bliss last week. As a citizen, it became worrisome for what happened to Malaysia market outlook as it stains with the title as the worst performing market for the year 2019.
As an investor, any bearish trending market poses the best opportunity for investment. The more it drops, the better it becomes. This is especially true to Malaysia market near future.
Causes for Decline
Major causes for Malaysia market or economic bearishness has to do with the recent political change. The change was very drastic. It turned away from an autocratic rule of a single political party for half a century to the first-time governing of a newly formed political alliance.
Worst of all, many of its component parties were newly formed. Though it was led by an experienced and capable Prime Minister, but most of its cabinet ministers are new and inexperienced. It will surely wrestle with many hardcore corrupted issues for some years to come before it turns to be a better governing body if ever possible.
Major blames for its current poor economic condition have to do with its lack of economic direction, interruption of its predecessor’s ambitious economic plans and the ongoing internal investigation of corrupted governmental agencies and institutional practices. However, the recent government has turned its hopeful light for a better future by resolving some of the major issues.
Some Positive Turns
First of all, the national debt has been significantly reduced as recently revealed by the Finance Minister in parliament. The Prime Minister also confirmed that the debt level now has been reduced to a much manageable level. This has been a great effort and priority of the new PH government.
Secondly, in order to strengthen relationship with China, taking advantage of the ambitious Belt and Road Initiatives, the East Coast Railway Link is reportedly on its way to resume construction next month after lowering its initial cost. The next multi-billion dollar mega project will be the revival of Bandar Malaysia. And the subsequent mega construction revival will be very soon the Singapore-Malaysia high-speed rail link. Because Bandar Malaysia was conceptualized as a township that would house the Kuala Lumpur terminus. When all these mega projects are revived and running, Malaysia economy data reading, and sediments will be boosted up running as well.
US-China Trade War
Current trade war between US and China is perhaps never ending in short term or even long term, to my personal view. This is going to change global trading relationship just as what I have written on The Great Tectonic Shift previously.
This ongoing trade war could make China manufacturers to shift some of their operation to South East Asia such as Malaysia in order to circumvent elevated U.S. tariffs. Malaysia is seen as a better destiny choice with much mature ports and transportation system comparatively.
Fundamentally speaking, the economy in Malaysia is still considered resilient and strong. Most authentic institutes gave positive forecast for its economic growth at 4.7% – 4.9% for this year 2019 including the MIDF and IMF alike. The country’s financial system which has been evolved and strengthen from the past many decades is still sound and solid. There is nothing to fear internally except external global trade dispute issues, negative for the local political and sensational economic reports.
Locals have More Confidence
There is another very interesting observation. Even though Malaysia market index is declining mostly due to foreign outflow, small cap or third liner stock indexes are advancing steadily since January 2019.
It shows that only those 30 index stocks or major big caps are declining. There are stock players particularly local investors’ confidence in Malaysia economy are still very high and positive. Could it be that those locals know their country’s economy better? And those foreign investors are mostly deceived by merely looking at superficial market sediments and dumped all Malaysia holdings just like the illusion wrongly perceived by foreign investors prior to GE 14 election time?
If this is true, would the timing on Malaysia market open a golden opportunity for investment now? After a while, these foreigners who freaked Malaysia bourse will be regretted and return in droves when they come to their senses.
In other words, the worst performing market now is always the best opportunity for investment especially when you have confidence that the global trade conflict between US and China is getting close to a resolution. Malaysia market index is now resting on the strong long-time support line near 1,600 points. Will it break down further, I would presume hardly so. But if it does, I will be gladly welcome it. Because the worst performing market will still be the best opportunity to invest, especially when you have real confidence on its fundamental economic condition. Would you think so?
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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 conclude individual decision.