Malaysia Market Outlook

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In October Market Outlook article, I have mentioned the Malaysia market index has shown an obvious bearish direction and wasn’t looking very bright in the near future. In that article, I have called those who are not so certain the Malaysia economy can sustain external headwind may opt to quit Malaysia market at the rebound near 1,600 points.

Index Rebounded

The KLSE index has truly reached 1,600 points recently, I wonder how many of you have truly quit Malaysia market then. The index has dropped back below 1,600 level these few days (Chart A).

Chart A ~· Malaysia Market Index has rebounded and retrieved last few days.

I have also highlighted in the next article that KLSE might have touched bottom at 1550 level and headed for recovery. Would the current drop back just a temporary retrieve in order to make a higher height above 1,600? Let’s re-evaluate the Malaysia market again.

Though KLSE has been bearish in 2019, Small Cap stocks have been growing. Those who have invested through mutual funds have benefited with such advantages (Chart B). CIMB Principal Small Cap Fund, for example, has profited 29% as of this day looking from January 3rd, 2019. And the Kenanga Growth Opportunity Fund has a whopping 38% return within the same period. Who said that the Malaysia market does not help investor to take profit home?

Graph B ~ Small Cap Funds in Malaysia have whopping profits in 2019.

Even then, shall we take profit now and leave the Malaysia market alone for a while?

Malaysia Market Outlook

When we look at the economic performance of China reflected at the Shanghai Index, we will have reservation for Malaysia’s economic future. As the greatest importer for Malaysian goods, China’s economic performance has been quite crucial to Malaysia economic growth. China’s economic as represented by Shanghai Composite index has been stagnated at the 3,000 level for quite some time. It also has dropped back recently.

Graph C ~ Shanghai Composite Index has stagnated for quite some time, reflecting its internal economic reality of China.

Though there was some “hope” for the trade war negotiation that pushes US indexes to new historical heights recently, the reality of signing the first round of trade war agreement is still yet to materialize. There are even speculations that the “hopeful” signing may be postponed to January next year. 

Internal Political Influences

At the political realm of the country, there is uncertain whether there will be a change in the Prime Minister by 2020 as promised during the previous election campaign. Some political quarters have already called Dr Mahathir to continue to hold his post longer or until the next election. While some have also expressed unhappiness over his lack of innovative drive to overhaul the country’s development and called for his resignation. This uncertainty might not help for the Malaysia’s economic future. Foreign investors will hold their feet until certainty is confirmed.

I personally believe the better time for investment will come after there is a change of Prime Minister. By that time, Malaysia index might have dropped even lower than 1,550, perhaps.   

What would your stance be then?

We will see by next week, whether KLSE will break through to higher height or drops lower than 1,550.  We shall wait and see!

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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.

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