Malaysia Baru, Where Art Thou?

It has been one year since the watershed 14th general elections (GE14), when the Pakatan Harapan (PH) government unexpectedly trumped Barisan Nasional (BN) 6 decade rule to wrest control of Putrajaya.  However, market reaction has not been kind with the benchmark KLCI plunging close to 12% since May 2018 as euphoria dissipates over lack of policy clarity and sluggish growth, making us the only regional market to be in the red this year. 

 One year on, where is Malaysia Baru headed? Is the local market really that short of zest to be considered ‘boring’?  In the following interview, Gan Eng Peng, Director of Equities Strategy & Advisory, Affin Hwang Asset Management offers some perspective and if the market has bottomed out.

Questions

  1. As we approach the one-year anniversary of PH government coming into power, what’s your assessment of the market so far and speed of reforms?

Malaysia is the only decent size market globally to be down this year.  We did not benefit from the liquidity driven risk-on rally.  Even Thailand, which had an inconclusive election has fared better than Malaysia.

It is fair to point that the speed and effectiveness of reforms has been lacking.   There has been a lot of own goals, flip-flops and policy risk coursing through corporate Malaysia.  Wholesale changes of top corporate personalities would grind down decision making.  To be clear, Malaysia is economically healthy – it’s just the animal spirits that has been taken down.  The velocity of money has slowed.  People are not driven to invest even though there is tremendous wealth on the side-lines.

  1. Are markets just too impatient or are there other external factors ailing the market?

Last year there were various external factors weighing down on markets, so we could hide behind these issues and said we were suffering together. But the performance this year has ended this debate of whether it is a global issue overhang or domestic underperformance.  It is clearly domestic underperformance.

Markets are always impatient.  It is a real-time measure of the performance and prospect of the country via its listed corporate.

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