Kuala Lumpur — One year after the historic win of Dr Tun Mahathir Mohamad and the Pakatan Harapan (PH) coalition, Malaysia is facing some grim realities as investors are choosing other markets and its economy is faltering.
Confidence in the government has also dipped as of late.
A report from Bloomberg states that “stocks recorded outflows in all but two of the past 12 months, the ringgit is trailing most of its peers and bonds may be on the cusp of another sell-off.”
The Star Online reported on Tuesday, May 14, that the national president of the Malaysian People’s Movement Party (Parti Gerakan Rakyat Malaysia) Datuk Dr Dominic Lau Hoe Chai said that he is concerned at the weak state of the country’s stocks, bonds, and ringgit.
A year after being in power, Dr Lau said, the people’s honeymoon with the PH government is over.
He expressed concern that the government did not seem to know how to boost the economy forward. He pointed out that in its endeavour to decrease public debt, the government had ended up adversely affecting growth and consumption.
This had also caused investors to get frustrated.
Dr Lau also cited government policies he believed were causing the economy to weaken, such as withdrawing from big infrastructure projects, PH’s firm stand regarding China, the reintroduction of the SST, regulatory restrictions, lessening public spending, and the plan to reintroduce Bumiputera shareholding quota.
He noted incidents when the government made sharp u-turns in reviving bug projects like the ECRL and Bandar Malaysia, while simultaneously Bank Negara Malaysia (BNM) recently cut its Overnight Policy Rate (OPR) to 3% for the first time since July 2016, Star Online reports.
According to Dr Lau, “These were attempts by the government to mend its policy failure and mistakes without openly admitting it, but it is noteworthy that public satisfaction in the government’s management of the economy also fell to 40%, compared with 60% previously, according to a poll by Merdeka Centre earlier in March.”
He added, “I call on the PH government to stop giving excuses by blaming the previous administration.
It is clear that the economy is not improving under Pakatan, and its policies are to blame. It is time Pakatan focus more on advancing the economy with good planning. Its honeymoon is over.”
With the current state of the economy, investors are staying away. Bloomberg reports Tim Love of UK based GAM Holding AG as saying,
“I don’t think I need to rush into Malaysia at the moment. Even with the valuation attraction which is now definitely coming up clearly, I don’t think that the outlook is clear enough.”
Bloomberg also reports that the country’s benchmark stock index has fallen more than 5% so far in 2019, and, moreover, is the worst-performing major equity market around the globe. While valuations are doing better poor company earnings and the sluggish economic pace have affected Malaysia.
In April, the economy received another blow when FTSE Russel stated that it could drop Malaysia from its World Government Bond Index because of worries about market accessibility.
A London-based portfolio manager at Merian Global Investors, Delphine Arrighi, said, “We’ve been neutral Malaysian government bonds for a while now. The decision by the central bank a couple of years ago to shut down the NDF market has essentially made it impossible to hedge bond exposure. I doubt offshore investors will now return en masse.”
And according to Yong Shao Fung, senior portfolio manager at Nikko’s Asian fixed income team in Singapore, “Real yields are still relatively high compared to peers but the downside risks have increased, including re-balancing due to the FTSE Russell headlines.”/ TISG
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