PETALING JAYA: It has been a year since the Pakatan Harapan government came into power, but it has not been smooth sailing for the local bourse on the back of external and local headwinds.
Corporate earnings have not picked up momentum in line with the slowdown in the global economy as external demand weakens.
Risks to economic growth have increased, prompting a 25-basis-point cut in the Overnight Policy Rate (OPR) by Bank Negara Malaysia to spur economic growth.
The FBM KLCI fell 212.96 points or 11.5% in the past one year to close at 1,633.55 points today from 1,846.51 points on May 8, 2018.
Construction and property counters, in particular, have been under pressure over the past one year, as the Pakatan Harapan government put on hold various mega projects in a bid to rein in government expenditure.
Over the past year, the KL Construction Index has declined 71.69 points or 25.5% to 209.44 points today while the KL Property Index fell 151.01 points or 14.07% or to 921.91 points.
“The stock market has been pretty much in line with what we expected. The KLCI ended (last year) in line with our expectations, with the lows and highs also in line with our estimates. The ringgit also moved in line with our expectations. Things panned out the way we expected it to,” said Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew.
“This year, we expect things to change in the second half of the year. While things did not go so well during the first half, it will get better in the second half. I would say, the worst is over and things will improve, barring unexpected events such as an unforeseen global financial crash or other external factors,” he told SunBiz.
Pong noted that there has been less liquidity in the market as the government has been cleaning up institutions such as Lembaga Tabung Haji and Federal Land Development Authority.
While corporate earnings have been weak, Pong said it may improve very late in the year given that some of the fruits of government reforms come through in the third quarter onwards.
Moving forward, he said the government needs to move into higher gear and implement more projects.
“They are already doing this, as the East Coast Rail Link is now back in play. I think other projects will be brought in progressively, such as the Kulim airport,” he said.
Commenting on calls to reinvigorate the private sector, he said such endeavours would take a long time, as the country has been depending on the government to drive investments and projects.
“The private sector has been weak, as we have been using government-linked companies to spearhead the economy. We’re so used to the government driving projects and dishing out contracts that reinvigorating the private sector may take a whole generation to happen, because it is a structural issue that cannot be changed overnight,” he said.
Last year, the total foreign net outflow stood at RM11.65 million, the largest yearly foreign net outflow since 2015, which saw RM19.49 billion of equities pulled out. The foreign net outflow of RM11.65 billion offset the total foreign net inflow of RM10.33 billion recorded in 2017.
According to MIDF Research, foreign funds were selling stocks listed on Bursa Malaysia during the last eight weeks of the year. For the week ended Dec 28, 2018, foreign funds sold RM127.6 million net of local equities.
Last month, foreign net outflow stood at RM1.49 billion, marking the third consecutive month of foreign net selling, bringing the year-to-date foreign outflow from Malaysia to RM2.76 billion compared with a foreign net inflow of RM3.71 billion recorded during the same period last year.
Source: The Sun Daily