Signs of investor confidence as Malaysia stock market, ringgit rebound
KUALA LUMPUR: Bursa Malaysia’s rebound from a sharp fall of almost 50 points right after the opening bell on Monday (May 14) is a reflection of investors’ confidence in the Pakatan Harapan (PH)-led government, analysts said.
Sunway University Business School’s Professor of Economics Yeah Kim Leng said that based on market trends, investors were more confident in the new government and Monday’s performance was seen as a form of affirmation of the current government in fulfilling its promises.
The benchmark FTSE Bursa Malaysia KLCI was initially dragged lower by falls in financial, telecom and airline shares, especially those with links to the former government, but closed to end the day 0.21 per cent higher.
Shares in AirAsia Group Bhd fell as much as 10 per cent after its chief Tony Fernandes apologised for endorsing former prime minister Najib Razak in the general election.
“Investors also opined that the global Brent crude oil price, which is now traded at US$76.96 per barrel, a level that is considered high, would give greater flexibility to the new government in managing the public coffers,” he told Bernama in a telephone interview on Monday.
Yeah pointed out that oil prices had helped ease concern on the new government’s fiscal policy, adding that the stock market reaction was comforting as it did not trigger the circuit breaker to suspend trading.
Some analysts were concerned over populist promises that Prime Minister Mahathir Mohamad’s alliance made during the election campaign, including plans to remove a goods and services tax, scrap toll fees, reinstate fuel subsidies and review Chinese investment deals.
Ratings agency Moody’s said on Monday that there was “little clarity” on the new government’s economic policy agenda and if it fulfilled its campaign promises without adjustments, it would be credit negative for the economy.
As for the ringgit, the local unit had earlier succumbed to selling pressure when it opened at a four-month low of 3.9850 per US dollar on Monday, but clawed back earlier losses before closing at 3.9480, the same level as last Tuesday, the day before the election.
On the ringgit’s prospect, Yeah said the expectation was that the local currency could perform better than it did during the 1997/98 Asian financial crisis when it was pegged at the 3.80 level to the US dollar.
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“It was during Mahathir’s era when the financial crisis took place, and I believe the ringgit would be in a better position now as it is supported by high oil prices, positive external support, export momentum and less concern about current account surplus, which cumulatively will be positive for the ringgit,” he explained.
Thus, for the longer term, closure of risk premium due to the unresolved 1Malaysia Development Bhd scandal would also build greater confidence among the investors, he added.