Why Malaysian Stock Market Optimism is Rising

It is difficult to discuss culture in Southeast Asia without referencing Malaysia. However, this country’s riches go well beyond just culture. It has an abundance of natural resources that most countries can only dream of. From minerals to fertile soils, Malaysia has it all. However, its history took an interesting twist when the country chose to move beyond its dependence on their natural resources into an economy grounded on high-tech manufacturing. Exporting technology such as semiconductor devices, as well as commodity exports such as palm oil and natural gas have since served as the main drivers of this country’s economy.

However, this economy has been struggling, for the most part, up until this past year. Since the global economic slump in 2008, the Malaysian economy has been struggling to recover its footing even after other countries in the world over experienced the 2009 upswing. This coupled with other external factors such as the trade war between China and the United States have kept Malaysia on the lower tier of its earnings.

This changed in 2017 as the country’s economy began picking up despite the prevailing global situations. The economy has been moving on up, and now more and more analysts are watching to see if the trend can survive the 1,750-point resistance level. This would mean that the economy will be able to maintain its recent recovery without dipping once again. Investors are optimistic and yet cautious as they wait to see if the upward trend will be maintained over the coming months and years. This change in headwinds towards a promising economic growth pattern has been attributed to locals spending heavily domestically and thus bringing vibrancy to the economy as a whole.

The rise in optimism about the economy has prompted foreign investors to come in and buy in to the equity market. This has resulted in substantial gains in the stock market, rendering it bullish. Also contributing to the investors incentives includes recovery of corporate earnings and a new perceived strength in the currency, as well as cheap valuation of key index stocks. Cheap valuation means that stocks are selling at lower prices than similar stocks in other markets in the region. This is because the Malaysian stock markets price-earnings ratio has remained significantly lower than the 10-year average of 19.24x.

Many analysts, however, maintain that the gains being seen at the moment might not last long, and thus approach the market with an ambivalence of intermingled optimism and caution. Investors, for the most part, believe that external and internal factors affecting the stock market are contributing to the market’s volatility and thus, their cautious approach. There is, however, another breed of analysts who believe that global economy cycle has maintained its normalcy, and that the China-US trade skirmishes that has everyone on the edge of their seats will probably not turn into a fully-fledged trade war that would rock Malaysia’s barely floating boat back to sinking point.

Offshore stock brokers are shuffling their cards and hoping to play them right so as to take advantage of the powerful export-driven economy of the country. This, coupled with government imposed tax incentives, and an abundance of natural resources have traders looking to Malaysia, if only to have a piece of this lucrative market.

At the end of the day, the Malaysian stock market is the bone of contention in many financial circles. The market, which lists more than 900 companies and stands at market capitalisation of almost half a billion US dollars, has investors from all over the world watching and waiting. However, if this growth pattern is maintained, the economy could be a high earner by the year 2025 and those willing to brave the risks could be the big reapers, when all is said and done.

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