I keep reminding myself on what should I expect of Malaysia’s FBMKLCI in the near term. It is true that there are multiple external and domestic issues that are affecting Malaysia and its equity market. From a common sense view and a personal perspective, I sum my view as follows:
The above diagram sums up the primary factors that are commonly known in the market. I personally hold an overall negative view on Malaysian equities, at least for the next two years. Corporate earnings continue to decline, with no clear ‘light’ at the end of tunnel. Malaysia has too much household debt, consumer sentiment will continue to be bearish. The country relies heavily on China for its trade, and this will create further uncertainty as to the negative impacts resulting from China’s slowing economy as well as its corresponding huge debt overhang problem. Low crude oil price will continue to dampen Malaysia’s fiscal balance.
More importantly is what will be the impact resulting from the flow of ‘hot money’ from the emerging markets upon the rate hike by the US Feds. In addition, is global recession in the making?
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