The Sun Daily reported back in October 2016:
Businesses and consumers are less optimistic about the Malaysian economy, a survey by the Malaysian Institute of Economic Research (MIER) shows.
MIER’s third-quarter (Q3) Business Conditions Index (BCI) dived 22.5 points to 83.9 points from 106.4 points in Q2 on the back of a slowdown in sales and production, declining local and export orders and rising stock levels.
The Consumer Sentiments Index (CSI), meanwhile, was down by 5 points quarter-on-quarter to 73.6 points in Q3 due to uninspiring employment and financial outlook. This is the ninth consecutive quarter that the CSI has remained below the 100-point threshold level of confidence.
The Malaysian Business Confidence index has begun its downward descent trend since mid-2010, reaching closer to low point of 80 (which happened to be the low points during the crisis period of 1998 and 2008-2009).
As shown below, it appears that there is a diverging trend of which the Malaysia’s FBMKLCI stock index has not fully incorporated the effects of slowdown in business confidence.
As forecasted by TradingEconomics.com, we may see possible worsening business conditions in Q1/17 before there is any expected recovery in the later part of the year:
We are seeing similar diverging trend between the Malaysian Consumer Index and the FBMKLCI whereby the FBMKLCI appears not to have fully reflected a weaker consumer sentiment.
As forecasted by TradingEconomics.com, it appears that consumer confidence will be weaker by Q1/17 before there is any expected recovery in the later part of the year.
Latest Updates – as of 19 January 2017
**Latest updates for Q42016 – Malaysian Business Confidence
STILL IN NEGATIVE TERRITORY
BCI drops for the second consecutive quarter to 81.2 points
Expected Index (EI) lost 12.4 points
Current Index gained marginally by 0.4 points
Overall sales and production trending higher but likely to drop in the next quarter
External orders dipped further
**Latest updates for Q42016 – Consumer Confidence
SENTIMENTS SHIFT LOWER
CSI falls further to 69.8
Current finances unfavourable
Income prognosis subdued, job outlook flat
Expectations of rising prices intensify
Cautious and selective shopping plans in the pipeline
Business and consumer confidence are leading indicators of the underlying economy. The key question is why hasn’t the FBMKLCI index reflecting these weakening fundamentals? Is there a recovery story in the pipeline? There is clear divergence between FBMKLCI and the current level of Business Confidence / Consumer Confidence. How long can this divergence sustain before a reversal?
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