Malaysia’s stockmarket sliding down a slippery slope

An explosion of Covid-19 cases, strict lockdowns and political gridlock has made this a difficult year for Malaysia. And now, investors are pulling out of Malaysian stockmarkets.

Malaysia’s stockmarket is “sliding down a slippery slope, seemingly unable to break its fall”, says a note from PublicInvest Research. An explosion of Covid-19 cases, strict lockdowns and political gridlock have made this a difficult year. On Monday Prime Minister Muhyiddin Yassin resigned, ending a contentious 17-month spell in power. Muhyiddin “was aligned with a scandal-tainted governing coalition”, says Daniel Victor in The New York Times. “Calls for his resignation gathered force as the country issued multiple lockdown orders… and endured widespread hunger.” 

Malaysia’s monarch has been consulting political parties on who to appoint in his place. Malaysia has been living under strict lockdown rules since June. The contagious Delta variant has spread regardless, with daily cases close to record highs.  

Export-dependent growth 

GDP is highly dependent on export-oriented manufacturing and inward investment from abroad, says Shankaran Nambiar in Nikkei Asia. Exports of goods and services account for 61.5% of GDP (the UK figure is 27.4%). 

Lockdowns have left local factories struggling to function. Foreign trade associations have complained bitterly about the rules. Global manufacturers cannot tolerate disruption for long: problems in one place can bring entire multinational supply chains to a grinding halt. If they leave then it will hit “at the heart of the Malaysian development model”. For all their talk of moving out of “production and packaging” and into higher-value activities, Malaysia’s politicians have failed to make the investments in education that would actually make that possible.  

Lockdowns aren’t forever, say Chua Han Teng and Philip Wee of DBS Bank. The country has done a decent job at getting vaccine jabs into arms. Malaysia looks the second-most likely country in the region to “exceed 80% full vaccination rate” by October, behind only Singapore. That should enable a domestic reopening later in the year and a big boom from pent-up demand. In the meantime, strong global goods demand is keeping exports buoyant.  

The vaccination campaign should have calmed traders’ Covid-19 worries, says Amy Chew in The South China Morning Post. The fact that stocks are still retreating suggests politics is the key problem. Unable to predict future government policies, investors are pulling out. Foreign investors sold a net 5.3 billion ringgit (US$1.25bn) of stocks in the first seven months 2021, according to data from PublicInvest. UOB Global Economics & Markets Research reports that 20.2% of Malaysian equities are owned by foreign investors, “an all-time low”. Strategists see better opportunities elsewhere in the region in countries such as Vietnam and Indonesia.  

Recommended

3 success stories set for long-term growth
Investments

3 success stories set for long-term growth

A professional investor tells us where he’d put his money. This week: Felix Wintle, manager of the VT Tyndall North American Fund, selects three favou…
24 Mar 2023
Best easy access savings accounts – March 2023
Savings

Best easy access savings accounts – March 2023

Rising interest rates have boosted the returns on instant-access savings accounts. We look at the top rates available on the market now.
23 Mar 2023
The best one-year fixed savings accounts - March 2023
Savings

The best one-year fixed savings accounts - March 2023

Earn over 4% on one-year fixed savings accounts.
23 Mar 2023
5 top UK tech stocks
Investments

5 top UK tech stocks

The UK market has never been considered a fertile hunting ground for tech stars. But there are plenty of promising companies beyond the old economy, s…
23 Mar 2023

Most Popular

Bank of England hikes key interest rate to 4.25%
UK Economy

Bank of England hikes key interest rate to 4.25%

The Bank of England raised rates by 0.25% following a surprise jump in inflation.
23 Mar 2023
Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall below £2,000, based on average typical use, from July, for the first time since 2022. We have all the detai…
21 Mar 2023
When will interest rates go up?
UK Economy

When will interest rates go up?

The Bank of England raised rates to 4.25%, its 11th consecutive increase. Does the base rate have further to go?
23 Mar 2023