‘Performance to hinge on government initiatives’

KUALA LUMPUR: The euphoria following Malaysia’s historic election last May has faded, leaving its stock market as Asia’s only one in the red this year.

The benchmark FTSE Bursa Malaysia KLCI has fallen more than one per cent so far this year, the only decliner in the region, while Singapore has surged four per cent and Indonesia gained three per cent.

The trend is unlikely to change as investors wait for government initia- tives to cut the budget deficit, clamp down on corruption and boost purchasing power.

“It keeps coming back to where the country is going to go, it’s kind of on the government to lead the way,” said Singapore-based Invesco Asset Management investment director Jalil Rasheed.

“Anybody who is taking a longterm view in Malaysia over the next five to 10 years needs to be quite patient for the next two to three years.”

The new administration has been in clean-up mode: cancelling and reviewing billiondollar projects while replacing dozens of chief executive officers at state-linked companies.

That led growth to ease to 4.7 per cent last year, with the government targeting a pick-up to 4.9 per cent this year. Economists aren’t so sure, predicting growth to reach just 4.5 per cent.

Malaysia’s earnings lagged its neighbours’ to fall 3.15 per cent last year, compared with 8.8 per cent rise for Singapore and 18 per cent gain for Indonesia.

Earnings in Malaysia were expected to rise only one to two per cent this year, said Morgan Stanley Southeast Asia strategist Sean Gardiner in Singapore.

“We would need to see jitters coming back to emerging markets so that investors appreciate Malaysia’s defensive nature.”

To woo investors, the country has rolled out an updated fiveyear economic plan that promised transparency and institutional reform.

Still, “talk is cheap, and now it’s a question of implementing”, said RHB Bank Bhd regional equity research head Alexander Chia.

The doldrums may last towards the end of this year, when the stock market may find a reason to gain if the government charts out better-than-expected spending in next year’s budget.