Restoring confidence to Malaysia’s market outlook
KUCHING: With Pakatan Harapan (PH) winning the 14th General Election (GE14), the immediate focus of investors will be on how the new government addresses policies and strategies to improve the business and consumer sentiment and private investment growth trends.
In its move to restore confidence, Kenanga Investment Bank Bhd (Kenanga Research) saw that the new government did not waste time to come up with measures to restore public and investor confidence during the two-day that the market was closed.
A day after the official victory, the PH government announced the initial line up of 10 key cabinet members and the Council of Elders. The main purpose of the council is to advise the government and to shore up confidence in the new administration.
“One of the major concerns following the unprecedented election outcome is policy uncertainty and unfamiliarity with the new leadership,” it said in a note yesterday. “The first act to remove such uncertainty was for BNM to continue with its scheduled Monetary Policy Committee (MPC) meeting on May 10, signalling it was business as usual.
“As expected the MPC decided to maintain the overnight policy rate (OPR) at 3.25 per cent, reassuring that the financial sector is strong and monetary and financial conditions are supportive of eco-
One of the major concerns following the unprecedented election outcome is policy uncertainty and unfamiliarity with the new leadership.
nomic growth in the post-election environment.”
Out of the 10 new cabinet line it had only announced the first three ministerial positions: Finance, Home Affairs and Defence.
Meanwhile, Affin Hwang Investment Bank Bhd (AffinHwang Capital) believed Malaysia will remain an attractive destination for foreign direct investments.
“We believe Malaysia will remain attractive as a destination for FDI inflows. Malaysia will benefit from the recovery in global FDI flows as well as higher intra-ASEAN and intra-Asia FDI flows.
“The PH government will likely pursue trade agreements with many parts of the world, from the Comprehensive 14 May 2018 and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was signed on 8 March 2018, the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN-EU Free Trade Agreement (AEUFTA).
Kenanga Research
“It is worth noting that the PH Government in general agrees with this, and they highlighted in their manifesto that their policies will be “geared towards competitive open economy, encourage investment and productivity.”
Meanwhile, MIDF Amanah Investment Bank Bhd ( MIDF Research) took comfort in the new Council of Elders whose collective expertise in both fiscal and monetary policies was much needed. “We took comfort in former finance minister Tun Daim Zainudin and former BNM Governor, Tan Sri Zeti Aziz, who will be able to provide sound advice and guidance to the freshly minted Finance Minister.
“In addition, former Petronas chief executive officer Tan Sri Hassan Marican’s and Hong Kongbased Malaysian tycoon Tan Sri Robert Kuok’s vast experiences in the commodities business namely oil and gas and plantations respectively, would be beneficial as Malaysia has high dependencies in commodities trading as its source of income.
“Furthermore, Professor Jomo’s expertise in developmental economics would be greatly needed as Malaysia continues to break out of the developing nation mould into the much coveted developed nation status.”
The new government has been tasked to ensure Malaysia remains on its medium and longterm targets as highlighted by the Eleventh Malaysia Plan ( RMK-11, 2016-2020). Under the 5-year plan, Malaysia’s economy is set to expand in the range between five to six per cent annually. So far, the average growth rate of 2016 and 2017 is 5.1 per cent.
“Looking ahead, we expect the economic growth to stay in the range especially with the recovery of commodity prices, strengthening global trade activities, stable labour market and healthy wage growth,” MIDF Research said.
“In spite of this, volatility of commodity prices, geopolitical risks, threat of trade war and monetary policy normalisation in major economies remain as downside risks in the medium term for the Malaysian economy. Smooth and orderly transition as well as clarity on policy direction will ensure Malaysia to remain on track.”