‘World stock market has yet to live up to expectations’

KUALA LUMPUR: The world stock markets, including Malaysia, do not live up to expectations and lack self-sustaining upswing as investors fear market complacency.

The equity-invested level globally is lower than expected although the market risk is low, or near record low levels since 1990, according to analysts.

Since July 1, the FTSE Bursa Malaysia KLCI has been only up one per cent as of Monday, similar to most regional indices, although Malaysian companies recorded good earnings in the first half of this year.

This is also despite Malaysia’s trade posting RM1.008 trillion in the first six months, surpassing RM1 trillion mark for the first time in the country’s history.

The rise was 22.7 per cent from same period a year ago.

The world stock markets hit record highs last Thursday, as optimism over tax reforms in the United States boosted risk appetite, but since then, the markets seem to hover below the level this week.

Analysts said many investors were dampening the bullish exuberance as they fear complacency as well as risks such as ongoing US and North Korea standoff, concerns over Brexit negotiations in the United Kingdom and Catalonia’s possible exit from Spain that would hurt their investments.

“All these news flows and fears that we are getting complacent could spark possible capital flight out of the emerging markets.

“Malaysia is no exception as it sees consecutive fund outflows from the equity markets,” said one of the analysts.

UOB Asset Management (Malaysia) Bhd (UOBM) said investors decelerate their investment levels as they fear the market was getting too complacent although by right, low risks should bring the level higher.

“There is actually nothing wrong with the market. This year should be a good year. The market is only taking a break now and short consolidation period. The earnings will catch up.

“Global central banks will only increase the interest rates gradually if the growth continues,” UOBM chief executive officer Lim Suet Ling told a media briefing, here, yesterday.

Wellington Management Singapore Pte Ltd vice-president and investment director Andrew Sharp-Paul said although the improved economic cycle has been long, there was still room for further growth with the expansionary monetary and fiscal policies by leading economies.

MIDF Research head Redza Rahman said though the stock market was quite complacent, that does not mean that a crash is around the corner.

“It is the worst of market complacency actually. Investors are often not willing to take profits of winning stocks, despite markets, especially in the emerging markets, going on a “yoyo” with increasing price volatility,” he said.

“I would rule out market crash for now, unless there is a significant change in earnings and also significant impact in market sentiment driven by the geopolitical events.

“There is still a fair chance of price increases for undervalued stocks, underpinned by expansion of earnings,” he added. Amir Hisyam Rasid

There is nothing wrong with the market. This year should be a good year. The market is only taking a break now and short consolidation period. The earnings will catch up...

LIM SUET LING

UOBM chief executive officer