MALAYSIA delivered a rather disappointing earnings season in the third quarter of 2018, and the profit trend is unlikely to improve for the last three months of the year. This has pretty much been accepted and priced into the market.
Corporate Malaysia’s poor showing has prompted many research houses to trim their targets and outlook for earnings as they take a cautious stance for 2019.
The poor earnings is already reflected in the FBM KLCI which is down 6.59% on a year to date basis. The mood on the street is bleak and no fund manager appears inspired to look for a stock idea anytime soon.
Thus could 2019 be better? Is there anything to look forward to?
One positive from doing so badly is that earnings will now be coming from a low base. The other strong catalyst will be the Sarawak government looking to splurge RM11bil on infrastructure in the next two years, ahead of the state polls that must be held by mid2021.
Some RM6bil will be spent on the coastal highway project, RM2.8bil on improving water supply and a sum of RM2.3bil will be used to enhance electricity connectivity throughout the state.
This sort of spending on the construction sector, although in Sarawak, will surely have some multiplier effect on the economy as a whole.
Another noteworthy issue is that Malaysia’s consumer confidence index rose to a high of 127 percentage points in the third quarter this year, making it the third most confident country behind India and Vietnam.
According to The Conference Board Global Consumer Confidence Survey, which was conducted in collaboration with Nielsen, the consumer confidence index was 10 points higher from the second quarter and 31 points higher yearon-year.
This shows strong optimism among consumers in Malaysia despite the sales and services tax (SST) implementation.
Perhaps after all the pessimism and poor market performance of 2018, 2019 might turn out to be not so dour afterall.