Sil­ver lin­ing

The Star Malaysia - StarBiz - - Short Position -

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.

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