PETALING JAYA: Bursa Malaysia’s market capitalisation has gone down by RM157 billion since the general election last year, with the FBM KLCI market barometer at 1,629 points compared to 1,846 just before the May 9 polls.
Pong Teng Siew, head of research at Inter-Pacific Securities Sdn Bhd, told FMT one of the main reasons for the drastic decline in performance was the government’s austerity drive.
Pong said this was exacerbated by the move by banks to rein in credit creation.
“The tightening by banks caused liquidity and money supply to contract. This was accentuated by a strong withdrawal by foreign funds from the Malaysian market,” he said.
The only positive sign for liquidity growth was the burgeoning trade surplus figures which contributed to trade liquidity.
Pong said among the greatest challenges for the government during this period was the level of debt it had to address.
He said the off-balance sheet financing undertaken by the government did not appear in official debt figures.
He added that the government had not erred in putting the national debt at RM1 trillion, as it had taken into account off-balance sheet financing including private finance initiatives (PFIs).
PFIs are loans carried out by the private sector on behalf of the government, where the government pays the profits and cost. They can be classified as deferred debts, as the government is not required to repay the sum immediately.
Phua Lee Kerk, chief strategist at Phillip Capital Bhd, told FMT that the greatest impact of the decline in market value would be the loss in wealth for investors.
He said this would impact consumption as their wealth would have been significantly eroded.
“It is quite normal for developing economies to see a decline in their markets when there is a change in government. This is because investors will adopt a wait-and-see approach to gauge the policies of the new government. They will remain sidelined,” he added.
He said the current government should be given two years before any “meaningful” appraisal can be made of their economic policies.
Yesterday, Bloomberg reported that the Malaysian market was one of the worst performing markets in 2019.