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Since Jan 12, Bursa Malaysia has fallen 2.1% compared to the double-digit improvements seen in the stock market indexes of Singapore and Thailand as well as the 7% bump the Asia Dow index has experienced.
Yeah Kim Leng, a professor of economics at Sunway University, said the stock market could be a useful, if imperfect, measure of economic health that highlights specifics such as how investors project corporate performance and economic growth.
“There are other things you can look at, like production numbers, exports and employment to get a full understanding of how the economy is doing, but the stock market index reflects the uncertainties among investors,” he told FMT.
“The numbers suggest that investors are not expecting a quick recovery in Malaysia. It shows a sentiment that unless we get on top of the pandemic, we aren’t likely to see a recovery strong enough to justify higher valuations.”
Yeah said the lack of improvement in the stock market suggested that investors locally and abroad did not foresee companies registering the kind of reversals of fortune that would justify investment, whether through dividends paid or capital appreciation.
HELP university’s Paolo Casadio agreed that the Bursa’s performance showed investors were still wary about the Malaysian economy’s prospects, but he said it was not entirely negative as the current KLSE value was similar to that seen before the pandemic began in late 2019.
“It shows there is still some support in the market and that these investors are waiting for a reason to expect upside potential,” he said.
“The local market will also be exposed to an overall correction in line with other international markets.”
However, Geoffrey Williams of the Malaysia University of Science and Technology said more valuable insights could be gleaned through other metrics, as the stock market was affected by “too many factors other than economic fundamentals”.
He said the contraction in Malaysia’s GDP in the first quarter of the year and an unemployment rate that had stayed above 4.5% gave a far clearer picture of the poor state of the economy.
Similarly, he added, the closure of 100,000 SMEs since the first movement control order painted a bleak picture of the situation on the ground.
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