Retail net investment on Bursa soars to RM5.83b YTD

Malaysia’s stimulus packages have softened COVID-19 impact on the economy

The YTD net retail investments on Bursa have increased to RM5.83 billion compared to RM2.45 billion for the whole of 2019. Net investments from local institutions stood at RM8.21 billion. In terms of participation rate, the local institutional participation rate stands at 48.4% with retail investors at 38.3% and foreign investors making up the remainder 13.3%. Trading value hit a record high of RM9.3 billion on May 29 following the surge of retail investors’ participation. It is left to be seen if the momentum will continue now that Recovery MCO is in place and almost all business have reopened and the workforce is no longer stuck at home.

According to Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed, the Government’s initiatives PRIHATIN Rakyat and PENJANA have softened the impact of the COVID-19 pandemic and paved the path towards economic recovery. Malaysia is fortunate to have a very diversified economy that does not depend on just one or two sectors. Food was provided for the people and no Malaysian family is unable to have access to food. Health was prioritized to ensure effective prevention of the pandemic. He said “Going forward from the fiscal point of view, the strategy for the next five to 10 years – we introduced the Shared Prosperity Vision in October 2019 with three main objectives, we want Malaysians to enjoy a decent standard of living. Secondly, we want to close the gaps – development for all – and finally, we want to achieve a united, prosperous nation.” 

Malaysia’s growth slated to average 3.4% in the next decade

According to Fitch Solutions, Malaysia’s growth is expected to moderate to a 3.4% average rate over the next decade compared to an average of 6.4% over the past 10 years, dragged by the likely contraction in 2020 due to the Covid-19 pandemic. It also noted that Malaysia’s active population growth is projected to slow to an average 1% in the next decade compared to 2.3% previously, while slower than before, this will still provide a tailwind to the economy. An added complication could be the boom in household debt fuelled by low interest rate in recent years, which will act as a drag on growth and would pose risks to financial stability if interest rates need to be raised sharply. Household debt as a share of GDP stands close to 85%, which is one of the highest in Asia. While debt service ratios are still manageable, a rise in interest rates could tip service ratios to unsustainable levels, leading to a rise in defaults. It also noted that the Malaysian economy is undergoing a process of external economic rebalancing, which will act as a drag on overall headline real GDP growth. At the same time, it will see private consumption growth outperform, creating investment opportunities in catering for the domestic middle class rather than overseas demand. Additionally, a more domestic focused demand picture will allow the economy to be more resilient to global demand shocks, reducing recession risks.

Malaysia’s debt might hit 55% of GDP

According to Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz, Malaysia’s debt level could hit the statutory limit of 55% of gross domestic product at the end of the year from 52% currently following the implementation of measures to save lives, protect livelihoods and stimulate the economy. The government had announced the RM260bil Prihatin Rakyat economic stimulus plan followed by the RM35bil short-term Penjana economic recovery plan aimed at stimulating the country’s economy that has been hit by the Covid-19 pandemic bringing the government’s direct fiscal injection to RM45bil. He added that the government is very committed to ensuring fiscal discipline is maintained. He said “Moving forward, what is most important is what we can do to improve the situation. The government is committed to fiscal discipline and to reduce the fiscal deficit to below 4% within the next three to four years.”

Malaysia’s Leading Index (LI) slumped to negative 5.5% in April, pointing to weaker growth

According to chief statistician Datuk Seri Dr Mohd Uzir Mahidin from the Department of Statistics Malaysia (DOSM), Malaysia’s Leading Index (LI) which provides an early signal of the future economic direction slumped to negative 5.5% in April 2020 from negative 3.6% in March 2020. The main components driving the 5.6-point downward shift were the number of housing units approved and the number of new companies registered. Considering the weaker performance of the annual LI and the LI growth cycle deviation from the long-term trend, it is anticipated that the economy will remain on the contraction trajectory in the coming months. The year-on-year (y-o-y) CI slipped to negative 19.3% in April 2020 from negative 3.6% in March 2020. This showed that businesses shut down and demand plunged in April 2020. The roll-out of Penjana the short-term economic recovery plan with the thrust of empowering people, propelling businesses and stimulating the economy will help to relieve economic pressures despite the challenging economic outlook. Thus, short-term and long-term economic measures are seen to foster robust economic revival.

This week, on Thursday (25Jun), the Ringgit was 4.2790 against USD from 4.2740 on Monday (15Jun). Meanwhile, the Ringgit was 3.0734 to the Sing Dollar on Thursday (25Jun).

On Monday (22Jun), the FBM KLCI gained 3.98 points higher or 0.26% to 1511.24 from previous Friday’s close of 1507.26. But as at Friday (26Jun) 10:00am, the FBM KLCI was trading sideways at 1491.95 from Monday, indicating the market is looking for clearer direction ahead.

FBM KLCI 3 Years Chart

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Site last updated July 6, 2020 @ 3:54 am; This content last updated June 29, 2020 @ 8:42 am