Malaysian Economy Against Emerging and Developed Market

Since 2015, most of emerging market and developed market have experienced an economic contraction, Malaysian economy too was not spared from this catastrophic event. Malaysian economy was badly affected during those time. Thanks to oil price crashed in 3rd quater of 2014 due to surplus of crude oil from shale oil boom in USA.

Courtesy of Petronas Activity Outlook 2019-2021

Due to Malaysian reliency on crude oil for its export in 2014 stands at 30.0%, those downturn proved to be too much to bear. As this figure is so huge to Malaysia revenue. Therefore, during this time Dato’ Seri Najib Razak has made a very bold decision to introduce GST on 1st of April 2015 at 6% to act as a cover for the lost of national revenue from crude oil export.

Courtesy of Malaysian Budget 2019

How is KLCI performing against Asia Pacific index post GE14?

As Malaysia is progressing since the late 2014 and entering into new era of GST and scandal hit 1MDB fiasco put a bad image onto government of the day. New administration took place in 2018 and the rest is history.

To date, KLCI performance was deteriorating since new government took the helm. Starting from 2018, KLCI was steadily losing its value down to 28% from its peak of 1,800 points prior to General Election 14 which was held on 9th May 2018.

Emerging market share prices are generally more volatile than those in more developed markets. This is because of the comparatively small capitalisation of the markets and strong investor sensitivity to potential political or economic changes. This volatility is particularly pronounced for foreign investors.

The Economist Guide to Financial Markets

KLCI against ASEAN index

As you can see on the table below, if we compare Malaysian index before and after GE14 we can see that the best performing nation during Pre – GE14 (4th May 2018) was Thailand then followed by Indonesia. Meanwhile after GE14 (4th Jan 2019), Indonesia performing better than Thailand.

Finally during COVID-19 (20th March 2020), most of these countries exercising nationawide lockdowns. Therefore causes their economy to contract. During this period the worst performing nation was Phillippines then followed by Singapore.

CountryPre – GE14, %Post – GE14,%COVID-19,%
Malaysia1.65-7.84-28.07
Singapore2.38-11.66-30.39
Thailand17.704.16-25.46
Indonesia10.8120.04-19.75
Philippines-4.26-1.53-39.37

Based on this result, the most progressive country in ASEAN is Indonesia then followed by Thailand.

KLCI against Asian index

Meanwhile, when competing against Asian countries KLCI was somewhat lagging behind as well. This is clearly significant on the table shown below.

CountryPre – GE14,%Post – GE14,%COVID – 19,%
Malaysia1.65-7.84-28.07
Hong Kong5.33-13.34-20.56
China-28.26-41.63-36.28
Korea18.32-3.11-25.65
Taiwan10.17-2.06-3.61
Japan13.88-0.87-16.12
Australia13.190.21-12.01

Based on this result, Malaysia is not the worst performing index. On the positive notes, Australia is the most progressive country in Asia then followed by Taiwan, Japan and Korea.

KLCI against International index

When you start comparing Malaysia with the likes of developed nation, we can clearly see that our progress is almost flat as compared to them!

CountryPre – GE14,%Post – GE14,%COVID-19,%
Malaysia1.65-7.84-28.07
USA32.7828.244.93
France10.46-5.14-18.92
Germany11.99-5.93-22.00
UK75.8771.65152.64
Holland13.190.21-12.01
Switzerland-2.26-5.50-5.34

According to this result clearly UK is the leading economy in the international market. The country is so resilient albeit of economic crisis. For instance during COVID-19, UK looks like it was spare from this pandemic. Their country does not contract albeit of the lockdowns.

Then followed by US, Holland and France as the most progressive country. Europe and Western countries proved to be the most influential market leader. Thanks to their strength in terms of population, purchasing power and advancement of technology.

What is left for Malaysia and ASEAN?

Although by comparison Malaysia and ASEAN is lagging behind Asia, Euro and Western region, the growth in this region is huge in future economic outlook. This is certainly true as this region is developing nation and have room to grow in the coming years. The outlook for ASEAN region is phenomenal in the coming years according to IMF

Provided most of these developed nation diversifying their economies to outsider. Not only China who is currently facing bottlenecking due to US-China Trade War and COVID-19 pandemic

Source:

  1. Petronas Activity Outlook 2020-2022
  2. Malaysian Budget 2019
  3. The Economist Guide to Financial Market
  4. World Economic Outlook, April 2020: The Great Lockdown
  5. Nikkei Asian Review
  6. Bloomberg

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