Top 5 News That Impacted Malaysia’s Economy & Stock Market in 2018

Just like that, another year is almost over. But the year 2018 is an eventful and momentous year for Malaysia with the extraordinary political events!


These events bring not only massive impact on the stock market, but also the whole country’s economy. So, if you’re Malaysian, and an investor, you should know what happened in the local scene.


Here’s a rundown of some of 2018’s most eye-catching stories.


1. Malaysia Has A New Government


It’s the year of many firsts, especially in politics.

 

Like what?!


Barisan Nasional, the coalition that has ruled Malaysia for 61 years since its independence has fallen from grace; a former Prime Minister became prime minister for the second time; at 93, Dr Mahathir Mohamad also became the oldest Prime Minister in the world, and a woman became the country’s first deputy prime minister.

 

All this happened after May 9, 2018, the polling day for the 14th General Election (GE14). Pakatan Harapan, led by Mahathir won the general election that shocked not just the nation but the world.

 

 

The long-running 1Malaysia Development Berhad (1MDB) scandal and high living cost are some of the major push in PH’s victory.

 

Although the new ruling coalition had set a 100-day agenda with a list of promises, uncertainty over government policies became one of the major concerns among businesses and investors.


Moreover, the sentiment has gotten worse when the Finance Minister has confirmed that Malaysia’s debt is above RM1 trillion, a figure that has fueled market worries and raised the prospect of a credit-rating downgrade.


As the foreign funds exited local stock market, the FBMKLCI Index has plunged almost 10% in two months, from 1846.51 points (8th May) to 1663.86 points (6th July). The index closed at 1672.60 points on 27th December.


2. Robert Kuok’s return adds optimism


Acknowledging the new government’s lack of experience, Mahathir announced the formation of a five-person ‘Council of Eminent Persons’ to assist the fledgling government during the transition period. It was a proactive measure to restore foreign investor confidence.

 

The advisory group is made up of former public and corporate figures, including former finance minister Daim Zainuddin, former Bank Negara governor Zeti Akhtar Aziz, billionaire Robert Kuok, former Petronas president Mohd Hassan Merican and prominent economist Jomo Kwame Sundaram.


Further, the unexpected return of Robert Kuok to Malaysia to attend his first meeting with the council was the biggest surprise for us! His return has added optimism among investors and the public over the country’s economy.

 

Robert Kuok and Tun Daim
Mr Robert Kuok and Tun Daim Zainuddin arrived at the Ilham Tower in Kuala Lumpur for a meeting with the other members of the Council of Eminent Persons on May 22, 2018. PHOTO: BERNAMA

 


Since moving his business headquarters to Hong Kong from Kuala Lumpur in 1975, the richest man in Malaysia has pared down his local investments.


No one would expect this business tycoon to reappear in the local scene, particularly after senior Umno politicians bashed him for launching his controversial book Robert Kuok: A Memoir ahead of the GE14.


3. SST is back


Ever since GE14, the government has reviewed and restructured all policies set by the previous government.

 

One of the most significant changes that many Malaysians have been looking forward to is the abolishment of the Goods and Services Tax (GST).  

 

 

Just after only a period of three years, Malaysia’s new government has decided to abolish the GST and reintroduced the sales and service tax (SST) regime that were used before GST.


GST was implemented with effect from 1 April 2015, and the rate fixed at 6%. But under the SST, the provision of services will be taxed at 6%, while the sale of goods will incur a 10% tax; this reintroduced tax regime was implemented from 1 Sept this year.


Question is, did the country’s consumer goods prices came down after these decisive moves?


Let’s look at the data.


Deputy Finance Minister Datuk Amiruddin Hamzah said a study by the Ministry of Domestic Trade and Consumer Affairs showed that the SST had lowered the prices of 291 items (70% of 417 items) since it was reintroduced in September.


Having said that, a lot of traders, merchants and hawkers did not lower down their price according to the adjustment of the new tax regime.


The Ministry of Domestic Trade and Consumer Affairs have received a total of 823 complaints mostly related to the rise in prices of goods since the reintroduction of the SST.


4. Termination of mega infrastructure projects


In order to rationalise the heavy debts in Malaysia, the government decided to cancel and postpone some of the mega infrastructure projects.


Therefore, the government has cancelled RM15 billion Multi-Product Pipeline and Trans-Sabah Pipeline projects and the RM60 billion MRT3 project for now.


They have also suspended the RM81 billion East Coast Rail Link (ECRL), and as well as postponed the implementation of the Kuala Lumpur – Singapore High-Speed Rail which would have cost us at least RM110 billion.

 

The Kuala Lumpur-Singapore High-Speed Rail (HSR) will not continue due to the project’s high cost. PHOTO: Facebook/myhsrcorporation

 

The construction sector is one of the biggest victims in the restructuring of government policies. Construction stocks like Gamuda Bhd (-56%), George Kent (M) Bhd (-79%) and WCT Holdings Bhd (-71%) fell sharply after GE14 as economists and analysts predicted the new government would review all mega projects approved by the previous government.


5. Major shake-out at GLCs and Public Institutions


Since its victory in the last general election, PH has begun the cleansing process at a very quick pace with revamping the executive officers and board directors at top government agencies and government-linked companies (GLC).


We saw a major shakeup in GLCs, government-linked investment companies (GLICs) and public institutions in just a few months and the process are ongoing.


Which companies or institutions involved in this round of restructuring? Who was resigned after GE14?


On the public institutions and GLICs, we saw Tan Sri Muhammad Ibrahim has relinquished his post as Bank Negara Malaysia governor; the entire Board of Khazanah Nasional Bhd has resigned; Tan Sri Abdul Wahid Omar also stepped down from the group chairman of Permodalan Nasional Bhd.


Other than that, we will see more GLC Chiefs step down in the coming months, including Datuk Seri Nazir Razak, the chairman of CIMB Group Holdings Berhad and Bursa Malaysia’s CEO Datuk Seri Tajuddin Atan.

 

 

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December 27, 2018
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