KUALA LUMPUR, July 17 — Local investors are maintaining a tight grip on their cash as they keep a cautious eye on Malaysian stock picks, amid a stuttering economy that is weighed down by the global oil crash and the persistent poor performance of the ringgit.
Public confidence in Malaysia’s economy has buckled under the weight of inflationary pressure caused by rising domestic fuel prices and the April 1 introduction of the Goods and Services Tax (GST), a situation that is not helped by the string of controversies involving state-owned firm 1Malaysia Development Berhad (1MDB).
“I try to hold on to more cash and I don’t really invest in the market now. As long as the 1MDB issue does not have a clear outcome, I guess investors won’t have confidence in the local market,” said John Ang, a remisier with a local bank.
The ringgit has been rated Asia’s worst performing currency this year so far, having slipped below the Asian Financial Crisis peg to 3.8050 against the greenback on July 6 amid multiple ongoing probes into the debt-laden 1MDB.
Reports have claimed that the investigations on the state investment company have worsened the ringgit’s oil-led decline, with jitters over Greece’s earlier plan to exit from the Eurozone and a recent rout in the Chinese stock market adding to risk-averse sentiments.
Even after regional sentiments improved following Greece’s conclusion of its conditional bailout deal, concerns remain that more external pressure may come from a strengthening US dollar with the US Federal Reserve’s plan to raise interest rates, expected some time later this year.
Lee, an avid investor now in his 40s, said he has opted for a “wait and see” approach and may even consider taking “a rest from the market”.
He echoed Ang’s view that “cash is king for now”, though he noted that some investors consider the current slack in the market as a healthy correction and an opportunity to buy up their favourite stocks at lower prices.
“And when the market is back to bull state they will take some profit. However, from a trader point of view, they will cut their losses and wait for the market to rebound,” he said.
One investor who sees opportunity in the slow market is Kumaran Padmanabhan, who has been buying up stocks on the local market in anticipation of higher returns once the market rebounds.
Kumaran, a manager at a telecommunications company in his 40s, observed that foreign investors have been pulling out likely due to the perceived political instability in Malaysia and the current global crude oil price slump, but expects things to pick up next year if crude oil prices average at above US$50 (RM190.18) per barrel.
“If you want to make money, now is the best time, a month ago it was 1,600 points, now it’s at 1,700 points, 100 point increase,” he said, referring to the Kuala Lumpur Composite Index (KLCI).
“I don’t know if it is a technical rebound or genuine rebound, but based on technical analysis, there is increased interest in people to invest, so that’s a good sign,” he said.
Another investor, Pan who is in his 50s, thinks that even if global crude oil prices remain low there is still profit to be made, especially from stocks of export-oriented local companies.
He admitted that the market uncertainty at the start of the plunge in global crude oil prices in the third quarter of last year prompted him to exit the market, but he has since resumed trading after it started stabilising at around US$40 (RM152.40) per barrel sometime in January this year.
“When oil prices go down, the industries that use petrol will have it cheaper and if they export, the weak ringgit will give more because of the foreign exchange, companies such as the export-based ones, so I’ve been moving to those companies,” he said.
Despite the weak market sentiment, several local funds and shares still managed to perform well over the first half of this year, according to Annie Hor, a financial planner at Harveston Wealth Management.
But those with the means have been asking to invest in non-ringgit assets amid weakness in the Malaysian currency, looking into areas such as overseas equity, fixed income or properties, she added.
Hor said diversifying investments between local and foreign options would help investors maximise their returns over the long term, especially if the ringgit faces an extended decline.
“But it does not mean go all foreign,” she said.
The Employees Provident Fund (EPF), meanwhile, believes the current market slowdown should not eat into contributors’ overall returns due to its diverse portfolio to mitigate risks.
Nurhisham Hussein, who heads the private retirement fund’s economics and capital markets department, added that the lower stock prices means the fund can buy undervalued stocks boost returns.
“As a retirement fund, the EPF can afford to take a longer term view on these investments as there is also nothing fundamentally wrong with the Malaysian economy or markets,” he said via email.
