Austerity pays — Stocks soar as investors calmed by skint Putrajaya

Justin Ong
According to the Bloomberg news service, the perceived fiscal discipline in the cancellation of several major infrastructure projects have led punters to view Malaysian stocks as standouts in the region. — Picture by Azneal Ishak

KUALA LUMPUR, Sept 18 — Investors are seeing pragmatism in the federal government’s cost-reduction measures, plotting a return to the Malaysian stock exchange they abandoned after the turmoil of the general election.

According to the Bloomberg news service, the perceived fiscal discipline in the cancellation of several major infrastructure projects have led punters to view Malaysian stocks as standouts in the region.

Aberdeen Standard Investments’ Bharat Joshi said the moves have convinced investors about the government’s commitment to prioritising the country’s economic fundamentals over quick growth.

“This has given investors renewed confidence on the country,” he said.

Morgan Stanley also bumped up its outlook for Malaysian shares last week.

The Mahathir administration has cancelled three billion-dollar pipeline projects previously awarded to China firms and is trying to terminate the East Coast Rail Link.

It also deferred a High-Speed Rail with Singapore to at least 2020.

Not all market watchers are convinced by the thrift, however, with Areca Capital Sdn chief executive Danny Wong expressing concern over remaining volatility in the government’s policies.

The new administration has made announcements that it later walked back as there was no policy support, such as the initial claim that foreigners may not purchase units in the Forest City development in Johor.

Wong said he is maintaining a wait-and-see attitude for possible opportunities later in the year.

“I am wary of liquidity tightening and corporate-earnings growth of certain sectors slowing down significantly,” Wong was quoted as saying.

“External uncertainties like the trade-related issue and EM currencies’ weakness cloud over the fundamentals.”

Billions of ringgit fled the local capital markets following the 14th general election as investors shifted their funds to safe havens while Malaysia worked out the first change in government in the country’s history.

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