Malaysia: What''s Your Take On The Economic Outlook Till 2012?

Hi. I am sharing my thoughts for the second time in my new blog site, and this time it is mainly catered for ponder by my Malaysian compatriots who, I believe, are equally inquisitive as me with regard to what is the likely local economic scenario in the near term until next year.

In the face of the negative issues that have besieged the US and Eurozone - and for that mater, also Japan which is trying to re-shape its economy after the latest calamities, plus China which needs to manage rising inflation and slowing growth - the prime questions will invariably be: "Will we, particularly the business circles, be significantly affected by the global downturn? What aspects, and for how long?"

Well, I am no economist or analyst by profession to offer "qualified" advice, but I have been spending time researching into various media sources to keep myself abreast of the latest global economic and market developments that may carry some kind of impact on Malaysia. May I therefore be allowed to offer my thoughts for your ponder. Whether you feel my points are valid or not, that I shall leave to your view.

No doubt negative events that prevail in the key global economies will have a domino effect on Malaysia, as reflected in the current local stock market experience for example, yet I still feel there are some positive factors that may reflect the other side of the coin. Here goes......

* Foreign Direct Investment (FDI) has been on the surge since last year. In the first half of this year, a total of RM21.3 billion roped in, compared to RM12.1 billion in the same period last year. In 2009, FDI was at a dismal low of US$1.4 billion only (please convert that into RM equivalent yourself). Looks like, if no major upheaval takes place in both the global and local scenes, Malaysia should be able to easily hit the set target of US$10 billion (or around RM31 billion) FDI by end of 2011. And if so, would that help to sustain the Malaysian economy and markets to some extent?

* The Economic Transformation Program (ETP), the formulated bastion of growth driver towards the noble objective of achieving high income and developed nation status by year 2020, is now underway and said to be in progress. Announcements made by the Government to media channels indicated that about half of the 133 Entry Point Projects have already been launched so far. Will mega projects like the Mass Rail Transit (MRT) and the Iskandar regional development area (in Johor State) translate into benefits to Malaysians, especially the business circles?

* Global market players are now seeking for safer havens to divert funds away from the developed markets. Malaysia has been deemed as one of the "investible" nations in the emerging economies of Asia. Inflow of funds is expected to continue. The bond and sukuk (Islamic bond) markets seem to be in good demand - reflecting investors' preference to safer vehicles for the time being?

* According to various media sources, international fund managers are taking the stance of leveraging on lower equity prices to selectively pick stocks for their portfolio. One asset management house, for example, was reported to have quoted that it was buying commodity stocks, expecting raw materials to rise up. Its chief economist was also quoted as saying that in order to beat inflation, now was the time to look for the right equity sectors.

*  Last but not least, allow me to share with you a "norm" called the "May Factor", which some analysts  upheld as a valid phenomenon in stock markets. They profess that over the few decades, studies have shown market indexes in the period of May to October to generally perform lower compared to the other six months of November to April. Rationale behind this norm: International fund managers go on summer/long leave around the middle of every year and come back to active play after a couple of months in order to shore up results for the end of the year. One business columnist of a media even recommended to keep watch for the moment and then look for stocks to pick up in September. Is the norm valid or cooked up? It is up to you to think about it.

* Much speculation is rife that the General Elections should be held either before the end of this year or early next year. Analysts say that there should be a run-up in the local stock market before the elections take place, just like previous GEs' experience. Whether there would be a pep-up in stock prices or not, I shall leave to your ponder. As it is, some analysts still predict FBM-KLCI to hit around 1,650 points before the year ends. Will that happen? Well, again, I shall leave the question to you for ponder.

Happy Pondering!

NOTE: My inputs are my personal opinions, which may or may not be in consonance with other people's views. Please be reminded that my inputs should not be deemed as 100% accurate since the above contents are sourced from media sources. You are welcome to form your own opinions and express your own views. I welcome comments.