Latest Updates/Events Pertaining To Economic & Market Overview

The investor circles at large, including my compatriots in Malaysia, are mired with reservations and cautious tread as they try to figure out what may likely be the scenario in the next one-and-the-half years from now, amid varying stories from different market protagonists about the global economy. There appears not much of improvements in the macro-economics of the US and Eurozone (needless for me to re-mention what the issues and concerns are). Japan seems to be busy re-constructing its infrastructure and supply chain, but we have yet to hear vibrant news about the success of its efforts to revive its economic standing in the global front.

Words like recession, deflation, inflation, double dip, correction, downturn, technical rebound etc. frequently pop up in the news media. I see less reference to depression and stagflation, and perhaps that may garner some comfort to intended market players. On the other side of the economic coin, we also come across comments that the situation is only temporary, and steadier tides should roll in after the rough waves recede......probably by end of this year or so? The conservative protagonists say, "Stay away from equities for the time being, go for safer assets". The adventurous ones say, "Now's opportunity to pick up good stocks at lower prices." As the perfect crystal ball does not exist for any party to predict exactly what will be the scene at the end of this year and the whole of next year, it is best that we make our own conclusions by being cognizant (consciously aware) of the present trends and events. By doing so, even if we do decide to head for the investment path now, we at least tread with some form of calculated direction.

Allow me to cite some pointers that may be pertinent to reflect on and then form your own overview about the markets for the nearer or longer terms.

* Notwithstanding differing opinions about what is yet to come, one salient concurred view that stands out is, current incessant volatility prevails in the global stock markets. It is more difficult for a would-be investor to foresee the level of stability of markets, at least for the immediate near term.

* Many investors now prefer the safer or less risky assets in the stead of equities. Bonds, like highly rated government papers, have shown greater demand. Gold has emerged as the sought-after alternative asset by people who are wary of the economic and market situations or those who are concerned with continual rising inflation. As it is, the demand hike for gold has uplifted its price to exorbitant levels.

* European Commission  chief Jose Manuel Barroso very recently declared that he did not expect Europe to slide into recession and that the European Union and the Euro was "strong and resilient". He was also quoted he did not anticipate a recession in Europe as the latest forecast by the European Commission showed there would be modest growth. Yet, there was another article which reported that growth in Eurozone services eased for the 5th consecutive month in August, and the bloc risked contracting in the 4th quarter if business conditions did not improve. Rating agency S&P meanwhile said the region should be able to escape a double-dip risk with a sluggish growth rate of 1.7%. Apparently, the reports paint varying scenes.

* On the Asian front, an outflow trend of foreign investments from the equity sector could be seen in the past two months. Foreign investors are the net sellers of Asian equities.

* Overall, GDP growth in overall Asia is expected to be slower this year and next year compared to 2010. However, the Asian Development Bank anticipates the growth rate for Asia to be 7.5% this year and 7% in 2012. China, the fast emerging big brother of the global economy, may grow by around 8.5% this year albeit at a slowing rate. On the longer term, Asia is deemed to be the region to invest in because of its strong macro-economic fundamentals. However, being export oriented and reliant on exports to the US, Europe and Japan for sustaining growth, Asia will invariably be impacted by any significant downturn in demand from the three major territories.

Now, back to my home ground of Malaysia. Some latest developments may serve as positive factors for the local investment and stock markets. Let's look at them (below).

*  Just recently, the Global Competitiveness Report released by the World Economic Forum identified Malaysia as the 2nd most competitive nation (after Singapore) in ASEAN and ranked 6th position in the Asia-Pacific region. Worldwide, it is at the 21st spot - a jump of 5 points from last year.

* Despite the slowing global economy, the progress of projects under the Economic Transformation Programme (ETP) still stays on track. As at to-date, 84 per cent of the 87 initiatives announced in October last year are undergoing implementation. News reports outline that 23 are already operational, 50 have commenced while the remaining 14 are in progress. At the same time, the Prime Minister just announced another 8 more initiatives which are expected to involve RM1.4 billion in investments.

* Foreign Direct Investments (FDIs) are flowing in prominently. For the first 7 months of 2011, the country attracted RM31.7 billion in FDIs, which already exceeded the whole of 2010's figure of RM29.3 billion and a huge quantum leap compared to RM5 billion secured in 2009. Of pertinent note is that 52 per cent of the FDIs valued at RM15 billion are in the manufacturing sector.

* According to one business magazine, some Malaysian investors have now shown preference to "defensive" stocks or those which may likely rebound in the short term. Defensive stocks are the ones which remain stable in different business cycles. During times of recession, they perform better than the market; but during expansion cycles, they perform below the market. They are not highly correlated with business cycles. They may also give constant dividends. Defensive stocks are companies which produce goods or services required by consumers in daily living, e.g. utility industry - every household needs gas and electricity regardless of the economy of a nation.

Lastly, my parting inputs for your consideration, and here goes.....

In periods of high market volatility, and when prices are near the bottom, it is better to take the medium to longer term view by selecting and picking good stocks. Look out for good bargains. Malaysians in particular may want to look at stocks which are linked to developments or initiatives under the ETP.

Special Note & Disclaimer: The contents of this sharing are mainly based on information extracted from various media sources, plus some of my personal observations/views. I shall leave to you to counter-check and verify the validity of the contents. I shall also advise that you conclude your own opinions, which may or may not differ from mine. Please note I shall not be deemed to be responsible in event of discrepancies that may arise.