Malaysia market commentary

After the second stimulus unveiled on March 10, 2009, KLCI lost 1.4 % ( Mar 10 : 855 & Mar 13 : 843) and Ringgit strengthened by about 0.6% ( Mar 10 : 3.7015 & March 13 : 3.6955). Despite of big RM 60 bln huh-hah announcement, the actual direct fiscal stimulus is more affordable of RM 13 bln to be deployed in 2009. Our budget deficit will still widen to 7.6% but Standard and Poor thinks our sovereign rating will remain unchanged, A- stable outlook, which is a relief to keep our funding costs low. Things seem to be all right at the macro level, so what is troubling the market?

Maybank and Public Bank were the punching bags - both lost 10% in the last 4 days. Right issues by Maybank to strengthen capital base triggered fear of coming potential massive write-downs soon. The new target price has been slashed to around RM 3.50 triggered the sell-off.

Maybank, JP Morgan, CLSA and etc downgraded Public Bank citing on over-valuation. One of the lowest target that I saw was from CLSA RM 6.20. We got another 13% downside from here. Luckily, we have not seen any bad remarks on CIMB yet, so stock price has been hanging there but the market already slaughtered them much earlier.

Weighing on bank downgrades, KLCI at 800 level is not a very far distant. With little bit of sympathy selling, it can easily slips below that. I am not looking to sell my holdings but keeping my powder dry on the buy side. Hope my readers will not mis-understood me.

Our Malaysia political opera soup still unreeling, getting interesting though. No real damage so far despite of some spicy stories managed to take up some of my spare time. Our political drama managed to break new export destination Europe aside from our traditional Singapore market. A week plus ago, a French journalist Arnaud Dubus writing on Altantuya appeared in French Daily Liberation trying to link N.A.R since the incident happened when he was the Minister of Defence. No smoking gun though.

Is Malaysia facing legal or constitutional crisis with the recent party hoping? I'm not in position to judge whether this is a legal issue, morality issue or simply amorality issue. If this country has true separation of powers, legal and constituinal issues should be resolved by the process itself. However, if this is amorality issue i.e. Macchievelli's move, outcome is easy to predict and I believe you know what that is.

Some quarters trying to connect the dots and trying to formulate a plan B - A.A.B should stay back as Senior Minister to counter N.A.R. Another plan B that I saw was, A.A.B and Pakatan should form alliance in case there is something bad happens. Of late, Dr. M has been fiecely criticizing N.A.R and warned him to pick clean cabinet or risking the end of BN in the next GE. Not sure who will win the Oscar award or Anugerah Bintang Popular.

Kopitiam talk asides, at this juncture, I am seaching for answers to the following questions

(i) are we facing a cyclical slowdown triggered by external events

(ii) when we reach at the bottom of the cycle, will our political and economic policy remain sound?

I am leaning towards cyclical slowdown for now but remain very worried mis-step or mis-management by politicians that can put all of us into basket case.