Ripple Effect on Malaysian Market in 2018

When investors start selling off their stocks it could only mean that they’re panicking for a reason that could affect them unfavourably, especially the foreign investors who were and still are the net sellers until this day, which is the 6th of July. It has already been more than a month have since the publishing of that article and yet the foreign investors are still selling off for various and logical reasons, which we will go through soon enough,

As most of us may know, there was the election for the next prime minister, which investors were already anxious about, adding to that, the opposition won, leaving investors both local and foreign in an uncertain situation, therefore, and the massive sell off. This happens everywhere around the world where investors who invest in that nation are always on the edge whenever an election of a huge scale takes place. Investors would panic if they feel like things are going to be uncertain, unpredictable, and worrisome. So, as they panic, most of the investors would sell whatever asset or debt they have invested in in that nation, not so different from Malaysia, which happened on the 9th of May last year.

Besides all of that, the finance minister announced two weeks later after the election that Malaysia have accumulated a debt of RM 1,000,000,000,000 which only made it worse for the market and its stakeholders. More panic ensued, causing a massive sellout in the Malaysian stock market which were mostly done by foreign investors and they continue to do so until this day, 6th of July. The national debt of a nation shouldn’t be more than 55% of its GDP, but after that announcement, it seems that Malaysia’s national debt is more than 65% of its GDP, which clearly explains the worrisome actions that investors have been doing ever since the announcement have been made.

Another factor as to why investors are panicking could be that maybe they think that the new prime minister and his party might impose capital control in the country, which is why they are pulling out from the Malaysian market as soon as possible so that they get their money before any kind of new regulations that would be imposed in the coming months or so. Although, there haven’t been any publicly known talks or announcements about capital control that might be implemented by the new prime minister in Malaysia, foreign investors liquidate their investments nonetheless since are still skeptical about it.

There were also international affairs that affected the selloff, which were the threats that have been made between the USA and North Korea about how they could bomb each other in a matter of hours with their intercontinental ballistic missiles, which also makes sense as to why the American market and the East and South East Asian markets went down quite badly as the investors are troubled of how such threats would affect the future of the market, so they panic and start selling off what they have invested in. But this issue of the USA and North Korea has been resolved as the president of the USA and the leader of North Korea had a face-to-face discussion at a summit in Singapore on the 12th of June about how they could resolve it, like North Korea stopping their nuclear productions, among other things.

On top of all that, the current affairs only made it worse as the USA have made threats to impose tariff of $50,000,000,000 on many products that come from China. And as of Friday, the 6th of July 2018, 12:01 am New York Time, the tariff of $34,000,000,000 on many Chinese products have already taken place and an extra $16,000,000,000 of tariff would be imposed on more Chinese products after two weeks from the 6th of July, only giving more concerns to those who have invested in Malaysia and other Asian markets. This has been the main impact as to why there investors don’t feel safe in the high risk investments such as the stock and bond markets, instead they invest in safe and short-term investments such as CDs, treasury bills, and so on.

We can clearly tell why the continuous and vigorous sell off that has been happening for two months now as we have discussed above in Malaysia, its neighboring nations and America and is still ongoing and has been predominantly caused by foreign investors who felt threatened by these situations. Investors never like feeling agitated by the markets as it would cause a panic and eventually a big selloff in the market, but because of the current affairs of political, social, and economical risks that have been taking place, investors feel like they have no other choice but to sell what they have invested in as they do not want to be in a loss and an unpredictable market.

Thank you for reading. Please stay tune for more articles.