Business Cycles & Investing: Malaysia (Jan 2017)

The Sun Daily reported back in October 2016:

Businesses and consumers are less optimistic about the Malaysian economy, a survey by the Malaysian Institute of Economic Research (MIER) shows.

MIER’s third-quarter (Q3) Business Conditions Index (BCI) dived 22.5 points to 83.9 points from 106.4 points in Q2 on the back of a slowdown in sales and production, declining local and export orders and rising stock levels.

The Consumer Sentiments Index (CSI), meanwhile, was down by 5 points quarter-on-quarter to 73.6 points in Q3 due to uninspiring employment and financial outlook. This is the ninth consecutive quarter that the CSI has remained below the 100-point threshold level of confidence.

The Malaysian Business Confidence index has begun its downward descent trend since mid-2010, reaching closer to low point of 80 (which happened to be the low points during the crisis period of 1998 and 2008-2009).

MY Business Confidence_Historical.png

As shown below, it appears that there is a diverging trend of which the Malaysia’s FBMKLCI stock index has not fully incorporated the effects of slowdown in business confidence.

MY Business Confidence_vs FBMKLCI.png

As forecasted by TradingEconomics.com, we may see possible worsening business conditions in Q1/17 before there is any expected recovery in the later part of the year:

Forecast_TradingEconomics.png

We are seeing similar diverging trend between the Malaysian Consumer Index and the FBMKLCI whereby the FBMKLCI appears not to have fully reflected a weaker consumer sentiment.

CSI_Diverging Trend.png

As forecasted by TradingEconomics.com, it appears that consumer confidence will be weaker by Q1/17 before there is any expected recovery in the later part of the year.

CSI_Forecast.png

Latest Updates – as of 19 January 2017

**Latest updates for Q42016 – Malaysian Business Confidence

https://www.mier.org.my/bci/

STILL IN NEGATIVE TERRITORY
  • BCI drops for the second consecutive quarter to 81.2 points
  • Expected Index (EI) lost 12.4 points
  • Current Index gained marginally by 0.4 points
  • Overall sales and production trending higher but likely to drop in the next quarter
  • External orders dipped further

**Latest updates for Q42016 – Consumer Confidence

https://www.mier.org.my/csi/

SENTIMENTS SHIFT LOWER
  • CSI falls further to 69.8
  • Current finances unfavourable
  • Income prognosis subdued, job outlook flat
  • Expectations of rising prices intensify
  • Cautious and selective shopping plans in the pipeline

Bottomline 

Business and consumer confidence are leading indicators of the underlying economy. The key question is why hasn’t the FBMKLCI index reflecting these weakening fundamentals? Is there a recovery story in the pipeline? There is clear divergence between FBMKLCI and the current level of Business Confidence / Consumer Confidence. How long can this divergence sustain before a reversal?

THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Author: Ken Utau

Markets Observer + Food Lover

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