Although the data coming out of Malaysia has been positive, with exports up 26.6% in April from a year earlier and economic growth of 10.1% for the quarter to March 31 this year compared to the same period a year ago, still there are fears that any slowdown externally may mean a slower economic expansion at home.
This is despite the fact that Malaysia’s economic destiny may not be as tied to the US and the EU as before with more intraregional trade and rising domestic consumption playing more important roles today.
In fact, in the past two weeks, analysts and news commentators are now saying that 2010 may not be as smooth-sailing for the global economy after all with some even saying that a double-dip recession may be around the corner.
Joseph Stiglitz ... Measures taken by EU nations collectively may be disastrous as ‘what is good for one nation can be disastrous for all’.
The overall message in recent months has been that the concerns over possible sovereign-debt defaults in the euro-zone will drag growth lower as EU governments rush to embrace austerity measures and private consumption falls.
“There is a risk that the European economy will go into a double-dip recession,” Nobel Prize winner and Columbia University finance and economics professor Joseph Stiglitz says in a June 15 commentary in London’s The Independent newspaper.
He says the measures taken by EU nations collectively may be disastrous as “what is good for one nation can be disastrous for all”.
Stiglitz adds that the fiscal conservatism of the US will make things worse for the developed economies as a whole.
Analysts are also saying that although China’s and Japan’s latest exports data have not shown any impact from the EU’s austerity measures, this will not last.
The question is how can investors here protect their investments as the situation becomes less rosy?
Kurnia Asia Bhd chief investment officer Pankaj Kumar Bipinchandra tells StarBizWeek that for investors who want to stay invested in the equity markets, this will mean going into dividend-yielding stocks that are defensive in nature.
“Pick consumer stocks that can provide some protection in terms of risks such as Aeon and Hai-O,” he says, adding that real estate investment trusts are also quite good in terms of yields.
Pankaj says the quarter to March 31 may likely be the best quarter in terms of growth in 2010 for Malaysia and economies around the world, boosted in large part by the base-effects of last year’s contractions.
“The current quarter will not be as good and the second-half will be slower than the first-half,” Pankaj says.
Inter-Pacific Asset Management Sdn Bhd chief executive officer Robbin Khoo suggests that those with a medium-risk profile should just stay in the market.
“Technically, I don’t see the market sliding downwards in a steep slope and watch currency movements at the same time, in particular the US dollar,” he says.
Khoo says since the market here is still very much dependant on foreign funds, a weaker US dollar will mean less foreign funds coming in, but when the currency strengthens, then the market will move up again.
However, for those with a low-risk profile, he says its preferable to exit the market as it will take some time to pick up.
“I foresee the market will be very quiet for the next two quarters and will slowly move up in the first quarter of next year barring any more corrections due to external factors,” Khoo says.
He adds that for those with a high-risk profile and have the extra funds, they should pick up more shares but in a selective manner.
“My advise is to look at the banking sector as they are usually the forerunners of an economic pick-up plus they’re more stable, otherwise consumer stocks are still a good bet,” Khoo says.
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