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Stabilizing market confidence

  • Instead of an anticipated selldown, the local stock and currency markets staged a surprising rebound on the first post-GE14 trading day.

Sin Chew Daily

On the first trading day after the regime change, both the stock and currency markets quickly recovered from a poor start even as analysts had warned of a selldown.

The ringgit surprisingly rebounded mainly because the change of government had been effectuated peacefully on the back of the country's solid economic fundamentals and overflowing confidence from Malaysians as well as investors in PM Mahathir and his team.

The thing is, Mahathir and his PH administration must come to terms with the reality that there are indeed uncertainties with the government's economic policies. Moreover, the speed with which the economic policies are implemented will also have an impact on local businesses.

After Tun Mahathir was sworn in as prime minister, he announced on the following day three senior cabinet members as well as a five-member Council of Elders, and this has somewhat consolidated market and public confidence.

Meanwhile, the other members of certain ministries that may have a bearing on the local market and economy such as the ministries of international trade and industry, consumer affairs and agriculture, have yet to be named.

These ministries are of utmost importance in addressing the problem of the country's long-term growth and potentials. The new office holders naturally will come under public limelight.

No doubt the market is focusing its attention on Pakatan Harapan's "hundred day pledges", including the review of major public infrastructural projects, abolition of GST and reintroducing fuel subsidies, among others.

Moody's has warned that these pledges are unfavorable to the country's credit rating while there is still lack of substantial information on the new government's economic reform measures at this moment.

GST is perceived as one of the factors that have caused widespread frustration among Malaysians. Its abolition therefore is expected to boost market and consumer confidence. That having been said, there are still concerns as SST may not be reimbursed from the government and will likely be transferred to the consumers.

In addition, SST collection is far lower than GST collection, and there is this need for the government to make up for the shortfall.

Former Bank Negara governor Zeti, who sits in the Council of Elders, has said the government can achieve its revenue goal through project prioritization, enhancement of public sector efficiency, cutting unnecessary waste and exploring new sources of income.

She feels that international rating agencies eventually want to see what policies the PH government has, and believes that the current economic climate favors the country's economic reformation.

There are nevertheless still risks, especially in view of the fact that government contracts and mega projects initiated by the previous administration may have to be deferred or shelved.

As such, the PH government will need to ensure the continuation of existing policies closely related to the country's economic fundamentals, including those on consumption, expenditure, trade and foreign direct investments (FDI), so that they can propel the steady growth of the national economy.

 

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