{"id":24151,"date":"2016-05-18T11:53:26","date_gmt":"2016-05-18T03:53:26","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=24151"},"modified":"2021-07-28T10:44:37","modified_gmt":"2021-07-28T02:44:37","slug":"despite-bad-headlines-malaysias-stock-market-soldiers-on","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/despite-bad-headlines-malaysias-stock-market-soldiers-on","title":{"rendered":"Despite Bad Headlines, Malaysia\u2019s Stock Market Soldiers On"},"content":{"rendered":"

Like how Superman avoids kryptonite, investors typically avoid uncertain markets.<\/p>\n

Uncertainties in the market are usually contributed by bad news and dark headlines such as political scandal and corruption, which inadvertently affect the stock market.<\/p>\n

Or so we thought.<\/p>\n

However, Malaysia has proven to be different. Malaysia\u2019s stock market thrives even when headlines seem to scream uncertainty.<\/p>\n

Malaysia has made international news for the ongoing allegations of corruption involving 1Malaysia Development Berhad (1MBD), the country\u2019s state investment fund. However, surprisingly, this didn\u2019t seem to bother investors, as we wrote recently<\/a>.<\/p>\n

Though, Malaysia\u2019s main stock exchange, the KLCI, had a good start to the year, it dropped recently and is now down a modest 3% so far this year.<\/p>\n

However, in the bigger picture, Malaysia is still the current home of the longest bull market in the world. The KLCI hasn\u2019t experienced a bear market (when the index falls 20% or more), since March 2009. It\u2019s up around 85% in US dollar terms since late 2008.<\/p>\n

<\/span>Malaysia\u2019s market charges amidst uncertainties<\/strong><\/span><\/h2>\n

One of the reasons Malaysia\u2019s stock market has held up so well is because it includes a lot of defensive companies. Defensive companies produce and sell the things people use regardless of scandal or uncertainty. These include electricity, mobile phones, basic food items, and other staples.<\/p>\n

Due to this, defensive companies\u2019 share prices tend to be more stable. With about 37% of Malaysia\u2019s stock market made up of defensive companies, it has been less volatile than most other markets in the world.<\/p>\n

It also helps that on a valuation basis, Malaysia\u2019s stock market is cheap compared to others. This attracts more interest from foreign investors and helps support share prices. And the country\u2019s pension fund has helped share prices by regularly investing in the Malaysian market.<\/p>\n[sc:sample_banner]\n

<\/span>It\u2019s not just here<\/strong><\/span><\/h2>\n

Malaysia isn\u2019t alone in having a strong stock market despite bad headlines. Brazil is another example (which we identified as a compelling opportunity on January 15<\/a>.)<\/p>\n

Brazil is embroiled in an epic corruption crisis, culminating recently in the Brazilian congress voting to impeach President Dilma Rousseff. She is also under investigation for her role in a corruption and embezzlement scandal involving Petrobras, the state-owned oil company.<\/p>\n

On top of these bad headlines splattered across the newspaper worldwide, Brazil is also facing its worst economic crisis in decades.<\/p>\n

However, the country\u2019s stock market seem to be oblivious to all these crises, as shown below. The largest Brazil ETF (New York Stock Exchange; ticker: EWZ), which gives investors access to 85% of the Brazilian stock market, is up 36% so far in 2016. (It\u2019s up 62% from its January 21 low.) The Brazilian real is also up 10% compared to the US dollar so far this year. This has helped boost the market\u2019s US dollar-denominated returns.<\/p>\n

(The MSCI Brazil Index UCITS ETF on the SGX (code: J0O), and on the Hong Kong exchange (code: 3048) are also both up 38% so far this year.)<\/p>\n

\"Sao<\/p>\n

Brazil and Malaysia aren\u2019t alone in having better market performance than headlines. The world\u2019s best-performing stock markets so far this year include Russia, Thailand, Turkey and Egypt. Most of these countries are in the news for all the wrong reasons too.<\/p>\n

<\/span>What\u2019s the key takeaway?<\/strong><\/span><\/h2>\n

Of course, any asset that\u2019s fallen in price can always fall further. However, investors tend to have this belief that what goes down must come up. And when something has hit rock bottom (or seem to be), it can only go up.<\/p>\n

This is why investors think it\u2019s the best time to invest during these uncertainties. If it\u2019s already at its worst, things can only get better.<\/p>\n

This article was first published on Truewealth Publishing<\/em><\/h6>\n
Image from Channel News Asia<\/em><\/h6>\n","protected":false},"excerpt":{"rendered":"

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