Market Update 17/10/2022 — The SEA Highlight.
The global forecast for the Asian markets is negative on rising fears of recession and higher interest rates. the Asian markets figure to follow the US lead as the market slid down. There are many turmoil incidents happening to the triangle SEA where Malaysia experiencing a parliament dissolved, next General Election is coming. Singapore on the other side having its fourth policy shift by its central bank. Indonesia who is keep going strong keeps Rupiah strong sliding off as the Dollar strengthens its value.
Malaysia - Parliament dissolved, paving way for GE15
Photo from Astro Awani.
Malaysian Prime Minister Ismail Sabri Yaakob made the official announcement of parliament dissolved on Monday, October 10, 2022, paving the way for the 15th national general election. 222 parliamentary seats will be up for grabs. At the state level, Sabah, Melaka, Sarawak, and Johor have already held their state elections, but are also entitled to dissolve their state assemblies.
The current government’s five-year mandate will be expired in July 2023. According to the PM, the election will soon take place before the end of this year as according to Article 55 (4) of the Federal Constitution, the GE15 must be held within 60 days of the dissolution of the Parliament. The election commission will soon determine key dates for nomination, early voting, and polling, as well as other matters related to the GE15.
Photo by Umar Mukhtar:
GE15 announcement’s impact on the market.
Changes could result in projects delay.
According to Rakuten Trade, currently, the impact on the stock market is not vagueness. This pattern repeated similarly to the last GE14 in 2018.
However, it is expected to see some possible stock market ambiguity during the pre-and-post-GE15. The GE15 will also open the door to possibilities for changes in the leaders of government-linked companies (GLC), delayed infrastructure project rollouts, and postponement of pre-negotiated contracts. It could cause a further slow process.
In addition, Rakuten mentioned that “In the previous elections, there is a before and after impact on the stock market. Certainly, there has always been a pre-election rally (during the GE)”.
GST re-implementation possibility
Nevertheless, the Budget 2023 had a footing of the addition of RM372.3B for next year’s budget allocation. It leads to a huge concern about whether we will be able to finance this huge budget. It might either hit or miss on the option of Goods and Services Tax (GST) re-implementation. However, GST might be one of the ways to finance the budget.
Investors could seek shelter in less political intervention sectors
With the uncertainty on how will GE’s result will turn out, it is expected for investors to shift to less political intervention companies/sectors. Sectors such as export-oriented and consumer needs are more beneficial in this time frame. On the other hand, the construction and energy sectors could be under pressure.
Bursa Malaysia KLCI (FBM KLCI) opened higher on Monday, October 17, 2022 – at 1.03 points higher at 1,383.50. Later, at 9.18 am, the benchmark eased 0.19 of a point to 1,382.28 from Friday’s close of 1,382.47. Last Friday, The KLCI finished modestly with the following gains from the plantations and telecoms, while the financials and glove makers were mixed with a total traded volume of 2.253 billion shares worth 1.761 billion ringgit.
Singapore - The Monetary Authority of Singapore’s policy shift
Photo by Kin Pastor
The Monetary Authority of Singapore (MAS), Singapore’s central bank, announced they will tighten monetary policy again. The central bank reported to “re-centre” the mid-point of the SGD nominal effective exchange rate (S$NEER) at its prevailing level. The decision was made to shorten imported inflation and aid in reducing domestic price pressures.
According to the report by The Global Economics and Markets Research team of UOB (United Overseas Bank), the majority of market consensus had expected a further rise in the slope of the policy band beforehand.
The central bank had adjusted the monetary policy thrice in a span of a year. The fourth time adjustment showcase the importance of price stabilization. The inflation rate might float at 5% till the end of the year and would likely shift to early Q1 2023.
What does it mean for SGD?
Unlike most central banks that use interest rates as parameters in managing monetary policy, The Monetary Authority of Singapore uses the exchange rate as its main policy tool. In short, tightening the monetary policy will allow the SGD to appreciate. It will later make imports cheaper and, in turn, help to help curb domestic cost pressures. It will aid in stabilizing the goods and services price.
The latest policy statement had a “markedly more bearish” tone compared to the central bank’s off-cycle policy statement in July – according to Barnabas Gan (RHB’s senior economist).
Indonesia - Rupiah further slid against the dollar.
Photo by Trip Savvy
Indonesia stoking fears that Southeast Asia’s largest economy is starting to crack after months of remarkable resilience against the dollar. In a span of 6 months (February to the end of August), Rupiah managed to be Asia’s best performer with just 3% slide while South Korea’s Won and the Thai Baht both dropped more than 10%.
The dollar’s relentless climb caused Indonesia’s currency to stumble. In September alone, the Rupiah slide 2.5% marking its largest monthly slide of YTD. The scenario will likely be leading to further dwindling currency reserves, rising debt obligations, and foreign capital flight. In addition to other countries of SouthEast-Asis also experiencing negative impacts on their currencies. Singapore dollar dropped 0.2%, while the Thai Bhat weaken by 0.5%.
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