The US stock market (Dow Jones) in 2014:

The Malaysian stock market in 2014:

Reuters attributes the plunge in Malaysian and Singapore share prices to weaker oil and gas prices. But is that the only reason?

The Edge has a cover story revealing that quite a few malls are reporting lower sales (except perhaps for F & B sales) even though their car parks may be full (well, there are not many other places to hang out, given the lack of green spaces in our urban areas).

This lower sales have been attributed to the higher cost of living (not to forget the higher household debt, mainly due to higher property prices and car loans), which has left many people feeling poorer.

And with the onset of GST, many are cutting back even more on non-essential items long before the implementation date. (Do you sense that you, your family and friends are more careful about their spending now?)

This sense of feeling worse off could erode support for Umno-BN in the coming months.

Looked at deeper, the slump reflects structural problems in the economy: low real wages, high household debt and neo-liberal policies (including an increasingly regressive tax system), which result in income inequality, leading to poorer consumer demand.

This poorer demand translates to lower sales, lower profits and excess capacity.

But the quest for corporate profits continues, regardless. But how to make profits, given slack demand? There is the drive towards the financialisation of the economy (banks and financial institutions amassing huge profits by extending cheap credit, further worsening household debt), speculation in properties (by developers and wealthier Malaysians and foreigners with cash to buy properties), speculation in commodities and sectors based on the depletion of natural resources (forests and oil).

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16 COMMENTS

  1. One Singapore Dollar is now worth RM2.62.
    So one nation progresses while the other is deading towards the Greek tragedy as the oil price keeps dropping.

    • The Malaysian ringgit has fallen to its weakest level against the Singapore dollar in almost two decades, as government bonds fell on concern that a slump in oil prices will hurt government efforts to reduce the fiscal deficit.

      S$1 could buy RM2.67, compared with RM2.63 at the beginning of the month. The value of the ringgit is now comparable to the levels during the depths of the Asian financial crisis in 1997 and 1998. The currency has declined 6.8% since October 10, the worst-performing currency in Asia, as the drop in crude threatens to crimp revenue in the petroleum-exporting nation. In other words, our economy is no better than the slump in 1997!

      Cost of living is going up while our Ringgit is depreciating.
      With 6% more to pay for GST, life is going to be very tough next year!

    • Malaysia could have avoided such financial calamity if it has previously uses its oil revenue to diversiy its core business away from petroleum industry, like what the Norway government has done successfully to mitigate business risks. But BN government are not known to be smart all along.

      • This is the problem of Malaysia putting all its eggs into 1 basket! For the past few years, all Malaysia did was O&G O&G O&G, now Malaysia is punished! Our ringgit is weakening, our markets are falling, jobs are lost, ……. Perkasa and Isma, I urge you guys to spend more time to educate yourself on productivity, job creation and managing resources efficiently. Stop politicizing the holy spirits and threatening others! Our govt, like MAS is technically bankrupt.

  2. Kadir Jasin asked:

    “The question is can we believe that our economic fundamentals are strong when the prices for our primary commodities and the value of our ringgit fall?”

    “Shares prices and trading volume on the Malaysian Bourse are also going down. There are more public listed companies that are in the red compared to those who are positive.”

  3. Yesterday all Asian stock indices rose except KLCI that continued to slide downwards. Investors are pulling out their money? How mich lower will Petronas stock price drop before it is attractive enough for picking?

  4. Personally, I am more apprehensive about how the present UMNO-dominated BN government is managing the future of the nation.

    MDV, 1MDB, Felda-FDV, PKFZ and all the massively big-money issues, together with the federal debt levels, including the shell games with the government guarantees and support letters…

    These add on to the still-unanswered question of why fuel prices are still high (despite the few cents decrease that was announced recently) when oil prioces have dropped like a stone, to the massive impact on the nation’s revenues (yeah, I did read Chua Jr’s denial… I do not exactly trust his acumen), to how Najib is fumbling more and more as assorted clowns and puppets play their games around him.

    Bottomline – even without the impending GST, I find myself thinking often of safety measures to help my family survive the gloomy future which Malaysia is careening towards.

    • Ringgit has depreciated so much that many could no longer afford overseas holiday.
      But if Ringgit were to rebound with the increase of brent oil price, you will have to pay much more for the non-subsidised petrol. Either way rakyat loses.

  5. Talking about tumbling stock market, the Vincent Tan’s majority staked MOL is now trading 80% below it’s offerong price of US$12.50 to be at US$1.69 on Monday ! Its CFO has resigned while its 3rd quarter results being delayed.
    So this is just one of the suffferings of cronied business locally flavored but not able to be shielded by events happening outside prefered circle in global economy ?

  6. You have to think twice before you spend nowadays especially when the Ringgit is depreciating a lot lately. Things will get worse when you need to pay 6% for GST from April next year. The KLCI started to fall alongside the Umno AG, surely a bad omen for Umno.

    • The cost of medical care may increase by between 1% and 2% when the GST is implemented next year, according to Health Minister Subramaniam according to The Star. Pray for good health!

  7. Anil,
    Lower disposable income is one factor. Young internet savvy consumers tend to shop online these days. Certain online shops do throw prices, especially during festive or clearance period. Sometimes the price can be 20-30% lower than those you find in retail stores in Penang!

    • Young people are buying online on Ali Baba’s Taobao. Retailers with high rental overhead wil soon have problems.

      • Penang Malls & Shop Outlets will soon be deserted other than those going there to enjoy air-con and window shopping. New generation to shop via internet at discounted prices since vendor no need to pay for shop rentals while courier service door-to-door has become economical these days.

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