Investors in Malaysia need to be concerned over recent developments in our country as well as externally which have a direct or indirect impact on investor sentiment. Hence the continuing political crisis over 1MDB, the sharp decline in the value of the ringgit against the US dollar, the battered commodity market affecting primary producing countries and pull back by foreign investors all have contributed to the depressed stock market.
What has made it even more of a turbulent storm is the recent decision by China to depreciate the yuan.Very few in the market – even among experts – expected this and the impact has seen the market take a further sharp fall.
There are two considerations that Malaysian investors may want to bear in mind looking ahead. One is that we are not the only country in the region that has seen its market fall badly. Believe it or not but in fact the Singapore share market – which Malaysians would expect to be the strongest and most resilient in the region – has dropped even more than the Malaysian one during the last one year. Of course, this is small or no consolation to our local investors who have lost money. But it puts into perspective the current market fall in our country for those who have started to panic about our local situation; and who think and mourn and groan that we are alone in experiencing this current market fall.
The table below compares the performance of the markets in the region and shows that only the small markets of Vietnam and the Philippine have remained in positive territory since the end of 2014. Besides Singapore, Indonesia has also taken a bigger hit than us.
The second consideration is that any economic storm will pass if the economic fundamentals are strong. While there may be many problems with our politics, I am confident that our economic fundamentals are not only strong but are superior to those in many other countries. This is why I have kept my money fully invested in Malaysian and continue to do so. This is why I am sure that we will weather the storm over our market right now.
This is the same in other countries where the fundamentals are strong. For those who have lost money and have lost heart, this is what Business Insider has to say in a recent article.
There is an equity risk premium in the markets. Over the long term, stock investors can earn average annual returns that are close to 5% above what they’d be able to earn at the risk-free rate. That’s a huge number when compounded over decades.
But it must be earned the hard way – battling through the worst the markets can throw at us. And, as both Buffett and Templeton can attest, it is when stocks are treating us the worst that this premium is right around the corner.
Finally, a reminder, that the stock exchange consists of over one thousand companies in the Main and Ace markets. When you invest your money, make sure you invest in those whose fundamentals are stronger than others and who can take advantage of the shrinking Malaysian ringgit!
As I said many a time, successful investors do not let their emotion over rules their logical thinking process. They dare to buy when people are selling desperately and sell when people are euphoric.