Taking the low-high for the past 52 weeks for FBM KLCI, the differential was just -15%.
The slightly broader FBM100 differential was -16%.
The very much broader EMAS index differential was -18%.
The small-cap index (similar to ACE index) was in a totally different hellhole, the differential was -41%.
As a broad-stroke, Khazanah's main holdings did look pretty awful for supposedly be chips.
Let's look at the major industries for Malaysia:
The palm oil index differential was -35%.
OIL & GAS
We know how important oil & gas industry is to us. Just have a look at the 12-month price chart for WTI. You can make your own conclusions.
If we take the normal definition of a bear market, the property sector is also well into bear market territory, a differential of -32%.
a) GST and/or SST reduced disposable income and the perceived contraction was the beginning of the 4 phase cycle.
b) The euphoric and unexpected political result in May was a joyous occasion but also brought about a lot of uncertainty. Too many companies were reliant on government contracts and many GLCs were inefficiently managed. The spring cleaning is well underway but it was expected to last for some time.
c) Retraction of certain contracts was expected. Cleaning up the books showed us the mess we inherited and the balance sheet showed that our new government hands are tied to a certain extent as what they can do, and curtailed by what they have to address first. The markets are important but not before we address other more pressing issues.
d) The weak ringgit has kept our export industries chugging along and our foreign reserves have stabilized and growing incrementally. The unexpected trade war between US-China has exacerbated and prolonged the slump in sentiment and dampened liquidity.
e) The government should start green-lighting projects again in a big way to jump-start the markets. Our government must be very aware of the state of capital markets.
f) The velocity of money is a very real thing. Each ringgit spent is supposedly worth RM7-RM8 in the real economy. Accelerated spending and constriction are just as impactful. I cannot think of a more business-friendly PM than Tun Mahathir, and I am sure he knows more than what I have written here.
g) I was doing my own research on penny stocks, those below 50 sen and plenty are trading at excessive discounts to their NAV, and many have a healthy balance sheet with good debt: cash ratio, and even OK PBT for the past couple of quarters albeit a tad lower. The substantial number of "good" candidates led me to believe that bargain hunters and company owners will start buying back in a big way soon.
h) The sentiment is a very big word. It is even bigger for equity markets. Participants need to be cognizant of that fact. Holding power is supreme for bargain hunters.
i) Foreign funds have been exiting the market with gusto, in particular just after the elections, and have continued to do so although at a slower rate of late. How much more can you sell? Its a pendulum after all.
j) The danger now is that the government does not realize the need to jump-start the equity markets. Employment is actually at a precarious level. Many companies do not wish to hire or do fresh capital spending because nothing seems to be moving, and the US-China trade spat is making forward decisions tough. We have a high level of mortgage debt per household and prices have been easing for the past 2 years. Banks are sitting pretty nervous on a lot of mortgages. All you need is a tip over on unemployment and you see default rates rise, which will crush banks' valuations overnight. Bearing in mind our civil service is bloated too. If we do too many "corrective measures" overnight, the whole thing could crumble.
h) For the above scenario, the government needs to step up do positive market-boosting measures. That is because, for the past 6 months, almost every single thing has been negative, restrictive, constrictive, regressive, deflating for economic activity ... even though many of the measures taken WERE NECESSARY for the good of governance and fiscal responsibility. But you cannot strangle the bad till the good part also suffocates.