Comparing the circumstances back in 1993 against the current situation.
In the early 1990s, despite slowdown in the global economy, as the third largest economy in South-East Asia, after Indonesia and Thailand, Malaysia was supported by relatively strong macroeconomic fundamentals and resilient financial system. With the real GDP growing at 9.9%, ringgit appreciation, strong export growth and the Government’s measures to hold inflation low at 3.6%, the local stock market became an attractive alternative to foreign investors.
In 1991, Tun Dr Mahathir Mohamad unveiled the philosophy of “Malaysia Incorporated” which was a development strategy for Malaysia to achieve a developed nation by 2020.
Before 1993
Foreign investment in Malaysia was - long-term direct investment in manufacturing sector.
However, massive influx of foreign capital inflow helped fuel the super bull-run in 1993.
Within the year, the market increased by 98% to reach an all-time high of 1,275.3 points and foreign investors’ participation accounted for 15% of total trading value of our local bourse. Lured many retailers into the market
1993
Government planned several mega projects, such as
KL International Airport (RM8bil), Johor-Singapore Second Link (RM1.6bil) and Kuala Lumpur Light Rail Transit (RM1.1bil).
Government planning on privatising its own corporations, such as Petronas, KTM and Pos Malaysia had also driven these counters into prime trading targets.
Besides, the ease of accessing bank credit by investors also contributed to the market rally.
High percentage of loans was channelled to broad property sector as well as the purchase of securities.
1994.
Bank Negara introduced a number of selective capital controls in early 1994 to stabilise the financial system,
2010
Economic Transformation Programme (ETP) with the aim to boost our gross national income (GNI) to US$523bil in 2020 from US$188bil in 2009. GDP growth is anticipated to increase by 6% this year.
September 2010 saw net inflow of foreign funds again in our equity market. Over the past few weeks, the average stock market daily volume had been hovering above one billion shares per day.
According to Andrew Sheng in his book titled From Asian To Global Financial Crisis, there were two main indicators to irrational exuberance during the super bull run in 1993. The first was the amah (domestic maid) syndrome. We need to be careful when amahs got excited about the stock market. This was because they did not know what they were buying and would always be the last to sell. The second indicator was when businessmen began to speculate stocks in the stock market. This was because they might neglect their businesses and use some of their cash for speculation.
Comparing our current market situation with the 1993 bull run, there are certain similarities that we see, such as strong economic growth, ringgit appreciation, inflow of foreign capital and ease of credit.
Local retailer participation may be the last push factor towards the bull run.
( source : The star )
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