ETF Trends
ETF Trends

Current global economic turmoil has affected Malaysia’s exchange traded fund (ETF), but the country’s leadership is adamant that no recession will be seen and the currency will rise.

Further, the central bank is ready to adjust monetary policy to support growth, reports Liau Y-Sing for Thomson Reuters.

Southeast Asian economies have been strengthened by crude and palm oil prices, but a sharp turnabout in these commodities will most likely induce a slowdown in an economy that heavily relies on trade. Forecasts for domestic economic growth is said to be 1.5% in 2009 with interest rates potentially lowered to below 3% from the current 3.5% by the second half of 2009.

To boost consumer confidence and spending, the government has reduced gasoline and rice prices, according to the Associated Press. Experts in consumer research warn that the government should only control critical items such as food and petrol and let the market regulate itself.

Recently, inflation has reached 8.2% in September and 8.5% in July/August,  which was the highest level in three decades. The government has slashed its economic growth forecast to 3.5% from 5.4% for 2009 and promised a $1.9 billion cash injection into the economy next year.

Growth for the manufacturing sector is expected to drop to .8% from its original forecast of 4.3% for next year. The government plans to remove import duties for manufacturing and ease licensing requirements to help businesses.

The Deputy Minister of Finance has a more optimistic take on the current economic situation in Malaysia. He expects no recession but a slowly expanding economy with a growth rate of less than 5% for 2008 and 3.5% in 2009, writes Bernama.

Optimistic news may sway the fickle investor but the iShares MSCI Malaysia Index Fund (EWM) is currently down 43.3% year-to-date, so the optimism doesn’t seem to be warranted at the moment. The fund is 7.3% below its 50-day moving average, but sharply off the 200-day by 25.2%.

ETF EWM performance

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.