The economy has proven to be resilient. Many foreign fund managers are revising their Malaysia weightings upward. The important factors are political stability, earnings growth, inflation rates and interest rates. Domestic concerns include the current-account deficit and how the inflation rate may be affected, assuming utility giant Tenaga Nasional gets an electricity rate hike as expected this year. A high level of capital imports is expected.
Lumpy items can cause the trade deficit to jump and result in the dampening of market sentiment.
The on-going Malaysian Airlines and Malaysian International Shipping Corp. fleet expansion programs are examples of capital goods imports that can skew the numbers. On the international front, something to keep a watch on is a heavy correction on Wall Street, which is quite possible. The KLSE is currently very active, with high volumes traded on a daily basis. An expected reduction in interest rates will help boost the market. I expect the Composite Index will rise above its previous high and either finish the year at 1,450 or hit that level at some point.