Shares up 1.8% on relief rally

Malaysian shares jumped 1.8 percent today, staging an anticipated relief rally in tandem with many major Asian bourses that last week suffered billions of dollars in losses amid doubts that world policymakers could deflect a global economic shake-up.

Experts told Malaysiakini that even though a five-point plan announced by Group of Seven countries over the weekend fell short of market expectations, what was happening today was a knee-jerk response to the bloodshed of last week.

“It is a tentative rise,” said David Cohen, director of Singapore-based Action Economics. Last week was such a huge sell off, so today is a correction for that.”

“The coast is not clear. Let’s see how the Dow reacts tonight,” said a dealer at a large bank-backed securities house. “Unfortunately, we still expect volatility. Whatever gains or technical rebounds there are can evaporate just like that.”

The Kuala Lumpur Composit Index rose 1.8 percent to close at 950.76 points. Local shares lost more than 8 percent last week, hitting multi-year lows, but the carnage was less severe than in many other Asian countries, such as in Japan, Taiwan, Hong Kong and Singapore - where the government has declared a state of recession.

In Hong Kong, shares shot up 10.2 percent after suffering its sharpest weekly decline in a decade, Singapore’s Straits Times Index rose 7.2 percent, while South Korean shares rose 3.4 percent. However, Taiwan bucked the trend, losing 2.2 percent, while in Japan, the stock market was closed for a holiday today.

Najib absent

Weighing on the local market is also the added political uncertainty following Prime Minister Abdullah Ahmad Badawi’s decision to quit by March next year.

While there is little doubt that his deputy Najib Abdul Razak will succeeed him, investors are unsure if Najib can push through solid solutions to buffer the country from a global economic meltdown.

The 55-year old Najib, who took over the finance portfolio last month, was conspicuously absent from Parliament this morning.

Widely touted as his "first test" as finance minister, Najib had been expected to face off Opposition Leader Anwar Ibrahim (left) who has called for a fresh budget to replace the “outdated" one proposed by Abdullah on Aug 29.

“We may or may not be heading toward a recession but we have to handle it, and we can’t do that with a Budget that is one-and-a-half months old,” said Anwar, who cited as his reasons mega changes in the global markets, such as fuel prices, which have almost halved in value since Abdullah drafted his 2009 spending plan.

No reasons were given for Najib's non-appearance but he has been dogged by an alleged sex scandal involving a controversially murdered Mongolian woman. The scandal flared up again over the weekend after website Malaysia Today ran an article that renewed attention on the case. Najib has repeatedly denied the allegations.

Abdullah forseees no recession

Meanwhile, Abdullah - at a separate function this morning - said Malaysia was not in danger of slipping into a recession, unlike its southern neighbour Singapore.

“I believe, insya-Allah (God willing), we can weather the storm. We still have strong economic fundamentals," Abdullah told reporters after delivering his keynote address at the US-Islamic World Regional Forum this morning.

"We have very strong reserves. Our trade surplus is still strong. We do have high domestic savings. We are not in any kind of turmoil. We have a healthy democracy.”

He also said the government would not re-peg the ringgit, a policy adopted by ex-premier Dr Mahathir Mohamad at the height of Asia’s own financial crisis in 1998 to stem capital flight.

“We have a lot of assets that we can use to withstand the impact of the situation we are facing today, but I’m not saying that it’s going to be easy,” said Abdullah, adding that the government would continue to remain business friendly.

“It’s going to be tough. If we stand together, if the citizens support the government, we can continue to work well with the private sector as a unit. We should be able to weather the storm.”

The premier is not the first government leader to reassure Malaysian investors. Other leaders including Najib, Second Finance Minister Nor Mohamed Yakcop and International Trade and Industry Minister Muhyiddin Yassin have offered a slew of reassurances to investors.

However, they have been lambasted by financial experts and civil groups, including Transparency International Malaysia, for painting a rosy picture and giving insufficient warning to the public of what some believe could be one of the worst-ever economic shake-ups.