Malaysia's been affected by the trade war quite a bit.
With a new government, and the US-China trade war escalating daily, the market has been thrown into turmoil. How should investors in Malaysia best manage their trades and avoid panic selling?
In our exclusive September webinar, former Bursa Malaysia VP Warren Mak shared his opinions on what best to do in these circumstances. We round up three key pieces of his advice for investors
1. Be prepared for a market slowdown – and maybe even a correction.
Thanks to the US-China trade war, the MYR outlook is currently bearish. The USD is expected to strengthen even further, thanks to a predicted increase in Federal Funds between this year and next year.
But a strong Dollar means a higher risk of default on dollar debt. The Malaysian economy may slow down, as imported inflation and weaker MYR could lead to higher interest rate policies. This could cause the cost of doing business to rise, and contribute to companies’ earnings falling. Eventually, there might be a stock market correction, when more and more companies show weaker performance.
2. It’s best not to hold on to stocks for too long.
When the market shows signs of continuous correction, or crashes, investors should not hold on to stocks for the long-term. Instead, they can consider holding cash (especially safe haven currency) or AAA bonds.
Those who really wish to buy stocks should use Warren Buffett's value investing method to identify undervalued good fundamental stocks – those with a decent percentage margin of safety and dividend yield.
3. Consider investing in gold and oil if the market remains uncertain.
Thanks to the strong Dollar, gold is expected to stay weak. And typically, investors will buy gold, as it’s a safe haven commodity when the Dollar is weak and the market is uncertain.
Most crude oil transactions are also traded in Dollar terms. The strong Dollar could cap oil prices rally. On the other hand, Malaysia as an oil producing country – will benefit when oil price rises. Other good investments in time of uncertainty include undervalued blue chips, REITS, and high yield stocks.
Liked this post? Attend our next webinar and ask our trainers your own burning questions. The calendar of webinars is available here.
About the Author
Warren Mak, Msc, CFP, FRM, was the former Vice President of investor education in Bursa Malaysia. He is also a trainer for programmes organised by SIDC Malaysia, and has almost 25 years of experience in banking, securities and derivatives, including nine years as a bank treasury dealer.