Is Malaysia located in another planet? Are we talking about planet earth?

Under the backdrop of the current global financial crisis which is originated from the US and spread to the Europe and now starting to affect the other parts of the world including Asia.A simple analysis of Malaysia 2009 economic outlook from the perspective of an ordinary working man.

As we all know that Malaysia’s major revenue sources are from the export of the crude oil and crude palm oil, specifically the crude oil export contributed nearly 40% to 46% to the nation’s revenue.

The US is still the leading export market of Malaysia, followed by European Union, South East Asia and the fourth is Japan.Overall manufacturing products accounted for 75 percent of Malaysia's total exports followed by crude oil and other minerals at 14 percent and agricultural products at 9.5 percent, as at 31 December 2007. While the exports of electrical and electronic goods accounted for 44 percent of total exports, with the US is the biggest consumption market.

For the last two weeks, the stock markets worldwide had been experiencing the severe bottomless spiral southwards. Malaysia’s Kuala Lumpur Composite Index , year to date, had been tumbling more than 30% since the early of the year 2008.

What the above statistics tell us?

As at 11 October 2008, the global crude oil price was tumbling to below USD 80.00 per barrel as compare to its record high of above USD 140.00 per barrel, while the crude palm oil price was recording below RM 2000.00 per tonnes for December 2008 order as compare to its record high of above RM 4000.00 per tonnes. This means that the country is going to experience the budget deficit if the government is not intending to review its already presented 2009 National Budget. We must be questioning where would be the funding sources for the mega projects such as the Iskandar Malaysia (formerly known as Iskandar Development Region or IDR) and the other Economic Corridor Region?The Iskandar Malaysia and the other Economic Corridor Regions had been hailed as the major engine of the Malaysian economic growth in the future.

The consumers' confidence level in US and the Europe had been dipped into the decades low following the subsequent collapse of their banking and financial institution. This will have huge impacts onto our export. With the external demand reducing, the manufacturing companies will abandon their existing expansion plan and tightening their budget. While the fear of massive manpower laid-off in the manufacturing sectors will soon dominate the Malaysian market. Then the possible rising of the unemployment rate will certainly pose a significant impact to the social instability which had been ailed by the political instability since Malaysian historical 308 political Tsunami.

The severe bearish market had dampened the households’ confidence level and their spending sentiment. They will finally tightening their belts and cut back on consumption. Hence, the slow growth of the domestic consumption.

With the internal and external negative development, we might tend to ask where the country’s economy is heading to?

The globalization seeds had long been taken root in this world for decades. This means, nowadays, the economies of the countries across the continents, in breadth and depth, are interconnected and interdependent.

Yet lately, we still heard our country’s leaders unanimously expressed confidence that Malaysia’s economy is still resilient given the current global financial crisis. They boasted that the country have a stronger economic fundamentals, sufficient foreign reserves and sound financial and banking system.

Hullo, Is Malaysia located in another planet of the universe? Not in planet earth?

Is this a good time to invest?

The year 2008 is certainly not good for the market.

Beginning of the year 2008, we have inflations, global fuel hike, the spreading of the "Sub-Prime" effect and the sudden increase of prices for all raw materials.

During the second quarter of the year, we have the "Political Tsunami" which hit the market at the heart and destroyed the confident of foreign investors in regards to Malaysia's political stability. Then, we have the disasters including earthquake, hurricane and cyclone etc all over the world which destroyed assets and reduce the liquidity of the market. We also saw the increase of petrol price of RM0.78 from the original RM1.92 to RM2.70 and most of the government's mega projects were put on hold.

During the 3rd quarter of the year, Datuk Seri Anwar Ibrahim makes his way back to Parliament and the rumours of whether the Barisan National Government will be replaced by the Pakatan Rakyat had put all the foreign investors on hold.

Now, we are at the 4th and final quarter of the year, is this a good time to invest?

If we analyze from the market, the petrol price hike seems to come to an end where the price dropped from the historical high of more than USD 140 per barrel to the current less than USD 100 per barrel. The drop seem to mark the end the mother of all inflations (petrol and transportation costs). We also see that the much publicised September 16 change government political strategy came to an end as nothing materialized. The festival seasons are coming and people seems to be more incline to spend.

We also see that share markets are going down to a point which doesn't reflect the true performance and potential of most of the public listed companies.

If we look at real estate, most of the projects are still on-going and there is still no sign of any abandoning of projects in the market unlike the 1997 crisis.

However, if we look at the political scenario, the dominant UMNO party will be holding their election end of this year and whether there will be political changes therein will affect the country tremendously.

We also have to look at the judicial system which remains unchange after the infamous "Lingam video clips" that may affect the confident on the legal system of Malaysia. This may not be good to encourage public confident to throw their money in the market especially the minority share holders.

We must also be aware that the unnecessary arrests made under ISA do have negative effect on people dumping money into the market.

Whereas in America, the "Sub-Prime" effect is still expanding. The forth biggest investment bank in America, the Lechman Brothers is currently in the midst of applying to the Bankruptcy Court in respect of its financial crisis whereas AIG, the well known international insurance companies are currently facing deep financial problems.

Until the end of this year, there are still a lot of risks which at the moment seems to be quite apparent but in the long run, this may be the drop that all investors are looking for -- before the market starts to bounce up again. This may be the golden opportunity that we are looking for.

Investment in the market involved risks, but if we have the extra cash that we can spare on assets that we can hold for a long period of time, this may be a good time to invest before your cash starts to devalue.