Malaysia's Economic Stimulus Plan: What To Expect?

THE second phase of Malaysia's economic stabilisation plan to be unveiled by the Government later today is expected to focus on measures to restore consumers’ and investors’ confidence. The stabilisation plan could see the Government focusing on shorter-term projects with a higher multiplier effects on the economy, and ensure that the country’s banking system remains strong, while funding and credit lines remained open to small businesses and manufacturers. The expected major beneficiaries for these measures could well be the construction and oil & gas sector.

Besides, the Government could introduce new measures to boost consumer spending, perhaps in the form of optional reduction in employees’ contribution to the Employees Provident Fund, similar to what has been done in both 2001 and 2003.

The plan could also include income support programs to protect rural households, especially smallholders in the palm oil and rubber plantations, amid the plunge in related commodities’ prices.

In anticipation of the positive measures from the plan, KLCI rose 4.1% yesterday in active trade.

So, could we expect a sustainable stock market recovery going forward? Well, in my opinion, much will depend on the state of affairs and key performance data released from U.S., and how the rest of the world respond. One of the key data to watch out for this week is the employment data to be released on Friday. Besides, whether related or unrelated, the world will be watching over the choice of American's next President in tonight's U.S. Presidential election!