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KLCI is now only some 80 points away from
its all time high of 1,314…
(Kuala Lumpur, Wednesday) : "KLCI is now only some 80 points away from its all time high of 1,314… and surpassing this would seem to be a breeze"
The above comment came from a local stock market specialist. But he cautions Malaysians to be more circumspect rather than exploiting the current market rally and be patting ourselves on the back.
He commented that "for the politicians and policymakers, stock market rally can be very ego boasting (when the market rallies, they would claim all the credits but when the market drops, they would pass the buck to people like George Soros)."
"Why? A stock market rally seems to be telling the whole world that everything is fine with its economy and that the government has adopted the right policies".
"Generally speaking, this is true but the stock market rallies for all kinds of reasons and some times, the market rally can be self-deluding or what is worse, the rally generates complacency among the politicians and policymakers and painful but necessary decisions are not made or postponed until it is too late. Then, the market crashes. The Great Asian Crisis in 1997/98 is a classic example of how rallies in stock markets can camouflage structural problems until it is too late and the day of reckoning comes in full blast".
The specialist opines that the way to manage a country or company is in a sense, very simple and commonsensical. " When things are fine and dandy, do not become overconfident; instead get ready for the storms ahead. This way, when the storms come, which eventually they will, one will not be so wounded or so devastated that one cannot recover forever or that the recovery takes such a long time to come. The storms, like the bright sunny days, will eventually pass and the whole cycle repeats. Take advantage of the storms and and use them to ensure that the eventual bright sunny days do not get to be so blinding".
The essence of this specialist criticisms was that the government under the leadership of the former prime minister implemented very short-term measures that greatly reduced or attempted to reduce the pain of the Great Asian Crisis. "In so doing, the government ignored the the adverse long-term implications of its actions and decisions. Instead of using the Great Asian Crisis to implement serious structural reforms, the government went for quickies. And we all know what quickies are like. Instead of using the crisis to prepare Malaysia for more and greater challenges, it went round blaming others for its follies."
" In many respects, Malaysia has paid a heavy price for this and is still paying the price for ignoring long-term problems. By shielding Malaysia from the harsh and painful realities of market economy, we now have a Malaysian workforce that is hopelessly complacent and in the process, losing out to the many fast rising regional competitors."
With the KLCI rallying, the specialist is deeply worried that our world-class complacency would become universe-class. "As the KLCI rallies, the politicians and policymakers would surely sit back and pat themselves for a job well done . Such self-prasing and complacency can be very infectious and soon Malaysians from all walks of life would fall into the same mental trap. Then, when the next crisis hits us, totally unprepared again. A few rounds of such a crisis, very quickly Malaysia would be in an economic quicksand".
The specialist's analysis is directed at the politicians and polymakers and Malaysians from all walks. Do not be seduced by the current market rally into thinking that we are on our way to developed status. Do not postpone the major structural reforms needed.