YEAR 2002 was clearly one of many misses for the local stock market. For the most part of the year, escalating tension in the Middle East, the threat of a double-dip recession in the US and a softening global economy was like a thorn in the side of most stock markets around the world, including Malaysia.
And these concerns continue to figure uppermost in most pundits' list on how the stock market is expected to fare in 2003.
The early signals in 2002, however, were rather encouraging. The key barometer, the Kuala Lumpur Composite Index (CI), from a low of 682.83 points on the first trading day of this year gained over 18 per cent in just over four months to peak at 808.07 points on April 23.
By this time, foreign funds had come scurrying back to Malaysia and market strategists were seen scrambling to adjust their earlier forecasts. As the index trended higher, so did the year-end predictions, with some pundits projecting that the CI would end the year between 930 and 1,000 points.
With the general investing environment looking supportive, the first half of the year saw a deluge of initial public offerings including that of telecommunications heavyweight Maxis Communications Bhd and toll operator Plus Expressways Bhd.
But just as observers were digging in their heels in preparation for the prolonged rally, mounting concerns over the direction of the US economy and the slew of corporate scandals unearthed there pulled the brakes on any more upward movement on the local bourse. Investors the world over were significantly spooked and the local market was not spared.
Come the end of the second quarter, all hopes for a rally fizzled out and were replaced instead by worries over several events unfolding in the domestic front.
The shocking resignation announcement by Prime Minister Datuk Seri Dr. Mahathir Mohamad in June left a short-term negative impact on investor sentiment. But the market soon after recovered some of the losses that had started in the first few days after the announcement.
As if there weren’t already an abundance of bad news in the market, concerns over the possibility of a US-led military attack against Iraq and the series of bombings in Bali in Indonesia and Zamboanga in the Philippines further chipped away investors’ confidence.
By this time, all notions that year 2002 would be a much better one for the investing fraternity had been put to rest. The central bank’s announcement that the country’s gross domestic product had expanded by 5.6 per cent in the third quarter failed to put paid to the listless trading activity on the Kuala Lumpur Stock Exchange KLSE). The CI hit a year low of 614 points on Dec 3.
Even the traditional year-end window dressing has been rather subdued this year. Analysts blame the current US-Iraq war standoff as the latest cause for the pull back of foreign funds from Malaysia.
The CI closed 2002 at 646 points, down 50 points from its Dec 31, 2001 close of 696 points.