Views from Malaysian CEOS on the impact of Iraq war

Nik Hassan Md Amin 

Executive vice-president 

(corporate banking) 

Bumiputra-Commerce Bank Bhd 


A prolonged war will be disastrous for the world economy, which is already very fragile now. We believe that the war will not drag on long enough to plunge the global economy into a depression and for oil prices to spiral rapidly. Nevertheless, the war and its aftermath fears are likely to impact on our economic growth for at least two quarters before stabilising in the final quarter of 2003. 

If the war turns out to be a short and successful one, as is generally expected, then we do not foresee a significant negative impact on the Malaysian economy, although gro-wth is likely to be lower than our earlier expectations of 4% to 4.5%.  

However, should the war turn out to be a severe and protracted one, the economy may be hit by the slowdown in exports, investments and tourism and this could have a long term repercussions on our economy. This could be further ag-gravated if the invasion leads on to the onset of terrorism activities. Concerns over security will definitely affect travelling and international trade may also be hampered as security measures are tightened and higher insurance and freight costs are imposed. In such a scenario, growth for 2003 may be flat and growth for 2004 may be modest. 

Bank Negara may cut the intervention rate by as much as 100 bps and an additional off-budget stimulus would also be implemented, pushing the government's current year fiscal deficit higher than the current 3.9%. 


Datuk Liew Kee Sin 

Group managing director 

SP Setia Bhd 


IF it is a short war, there will be no impact at all. Morally it is wrong to kill people but from the business point of view, the war will remove a lot of uncertainty. 

If it is a long war, the first impact would be on oil prices. If the price of oil rises, then the whole world would be affected.  

Luckily for Malaysia, we have palm oil, which is doing well, and petroleum. The impact on Malaysia is minimal and those commodities will see us through. 

When the war is over, the United States is obligated to rebuild Iraq. Hopefully that will create a lot of activity around the world, thereby increasing consumption.  

Should the US economy boom after the war, just like it did after the first Gulf War, the economy of the whole world will improve. 

The overall impact, once the war is over, will be more positive than negative. 

We also believe that once the war is over, our sales will pick up tremendously. 

As far as SP Setia is concerned, war or no war, we have to be careful with our cost structure. It is the cost structure that determines whether you make or lose money. 

Francis Pereira 

Vice-president (corporate affairs)  

Titan Petrochemical & Polymers Bhd 


THE threat of war has over the past months sent oil prices up sharply, resulting in higher feedstock prices for petrochemical companies across the globe, including Titan. 

As we source a good part of our raw materials from the Middle East, the volatility in raw material prices has also caused difficulties for our production planners. 

It's a challenging time for Titan but we are confident of overcoming it as we have drawn up plans and strategies to address those issues. 

One strategy is to diversify our sources of supply in order to reduce the reliance on the Middle East. 

There could be a disruption to oil supply should the conflict between US and Iraq spread into other oil-rich neighbouring countries in the region.  

But from what we have seen from the 1991 Gulf War, such a possibility (of spreading conflict) is rather limited.  


Datuk Wong Siew Hai 


Intel worldwide 

testing and assembly  


BUSINESS would proceed as usual without any slowdown in production or any lay-offs.  

It is too early to comment on the effects of a prolonged war.  

We are continuing our work with the po-lice on security matters. 


Datuk Wong Siew Hai 


Intel worldwide 

testing and assembly  


BUSINESS would proceed as usual without any slowdown in production or any lay-offs.  

It is too early to comment on the effects of a prolonged war.  

We are continuing our work with the po-lice on security matters. 


Tan Sri Khalid Ibrahim 

Group chief executive 

Kumpulan Guthrie Bhd  


THE war in Iraq has certainly heightened economic risks but the palm oil industry is unlikely to be affected significantly. Nonetheless, the industry will probably see some additional fluctuation in prices in the near term but the risks have already been factored in, and palm oil is just as exposed as other tradable commodities.  

Besides, the additional risks are seen mostly on the logistical aspects, the additional costs of shipment and delivery to areas of increased risks.  

However, these risks are limited and not seen to have significant bearing on the major destinations of palm oil such as China, India and Pakistan.  

Recent indicators suggest that demand for edible oils such as palm oil is expected to remain firm going forward. 

In fact, the views from the recently concluded MDEX con-erence pointed to sustainable palm oil prices this year, projecting a benign range of RM1,300 to RM1,500 per tonne.  


Martin Bek-Nielsen 

Executive director  

(finance and marketing) 

United Plantations Bhd 


AS a palm oil producer, we hope that the war will not be prolonged as it will create uncertainties in the market and has a dampening effect on the commodity price.  

Jitters over the war, which started since last September, had somewhat taken its toll on the price of crude palm oil (CPO) over the past month, resulting in a 10% to 15% drop so far.  

In fact, when the war broke yesterday, the CPO Futures at Malaysia Derivatives Exchange fell from an early high of RM1,489 per tonne to a low of RM1,462 per tonne within a few minutes.  

The US-led war on Iraq is more “intense” at attracting global interests compared with the Afghanis-tan war. However, I foresee this war will be resolved quickly within a month. Once the war ends, I expect the price of CPO will bounce back to better levels of RM1,700 by June-July based on the current low stocks and stagnant productions. 


Uday Jayaram  

Senior Analyst 

ING Baring 

WE expect a post-war rally on the assumption that the war is going to be short. We believe high beta stocks are the best way to ride this impending rally. This is also time for investors who have a longer investment horizon to pick up fundamental stocks that may have been sold down recently. 

The Malaysian market may lag other regional markets as it is a low beta market but that would not exclude it from being a part of an Asia-wide rally. The KLSE is more expensive compared to its peers Thailand and Indonesia but we have steady economic growth, a broader spectrum of sectors and greater resilience to external shocks. 


Lim Beng Leong 

Head of research  

Thong & Kay Hian Securities  

We expect a powerful rebound in the near term, which may send the KLSE CI to 680-700 points. We have been recommending clients to buy as we do not expect the market to dip when the war starts. 

The inflow of foreign funds may not matter much to the rebound because the ample liquidity in the economy should be enough to fuel the uptrend. The local institutional investors have strong buying power to drive the market forward. 

We like banking stocks such as AMMB Holdings and Commerce Asset-Holding Bhd, chipmaker Unisem and MPI and also PPB Oil Palm Bhd and Maxis Communications Bhd. 


Pankaj Kumar 

Assistant general manager  

OSK Research  

We are advising investors to stay on the sidelines and to monitor the latest development in the war zone before committing to any position in the market.  

There is no urgency to chase stocks at the moment. It's true that an uncertainty has been removed when the war started but the duration of the war remains unknown. There are also other variables such as the counter attack by Iraq and the possibility of terrorist attacks. 


Franklin Tan 

Head of research 

OCBC Research 

According to history, stock markets would surge before and after a war. We are recommending investors to buy. The upside potential is expected to be 20% to 25%.  

The KLSE has been oversold. There should be a “relief rally” to correct the oversold position.  

But the rebound may not be as strong as the rally during the Gulf War previously because there was a wider approval in the international community 12 years ago compared with the present US-led attack on Iraq. Besides there are also concerns of terrorist attacks in other parts of the world. 

Hence, investors should also prepare to see some disappointments, as the rally may not be a smooth one. We advise clients to trade the cycle. We recommend high beta stocks such as Unisem Bhd, MPI Bhd, RHB Capital Bhd. We also like Celcom Bhd and Malaysia Airlines.  


Ang Kok Heng 

Senior general manager  

TA Asset Management  

The war is likely to be well contained in Iraq and a short one – two to three weeks. I am waiting to buy on share price weakness. 

The war is not expected to make much of a dent on the economy (on assumption of a short war).  

The KLSE has been behaving “coolly” so far although the other markets have gone up substantially mainly because of the low foreign shareholding in the local market.  

The economic fundamentals will take a centre-stage to dictate the market direction after the war. We are quite concerned about the health of the US economy currently.  

Peter Tai 

Dealing Manager 

JF-Apex Securities 


The start of the long awaited US-Iraq war has somewhat removed some element of uncertainty, resulting in a better stock market performance today (Thursday). This is considered a technical rebound and is expected.  

Going forward, investors will be keeping a close eye on any signs of terrorist retaliation that might include the use of bio-chemical weapons.  

In view of this uncertainty, the CI's rise is likely to be capped at 650-level in the short term, while the benchmark index will be strongly supported at 600-level. 


Baljeet Grewal 


Aseambankers Malaysia Bhd 


Acting Prime Minister Datuk Seri Abdullah Ahmad Badawi's statement that the government will actively manage the country's economy, financial systems and capital markets to ensure that they remain stable and strong is a prudent and timely move to quell nervousness and anxiety in financial markets domestically.  

We also expect the government to announce the impending fiscal pump-priming package a little sooner than anticipated. 

At the onset of war, the benchmark Brent crude slipped 6% to US$28 per barrel as the “uncertainty'' surrounding the Iraqi conflict clears. Nevertheless, this drop may only be temporary and the general consensus is that oil prices will accelerate upwards given the supply implications. 

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