Suqiu And The Bearers Of Bad Tidings
The finance minister, Tun Daim
Zainuddin, is confident that with the "resolution" of the Suqiu
proposals -- the word means "proposals", not demands, as UMNO thinks
it is -- the stock market has no way but to go up. "It's the
beginning ... it'll pick up if you all (the Press) don't come up with
negative
statements." Foreign investors should now know the country is
stable, which faces no problems, and would lead to greater confidence. If
only it were that simple!
Did the Suqiu proposals
make the country unstable? How? If it did, no one seems to have noticed
it. If it had, would not the cabinet ministers have ranted and raved well
before that? Until Tun Daim said so, no one in the government even
suggested it. The agreement between the Suqiu committee and UMNO Youth
resolves nothing, only postpones the conflict to a later date. Why is the agreement
with UMNO Youth and not with the National Front or with UMNO or MCA? The agreement carefully skirts over the
contentious issues, and appears in the end
to be a storm in
a teacup.
Is it? The
Suqiu proposals were discussed in the National Economic Consultative Council
(NECC) II. The Suqiu representative who signed the pact with UMNO Youth
holds a high position in NECC II. Was there male fide in releasing the
proposals when it was? How did what was discussed in camera come up to be
the political hot potato it became? That it was UMNO Youth, not the National
Front, MCA or UMNO that reached an agreement means it is still a contentious issue.
Where is the MCA in all this? Should it not have been involved in the
resolution, if indeed there is a resolution? Or is UMNO telling the MCA
that UMNO Youth is a better body to discuss Chinese issues than the Chinese
party in the National Front?
So, however you
look at it, the Suqiu problem remains unresolved. But the Kuala Lumpur
Stock Exchange is lacklustre not because of the Suqiu proposals. That has
to do with a general feeling amongst investors, local and foreign, that they
get a raw deal. The MAS bailout, which preceded several other bailouts,
including of Renong and UEM, is the financial straw that broke the camel's
back. It proved beyond doubt that the government would bail out its cronies
come what may, and that changes the game of investment in Malaysia.
This is not written about in the local newspapers, but
any foreign investor
and, indeed, the local, is made aware of this, especially if he is a
substantial investor, by his stockbroker. I would add that because we do
not discuss, in our daily newspapers and media, the reality that is now passed
by word of mouth, we stumble -- and badly. Those who should be reporting
this do not. That is the fundamental flaw in our media. It is so
frightened of being second-guessed by politicians that it takes the line of least
resistance, and fail. The market is always better informed than the best
newspapers in the world. In Malaysia, where the media provides figleafs
to cover the bad news, it takes a life of its own.
Now for the reality: the KLSE is in shell-shock.
Besides the MAS bailout,
which questioned the government's fiscal and financial policies, there is the
Lunas typhoon and the Malay unity fiasco. The Lunas by-election upset the government's
political equilibrium, and the Malay unity fiasco, to which must be added the
Suqiu proposals since one impetus for the Malay unity discussions is to put the Chinese
in there place, the racial equilibrium.
On all
three counts, therefore, the KLSE is weighted down. Long term investors
prepared to live with racial and political problems drew the line at the MAS
bailout. There is just no interest. The KLCI index is pushed up
literally within the last five minutes of trading, when a sudden surge in
the stock prices of Maybank, Tenaga, Telekom (weighted shares in the KLCI index
of 100 shares) keept it buoyant. But the overall weakness is all too clear:
the turnover declines day by day. What the Suqiu affair did was to add to
a litany of negative conditions in the KLSE. The foreign investor has
moved out, is unlikely to return not because of what I write today but because
its own researchers, several of whom live in Kuala Lumpur, find too many things
wrong with what happens at the KLSE. They would say nice things in
public, but their private reports -- I have seen a few --
pull few punches.
There is no reason why anyone should come to this
market except to make money.
There is no imperative of "social contracts" that investors who part
with their money on the KLSE should abide by. They are more interested in making
sure they get a fair return for their investment. They bitch and they grumble
when the odds turn against them, but if they are above board and done with the
best of intentions for the market as a whole, few would go beyond it.
But if it is not, as now, they would desert it in droves, and not come back
because the finance minister says conditions have improved with the Suqiu
settlement. Especially, when the self-same finance minister also controls
about two-thirds, directly or indirectly, of the counters on the KLSE. Be
prepared for more shocks.
M.G.G. Pillai
pillai@mgg.pc.my
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