The impact of the 14GE is expected to be temporary. The underlying direction of the KLSE will still be determined by fundamental factors such as inflation rate, interest rate, exchange rate, and corporate earnings.
At the top of the watch list is Malaysia’s inflation rate. There are many signs pointing to a rising trend of inflation. Oil price has been on the rise, economic growth has been strong, the unemployment rate is the lowest in 2 years. Nominal wages may increase at a faster pace in 2018. With the Federal Reserve in a tightening mode, Bank Negara may have raise interest rate again. For more on Malaysia’s economic outlook and the trend of the Ringgit’s exchange rate, please see the analysis in this week’s KLSE Conclusion.