Talk of new Malaysia taxes prompts investor selloff

Talk of new Malaysia taxes prompts investor selloff

KUALA LUMPUR,. Expectations that new taxes could be announced during Budget 2019 has caused investors to withdraw from the local stock market.

Bloomberg reported that Prime Minister Tun Dr Mahathir Mohamad’s hints of new forms of taxation in remarks on Tuesday has led investors to be accept that the post-election volatility may now be extended.

The report outlined how volatility in the local stock market leaped to its highest since July this year, after the FTSE Bursa Malaysia KLCI Index dropped 2.2 per cent a day after Dr Mahathir’s remarks

Ivy Ng, head of Malaysia research from CIMB Investment Bank, said the volatility was not unusual.

“There’s some uncertainty around policy changes from the government that can lead the market to be volatile in the near term.

“These are not new as the government has given the same guidance before,” she was quoted saying.

However, Malaysia research head at AllianceDBS Research, Bernard Ching, said investors came away unenthused following a meeting between the government and the investment community.

He said the implied message was that the Budget will not contain “goodies”.

“It’s unclear how low the market can go. All I can say is that the market will enter a period of uncertainty until the budget 2019 announcement,” Ching was quoted in the report.

Dr Mahathir suggested on Tuesday that new taxes may be needed to address the debt amassed by the previous administration.

Conceding this would be unpopular, he said the only other viable option would be to sell off the nation’s assets.

Tony Pua, political secretary to Finance Minister Lim Guan Eng, said the volatility was just a readjustment to the new norm.

“(The stock market is) adjusting and reprioritising. Yesterday’s plunge is temporary and the market will recover soon,” Pua was quoted saying in the report.

Other industry players, such as Fortress Capital Asset Management Sdn Bhd’s director Geoffrey Ng, who was quoted saying investors would now take the opportunity to stay cautious in the market.

“Less spending from the government and higher taxes from the private sector is getting discounted in the markets. Some investors will take money off the table and some will delay fresh investments,” Ng said in the report.