Minimal impact on M'sia from US govt shutdown

by **Cals** Wed 02 Oct 2013, 18:38

Published: Wednesday October 2, 2013 MYT 12:00:00 AM
Updated: Wednesday October 2, 2013 MYT 1:18:52 PM
Minimal impact on M'sia from US govt shutdown
BY YVONNE TAN
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Bursa Malaysia finished yesterday 0.02% higher at 1,769 poin ts. — AFP
PETALING JAYA: Malaysia’s economy and l stock market are not expected to suffer any significant impact from the partial shutdown of the US government, as long as it is not long-drawn.
RAM Holdings Bhd chief economist Dr Yeah Kim Leng said that while there would be a “slightly negative knock-on effect”, it would mostly affect investors’ sentiment more than anything else.
“If the shutdown is prolonged, this could result in slower economic growth, which some estimate could shave a quarter of a percentage point from the US gross domestic product for this year.
“That would probably have a slight effect on Malaysia’s economy – on our exports specifically,” Yeah said.
Alliance Research economist Manokaran Mottain is slightly more optimistic, saying the entire shutdown issue would be resolved very soon, as the US could not afford to prolong it.
“As it is, we are not expecting any impact on markets,” he said.
Bursa Malaysia finished yesterday 0.02% higher at 1,769 points.
The FTSE Bursa Malaysia KL Composite Index, together with a few key regional markets, bucked the overnight performance of the Dow Jones, which finished lower after the partial shutdown.
While media reports quoted US President Barack Obama as saying a “shutdown would have a very real economic impact on real people, right away”, US market analysts mostly are not expecting any significant damage to the US economy unless it lasts more than a few days.
The US shutdown is the first since 1995, which lasted for three weeks going into 1996 and cost the US federal government more than US$1bil (RM3.23bil) in costs, according to reports.
Back home, market analysts are thinking more about the impact on the stock market of the impending quantitative easing (QE) by the US.
“The longer the US delays its QE tapering, the more painful would be the hangover, which combined with the risk of its fiscal brinkmanship and weak fundamentals of some emerging economies, suggest that investors in emerging markets may have to live with large swings in short-term capital for a while longer,” RHB Research said in a report yesterday.