M'sia not expected to suffer significantly due to partial shutdown of US Govt

M'sia not expected to suffer significantly due to partial shutdown of US Govt

PETALING JAYA - Malaysia's economy and the local stock market are not expected to suffer any significant impact from the partial shutdown of the US government, so 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 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 United States 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 per cent 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 United States.

"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.

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