What Happen to Stock Market in Year 2023?

1. Quick Comparison: Stock Market Performance of Malaysia and US

FTSE Bursa Malaysia KLCI: KLCI stands for Kuala Lumpur Composite Index, which is the main stock market index of Bursa Malaysia. The KLCI is made up of the 30 largest companies listed on the Bursa Malaysia based on market capitalization and liquidity and it is a widely used benchmark for the performance of Malaysia stock market

Dow Jones Industrial Average ("DJI"): One of the most widely used stock market indices in the world and a benchmark for the performance of the US stock market. It is a price-weighted index that tracks the performance of 30 large publicly traded companies in the US.

KLCI recorded straight 6 months losses in 1H2023. It had its worst month in Mar 2023 and best month in Jul 2023, which both are 1 month later than DJI. DJI had its worst month in Feb 2023 and best month in Jun 2023.

Despite both KLCI and DJI have quite a different monthly performance, but they both shared a similar trend in year 2023:

Note: Green line for KLCI while blue line for DJI  Source: Tradingview

2) Important events in year 2023

1) World Bank cut global economic growth

In Jan 2023, World Bank slashed its 2023 growth forecasts to only 1.7% from 3% which the organization earlier projected in Jun 2022. The global GDP growth projection of 1.7% in 2023 will the slowest pace outside the 2009 and 2020 recessions since 1993. World Bank warns global economy could tip into recession in 2023 the impact of central bank rate hikes intensifies, Russia's war in Ukraine continues, and the world's major economic engines sputter.

2) China end zero covid policy and border re-open

China officially ended its zero Covid 19 policy in Jan 2023 and reopened its borders to foreign tourists in Mar 2023. The China government longstanding zero covid strategy had been burden the country's economy with heavy cost, caused China’s economy grew by just 3% in 2022. International Monetary Fund ("IMF") pointed that Asia poised to drive global economic growth as boosted by China’s reopening.

3) US interest rate hike

Based on the lastest Oct 2023 US Federal Reserve's meeting minutes, Federal Open Market Committee members still worry that inflation could be stubborn or move higher, and that more may need to be done. The minutes gave no indication that members even discussed when they might start lowering rates. At the least, they said policy will need to stay “restrictive” until data shows inflation on a convincing trek back to the central bank’s 2% goal. The Federal Reserve's next interest rate decision comes on 13 Dec 2023, and rates are likely to remain unchanged.

4) Credit Suisse Collapse

Credit Suisse, the second-largest bank in Switzerland, collapsed in Mar 2023 and was bought by rival UBS for 3 billion CHF (about $3.3 billion USD). Credit Suisse faced numerous scandals in recent years, including a spying scandal, the collapse of two investment funds in which the bank was heavily involved, and a rotating group of executives, eventually led to the collapse. Immediately prior to Credit Suisse’s collapse, two U.S. banks—Silicon Valley Bank and Signature Bank—also collapsed, sending shock waves through the global financial system.

5) US debt celling worries

In June 2023, US President Joe Biden finally signed a bill that suspends the government's $31.4 trillion debt ceiling, which had been hit in Jan 2023, averting what would have been a first-ever default in US history. If the government runs out of funds, the Treasury would have to either default on payments to bondholders or immediately curtail payment of funds owed to various companies and individuals that had been mandated but not fully funded by Congress. Both situations would be expected to result in a global economic meltdown.

6) Malaysia six state election and Budget 2024

Malaysia six state election, which took place in Aug 2023, was the first electoral test for Anwar's unity government and the cooperation of two major coalitions -- the Anwar-led Pakatan Harapan (PH) and the Barisan Nasional (BN).

The state elections determined the future of the cooperation between PH and BN, two political forces that have a history of antagonism but have now formed a unity government.

The result of six state election came out with Anwar’s Unity Government retained the three states it previously held, but lost seats in each of them and was nearly wiped out in the remaining three Malay-dominant states, which CNBC viewed as a "setback" for Anwar's ruling government.

In Oct 2023, Malaysian Prime Minister Anwar Ibrahim tabled the country’s largest-ever budget, as he made a further push for a shift from the current blanket subsidies to a more targeted approach aimed at giving more to the truly needy.

Biggest spotlights of the Budget 2024 included an increase to the Sales and Services Tax (SST) from 6% to 8% and targeted subsidies.

7) US credit rating downgrade

Rating agency Fitch Ratings in Aug 2023 downgraded the US government's top credit rating, citing fiscal deterioration over the next 3 years and a steady deterioration in governance over the past two decades, marking only the second time in history that the US has been stripped off its top-tier credit rating.

Fitch's move had limited and temporary direct impact on the US economy and stock markets, though short-term fluctuations in the dollar's exchange rates and global markets are expected.

8) China's Country Garden debt crisis

Country Garden, one of China's biggest property developers, recorded USD6.7 billion loss for the 1H2023, became the latest real estate giant to warn that it could default on its debts. Country Garden debt crisis further deepened the worries of China's property market, which came after Evergrande, another significant property giant defaulted 2 years ago.

9) Israel - Hamas conflict

Hamas terrorists launched an unprecedented surprise attack on Israel and infiltrated the country by air, land and sea in Oct 2023. the region stands on high alert amid fears of a wider conflict and thousands dead on both sides of the Israel-Gaza border. The war had rattled global financial markets, sending stocks tumbling, the Israeli shekel sliding and oil prices climbing.