The Russian Invasion Of Ukraine and the resulting geo-political tensions would not have any significant impact on the Malaysian economy in the short-term instead might result in an increase in the price of commodities such as crude oil that would bode well for the economy, economists chimed in to say.
They add that Malaysia was a net exporter of oil and the price of crude oil was already firming up coupled with the price of commodities all point to the direction of bolstering the economy but the prolonged crisis would invariable affect Malaysia.
Dr Yeah Kim Leng of t Business Sunway University School of Business said that the heightened tension in the region would prop the price of crude oil to currently US100 which bodes well for the economy as Malaysia was a net exporter of oil. “A US$1 increase in the price of crude oil would result in additional revenues of RM300 million and the present increase in the price of oil could rake in additional RM8 to RM 9 billion to the Malaysian coffers,” he said.
However, he said that if the present crisis lingers for more than two quarters., it will have a dampening effect on the global economy and Malaysia would not be spared from the ill effects.
He said that the continued disruption in the global chain because of the war and the sanctions being imposed on Russia could result in an unusual spike in the price of commodities that would affect global demand and thus affects Malaysian exports.
“We are vulnerable to the vagaries of the world economy and the instability around us and if the economies of our exporting countries are affected, this would certainly affect their ability to buy our goods,” he said.
He said that a solution to the crisis would be found soonest as the lingering crisis in Ukraine would only exacerbate the present economic woes. “We are just reeling out of health crisis and now the present crisis would add to our problems,” he said.
SERC executive director, Lee Heng Guie said that he see’s no impact in the short term but adds that if the crisis were to linger, it could add to the already inflationary pressures mounting on the world economy that was reeling from the pandemic.
He said that Ukraine and Russia were the largest exporters of Wheat and Corn that were used in the Poultry industry, and this would propel the prices of poultry products, but Malaysia needs to be vigilant if the crisis were to linger for a longer period.
He added that the financial markets would have to brace for greater volatility in the coming weeks although fund managers and analysts have said that volatility would provide opportunities for bargain-hunters.
After weeks of accusations and denials, Russian armed forces crossed the border into separatist-held parts of eastern Ukraine, supported by airstrikes and heavy artillery.
Commodity prices have spiked while bond markets rallied. Investors will need to watch the reaction of the EU and NATO, considering Europe’s dependence on Russian energy is President Putin’s key leverage
RHB Research said that the ongoing market volatility could be an opportunity to accumulate and in the near-term expect a shift to defensive sectors – consumer, healthcare, utilities, basic materials REITs, and resilient high dividend-yielding stocks
Malaysia has limited trade and business ties to Russia and Ukraine and offers a partial short-term hedge to investors given the importance of oil & gas and CPO to the domestic economy. Surging aluminium prices bode well for Press Metal as the supply deficit worsens.
The research house said that its 2022 strategy report that highlighted investment themes that include a trading-oriented market, rotation into value sectors on the back of a looming recovery, and centered around a core defensive posture, has played out relatively well thus far.
