Factors that Influenced the Malaysian Stock Market Index

The stock market prices and value vary day to day as a result of market forces. This means that stocks and shares prices change as result of supply and demand of goods and services. The stock market influences the financial decision making of companies. Therefore, it is important to follow said shares as well as others that might affect stocks of interest. Price vary accordingly with demand and supply, that is, if there is a higher demand then prices increases, whereas, if supply is higher than demand, stock prices decreases.

A macroeconomic item (or factor) may be generally categorized as anything that influences the direction of a particular large-scale market (Investopedia, n.d.). For this analysis, the macroeco-nomic factor shall be interest rate (i.e. discount rate). The following sections that scrutinize the implications of changes to interest rates to the Company’s Present Value* (PV), based on its Free Cash Flows* (FCF); discuss the impact of an issue within the overall stock market on the Com-pany’s stock valuation numbers, other financial variables, or its overall portfolio management; and analyze and discuss the impact of an external factor to the Company.

Since the great depression, the global economy has been facing a number of ups and downs. With the markets being built rapidly and crashing down in the other instant, elements that actually make up the skeleton of the international economy seems to have correlated variables. These variables seems to have been correlated with each other in numerous combinations and their correlation is what makes the market fluctuate. The volatility of the global market becomes more apparent in times of recession when the correlation between variables like stocks, bonds, US dollar, Euro, gold and oil becomes more apparent. Therefore, it is of paramount importance that these correlated variables should be studied with a very keen eye. Since the link between currencies, commodities, stocks an bonds runs very deep, change in any one of them seems to have a profound impact on the rest hence changing the face of the market.

With the arising of the capital market in the United Kingdom in the 18th century, the stock market becomes an essential approach for investors to invest. The price of stock fluctuating enormously, there are usually two kinds of invest in the stock market: long-run invest and short –run invest. In order to conduct a long-time invest more rationally, information about the company such as its operating situation, financial situation are required to judge if it is worthwhile to invest. As for short-time investment, stock prices are more dynamic and susceptible to quick change. There exist more unpredicted factors such as other investors’ behavior on this stock, the influence of social media, the social influence and etc. Markov Chain is a stochastic model describing a sequence of possible events in which the probability of each event depends only on the state attained in the previous event (Markov Chain, n.d.). The Fluctuation of Stock Price can be regarded as Markov Process (Vasanthi, 2011), there are a lot of researches in this field and the prediction model had already well established. According to the situation of different countries these models are adjusted when applied in different countries and different market.

The analysis of this paper will derive the validity of the Fama and French (FF) model and the efficiency of the Capital Asset Pricing Model (CAPM). The comparison of the Fama and French Model and CAPM (Sharpe, 1964 & Lintner, 1965) uses real time data of stock market to practise its efficacy. The implication of the function in realistic conditions would justify the utility of the CAPM theory. The theory suggests that the expected return demanded by investors on a risky asset depends on the risk-free rate of interest, the expected return on the market portfolio, the variance of the return on the market portfolio, and

In the previous chapter, the researcher has covered some basic information about the stock market. Hence, in this chapter, the current situation that the Chinese stock market is suffering from and factors contributing towards this crisis will be analysed. At the end of this chapter, readers will have an idea how a market which was stable for many years could become unsteady within such a short period of time.

The aim of this study is to investigate the financial momentum effect on pricing of stocks in Borsa Istanbul 30 index(BIST30). The sample for this study is monthly data from April 2013 to March 2016. Momentum effect is tested by using Fama-French Three Factor Model. The data is classified into three categories being the top 30%, average 40% and lowest 30%, and the top 30% and the bottom 30% are used for calculations.

The belief of macroeconomic variables influencing the stock market has been a highly debated discussion for the past decades. There has been no clear conclusion whether or not macroeconomic variables impact the stock market or inversely. The importance of this study have been increasingly critical as not only stock agents find the critical importance but the government to implement macroeconomic policy; the solid finding of this relation will enable policy makers to efficiently and effectively control the economy as well as the capital market. We aim to cover some relationship between macroeconomic indicators, including consumption, interest rate unemployment rate and inflation rate, and with stock price.

By analyzed the link between financial asset prices and monetary policy is highly important to achieve a better understanding in the transmission mechanism of monetary policy, as the changes in financial asset prices is a main role in several channels. We contribute empirical confirmation data on the relationship between monetary policy and the financial stock market. In the economy, stock prices are among the most strictly monitored asset prices in the market and stock prices are also frequently seen as being strongly sensitive to economic situation. Bernanke and Kuttner (2005) stated that some researchers view the stock market as a separate source of macroeconomic volatility to which governmental may wish to acknowledge. Stock prices often known as volatility and boom-bust cycles and leading to the interest about preserved deviations from their fundamental values. Hence, the authorize quantitatively the continuation of a stock market respond to the monetary policy changes will not only be significantly related to the study of the stock market purpose but will also assign to a further research and understanding of the element of monetary policy and further discussion of the economic impact on stock market.

In figure 3, Cho and Rhee (2014) show the composition of capital flows for all 10 Asian Countries excluding Hong Kong and Singapore. While the FDI was quiet stable, the portfolio investment part decreased from 2.2% of GDP in 2007 to -2.9% in 2008. Also, the other investment part of capital inflows, like bank loans, declined since 2007; nevertheless, it rebounded over than the pre-crisis level and became the major source of capital inflows after GFC.

In the real financial cycle, there is an important relationship between the monetary policy and stock market. In different stock market, the effectiveness of monetary policy is different. In the bear stock market period, the monetary policy is more effective than in bull stock market periods. This article analysis how does the monetary policy effect the stock market in the Association of Southeast Asian Nations “ASEAN-5” economies (Malaysia, Singapore, Indonesia, the Philippines and Thailand). The economists use Markov switching models and the rule-based nonparametric approach with data from Jan 1991 to Dec 2011. As a result in the long-run, the monetary policy has a negative and statistically significant on real output in both market periods (bull and bear). In the short run, there is no statistically significant relationship between monetary policy and real output.

Numerous studies have found that a negative relationship exists between inflation and real stock return without explanation about the relationship, that is known as “a stock return – inflation puzzle” (Ghafoor et al. 2014, p.149). The relationship between stock prices and inflation still interesting for researchers due to its puzzling result between developed and developing countries. The negative relationship between stock return and inflation was found in the US, South Africa, Brazil, Bahrain, Jordan, Saudi Arabia, while positive relationship was found in Malaysia, Turkey, Canada and Namibia (Chandran et al. 2011, pp.2-7). Adrangi et al. summarise the relationship into two propositions. The first proposition is the negative relationship between inflation and real economic activity, while the other proposition is the direct relation of stock returns to the real economic activity. He investigated those propositions on Chile and Peru, where there was a negative relationship between returns and unexpected inflation, while a

The East Asian Crisis started in 1997 due to a buildup of a large amounts of capital in the early 1990s inflows not due to foreign direct investments but because of bank loans and portfolios capitals which had reversed and led to great amount of macroeconomic pressures on the economie of east asian countries affected, leading to an appreciation of exchange rate, high interest rates, financial instability and stress.(Dornbusch, 2001). In reviewing Malaysia, we have to

There was a significant changing at the end of Q4 as the rates were decreased slightly from 0.38%, 0.5% and 0.63% to 0.31%, 0.44%, and 0.56% respectively. The interbank rates for the year 2010 were continuing decreased. It happened because of Singapore economic growth was 14.5% and the inflation rate was 0.6% (Monetary Authority of Singapore 2012).

In my report as requested I picked one component of MSM30 Index sample. I have chosen to talk about Bank Muscat Share (BKMB) to analyze its performance