KUALA LUMPUR, Dec 5 (Bernama) -- Bursa Malaysia closed lower on Friday amid mixed regional market performance as investors turned cautious over a possible rate hike by the Bank of Japan (BOJ) and upcoming US economic data that may influence the Federal Reserve’s (Fed) interest rate decision next week. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) pared most earlier losses to settle 4.55 points easier, or 0.28 per cent, to 1,616.52 from Thursday’s close of 1,621.07. The benchmark index, which opened 0.37 of-a-point lower at 1,620.70, moved between 1,609.67 and 1,621.25 throughout the day. The broader market was negative, with decliners outpacing advancers 604 to 439. A total of 550 counters were unchanged, 1,151 untraded, and 18 suspended. Turnover declined to 3.17 billion units worth RM2.24 billion from 4.48 billion units worth RM2.75 billion yesterday. Rakuten Trade Sdn Bhd vice-presiden...
Market Surge Amid Economic Strain
China’s equity market is staging a powerful rally despite persistent economic headwinds. The Shanghai Composite Index recently hit a 10-year high, while the CSI 300 has gained more than 20% from its 2025 low, adding nearly US$1 trillion in market value in just a month.
This surge comes even as domestic consumption, property prices, and inflation indicators flash red. Consumer prices were flat in July, producer prices declined for a 34th straight month, and GDP deflator readings remained negative — all pointing to a deflationary spiral undermining corporate pricing power.
Drivers of the Bull Run
Excess Liquidity: Cash-rich investors are rotating into equities amid limited alternatives.
Policy Support Expectations: Hopes for targeted measures from Beijing, though so far the government has avoided large-scale stimulus.
Margin Trading: Outstanding margin debt has climbed to 2.1 trillion yuan, nearing levels seen before the 2015 boom-bust cycle.
Animal Spirits: Improved liquidity and investor sentiment are reminiscent of the exuberance seen a decade ago.
Yet, earnings momentum tells a different story. Forward earnings estimates for CSI 300 constituents are down 2.5%from recent highs, with companies like JD.com and Geely under profit pressure from intense price competition.
Bubble Risks vs. Resilience
Bear Case: Analysts at Nomura and TS Lombard warn of “irrational exuberance” and see parallels with the 2015 crash. Weak demand, deflation, and strained corporate margins may ultimately undermine the rally.
Bull Case: Supporters argue this cycle is more measured. Stronger corporate balance sheets, larger domestic savings, and more direct market-rescue tools offer buffers absent in 2015. The rally has also broadened beyond a handful of tech names, suggesting more durable breadth.
Sector & Strategy View
Avoid: Sectors facing deflationary margin pressures (consumer discretionary, autos, e-commerce).
Favorable: Firms with structural growth drivers (technology leaders, sectors benefiting from government incentives).
Tactical Note: Liquidity-driven rallies in China often prove volatile and sentiment-driven. Investors should watch margin-debt trends as a leading indicator of sustainability.
Investment Takeaways
Disconnect Between Markets & Economy: Equities are surging even as fundamentals remain fragile.
Bubble Risk Rising: Liquidity and sentiment are fueling gains, but earnings revisions trend lower.
Policy Watch: Beijing’s measured stance may support stability but also risks prolonging weak demand.
2015 Parallels: Margin trading and exuberance recall the last major boom-bust cycle.
Selective Exposure Recommended: Favor resilient tech and policy-supported sectors; avoid high-competition industries.
Bottom Line:
China’s bull run is less about fundamentals and more about liquidity and sentiment. While this may sustain momentum near term, the risk-reward balance is tilting toward caution, especially if deflation persists or investor confidence reverses suddenly.
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