Weak KLCI performance: what happened to "investors' confidence"?

About a month and a half ago on Friday, 19 March -- two days before the general election -- the Kuala Lumpur Composite Index soared to a 4-year high of 904.45 points.

The Barisan Nasional naturally exploited the KLCI’s performance to woo voters. Both candidates Abdullah Badawi and Najib Razak led the BN party in their spin on the KLCI’s high. Saying its strong showing indicated foreign investors’ confidence in the BN, they told voters to give the BN a strong mandate at the polls so that the BN government could attract even more foreign investments into the country.

The mainstream media uncritically joined in the BN spin. In echoing and trumpeting the BN message, they essentially told voters that, since foreign investors had strong confidence in the BN, there was really no reason for them not to vote for the BN at the polls. This single reason of strong investors’ confidence in the BN was splashed on the frontpage of the mainstream papers and appeared as one of the first three items on TV news bulletins.

Well, that was then. Ever since Abdullah’s BN secured a big mandate at the polls, the KLCI has generally been on the downward slide, with only tiny upswings here and there but not enough to check it. And on 30 April, the KLCI was down to 838.21 points, a drop of 66.24 points from 19 March.

So, why the slide? Here, the mainstream media did not have a unanimous consensus, unlike the reason offered for the strong KLCI showing on 19 March. Some explanations being floated for the slide include a consolidation of the market as a technical correction to an earlier market surge, poor showing of the regional markets, a potential rise in US interest rates, a fear over a hard landing for China’s economic expansion, reappearance of SARS in Beijing and Anhui in China, and the bloody clashes on 28 April leading to 112 dead in Pattani, Thailand.

The slide to below 840 points at the end of April was played down by the media. It did not appear in the first or main section, let alone the front page, of newspapers. The slide was given the business-as-usual coverage in the business section but not page one material there either. The same on TV, which offered merely a perfunctory announcement under the business segment.

The different coverage of the KLCI’s high (on 19 March) and low (on 30 April) by the mainstream media raises several questions. What has happened to foreign investors since the election? Did not the BN say - and this was cheerily trumpeted by the mainstream media - that they would continue to pour major investments into the country if the BN secured a big mandate at the polls? Where have they gone? After all, the country’s economic fundamentals continue to remain sound, according to analysts.

Now, obviously, things are not as simple as that. All kinds of reasons can affect the performance of the stock market, especially when the KLCI is a relatively small one in the global economy. There are the internal and external factors to begin with. And, surely, one cannot discount profit taking and even greed on the part of investors as another factor although this factor is typically not mentioned. Otherwise, why invest? In other words, explaining how the stock market performs is not an exact science, let alone a simple cause-and-effect relationship; its performance is based on several factors at play at a given time, even though some might have a larger saliency than others.

And so, why should the KLCI’s red-hot performance in the couple of days before polling day last month be explained uncritically by just one factor alone--foreign investors’ confidence in the BN? What about some indications of a healthy US economy back then? Or a relatively stable period in the region back then as the various East and Southeast Asian countries were getting more upbeat about the year that was unfolding?

While it was expected of the BN to link the strong KLCI performance to foreign investors’ support for them, a more credible or independent media would be judicious with that coverage. Of course, they should not ignore the BN’s point or spin, but neither should they be carried away by it as they were.

The different media coverage of KLCI’s high and downward slide suggests that when an event could be favourable to the BN government (the KLCI’s strong performance), the mainstream media would present only one side of the story - the BN’s spin on it – and give it prominent coverage. But when the event could be unfavourable (the KLCI’s weak performance), the mainstream media would try to distance the BN government from it by playing up other side (in this case, highlight external factors to explain the KLCI drop) to the story and downplaying coverage of it as a whole.

Hmm, all this has a familiar ring to it. Do the mainstream media not have a similar approach to covering other issues that may have a bearing on the public perception of the BN government?