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The strong rebound in the stock market is a sign of economic confidence - but it is also seen as a return of the dreaded speculators, given that valuations are overstretched.
The Kuala Lumpur Composite Index has rebounded from 262 on 1 September, 1998 to 762 points on 26 August, 1999. On the face of it, the market is showing its confidence in the economic recovery. Strong economic growth is under way, the balance of payments is in surplus, direct investment flows are strong, and the stock exchange has reacted positively to the regions economic rebound. The recent announcement that Malaysia will be restored to the MSCI Index in September has also boosted the market's value.
However, cynics point out that Malaysia's bull run appears to be getting ahead of itself, that valuations are now stretched and that stock market market rallies are traditional in Malaysia ahead of general elections. In other words that, once again, the market is being driven by speculation.
The issue of speculation in Malaysia is a vexed one. Everyone in Malaysia is united in agreeing that speculation is a bad thing, indeed a terrible...