(Penang, Friday): When the Prime Minister, Datuk Seri Dr. Mahathir Mohamad, announced the decision to set up a National Economic Action Council (NEAC) on Nov. 20 to deal with the economic crisis and to put the Malaysian economy back on track in the wake of the fall in the value of the ringgit and the stock exchange, the ringgit was worth RM3.5 to the US dollar. Yesterday, when the NEAC held its inaugural meeting, the ringgit closed at 4.53 to the US dollar - a fall of some 30 per cent in the past two months.
When Mahathir announced the formation of the NEAC on 20th November last year, he said that the NEAC would have emergency powers to deal with the economic crisis without any declaration of a state of emergency, implying its urgency.
The question that is crying out for an answer is why it had taken the government over two months before the NEAC could be formed and hold its inaugural meeting, when the value of the Malaysian ringgit had fallen by some 30 per cent in the intervening period.
It is true that the KLSE Composite Index was in a better position yesterday, when it fell from the previous dayís close of 590.55 points to 575.21 points, as compared to Nov. 20, when it stood at 536.63 points.
November 20 was in fact one of the "black-lettered" days for the KLSE CI last year. It registered its third lowest level for the whole of 1997 as a result of the RM2.34 billion UEM deal to acquire 32.6 per cent stake in Renong, which so shattered market confidence that it caused a bloodbath of the stockmarket, wiping out some RM100 billion capitalisation in three days!
From Nov. 20 till the end of the year on 31st December, the KLSE CI fell below the 600-point mark except for the four trading days from Dec. 5 to 10, 1997 when there was a short-lived rally above the 600-point level as a result of the confidence-boosting from the second 1998 Budget announced by the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim on Dec. 5 last year.
In the last three weeks of January 1998, the KLSE CI crashed through the psychological level of the 500-point to end as low as 477.57 at the close of trading on January 12. It never rose above the 600-point level in these three weeks.
Last August, the Prime Minister, Datuk Seri Dr. Mahathir Mohamad and the Economic Adviser to the Government, Tun Daim Zainuddin, had advised Malaysians to enter into the stock market to buy shares as they were underpriced. Many accepted the Prime Ministerís advice and even sold properties to buy shares, especially after Mahathirís annoucement of a RM60 billion rescue fund to prop up share prices - believing that this was a sure-win and cannot-lose situation.
All are now regretting their entering the stock market at the time, when the KLSE Composite Index was between 800 to 930 points.
When Mahathir first made the call to investors that it was the "best time to buy shares" on August 7, the KLSE CI closed at 928.33 points. On the next day, on August 8, the KLSE CI rose to 932.36, and after that it was a continuous downward slide, and the 932.36 point was the highest level of the KLSE CI for the next five months till today.
The last time the KLSE was in the 800-point band was on Oct. 16 when it stood at 802.02 points. The last time the KLSE was in the 700-point band was on November 7, when it stood at 707.45 points.
As the government has called on investors to enter the market when the KLSE CI was in the 900-point band, why were two long months taken just to form the NEAC when there were only four trading days from Nov. 20 when the KLSE CI was in the 600-point band?