AS this is the last column for the year 2021, it is an opportune time to reflect on the performance of financial markets and factors that dictated market directions.

       The year 2021 indeed was full of promises as investors were looking forward to pent-up consumer demand that was expected to drive economic growth in the post-pandemic world.

       With vaccines slowly but surely being rolled out, economic growth projections for the year were robust, with growth expectations of between 6.5% and 7.5% as envisaged by the government when Budget 2021 was tabled.

       But the stars were not aligned Malaysia’s way, as even at the start of the year itself, economic activities were disrupted by the announcement of the movement control order (MCO) on top of the Declaration of Emergency and the suspension of the Parliamentary session in early January itself.

       While Malaysia announced plans for inoculation of its population, the slow pace of the rollout was slowly taking its toll on the number of cases, despite the MCO. Left with no choice, Malaysia moved towards the implementation of a full MCO which came with greater restrictions.

       At the same time, the political temperature too was rising, as the sitting prime minister then, Tan Sri Muhyiddin Yassin, lost the majority support in the house and it was back to another game of political maneuvering, which eventually led to the appointment of Datuk Seri Ismail Sabri Yaakob as the ninth Prime Minister of Malaysia.

       This coincided with Malaysia’s experience of the peak number of Covid-19 cases as well as the number of deaths in August.

       Battling against the pandemic, the government introduced various economic stimulus packages to the tune of RM225bil, bringing the pandemic-led assistance programme since last year to RM530bil, of which some RM83bil was direct fiscal injection.

       This also includes the various Employees Provident Fund-related withdrawal schemes which have proven to be popular among its members as some RM101bil have been withdrawn.

       While economic momentum for 2021 was in full swing in the second quarter (Q2) period when the economy expanded by 16.1% year-on-year (y-o-y), it was the reverse in the Q3 period as the economy contracted by 4.5% y-o-y.

       Based on seasonally adjusted figures, technically, Malaysia entered an economic recession yet again as we experienced two consecutive quarter-on-quarter of economic contractions.

       Nevertheless, as far as market earnings are concerned, not many changes were seen throughout the year, but individual sectors and stocks did see some gyration in numbers, especially those within the glove sector, plantation and other commodity-based companies which benefitted from the sky-high commodity prices.

       Commodities at record high

       Supply chain disruptions, pent-up consumer demand and energised economies drove commodity prices to either multi-year highs or all-time highs.

       Crude oil surged to as high as US$86 (RM361) per barrel, palladium hit a high of almost US$3,000 (RM12,600) per ounce, aluminium surged to US$3,170 (RM13,314) per tonne, while our once darling commodity, tin, rose to more than US$40,000 (RM168,000) per tonne as observed in the London Metal Exchange.

       Our golden crop, crude palm oil, even surpassed the RM5,000 per tonne level – a level that none of the market forecasters had predicted to reach this year.

       Even cryptocurrencies were on a tear this year, as more of them were introduced in the market resulting in unprecedented demand and topsy-turvy price movements.

       At one stage, the market capitalisation of all the cryptos combined even surpassed the US$3 trillion (RM12.6 trillion) mark, and the largest of them, bitcoin, hit a high of almost US$69,000 (RM289,800) per coin and was last seen at just over US$51,000 (RM214,200) per coin, up 75% in 2021 alone.

       Another spectacular run was also seen in ethereum, which surged to a high of US$4,865 (RM20,433) per coin and was last seen at about US$4,100 (RM17,220) per coin, which is more than a four-fold increase this year alone.

       Equity markets do well

       From almost a 26% gain on the S&P 500 Index to the near 22% rise of the Taiwan Stock Exchange Weighted Index (TAIEX), and 20% gain each on the BSE’s SENSEX Index as well as Euro Stoxx 50 Index, equity markets were fuelled by ample market liquidity that was continuously fuelled by the never-ending expansion of the global central bank balance sheet, with the United States Federal Reserve (Fed) itself expanding its balance sheet by as much as US$1.4 trillion (RM5.88 trillion) this year.

       The sheer character of technology stocks was the main draw for investors in 2021 and hogged the limelight.

       This includes Tesla’s spectacular market gains this year and Apple’s ever-expanding market capitalisation, which was last seen at almost US$2.9 trillion (RM12.2 trillion).

       Startups too made headlines this year with the listing of companies like Rivian, a pickup truck electric company with zero revenue on listing but promises to be a truck business, and the listing of Grab via a special purpose acquisition company or SPAC listing on the Nasdaq.

       With so much liquidity and bloated asset prices, mergers and acquisitions too were major market-moving factors, as some US$5.6 trillion (RM23.5 trillion) worth of deals were announced this year globally, beating the previous record high of US$4.4 trillion (RM18.5 trillion) set in 2007, right before the Global Financial Crisis.

       Dollar vs yuan

       Despite the massive liquidity provided by the Fed as well as the US’ never-ending expanded debt, the dollar was one of the strongest currencies in the world this year as the Dollar Index itself was up by 6.8%.

       However, it was the yuan that took the shine out of the dollar, as the Chinese currency appreciated by 2.4% against the greenback.

       The ringgit weakened by about 4.5% this year while Asia’s worst currency must surely be the Turkish lira, which had one time lost more than half of its value against the dollar but has since recouped its losses as president Erdogan announced plans to make up the losses suffered by depositors, should the local currency fall more than the current rate of deposit offered by banks.

       Malaysian capital market buzzing

       The year 2021 will be remembered in history as far as the Malaysian capital market is concerned. The year brings the best and worst of corporate Malaysia.

       In corporate earnings, we saw spectacular quarterly earnings not only among the glove makers but also record earnings from Petronas Chemicals Group Bhd and among some plantation companies, driven by the surge in commodity prices.

       At the other end of the spectrum, we saw huge losses among companies impacted by the pandemic, and leading that pack was of course AirAsia Group Bhd and its sister company, AirAsia X Bhd.

       The latter will surely be recognised as the company with the largest quarterly loss ever by a listed company when its Q6 of 2021 results showed a net loss of RM24.6bil, which brought its full 18-month net loss to RM31.6bil.

       The year 2021 was relatively a good year for new listings with the market’s warm reception to most initial public offerings or IPOs. The most successful of them must surely be the listing of CTOS Digital Bhd, which was not only the biggest IPO of the year with total fundraising of RM1.21bil, but one that has given investors’ huge returns in terms of capital gain with the price today 57% higher than its IPO price of RM1.10 per share.

       An ESG-themed year

       The environment, social and governance (ESG) theme was surely the most on investors’ minds this year, as they voted with their feet whenever a corporate was seen flaunting the ESG guided practices.

       Malaysian corporates were indeed shunned by investors as labour-related issues took centrestage while governance issues, especially in relation to one corporate, hogged the limelight as auditors and regulators were taken to court for matters related to the company’s audited results and audit findings.

       Talking about governance, the authorities too have played their part this year with the updated Malaysian Code of Corporate Governance 2021 (MCCG 2021), which was released at the end of April, while the fourth edition of the Bursa Corporate Governance Guide 2021 was issued less than two weeks ago.

       The guide provided by Bursa entails further details as to how corporates could adopt the best practices as outlined in the MCCG 2021.

       The year 2021 will also be remembered for the release of the Capital Market Masterplan 3 (2021-2025), which basically will help market intermediaries take the lead in taking Malaysia to greater heights, not only in terms of market size but products, services and the use of technology as enablers of transactions.

       Winners and losers

       As we are coming to the close of 2021 and as we welcome the New Year, it is an opportune time to take a peek at the market’s winners and losers this year.

       Bursa Malaysia’s Main Market top-five biggest gainers, as measured by the FTSE Bursa Malaysia Emas Index up to Thursday’s closing, was Kobay Technology with a year-to-date gain of 634%, followed by BSL Corp (+479%); Hong Seng Consolidated (+433%); Dataprep Holdings (+358%); and Tanco Holdings (+300%).

       The top-five losers were Sarawak Consolidated Industries, which fell 87%, followed by Euro Holdings (-84%); Green Packet (-80%); Supermax (-76%); and KPower (-76%).

       With that, it is a wrap for 2021. This column will provide a preview as to what to expect in 2022 in next week’s New Year’s Day column.

       To those celebrating, Merry Christmas, and to the rest, happy holidays.

       Pankaj C Kumar is a long-time investment analyst. The views expressed here are the writer’s own.