Households and Stock Market in Financializing Malaysia – a Cultural Political Economy Approach
Malaysia is an interesting case study. Despite its grave experiences in the 1997 Asian financial crisis (AFC), which witnessed the weeding out of retail investors who held half of the stocks listed in the Kuala Lumpur Stock Exchange (KLSE) (Jomo, 2003, p.128), direct retail investors’ participation is still high at 19.05% and 48.5% of value and volume traded respectively as of December 2015 (Bursa Malaysia, 2015). Prior to the AFC, development of the stock market had been used as a solution to socio-economic and ethnic income distribution, guided by a controversial racial policy that ran from 1970 to 1990. The outcome of these different events sees a misfire of government’s initiatives and policies, a theme that we place specific interest on in this study.
Following Engelen et al. (2011), we recognise political and business elites’ role in creating financial spaces, allowing them to grow and become more complex. We draw on Erturk et al.'s (2007) notion of infelicity, the discrepancy of promises and outcomes made by governments, to explore how such attempts to shape policy may be characterised by the authority behind political objectives, but which may not guarantee success. We will also extend the findings of Langley's (2008) study of the everyday life in observing how macroeconomic processes can transform financial identities and subjects at household levels by applying a Malaysian context to this understanding.
In exploring the financialization of Malaysian households, we question how the development of the Malaysian stock market has allowed for its activities to be entangled in the everyday lives of Malaysian households; with sub-questions of which events, policies, and political and/or business elites have been integral to the entanglement of stock market activities in the everyday lives of Malaysian households?
A mixed methods study is carried out to address these questions. We begin with an analysis of official government documents and academic papers. Then, semi-structured elite interviews are carried out with high-ranking officials and officers from the government, government-link companies, financial institutions and the private sector. The interviews are used to explore: the impact of the 1970s onwards socio-economic policy on the stock market; the impact of the AFC on the Malaysian capital market; the differences between stock market activities pre- and post-AFC; the drivers of recent initiatives (government-led and otherwise) to bring retail investment back into the capital market; the discrepancies between institutional objectives; and the working out of financial inclusion including the limitations of financial literacy and financial education. Using these methods, we are able to construct both a historical analysis of the development of the stock; and critically analyse this development as an elite project with certain outcomes, exploring themes such as economic rationalism of nation building, narratives of money politics (described as state-business relationships), and modern-day issues of financial inclusion and inter-ethnic versus urban-rural divide. The analysis is presented through separate different economic and time periods.
The period of racial policy (1970-1980) saw the stock market affected by a post-colonial socio-economic policy devised in 1970 to reduce poverty and more importantly to redistribute wealth inter-ethnically through unit trust funds managed by large government-investment arms; thus bringing a mass of ordinary investors to the stock market for the first time. The period of money politics (1981-1990), which saw the application of an economic modernisation strategy fostered by state-business relationships; here political patronage (sometimes controversial) in business spaces was defended as an act designed for national economic advancement. The period of financial liberalisation (1991-1996) saw the adoption of financial liberalisation strategies and a privatization policy; an exercise which brought the listing of large privatised firms, raising market capitalisation of the KLSE by 22.1% in the period of two years and increasing retail participation at a composition of 60:40 to institutional investors (Malaysian Economic Planning Unit, 1996, p.212-213). The period of financial crisis (1997-2000) focused on the impact of the AFC, the result of which collapsed the KLSE by approximately 80% in terms of market capitalisation (Sulong, 2014). Lastly, the period of post-financial crisis reforms (2001 onwards) demonstrated efforts by the Malaysian Government to modernise the capital market and domesticate financial activities using financial reform mechanisms and initiatives.
The elite interviews help build a more complex story on the Malaysian stock market and the programme of financial citizenship, demonstrating that the Malaysian stock market’s progression is not driven purely by economic mechanisms, rather it is characterised by a congruence of events, policies, and political and business elites specific to the country’s national and cultural contexts. The stock market is found to be a site of tensions and paradoxes between government objectives and outcomes; illustrated by i) the surfacing of the AFC, which interrupts the national programme of financial citizenship development, instead resulting in a messy outcome of unexpected behaviour in the stock market; and ii) the growing wealth inequality in present day that continues to spread between the urban-rural divide, thus further complicating current programmes of financial citizenship development.
 Financially self-sufficient entities enacted to carry out government mandates.