Part 1 (here)

New Building In The City

Taking the theory of a skyscraper bubble back to our own country, we have the development of KL118 underway which tops the Petronas Twin Towers by almost 200 metres standing at 644 metres upon completion. The project is funded by Permodalan Nasional Berhad (PNB) at an estimated budget of RM 5 billion.

Since PNB is also part of the government’s asset management unit, it is likely that the financing comes from selling bonds or products like Amanah Saham to the public. It could be selling debt papers to the government acting as a form of a fiscal stimulus to kick start the project. In a way, it seems likely that it is another form of investment that buffs the economy at the right time.

The First Rumour

I found that as early as 2010, the news that a new skyscraper would come up and would be called Menara Warisan Merdeka was already floating in skyscrapercity.com web forum. It seems that the government delayed the project with multiple changes on its completion date up till the recent award.

Another Bubble In The Making?

The first true GDP growth rate decline came in after 2009 or to be more exact as what the chart below shows which is in 2010 when the economy is no longer growing at a the fast pace of around 6% after the rapid recovery from the Global Financial Crisis.

More worrying is that the GDP growth rate had been declining over these years where it recorded the lowest at only 0.7% for Q3 2015.

It was finally thought that a massive project would create growth and increase the sentiment. Finally in October 2015, the Samsung-UEM consortium won the construction job for the whole project. Our nation’s press finally posted news on this and everything about the building turned official for the first time.

I truly believe that the government’s delay on the skyscraper project and made the news official just last year could be represented as a good evidence that the country is in need of a project since sentiment is all time low.

The Current Problem

The growth of property sector saw the biggest decline in years after news on rising interest rates and lower loan approvals by Bank Negara.

Unemployment started to creep up above 3% again causing a major concern. Known local banks, government linked companies and oil and gas companies had already reported how many personnel cuts were in place. We are left with the unknown of how many more personnel in the private sector that received the voluntary leaving exercise whi weren’t included in part of the statistics.

Although the unemployment rate from the 5-year trend doesn’t show worrying signs, the current numbers might be lagging to reflect the actual amount of people without jobs at the current moment.

The reason behind is simple. Getting laid off would mean that one gets compensated accordingly and at times, generously becoming one’s retirement fund. That meant that the bank accounts are still loaded and the recently unemployed isn’t still part of the statistics yet because they just aren’t looking for a job.

A continuous slowdown in the economy would meant that the unemployment number would continue to rise with labor intensive operations like manufacturing going down further. In fact the strengthening ringgit could turn into a major concern when manufactured products see a much lower demand especially in exports.

Altogether, the signs might become more visible in time or probably nearer to the completion of this massive project since the completion marks the end of a boom. As a savvy investor, you could start to identify leading indicators to an economic slowdown ahead.

The quarterly GDP numbers are lagging as well but as part of this nation’s economy, the firsthand experience in terms market sentiment might be a better leading indicator.

Let us see what happens from here…

I’m forecasting that since the completion is in 2020, we should see this year stabilizing and then markets start to pick up again in 2017 and 2018. Markets might be overly optimistic in 2019 and a likelihood of a bull run to occur in 2019 is really high.

That is when bubbles would build up!

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