May 15, 2014 12:02 am JST

Malaysia stocks hit a record high despite lingering risks

WATARU YOSHIDA, Nikkei staff writer

SINGAPORE -- The optimism driving emerging market shares is prevailing in Malaysia as well, despite risk factors including territorial tensions between Southeast Asian nations and China and the troubles of Malaysia Airlines.

     On Wednesday, the Kuala Lumpur Composite Index ticked up 0.7%, reaching an all-time-high of 1,879.2.

     The benchmark index fell after the March 8 disappearance of Malaysia Airlines Flight 370, nearly sinking to the psychological turning point of 1,800 on March 14, but then began to gather upward momentum once more.

     There are factors particular to Malaysia behind the upswing. For one, recent economic indicators like sales figures for the manufacturing and retail sectors have been robust, helping allay persistent concerns over the potential for economic slowdown.

     The market has also recovered from the shock of the flight disappearance. Malaysia initially looked to be headed toward a worsening of relations with China, from which many passengers of the ill-fated craft hailed, but talk of such concerns is now seldom heard. Investors are bullish, amid an across-the-board recovery in emerging market stocks.

     Still, it is unclear whether Malaysian stocks will continue to rise. The government could still provide Malaysia Airlines with a massive capital injection to help rehabilitate the fraught carrier.

     As a member of the Association of Southeast Asian Nations, Malaysia's relations with China may become more sensitive, amid territorial disputes between Asean members and Beijing in the South China Sea.