The influence of macroeconomic factors on the Malaysian equity market

This study explores the influence of macroeconomic variables on stock market performance by utilizing regression and correlation analyses on the movement of the indices at Kuala Lumpur Stock Exchange. The performance of the stock market will be measured based on the level of the indices stated by KLSE. This study was carried out for a period of five years from 1998 until 2002, a period when the Malaysian economy was experiencing various economic situations from a booming economy to the economic (financial) crisis. The variables analysed in this study are macroeconomic variables as independent variables and stock market performance as the dependent variable. There are three macroeconomic variables in this analysis namely, gross domestic product (GDP), interest rate and inflation rate. According to previous research, the gross domestic product, interest rates and the inflation rates were considered the most common elements taken into consideration. Compared to previous studies on the impact of economic variables (gross domestic product, interest rate and inflation rate) on stock market performance, there are some similarities and consistencies in terms of the findings. The results of this study suggest that the macroeconomic fundamentals in Malaysia i.e., gross domestic product (GDP), inflation rate and interest rate have different influences on stock market performance.