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Misplaced enthusiasm with Bursa’s FBMKLCI performance

June 15, 2013

Najib Upbeat with Bursa’s FBM-KLCI misplaced? – Dzulkefly Ahmad (TMI – Sideview).

  1. We believe that the statement of PM Najib that the FBMKLCI (capitalization-weighted stock market index) rally due to BN electoral results is at best an inaccurate exaggeration.
  2. FBMKLCI gained by 6% year-to-date is mostly due to regional foreign funds which incidentally is already a regional trend and not a specific trend in Malaysia.
  3. Secondly, it must be also noted that investors are piling back into the long-underperforming stock market as Bursa has stubbornly underperformed since March 2009.
  4. More substantively, we could see that even after the gain post GE, of the relative underperformance. Despite BN winning the election, Bursa is still trailing behind regional peers such as Indonesia, Thailand, Phillipines and Singapore who have all gained more than 10% year to-date.
  5. The irony about post GE rally is that most domestic funds are still cashed up and do not lend support to the local market. In fact domestic funds which are so-called Government-Linked-Investment companies (GLIC) have been net sellers of domestic equities in recent months ie January to May. Only retailers and foreign investors are net buyers who buy underperforming stocks.
  6. Further, we also noted that the rally was led by lower liners such as FBMMidCap and FBMSmallCap who outperform FBMLargeCap such as Sime, CIMB, Gamuda and MRCB.
  7. If the global economy continues to deteriorate over the next few months it is likely that the larger-cap sector would underperform relative to the small caps because of the flight of quality due to deteriorating economy reflected by the 4.1% lowest GDP growth in th 1Q 2013 since 4Q2009.
  8. To easily prove that this rally remains unconvincing is to look at Ringgit which continues to deteriorate and down by 6.8% in just one month while Bursa gains a meagre 6% within five months. We also believe that there is a mysterious disconnect between Bursa and Ringgit performance.
  9. It is worth noting that the exchange rate better reflects long term confidence on the economic power ( Purchasing Power Parity and genuine FDI) than Bursa FBMKLCI which is based on fluid short  term sentiments (ie hot money and potential leakages).
  10. PM Najib doesn’t need to be told that in the final analysis, it is currency and purchasing power that determine the rakyat well-being. Furthermore, as at 2012, Malaysian personal disposable income is still unable to catch up with the inflation rate. The looming hike in inflation from1.8% to 2.8-3% in 2014 compounded by ‘subsidy rationalisation’ and the impending GST are surely cause for concern. Much as he wants to show that he is upbeat with the Bursa current performance, Najib couldn’t and shouldn’t be oblivious of the bad prognosis and the precarious situation ahead.
  11. He must remain focus on concrete structural economic reforms and address serious systemic leakages and abuses while enhancing transparency and accountability in his administration. Only through genuine reforms do we get to be on a different trajectory of competitiveness and a vibrant economy and hoped to support a strong stock market.

Dr Dzulkefly Ahmad, Executive Director Pas Research Centre. (Corporate Finance Resource Group).

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4 Comments leave one →
  1. najib manaukau permalink
    June 15, 2013 5:09 am

    Najib must prove to all the voters that his words are all accurate and true. He has promised just before the elections that he will build one million affordable houses if he is reelected. Now that he is, even though as the minority government, he is still the P.M. and he must keep this particular promise other than the many others he made. Or they are all just his empty promises meant to be broken ?
    I am just reminding him of this one so that he will not give insufficient time to do so, as an excuse, when the next election comes. Please remember the clock is already ticking !
    You have to find the land for the million affordable houses to begin with, and above all you have to find the money to build them. Even though you have to borrow them as you are already in deficit so start cracking and plan to build the one million affordable houses, no excuses when the next election comes.

  2. alias permalink
    June 15, 2013 7:05 am

    masalah utama kepemimpinan BN sekarang ialah penerajunya tidak streetsmart as u or me or any other joe public,
    contoh utama PM tidak pernah merasai keperitan hidup rakyat kebanyakan.

    everybody in malaysia knew that najib is silver spooned.

    how will pm evaluate what is important for joe public since he himself is disconnected with reality.

    on ringgit performance any tom dick and harry knew that to import big ticket capital goods, ringgit need to be massaged to be stronger until all purchases of heavy machineries is concluded.

    and stock market massaging is so easy to do with help of state funds.(EPF,KWAP,PNB,unit trust issuer etc etc.)

    artificial market force will ruined the economy in the long run as real value will not be achieved.remember 2008 when value of security is lesser than borrowings.

    conclusion are mere rhetoric and artificial market will make malaysian poorer in the long run.(present purchasing power parity will show this theory is right)

    there are tonnes of other comments and critics to write as malaysia has so many no brainers at the top.

  3. truthseeker permalink
    June 20, 2013 5:48 am

    hahaha..all types of markets along with its toxic betting models are getting sucked into the blackholes.

  4. truthseeker permalink
    June 20, 2013 6:20 am

    The Global Race for Shale Development Is On
    Marin Katusa, Chief Energy Investment Strategist
    June 18, 2013 9:25pm

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    Guess who the US Energy Information Agency (EIA) says has 430% more proven gas reserves than the US?

    Guess who has twice as much as the US in shale gas technically recoverable?

    Guess who has over twice as much proven oil reserves as the US?

    The EIA recently published a 730-page report which assesses the shale formations of 41 countries. The global race for shale development has started. Countries that are not now known for their oil and gas production are showing much shale oil and gas promise.

    Would you be surprised to know that China has more proven oil reserves than the US?

    If you want to know the answers to the three questions we have at the beginning of this missive, then I believe you will be interested in the Casey Energy Report’s plans on profiting from the global shale race. If you thought the US was the king of shale, we are sorry to burst your bubble… it no longer wears the crown.

    A picture is worth a thousand words:

    Now, do you know how to make money from the global shale race? Countries like China, Argentina, and Russia are starting to exploit their unconventional energy sources. The global race for shale development and exploitation is on, and fortunes will made. Make sure you are well informed before you place your bets on this global race, as fortune will favor the bold – but the informed will fare much better.

    Casey Research was the first in the business to publish a report on the potential of the European shales, years before the EIA came out with this report. Our subscribers made over 600% gains on Cuadrilla Resources, which just recently completed a deal with Centrica that valued the company in the hundreds of millions. Been there, done that.

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