Malaysia KLCI Hits 10-Year High – So What?

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Feb 04 2007
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Last Friday, Feb-2-2007, marked the historical moment in Malaysia as the local bourse, Bursa Malaysia or popularly known as KLSE (Kuala Lumpur Stock Exchange) Composite Index closed at 10-year high when it added 20.13 points or 1.69% to 1,209.48. The external factor which helped the KLCI was the Wall Street gains the day before. Trading volume was 1.47 billion shares valued at RM 3.71 billion.
The Star reported that overseas investors now own nearly a third of exchange operator Bursa Malaysia Berhad, a quarter of Tenaga Nasional Berhad (KLSE: TENAGA, stock-code 5347) and over 40% of Bumiputra-Commerce Holdings Berhad (KLSE: COMMERZ, stock-code 1023). They also own substantial shares in top companies like IJM Corp Berhad (KLSE: IJM, stock-code 3336) and IOI Corp Berhad (KLSE: IOI, stock-code 1961).
If you look at Friday’s top gainers, you’ll notice the main contributor to the index was Genting Berhad (KLSE: GENTING, stock-code 3182), Bursa Malaysia (KLSE: BURSA, stock-code 1818), Kuala Lumpur Kepong (KLSE: KLK, stock-code 2445), Malayan Banking Berhad (KLSE: MAYBANK, stock-code 1155) and Telekom Malaysia Berhad (KLSE: TM, stock-code 4863). But if you re-look at the top volume, you still cannot escape the view of the penny stocks (second or third liner stocks) struggling to register more gains over the months. This is so different from the period of pre-1997 Economic Crisis when it’s rare to have penny stocks appeared on top 20 volume counters. I’ve covered this issue on my previous website at Why Malaysia Yusli Blames Local Investors?
According to stock exchange data, the daily average value of stocks traded on Bursa in January was RM2.1bil compared with RM1.28bil in the final quarter of 2006. Brokers attributed the sharp increase in trading value in recent months to the huge inflow of funds from overseas. So with these indicators, KLSE is indeed in the bull-run phase and it’s only about 100 points away from the 1993-1994 Super-Bull which registered the highest composite index of 1,332 (Jan-5-1994) before the bear took over. In fact, looking at the chart, since the resistance level of 1,018 was breached on fourth quarter last year, 2006; the composite index was on 45 degrees uptrend.

It’s not difficult to breach the 1,332 level – you need another 7 trading days of continuously register 20 points gain to breach it or 14 trading days of 10 points gain to achieve the desire result.
But the question remains – are you making any money from this so-called bull-run? If not, why not? Most probably your portfolio does not include blue-chips or index-linked stocks. But if you can only make money from blue-chips and not other stocks, then can you call this round a super-bull even if the composite index breaches the 1,332 level? So what if KLCI close at 1,500 level; but only a handful of expensive blue-chips were the gainers? Foreign investors no doubt will not touch second and third-liners stocks. These stocks were traditionally chased by retail investors, speculators, syndicate who prey on first-comers or whatever you wish to call it. The reality is local retail investors are not putting their hands on the chopping board, at least not yet, after losing several fingers already.
Everyone is waiting for somebody to start the ball-rolling on the second or third liners stocks. Maybe EPF (Employees Provident Fund) or PNB (Permodalan Nasional Berhad) should start by showing retail investors their confidence on some good performers stocks categorized as second or third liners companies. Then the chain reaction will sparks the desire participation from retails dreamt by Yusli, chief executive officer of Bursa Malaysia.
# TIP: Looking forward, the 1,271 level registered on Feb-25-1997 at the height of pre-1997 Economic Crisis would be the important yardstick on how far more KLSE can goes.
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You write well and your articles are informative. Keep it up and congrats on your PR achievement 🙂

I remember reading a recent study which put the Kuala Lumpur stockmarket as having suffered negative growth since the 1997 Asian Financial Crisis while other regional stockmarkets has forged ahead and recorded postive growth. My own private studies confirm this fact. The market total combined capitalization of all stocks listed on the Malaysian stockmarket, sans new listings, have indeed shrunk since the heady days pre-1997. The Kuala Lumpur Composite Index is one among a gamut of smoke and mirrors that the Malaysian authorities use to mask the Malaysian stockmarket’s true performance. So I am in complete agreement with you when you said “Malaysia KLCI hits 10-year high – So What?

thanx damien …

outsider, a government who’s not willing to face reality but to hide facts ultimately will face the true & painful consequences …

cheers …

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