Crux Of Bursa's Problems
It must be funny when the papers blared that the Malaysian market is at a 6 year high, and you look at it and it felt like a 6 year low. What is so great about hitting a 6 year high?? Tons of markets have went past that already. Let me qualify first, I still think KLCI will test 1,000 by year end and 1,050 by 1Q2007, even with that performance, there are deeper issues with listed Malaysian companies that needed to be addressed. Am I being harsh? Well, just look at the pre1997 crisis index levels, and where they are now:
KLCI 1,077. Now 955. -11%
Hang Seng 15,196. Now 17,096. +12.5%
Dow Jones 6,823. Now 11,373. +66%
Jakarta Composite 724. Now 1,470. +103%
Straits Times Index 1,921. Now 2,505. +30.4%
SE Thailand 527. Now 692. +31%
Philippines Comp 2,447. Now 2,405. -2%
I have selected the big ones for comparison, and the regional indices because they are most comparable as we all had the Thai baht crisis, and we all have had the SARS effect, etc... What is so amazing is that Thailand, which was where the Asian financial implosion started, and Indonesia, they both took IMF's remedy, are now 31% and 103% higher than precrisis levels - ???? Even Hang Seng which suffered horribly owing to the fact that they did not devalue (unlike the ringgit which is still 30% from precrisis levels vis-a-vis the USD), has now surged past precrisis levels, suicides with charcoal and jumping off buildings have subsided substantially in HK.
All that is most galling when oil prices have remained very firm over the last 2 years, and we have tons of it. Something is horribly wrong. I can explain the 2005 markets for Malaysia as foreign funds betted early for a free float of the ringgit but was pretty pissed off in the end. If you talk about fundamentals, not many realise that KLCI stocks present the best dividend yield among the regional markets, averaging 4.8%, while HK's was only 3.4%, Singapore at 3.9%, Thailand at 4.3% and Indonesia a paltry 2.6%. So is it a growth issue? Maybe... some ideas on what is wrong have already been said. So, even when KLCI hits 1,000... we shouldn't be that happy. Look at the volume, remisiers want to kill themselves already at a 6 year high!