Thursday, September 07, 2006

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!

5 comments:

Rohan_888 said...

Yes, something is very wrong with the market. Getting confidence back will take a long, long time, too many people burned. Would be interested to see statistics about small time investors how they have done the last 10-15 years, my guess is that at least 95% of them lost money.

Still, not all the news is bad, looks like we have finally a good boss at the SC who means business. With a good female boss at Bank Negara, may be good idea to aim for a female PM?

Is there also something wrong with the currency, an oilrich country exporting more than it imports, with currency trading near all-time low, sounds rather strange to me. Is there something that is missing from the statistics?

Salvatore_Dali said...

rohan,

i would rate bursa boss performance at 6.5/10, and the Bank Negara lady at 7.5/10, and the SC lady boss at 8.5/10 despite being there for just a short time.... there are a lot of things bursa could do, the introduction of single stock futures, road shows, the charging for investment tutorial portal... all big mis-steps...

boyplunger said...

Hi

What was the pre 1997 date use in your calculation for the total return.

I pressume it is from 7 Sep 1997 -7 Sept 2006?

Thanks

boyplunger said...

To add on

Would you have the performances return since May 1997? Thats the peak for all the markets at that time.

Thanks again

Salvatore_Dali said...

sorry,

i don't have those figures you wanted...