Wednesday, June 17, 2009

FTSE Bursa Malaysia 30 - Important Posting


Bursa and FTSE, or rather Financial Times, have been trying to make everyone use the FBM indices instead of the EMAS and KLCI. I guess FT would be able to earn fees for anyone using the new indices. One may argue on better computational and calculation ability by FT, or better market acceptance, or better marketability, etc... still somebody is forcing the thing down our throats.

Safe to say that despite Bursa and FT efforts, the media and investors by and large still preferred to quote KLCI and the EMAS, hard to retrain old dogs. In a move that almost is akin to raising the white flag, the 'twins' also put out the FBM KLCI index... hello, if there is nothing wrong with KLCI, why do we need to have FBM in front of the KLCI??? Its like putting MahSing MAS onto the planes should Mah Sing buys MAS - you can, but its stupid.
This posting will probably be worth hundreds of thousands if I were to speak at a conference or closed door seminar for professional investors. I should really open a bank account for donations to compensate myself.

Now they have tweaked the thing even tighter by putting up FBM 30, which is FTSE Bursa Malaysia Large 30 Index. Now the smart thing was to put all FBM 30 into FBM KLCI as well. One can argue that the CI is most widely followed by international investors, plus Malaysians and Singaporeans in particular. It is also the futures which the index is based on. Many older index funds use the KLCI as a benchmark for weighting their positions.

The biggest drawback of the KLCI is that many of the component members are illiquid and may have little in free float - that makes for difficult hedging, indexing and replication for ETF purposes. Like it or not, we will have two indices that we all will follow in the end, the KLCI will continue to be numero uno (don't believe me, try taking down the KLCI and hear the complaints) ... however smart investors would do well to pay heed to the FBM 30 index because those top 30 stocks will get better recognition and investors' interest. I see newer ETFs to relicate the FBM 30 rather than the KLCI type of indices. Its easier, cheaper, more accessible and plainly smarter.

That said, these 30 stock swould be accorded a premium to the rest of the smaller CI stocks. The premium is justified and will even grow when more country ETFs are introduced. Heck, I even think eventually there will be a FBM 30 futures index trading side by side the KLCI futures. The 30 stocks are better recognised, easier to replicate, better in transparency and liquidity ... heck even the Dow Jones index is only made up of just the 30 largest traded companies in the US.

As these stocks will be accorded higher premiums, it is good to take note of them. But not all dogs are created equal. Some will have a bigger premium because their fundamentals are better, or because they have better free float (the index rewards stocks with better liquidity).

Bumi Commerce
Sime Darby
Public Bank
Maybank
TNB
IOI
Genting
Axiata
MISC
Resorts
Telekom Malaysia
AMMB
DIGI
PPB Group
KLK
BAT
PLUS
Petronas Gas
YTL Corp
YTL Power
B Toto
UMW
Tanjong
MMC
Astro
Parkson Holdings
Petronas Dagangan
RHB Capital
MAS

For private investors who are the buy and hold types. These 30 may be a good starting to choose from as the premiums accorded to them is an added bonus.

Economists and strategists just have to make a note on the composition of the FBM 30 as to whetehr they are a good reflection on the real economy. Government leaders have to learn to interpret these indices before making broad strokes conclusions about the health of the overall economy and industries. The FBM 30 is tilted heavily to banks and financials, plantations, utilities and gaming. The FBM 30 is underrepresented in transportation, logistics, conglomerates and oil & gas.


p/s photos: Stefanie Sun Yan Zi

13 comments:

Richard Cranium said...

How or where can I get the free float figures for these 30, apart from scanning their shareholder list?

Jaffar said...

Hi,

Thanks for always giving your best advice and comments which have benefitted me a lot.

Pls do me a favour.. can you pls comment on Oriental Holdings Bhd. I think this stock is worth several times dead than alive. Moreoever the directors somehow are not keen to bring more value to shareholders.

They have just declared a pathetic final dividend of 6% making total 16% whereas the Company has plenty of cash and also assets rich which have not been revalued for a long long time.

Again your expert feedback and guidance would be gratefully appreciated. Tks

mong said...

Hi, Dali :
the listing consists of only 29 counters instead of 30.

STMong

Salvatore_Dali said...

JAAFAR,

Pls refer to my usual replies to other readers' queries...


Blogger Salvatore_Dali said...

fusion,
u dont have to ask me... if u have to ask me, the counters i will say wont be as good... if there r good buys or sells, i will post accordingly, no need to ask... if i dont post buys for a long time, it means i see no good buys

rad, dont take this the wrong way, but i am not running an investment advisory service.. u can ask, but if i post nothing, it means i have no time or knowledge or view on those stocks

RAD said...

Dear Dali

Has market correction started?
You predicted 1072 or something but the rally had bit more strength on its legs.....

Do your forecast the market to go down to at least 1000?

Regards
S. Radhakrishnan

Local Boy said...

Hi,

Can you please advise me how can i invest directly(real time) or invest without much hassle in USA and China equity market.

random said...

give a man a fish and he eats for a day...

solomon said...

3 years anniversary with FTSE now.

Is it by coincident that we had Dow30 and now we emulating it having FTSE 30?

If that is the case, I would like to see the FTSE Transportation and FTSE Utilities. But not many good representation in these stocks.

Lee said...

I think the readers here are starting to take advantage of Dali. He's sharing all his analysis and research info with us without charging us a single cent. A lot of us benefited from his blog. Maybe in future , you can charge a consultation fee to readers who want to post a question to you. By doing that, at least it is a win-win situation for both parties and i will not feel embarrass to ask for your opinion. Maybe you should consider that. Thanks a lot again for your daily post.

Lee said...

I think the readers here are starting to take advantage of Dali. He's sharing all his analysis and research info with us without charging us a single cent. A lot of us benefited from his blog. Maybe in future , you can charge a consultation fee to readers who want to post a question to you. By doing that, at least it is a win-win situation for both parties and i will not feel embarrass to ask for your opinion. Maybe you should consider that. Thanks a lot again for your daily post.

Little Bear said...

I think we're missing Hong Leong in Dali's list.

i'm referencing the list published by the edge. http://www.theedgemalaysia.com/business-news/16194-new-benchmark-to-adopt-current-fbm30-constituents.html

de Engineur said...

hi Dali, thanks for the your insight & opinion.

Off topic: your posting was quoted in The Edge Msia - http://www.theedgemalaysia.com/edge-links/17958-ftse-bursa-malaysia-klci-what.html

cheers,
Floyd

frank.lib said...

Then... what index you suggest that can reflect the whole market?