Tuesday, June 23, 2009

Malaysian Stocks To Start 'Catching Up'

MALAYSIAN stocks, beaten by regional peers this year, will start “catching up” as the exchange introduces a new benchmark index and the government eases curbs on foreign investment, CIMB Investment Bank Bhd said.

“Malaysia will not lag behind for long,” Terence Wong, an analyst at CIMB, said in the report. “For investors that have missed out on the big gains made by higher-beta regional markets such as Hong Kong and Singapore, Malaysia provides a second opportunity to get exposure to the regional rebound.” Beta is an indicator of volatility.

The Kuala Lumpur Composite Index has risen 17 per cent this year, trailing behind Southeast Asian benchmark indexes. Prime Minister Datuk Seri Najib Razak, who took office on April 3, announced stimulus plans valued at RM67 billion (US$19 billion) to restore economic growth as the nation nears its first recession in a decade.

Investors should buy so-called “high beta bombed-out sectors” such as construction, property and building materials and oil and gas, the report said. Gaming and rubber glove stocks are also “still attractive,” it said.

Malaysia’s stock exchange said on June 16 that Najib will make “significant announcements” related to his plans to ease restrictions on foreign investment at an annual investor conference on June 30 and July 1.

On July 6, Bursa Malaysia Bhd, the country’s stock exchange manager, will cut the number of companies in its Kuala Lumpur Composite Index to 30 from 102, in the measure’s biggest overhaul aimed at removing the smallest and most tightly held companies to attract investors.


The FTSE Bursa Malaysia KLCI will comprise the largest companies by market value with at least a 15 per cent free float, or the portion of shares publicly available for trading.

Funds in Singapore, Hong Kong and Europe are “mostly underweighted in Malaysia,” Wong said. “Malaysia’s status as a laggard market that will catch up with regional peers in this rally as investors ‘rediscover it’ has been reinforced,” Wong said. -- Bloomberg

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