KUALA LUMPUR: Malaysia’s stock exchange was among the region’s most buoyant four years ago. Its problems since then reflect not only the country’s political and economic uncertainty, but also its difficulties in attracting foreign investment.
The flotation of Malaysian palm oil producer Felda was the biggest initial public offering of 2012 in Asia, raising US$3.2 billion (S$4.4 billion) at a gloomy time for new listings globally. In the same year, Asia’s biggest hospital operator, IHH Healthcare, raised US$2 billion with a listing in Kuala Lumpur and Singapore.
For Bursa Malaysia, the country’s stock exchange, that blockbuster year illustrated the effectiveness of Malaysian companies in raising capital. But one of the main reasons for that success has hobbled the country’s ambition to become an entry point to Southeast Asia for global investors.
Malaysia’s thriving pension schemes encourage asset managers to use their significant pools of savings to buy domestic equities. So while companies have easy access to capital, prices on Bursa are high, and trading is low as institutions tend to buy and hold — resulting in less attractive securities for foreign investors. “It is really a recycling tool of domestic savings,” says Mr Herald van der Linde, head of Asia Pacific equity strategy at HSBC.
On price-to-earnings ratios, Malaysia is the third most expensive equities market in the region after India and the Philippines, Mr van der Linde says.
Bursa’s chief executive, Mr Tajuddin Atan, told shareholders this year that the exchange has a “clear strategy to become a regional leader and Asean’s multinational marketplace”.
As things stand, however, Malaysia’s exchange lacks the depth and liquidity to attract global investors, analysts say. The high valuations of Malaysian stocks also deter external investors. Foreign investors pulled out net RM19.5 billion (S$6.4 billion) last year and RM6.9 billion in 2014, according to MIDF Research. So far this year, foreign equity investments are up net RM0.2 billion.
The average daily traded value of Bursa’s securities market declined slightly last year, falling to just over RM2 billion. The comparable figure for SGX, Singapore’s stock exchange, was S$1.1 billion.
