The KLCI has performed very poorly over the last decade.

The KLCI has performed very poorly over the last decade.


KLCI
10 years ago 1628.55
6.1.2026  1671.56
+43.06 (+2.6%) over the last 10 years.

 

Analysis of KLCI's 10-Year Performance (2016–2026)

Overview of Returns

• Absolute Return: +43.06 points, or +2.64% over 10 years.

• Annualized Return: Approximately 0.26% per year.

• Inflation-Adjusted Return: With average Malaysian inflation around 2–2.5% per year, the real return is negative. Purchasing power of an investment tracking the KLCI would have eroded.

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Critical Discussion Points

1. Severe Underperformance vs. Global & Regional Peers

• Over the same decade, most major indices delivered significantly higher returns:

  • S&P 500: ~160% (approx. 10% annualized)

  • MSCI World: ~110%

  • Even regional peers like India’s Nifty 50, Indonesia’s IDX Composite, and Vietnam’s VN-Index outperformed.

• This suggests structural issues in Malaysia’s equity market beyond just global trends.

2. Possible Contributing Factors

• Economic & Political Headwinds:

  • Political instability (change of government multiple times between 2018–2023)

  • Slower GDP growth relative to regional peers

  • Decline in FDI in some periods; competition from Vietnam, Indonesia

• Market Composition:

  • KLCI is dominated by old-economy sectors (banking, plantations, utilities) with limited exposure to high-growth tech.

  • Lack of large, innovative public companies (compared to TSMC in Taiwan, Tencent in Hong Kong/Shenzhen).

• Liquidity & Sentiment:

  • Persistent net selling by foreign investors since 2014–2015.

  • Retail investor participation often speculative, favoring small caps over blue chips.

• Currency Effect:

  • MYR depreciated against USD over this period (~MYR 4.20 in 2016 to ~MYR 4.70 in 2026 est.), reducing returns for foreign investors and affecting capital inflows.

3. Dividend Consideration

• Total return would be higher if dividends included (KLCI average yield ~3–4%).

• However, even with dividends, total return likely underperformed global equities and possibly local fixed income.

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Broader Implications

For Investors:

• A "lost decade" for passive index investors in Malaysian large caps.

• Active stock selection or sector bets (e.g., tech, renewable energy) might have performed better.

• Highlights importance of global diversification for Malaysian investors.

For Malaysia’s Capital Market:

• Raises questions about market attractiveness and corporate governance.

• Government and regulators have attempted reforms (e.g., enhancing ESG, promoting tech listings via LEAP market), but results in index performance remain weak.

• Suggests that KLCI may no longer fully reflect Malaysia’s economic potential, with growth occurring in mid/small caps or unlisted firms.

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Conclusion

The KLCI’s near-flat performance over 10 years is disappointing and concerning. It reflects:

1. Macroeconomic and political challenges limiting corporate earnings growth.

2. Structural issues in market composition and global competitiveness.

3. Potential capital market stagnation relative to peers.

While dividends provide some consolation, the index’s failure to generate meaningful capital appreciation highlights the need for urgent reforms to revitalize public markets, attract listings of high-growth firms, and improve investor confidence. For long-term national prosperity, Malaysia must address why its premier equity index has barely moved in a decade.

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Analysis of the 2.6% Decade-Long Return in Bursa Malaysia

1. What This Means for Investors

A 2.6% total return over 10 years on the KLCI (Kuala Lumpur Composite Index) implies:

• Negative real returns after adjusting for inflation (Malaysia's average inflation over the past decade ~2–2.5%).

• Almost zero excess returns above the risk-free rate (FD rates averaged 2.5–3.5%).

• A lost decade for equity investors in index-tracking portfolios.

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2. Critical Discussion

a) Underperformance vs. Other Asset Classes

• Fixed deposits likely matched or beat KLCI returns with lower risk.

• Properties, gold, or global equities (e.g., S&P 500 returned ~12% annualized) vastly outperformed.

• This shows local equity market weakness and poor capital appreciation.

b) Structural Issues in Bursa Malaysia

• Concentration risk: KLCI dominated by finance, plantations, telecoms – sectors with low growth in this period.

• Liquidity & foreign outflow: Net foreign selling since 2014–2015 due to political uncertainty, governance concerns, and better opportunities abroad.

• Lack of tech/ex-growth sectors: Missing high-growth companies (compared to US/Asia tech booms).

c) Investor Implications

• Passive index investors suffered – active stock-picking might have yielded better returns (e.g., in small-mid caps).

• Dividends saved the total return: Much of the KLCI’s 2.6% likely came from dividends (yield ~3% avg). Without dividends, capital gains were negative.

• Currency effect: MYR weakened ~30% against USD over decade, hurting returns for foreign investors but also making exports more competitive (not reflected in local-currency index return).

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3. Comparison with Risk-Free Rate (FD)

• FD at ~2.5–3% meant equity risk premium was negligible or negative.

• This violates a basic finance principle: investors take higher risk (equities) for higher expected returns. Here, they were not compensated.

• Behavioral impact: Retail investors may lose confidence in equities and retreat to FDs, reducing market depth.

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4. Root Causes & Critiques

• Governance & politics: 1MDB scandal (2015), political instability (2018–2020), policy flip-flops affected market sentiment.

• Economic model: Malaysia stuck in middle-income trap, lacking productivity growth and innovation-driven IPOs.

• Market development: Bursa failed to attract large high-growth listings; many companies delisted or privatized.

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5. Conclusion & Outlook

The 2.6% return signifies:

• A failed decade for broad equity investors in Malaysia.

• Capital misallocation – money in banks yielded similar returns with less volatility.

• Need for portfolio diversification internationally – investors who kept assets solely in KLCI underperformed globally.

• For policymakers: urgent need to revitalize public markets, improve governance, attract growth sectors, and incentivize long-term equity investing.

Final note: While the KLCI return looks dismal, some individual stocks and sectors (e.g., gloves during COVID, certain consumer stocks) did well. This highlights the limitation of using KLCI as the sole market proxy – yet for most retail and institutional investors tracking the index, it was indeed a lost decade.

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Given the challenging environment in Bursa Malaysia, here’s how investors can strategically position themselves to profit, rather than passively accept low index returns:

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1. Shift from Passive Index Investing to Active Stock-Picking

The KLCI’s poor performance doesn’t mean all stocks performed poorly. Investors should:

• Avoid broad-market index funds tracking KLCI.

• Use bottom-up research to identify companies with strong fundamentals, good governance, and growth potential outside the KLCI heavyweights.

• Focus on small- and mid-cap stocks (under-researched, higher growth potential).

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2. Sector Rotation & Thematic Investing

Move away from traditional KLCI-weighted sectors (banks, plantations, telecoms) toward:

• Export-oriented companies benefiting from weak MYR (electronics, gloves, commodities).

• Technology – though limited locally, some EMS (electronics manufacturing services) and tech-related firms exist.

• Consumer & healthcare – resilient domestic demand.

• Renewable energy & infrastructure – government push for energy transition (solar, EV infrastructure).

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3. Dividend Investing with a Quality Screen

Since capital gains were minimal, dividends contributed significantly to total returns.

• Focus on high-dividend-yield stocks with sustainable payouts (e.g., REITs, utilities, selected blue chips).

• Ensure dividend growth – not just high yield but increasing payout over time.

• Dividend reinvestment plans (DRP) – compound returns even in flat market.

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4. Tactical Use of Fixed Income & Alternatives

Given equity returns matched FD rates:

• Strategic asset allocation – keep part of portfolio in higher-yielding fixed income (corporate bonds, sukuk).

• Consider money market funds or Islamic deposits for flexibility.

• Use Gold/Commodities as hedge against inflation and currency weakness.

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5. International Diversification

• Invest abroad via Malaysian feeder funds, ETFs, or direct trading in SGX, US markets.

• Gain exposure to high-growth sectors (tech, AI, healthcare) unavailable in Bursa.

• Currency diversification – mitigate MYR depreciation risk.

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6. Defensive Strategies

• Sell-write covered call options on stocks you own – generate income in sideways market.

• Pair trades – go long on strong sectors, short on weak KLCI constituents (if shorting is accessible).

• Value investing – look for undervalued stocks with strong balance sheets, low P/B, high net cash.

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7. Exploit Market Inefficiencies & Special Situations

• Merger arbitrage – Bursa has seen privatizations, M&A; exploit price gaps.

• IPO flipping with caution – some IPOs pop on listing day (though long-term performance mixed).

• Corporate actions – rights issues, special dividends, spin-offs can create opportunities.

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8. Adopt a Global Macro View

• Time entry/exit based on MYR cycles – invest when MYR is weak (helps exporters), hold cash/FD when MYR strengthens.

• Monitor commodity cycles (oil, palm oil) – position in related stocks accordingly.

• Watch foreign flow trends – buy when foreign selling is excessive (contrarian play).

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9. Utilize Structured Products & Leveraged ETFs with Caution

• Leveraged/inverse ETFs (available in Bursa) to profit from short-term moves (high risk).

• Structured warrants – for directional bets on index or stocks.

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10. Long-Term Strategic Shifts

• Reduce home bias – Malaysian investors traditionally over-allocate to Bursa. Global allocation is essential.

• Private market opportunities – consider private equity/venture capital via platforms targeting Southeast Asian startups.

• ESG-focused investing – global funds increasingly look for ESG-compliant companies; Bursa has ESG indices.

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Critical Reminder

• Risk management is key – low index returns don’t mean no returns, but they do mean stock selection matters critically.

• Cost control – avoid high brokerage fees, management fees on underperforming funds.

• Behavioral discipline – don’t chase speculative penny stocks; focus on fundamental drivers.

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Bottom Line:
To profit in Bursa Malaysia, investors must be active, selective, and global. The era of “buy and hold the KLCI” is over. Success will come from:

1. Picking winning sectors and stocks,

2. Harvesting dividends,

3. Diversifying internationally, and

4. Timing exposure based on macro cycles.

Investors who adopt this multifaceted approach can still achieve attractive returns despite the market’s overall stagnation.

Malaysia has seen 4 times more foreign capital outflow from stock market this year

 

Malaysia has seen 4 times more foreign capital outflow from stock market this year. What’s at play?

While Prime Minister Anwar Ibrahim’s government has repeatedly touted Malaysia as a high-value destination for foreign investment, international portfolio capital continues to leave the country’s financial markets.

KUALA LUMPUR: The Malaysian economy is not at risk of hitting any major bumps in the coming months, but the country’s tepid growth prospects and cautious political outlook are why foreign investors have been pulling out from its financial markets, economists and analysts say.

As of Sep 30, net portfolio equity outflow from the Malaysian stock market this year hit RM16.4 billion (U$3.9 billion), about four times the full-year outflow of RM4.2 billion in 2024, said RHB Research in a note earlier this month.

According to Bank Negara - the country’s central bank - the non-resident outflow from the stock market in 2023 was RM2.3 billion.

Foreign shareholding now stands at around 19 per cent of total market capitalisation and is at an all-time low, CIMB Research was quoted as saying in reports this month. The shareholding ratio has fluctuated between 22 per cent and 23 per cent for some years.

Bonds are bleeding too: September saw RM6.8 billion in net foreign selling, reversing a brief inflow in August, according to RAM Rating Services. 

RAM added in a note last week that foreign holdings in Malaysian bonds have already edged lower in the first half of this month, falling to RM285.8 billion as at Oct 14, down from RM287.0 billion as at end September. 

Bank Negara figures show that foreign holdings stood at about RM275 billion at the start of January, rising to a high of RM302 billion at end May this year, before retreating to current levels.

“It is a worrying trend,” former finance minister Tengku Razaleigh Hamzah told CNA of the haemorrhaging of foreign capital from the Malaysian financial markets.

“It is clear that foreign investors don’t have an upbeat long-term view on Malaysia, (with) little faith in … the management of the economy,” he added.

The exodus of foreign portfolio capital is a region-wide phenomenon because of the uncertainty in the international economy and concerns over new tariffs that the United States government has been threatening, investment analysts said.

Indonesia, Philippines and Thailand are also losing portfolio money from a broad cross-section of portfolio investors, comprising private equity interests, hedge funds, and large international pension and insurance companies.

But Malaysia’s outflow has been one of the sharpest among members of the Association of Southeast Asian Nations (ASEAN), raising serious concerns at a time when competition for limited overseas capital is becoming more intense among regional economies.

SLOWDOWN 

The Malaysian economy, ASEAN’s fifth-largest, is expected to grow at a slower pace of around 4.2 per cent next year, down slightly from the projected 4.5 per cent expansion in gross domestic product (GDP) this year, according to Kenanga Research.

The lukewarm outlook is despite the country’s success in attracting direct investments in key sectors of the economy.

According to the Malaysian Investment Development Authority (MIDA), the country attracted RM378.5 billion of approved investment in 2024, up 14.9 per cent from the previous year. 

For the January to June period this year, MIDA noted that approved investment hit RM190.3 billion, up 18.7 per cent from the same 2024 period.

BURSA at a glance

 

BURSA MALAYSIA BHD

 

Malaysian Equity Market

 Equites

The fortunes of a country’s equity or stock market are closely aligned with its economic well-being, and Malaysia is no exception. Similar to its global peers, Bursa Malaysia been enduring much turbulence in the last few years. Buffeted by strong external and internal headwinds, the market capitalisation of the local bourse had moderated further to RM1.74 trillion as at end-2022 (end-2021: RM1.79 trillion).

Profile of Malaysian Equity Market

Bursa Malaysia has the distinction of being among the biggest bourses in ASEAN with well over 900 listed companies. Investors can choose from a variety of listed products, including equities, derivatives, exchange-traded funds (ETFs), real estate investment trusts (REITs), and exchange traded bonds and sukuk (ETBS). Notably, 789 (81.2%) of the 972 listed entities on the local bourse were Shariah-compliant securities as at end-December 2022. These accounted for RM1.139 trillion or 65.6% of Bursa Malaysia’s overall market capitalisation as at the same date. Despite the tumultuous global markets, a total of RM26.0 billion was raised from the Malaysian equity market in 2022. Of this amount, RM3.5 billion originated from the primary market, i.e., via 35 initial public offering (IPOs). The other RM22.6 billion stemmed from secondary fundraising. The sturdier performance in 2022 was driven by a 52% y-o-y surge in IPOs and a 58% spike in secondary issuances.

Three Types of Markets on Bursa Malaysia

Bursa Malaysia operates through three markets – the Main Market, the ACE Market and the LEAP Market. Each has a different set of listing criteria for aspiring candidates. The following represents some of the most salient points of the respective markets.  

The Main Market is the primary market for larger companies with strong operating and profit track records, with a minimum required market capitalisation of RM500 million upon listing, among other things.

The ACE Market is a sponsor-driven alternative market designed for smaller companies that exhibit strong growth potential. No minimum profit or operating track record is required for listing.

The LEAP Market is a fundraising platform for what are perceived as underserved SMEs, which do not need to demonstrate any operating or financial track record. This adviser-driven market is only available to sophisticated investors.

In 2022, the Main Market hosted the listing of five companies while the ACE Market welcomed 25 and the LEAP Market contributed another five – bringing the total to 35 IPOS for the year. Together, these newly listed entities raised RM3.49 billion.

Listing Process and Platforms

The listing process (from the time the candidate engages an adviser to the day of listing) usually takes four to nine months, depending on the structure and complexity of the listing scheme. Upon approval, the entity will be given six months to complete its IPO exercise.

Bursa Malaysia also offers an end-to-end Shariah-compliant investing platform, along with the world’s first end-to-end Shariah-compliant commodities-trading platform. In recognition of the importance of sustainable and responsible investment, Bursa Malaysia launched the FTSE4Good Index in 2014. This index permits investors to measure domestic companies’ performance based on ESG standards. In July 2021, the local bourse introduced the FTSE4Good Bursa Malaysia Shariah Index – the Shariah-compliant version of the former. This new index will assist fund managers to develop new investment products constituting a portfolio of Shariah-compliant equities, guided by sustainable investing principles.

Investor Profile

The Malaysian stock market benefits from a diverse pool of investors, underscored by sturdy support from local institutional and retail investors. Domestic institutions remained net sellers in 2022, to the tune of RM6.53 billion (2021: RM9.1 billion). Meanwhile, local retail investors infused RM2.31 billion of net funds into the equity market, which paled in comparison to the previous year’s RM12.2 billion. Interestingly, foreign investors pumped in RM4.40 billion net (2021: RM3.15 billion) after four consecutive years as net sellers. Against this backdrop, the participation rate of retail investors declined to an average of 25.7% in terms of transaction value, relative to 34.6% in 2021. Nonetheless, this is still higher than the five-year pre-pandemic average of 18.8%

Trading Procedures

To invest in shares in Malaysia, one must be over the age of 18, open a Central Depository System (CDS) account and a trading account at a stockbroking firm. There are specific steps to follow pursuant to this, as detailed on Bursa Malaysia’s website.

Regulatory System

The Securities Commission Malaysia (SC) is the ultimate regulator of the Malaysian capital markets, including the equity market. As the front-line regulator, Bursa Malaysia, is tasked with safeguarding a fair and orderly market for the trading of securities and derivatives. The SC supervises and monitors Bursa Malaysia on listing, trading, clearing, settlement, and depository operations – to ensure the latter effectively performs its regulatory duties and obligations. Brokers and regulated entities must comply with the various rules set by Bursa Malaysia.

https://www.capitalmarketsmalaysia.com/public-equities/

More than 700 companies valued at below US$100 million on Bursa

Mon, 23 Mar 2020

KUALA LUMPUR: The double whammy of the Covid-19 outbreak and the oil price crash has dampened investor sentiments around the globe, especially on net export oil-producing economies like Malaysia.

The FBM KLCI has plunged nearly 18% year to date (YTD). Valuation wise, KLCI’s current price-to-earnings ratio (PER) stood at 14.56 times, representing a 15.1% discount to its 10-year average of 17.15 times.

Simply put, it is the market in which investors, with cash in pockets, could cherry-pick the good bargains.

Since investor sentiment is transient in nature — they come and go like dark clouds, as such we look into how many Malaysian-listed companies lie in the affordable range, to a business-centric and well thought out billionaire investor that has US$1 billion (RM4.43 billion) cash on hand.

According to Bloomberg data, there are about 868 companies which market capitalisation (cap) is at or below US$1 billion.



Big caps at discount on valuation



There are 31 big-cap companies, which market cap is in between the US$500 million to US$1 billion categories.

The stock exchange, Bursa Malaysia Bhd, is among the 31 listed entities.

Bursa Malaysia closed at RM4.70 last Friday after it rebounded 28 sen or 6.33%, giving it a market cap of RM3.79 billion, less than US$1 billion. The stock exchange is trading at PER at 20.45 times compared with its 10-year average of 23 times

LPI Capital Bhd, which sits on top of the list, came in at a total market cap of RM4.31 billion. The home-grown insurer last closed at RM10.82 as of last Friday — indicating its current PER valuation stood at 13.37 times, representing a 23% discount to its five-year average PER of 17.38.

With US$1 billion in hand, the billionaire investor can even afford to buy out utility companies, namely YTL Power International Bhd (RM4.1 billion), Malakoff Corp Bhd (RM3.32 billion) and Gas Malaysia Bhd (RM3.21 billion).

The three utility giants’ stock price fell in the range of 7% to 30% YTD, to close at 53.5 sen, 68 sen and RM2.50 last Friday.

Shares in Astro Malaysia Holdings Bhd saw its price dropped by more than half year-on-year (y-o-y) to 73 sen, valuing it with a total market capitalisation of RM3.81 billion. The stock is currently trading at a PER valuation of 5.98 times, according to Bloomberg. The media stock’s PER valuation is indeed at a 73% discount to its five-year average PER of 22.3 times.

It is worth noting that many of these companies are trading substantially lower than their net asset values. The list of companies includes Malaysia Building Society Bhd, FGV Holdings Bhd, Oriental Holdings Bhd, Affin Bank Bhd, Lotte Chemical Titan Holding Bhd, Alliance Bank Malaysia Bhd, DRB-Hicom Bhd and AirAsia Group Bhd.

A random check on all the stocks’ valuation, in comparison to end-October 2008 period (the heights of the global financial crisis), four out five of the stocks have suffered lower PER valuation during the 2008 selldown period.




Mid-large cap choices


There are 124 companies that are valued between US$100 million and US$500 million.

A billionaire investor, who has US$1 billion in hand, could afford a buyout of some oil and gas giants, Bumi Armada Bhd, Velesto Energy Bhd and Sapura Energy Bhd, which have been succumbed to irrational selldown after the meltdown on the crude oil prices.

Remarkably, shares in Supermax Corp Bhd was the only one yielded positive among the top-31 companies within the category. Supermax which gained 7% YTD, closed at RM1.49 last Friday — valuing the rubber glove maker at RM1.96 billion. Valuation of Supermax which was widely viewed as one of the beneficiaries for the pandemic containment efforts stood at 18.85 times PER, 33% higher than its 10-year average of 14.18 times.

Companies that sit above the RM2 billion mark within this category include Aeon Credit Service (M) Bhd, Shangri-La Hotels (Malaysia) Bhd, Allianz Malaysia Bhd and UMW Holdings Bhd — which saw their share price slid between 13% to 68% y-o-y.

In particular, Aeon Credit is trading at a single PER of 7.86 times based on last Friday’s closing of RM8.58. The valuation is at a 17% discount to its five-year average of 9.47 times.

While Shangri-La Hotels’ stock price was holding up strong at RM4.85 despite the concern on the Covid-19 outbreak that will affect occupancy rate. The five-star hotel group is trading at PER of 33.7 times, which is a 12% premium to its five-year average of 29.92 times.

Meanwhile, Allianz Malaysia, which used to trade above six times average PER in the past five years, is currently trading at a 32% discount at 4.31 times PER at RM12.02. Interestingly, Allianz’s net tangible assets (NTA) currently worth about RM11.89 per share — indicating that the investor gets to own 98% of the tangible assets for every ringgit invested into the insurance company.

Some of the notable consumer-related companies within US$100 million-US$500 million market cap range, includes Guan Chong Bhd (RM1.78 billion), Leong Hup International Bhd at RM1.68 billion, 7-Eleven Malaysia Holdings Bhd (RM1.49 billion), Aeon Co (M) Bhd (RM1.40 billion) and Padini Holdings Bhd (RM1.35 billion), which saw their share price tumbled 9% to 47% YTD. This group of companies, except for Leong Hup which was newly listed last year, were trading below their five-year average PERs.

Among the semiconductor companies that are within US$100 million and US$500 million range, Malaysian Pacific Industries Bhd (RM1.81 billion) was the only one traded at a premium to its historical values, which stood at 13.44 times PER, representing a 7% premium relative to its five-year average of 12.48 times.

Meanwhile, Frontken Corp Bhd, VS Industry Bhd and Pentamaster Corp Bhd are all traded at a discount to their historical values. Their share prices had plummeted 20% to 45% YTD.



Cheaper companies but cheaper quality



With US$1 billion in hand, billionaire investors will be spoilt for choice at bargain prices for stocks with a market cap of US$100 million or less.

There are 713 companies valued at below US$100 million, based on last Friday’s closings, according to Bloomberg.

Out of the top 31 market cap companies within this category, there are five loss-making companies.

Interestingly, companies in which NTA is significantly higher than their respective share prices include MNRB Holdings Bhd, MPHB Capital Bhd, Sunsuria Bhd, Muhibbah Engineering (M) Bhd, Malayan Flour Mills Bhd, Can-One Bhd. Share prices in these companies have tumbled 25% to 66% YTD.

MNRB’s NTA at RM2.97 per share is about close to five times higher than Friday’s closing price of 52 sen. While Can-One’s NTA stood at RM9.01 per share, close to four times higher than its share price of RM1.93, and MPHB’s NTA of RM1.88 per share is more than two times higher than its last trading price of 56.5 sen.

In terms of price valuation, all of the companies were traded below their five-year average PER, except for Amverton Bhd and Ayer Holdings Bhd which are both involved in property development.

Amverton, which has a valuation of RM438 million, saw its share price closed at RM1.20 — implies current PER of 85 times, three times higher than its five-year average of 28 times.

Ayer Holdings current PER stood at 29 times, representing 22% higher than its five-year average of 23 times, as of last closing price of RM5.20, valuing the company at RM389 million total market capitalisation.



https://www.theedgemarkets.com/article/more-700-companies-valued-below-us100-million-bursa