KL bourse out to woo retail investors

KL bourse out to woo retail investors
Published: 2010/06/09

Malaysia’s bourse said it’s seeking to lure individual investors who have shunned the market a decade after the Asian financial crisis.

Bursa Malaysia Bhd is working with brokerages and banks to “to reach out to retail investors in various towns and cities” to open up accounts and encourage online trading, chief executive officer Yusli Mohamed Yusoff said in an interview in Kuala Lumpur.

Trading by individuals fell to as low as 20 per cent of trading value from more than half before the start of the Asian financial crisis in 1997, when the benchmark index slumped by a record 52 per cent.

“A lot of retailers lost a substantial amount,” Yusli said yesterday. The result is that the market is now “dominated by the local institutions,” he said.

Most individual savings started shifting to mutual funds and unit trusts since Malaysia’s economy went into a recession in 1998, Yusli said. They haven’t returned to stock trading even as the economy expanded at an annual average of 5 per cent over the past decade and the benchmark index more than doubled.

The FTSE Bursa Malaysia KLCI Index has climbed 1.2 per cent so far this year, paring a gain of as much as 5.8 per cent amid concern austerity measures in Europe will reduce demand for the Malaysia’s technology and commodity exports.

Lagging Behind

The KLCI’s 45 per cent gain last year lagged behind Southeast Asian neighbors even after the government announced stimulus plans totaling RM67 billion to help pull Southeast Asia’s third-largest economy out of a recession.

Trading slumped by half to an average US$375 million a day over the six months ended May from the same period 13 years ago, right before the start of the regional financial crisis in July 1997, according to data compiled by Bloomberg. Neighboring Singapore’s figures have quadrupled to US$1.1 billion over that time, data from the city-state’s exchange show.

“People’s risk appetite is not there anymore, not like those days,” said Lye Thim Loong, who helps manage US$500 million at Avenue Invest Bhd in Kuala Lumpur. “Those who traded recklessly with no fundamental reasons got burnt.”

The slump in trading by individuals coincided with an exodus by foreigners from Southeast Asia’s second-biggest stock market, leaving Bursa more reliant on domestic institutional funds. Overseas investors have sold a net RM1.36 billion of Malaysia’s equities this year, adding to RM8.57 billion withdrawn in 2009 and RM38.6 billion ringgit that flowed out in 2008, according to exchange data. In 2007, they bought a net RM24.7 billion.

Foreigners

The exit left foreigners holding 20.6 per cent of local stocks at the end of April, down from 27.5 per cent in April 2007, according to stock exchange data. Overseas investors held 9.33 per cent of Tenaga Nasional Bhd at the end of April, compared with 27 per cent in April 2007, according to data from Malaysia’s biggest power producer.

The state-controlled Employees Provident Fund accounts for 50 per cent of daily trading volume in the equity and bond markets, Prime Minister Najib Razak said on March 30. More than half of the RM417.1 billion of market value in the benchmark stock index is owned by government-linked funds, according to calculations by Bloomberg.

“We’d rather see a more balanced distribution, so that one particular sector doesn’t dominate the market so much,” Yusli said.

Retail investors’ share of trading is low by comparison with at least one neighbor, Thailand, where individuals accounted for 56 per cent of turnover so far this year, according to data compiled by Bloomberg. Exchanges in neighboring Indonesia and Singapore don’t track the figures.

“There has been some increase in the total of retail account sign-ups recently, but the amount is negligible,” Alex Hwang, chief executive officer of HwangDBS Investment Bank Bhd in Kuala Lumpur, said in an e-mailed reply to questions. Investors are “more careful these days due to the volatile market,” he said. -- Bloomberg


Read more: KL bourse out to woo retail investors http://www.btimes.com.my/Current_News/BTIMES/articles/20100609084947/Article/index_html#ixzz0qLed7Wsg

Saturday March 13, 2010

Getting the right balance, vibrancy and diversity

WHO are the investors that we should be targeting?
Yusli: I think we need to have a good balance. At some point for the past few years, a third of our stock market investors was foreign, a third was local retail, and a third local institutions, and that was quite a good balance.
But today, more than 50% of our stock market investors are local institutions. That, to me, has gone a bit too far to one side. We need to bring the balanced equation back.
Besides a good mix of foreign and local investors, we also need to have a good mix of investors with different strategies – short-term and long-term.

There’s excess liquidity in the banking system, but these are not going into the capital market, even though some of the big caps do offer better returns compared with fixed deposits. So, maybe we should be targeting domestic funds – retail and institutional – to invest in our own market?

Yusli: Bursa Malaysia is working closely with the participating organisations such as brokers and remisiers to tap into retail money. Increasingly, we are now seeing more domestic retail investors trading through the Internet, which is in line with the global trend.
On top of that, I hope there will be further liberalisation in terms of licensing for retail sector to bring about more competition that will result in more products being offered to Malaysian retail investors. I think Malaysian consumers deserve to have a full range of products and services that consumers in other parts of the world are getting.

Most of our retail investors are not that sophisticated. So, maybe we need to provide them with some form of protection, especially when the market is subject to manipulation, among others. What’s your opinion?

Yusli: We take these issues very seriously. Investor protection and corporate governance issues are very high on our priority list. We have a special team that constantly monitors all the trading activities in the market, and we’re quick to query the companies when we suspect some unusual market activities.

Could the lack of interest in the local market be due to the lack of good quality, investable companies around?

Cheah: Well, there are many good-quality companies in the country. Some of them are not listed, but for some of those listed ones, you can hardly see any action. They are very solid, but they just want to remain quiet and stay in the comfort zone, perhaps because they are family-controlled and are not interested to do anything else. So there are very few corporate exercises.
Chin: There are some good companies around, but some of these stocks are just not “monetisable” for the broker to justify covering because their trading volume is too low. For the brokers, a counter has to trade above a certain level (that is, at least US$1mil a day for CLSA) for it to be monetisable and worthy of our time and resources.
Yusli: Some companies are a good deal, while some may have business models that are more volatile. But just as we need different traders to play our market, we also need to have a variety of companies to cater to their varying appetite, and this could create market vibrancy.
I think that’s just what’s missing today. There’s no vibrancy in our market. We need to create vibrancy because that will bring in more liquidity.
I’d like to see more corporate activities such as major IPOs and mergers and acquisitions because these will create interest and attract attention to the market.
And as part of our effort to create market vibrancy, Bursa Malaysia has already put in place the infrastructure, including direct market access or DMA, for investors to engage in more sophisticated form of trade such as shorting, but we don’t see people using them very much.
The problem is many of our investors seem to be very comfortable doing just plain vanilla trading, while the whole world has gone sophisticated with facilities like dark pools and multilateral trading facilities.

Does having foreign listings help promote vibrancy in our market?

Yusli: At the moment, we have only a handful of foreign listings in our market. Over time, we’ll have more.
Foreign listings provide diversity, especially for Malaysians who are reluctant to trade overseas, the opportunity to invest in a foreign company. But foreign listings are still a new thing for most Malaysian, so there are still some reservation over trading in those stocks.

The perception is that not-so-good companies are being listed here because they can’t get listed elsewhere.

Cheah: I think Malaysians are just not familiar with these foreign listings. Singapore, for instance, also went through a tough initial period when they wanted to introduce listings of China-based companies.
Here, we check on the companies before they are listed, and the SC also interviewed them to ensure that they are good companies. I believe the market will gradually get used to it.
Yusli: As you’ve seen, one of these foreign companies has actually produced very good results. Again, go back to the fundamentals, and the fundamentals of these foreign listings are indeed strong. Our investment bankers have done their due diligence. They are not going to bring bad companies to list here.

Year to Date KLSE Performance (31.12.2009)

KLSE  1 Year Chart
http://finance.yahoo.com/echarts?s=%5EKLSE#chart1:symbol=^klse;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Important lessons learned from the last 2 years.

1. Always buy good quality stocks.
2. Do not over-diversify.
3. Monitor the business.
4. Do not be influenced by the market price.
5. Do not follow or be influenced by the crowd. The crowd is often wrong.
6. Volatility in the market is a friend, take advantage of it.
7. Always buy at bargain price. Always buy with a margin of safety, at a discount to the fundamental intrinsic value.
8. Do not lose your capital. Even in March 2009, the portfolio still showed a gain.
9. Develop a good investing philosophy and strategy. Stick to them.
10. Invest for the long term.
11. Understand your emotions to greed and fear. Challenge them before reacting. Are these rational or appropriate given the facts?
12. It is often alright to do nothing.

Happy New Year to all.

Kuala Lumpur one of the worst-performing markets, in relative terms

Question marks make investors shy away from KL market
Tags: Andrew F Freris | Annual bond conference | economic recovery | Expensive valuations | FBM KLCI | Fiscal spending packages | GDP | Iskandar Malaysia | Local equity market | monetary policy | Mutted earnings revisions | RAM Holdings Bhd | stimulus packages

Written by Ellina Badri
Monday, 16 November 2009 11:36

KUALA LUMPUR: Expensive valuations, muted earnings revisions and uncertainty on the private sector’s role in driving the economy have made the local equity market unattractive relative to other regional markets, BNP Paribas Private Bank Hong Kong senior investment strategist for Asia, Andrew F Freris said.

“There is a mixture of good and some areas where investors may still have a question mark. By no means, I am not unhappy by what I’ve seen but in terms of relatives, that’s actually why some investors might prefer other markets.

“These are the reasons that have made Kuala Lumpur one of the worst-performing markets, in relative terms, because it has gone up less than other Asian markets,” Freris told The Edge Financial Daily on the sidelines of RAM Holdings Bhd’s annual bond conference here last week.

The FBM KLCI has gained 44.96% from the start of the year up to last Friday’s close. Singapore’s Straits Times Index has risen 54.82%, Hong Kong’s Hang Seng Index has gained 56.76%, and China’s Shanghai and Shenzhen indices have risen 75.07% and 108.31%, respectively. The Jakarta Composite Index has surged 79.05%.

Nonetheless, Freris said due to the government’s two stimulus packages and the liberalisation of the financial system and capital markets, things here were changing rather quickly.

He also highlighted the government’s initiatives in Iskandar Malaysia, Johor, saying the progress and effects of that project were “major”.

“Malaysia has got a strong , structurally supportive fiscal environment and monetary policy that stay cautious, but I imagine the reason the market is not performing much more strongly is the question mark about how long the government will continue to lead and when the private sector will start taking over,” he added.

Freris


On the outlook of the Malaysian market and economy, he said the FBM KLCI could continue rising until the market saw two consecutive quarters of gross domestic product (GDP) growth, which would then impact earnings and in turn signal an interest rate hike.

He said sectors likely to benefit from the economic recovery included CONSTRUCTION [] and infrastructure, mainly due to the initiatives set out in the government’s RM67 billion fiscal spending packages.

Monetary policy here was likely to remain supportive of growth and the overnight policy rate would not be raised “anytime soon”, he said.

“Second quarter GDP was also better than the first, and we reckon 3Q09 will be pretty supportive,” he added.

Meanwhile, on the performance of global stock markets going forward, he said BNP Paribas was still very cautious, adding while there still may be room for markets to make gains, the G3 markets, especially the American market, remained very “jumpy”.

Hence, the bank also remained cautious about the Asian markets, although it was positive on China and South Korea, he said.

“As a whole, we’re very cautious and conservative. We’re quite boring, really. We’re not telling our clients to dive into equities, but neither are we telling them to stay away,” he said.

He also said the bank was neutral on India, adding the Singapore, Malaysia and Hong Kong markets were not included in its investment universe.

“Equity investment is fairly globalised, equity allocation takes place across and within markets, so it is no surprise if the S&P 500 index in the US goes up, the KL market will also go up.

“As long as there is quite a degree of jumpiness in the US market, because of the uncertainty of the extent and sustainability of a recovery, that will be reflected back in KL,” he added.


This article appeared in The Edge Financial Daily, November 16, 2009.

KLSE TRADE STATISTICS: LOCAL VS FOREIGN October 2009

http://spreadsheets.google.com/pub?key=txKJ-CJ_m_KD-Agbe6RtG5g&output=html

http://www.klse.com.my/website/bm/market_information/market_statistics/equities/downloads/trading_participation_investor2009.pdf


Observations:

The average price per unit volume of shares for the foreign institutions was MR 3.63; that for the local institution was MR 3.33.

The local retail investors were mostly into penny shares. The average value per unit volume traded was MR 0.66.

Half the volume of shares (49.96%) traded in October were generated by local retail investors.

Foreign Institutions were net buyers in October.

Local Institutions were net sellers in October.

No net change in value in trades of local retail investors. However, the volume of shares bought were higher than those sold.

The local retail investors were selling higher priced shares to buy into lower priced shares in October.

Based on value of shares traded, the Local Institutional funds were the biggest players in the local KLSE (43.69%).

Past Market Movements: Malaysia KLSE

By using an index, we can very quickly have an idea of how much the market has moved within a noted period. 

For example, if the index stood at 800 and it is now standing at 1200, we can say that the market as a whole has moved up 50%  [(1200-800) divided by 800)].

Click: http://finance.yahoo.com/echarts?s=%5EKLSE#symbol=%5EKLSE;range=my
This figure shows graphically the movements of the KLSE for the years 1999 to 2009. 

What can we learn from the history of the overall market movements in the Malaysia stock market?

KLSE 1994 to 2009

http://finance.yahoo.com/echarts?s=%5EKLSE#symbol=%5EKLSE;range=my

Is there a correct time to buy and sell?

KLSE Market Performance last week

Asian Economic News
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Malaysian Shares May End Win Streak
10/18/2009 6:41 PM ET

(RTTNews) - The Malaysian stock market has finished higher now in four consecutive sessions, collecting more than 20 points or 1.9 percent to hit a fresh closing high for the year. The Kuala Lumpur Composite Index moved above the 1,255-point plateau, but now analysts are forecasting a modest retreat at the opening of trade on Monday.

The global forecast for the Asian markets suggests weakness, thanks to disappointing economic and earnings news out of the United States. Technology and financial stocks are expected to be under pressure, although strength among the commodities - especially oil - may provide some support. The European and U.S. markets finished modestly lower on Friday, and the Asian markets are forecast to follow that lead.

The KLCI finished modestly higher on Friday, thanks to firm support from the financial stocks and the plantations, while the industrial issues saw more modest gains.

For the day, the index added 9.91 points or 0.80 percent to finish at 1,256.77. Volume was 1.147 billion shares worth 1.217 billion ringgit. There were 481 gainers and 239 decliners, with 238 stocks finishing unchanged.

Among the gainers, DBE Gurney Resources, SKP Resources, TA Enterprise, Sime Darby, Maybank, CIMB Group, Tenaga, IOI Corp and Genting all finished higher.

http://www.rttnews.com/Content/AsianMtUpdates.aspx?Node=B3&Id=1096268