,Bursa Malaysia, lacking excitement, needs a catalyst
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SINCE 2014, the Malaysian stock market appears to be trapped in a curse, looking at how the main blue-chip and small-cap indices have struggled unsuccessfully to scale back to their previous record-high levels.
In contrast, the MSCI World Index and the MSCI Emerging Markets Index have soared to multiple new highs since 2014 with double-digit annual growth for many years.
For years, Bursa Malaysia has been affected by continued foreign fund outflows, especially since the 1Malaysia Development Bhd controversy, worsened by domestic political uncertainties.
New listings on the Main and Ace Markets have also reduced over the past decade. In 2019, prior to the pandemic, only 15 initial public offerings (IPOs) were done on both markets as compared to 29 listings in 2010.
Not only that, mega-IPOs in the past decade have largely failed to impress despite making headlines prior to listing. A classic case would be FGV Holdings Bhd, which was touted as the world’s second-largest IPO in 2012.
The stock has suffered a drastic fall since its listing and has never recovered to its 2012 levels. Currently, it is trading at less than one-third of its IPO price.
Bursa Malaysia has also fared unfavourably when it comes to the listing of foreign companies in the local market. While a handful of China-based companies have been listed in the past decades, many of them have underperformed.
Hence, it is not entirely surprising that the FBM KLCI has recorded negative growth for every year since 2014 with the exception of 2017 and 2020.
Analysts and market observers have constantly highlighted the need for fresh catalysts for the Malaysian stock market to break out of the current “curse”.
Interestingly, the prospects of a general election (GE), at least in the last two to three polls, have been instrumental in creating a rally and pushing up the FBM KLCI above the 1,800-point level.
A popular theory is that the stock market is an important fundraising avenue for election expenses, and hence, the market should rally ahead of the polls. Market chartist and observer Ridzuan Ibrahim says the FBM KLCI has rallied three to five months ahead of the past three GEs.
“Based on the previous trend, the FBM KLCI is capable of moving higher by between 200 and 400 points before each election, with the condition to remain above the 1500-point level as this is a strong support zone, ” he tells StarBizWeek.
The FBM KLCI first broke the 1,800-point level in July 2013, about three months after the 13th GE (GE13). However, it went on a downtrend since mid-2014 and only began to recover in 2017.
The FBM KLCI broke the 1,800-point level once again in January 2018 and just a few weeks ahead of GE14 in May 2018, the index closed at an all-time high of 1,895.18 points.