PETALING JAYA: Bursa Malaysia’s FBM KLCI is appealing amid the current global uncertainties as its earnings have been resilient and shareholder backing is solid.
Maybank Investment Bank Malaysia head of research Anand Pathmakanthan said that over the last two years, the index has been criticised as it is an old-economy index with 30% banks, 25% commodities and mostly plantations, and a lot of telcos and utilities.
“But now, we find investors embracing this because these may not be very sexy businesses in terms of growth profile, but they are dependable businesses. The cash flows are solid, the balance sheets are solid, and there’s visibility on the earnings, cash flows and also dividends. That’s a big reason why investors have gravitated to markets like Malaysia in this very uncertain times, globally, because you have that dependency,” he said at the Bursa Malaysia-Maybank Sectorial Series: ‘Why Malaysia?’ virtual seminar today.
Additionally, many government major investment companies including Khazanah Nasional Bhd, Permodalan Nasional Bhd (PNB), Retirement Fund Inc (KWAP) and the Employees Provident Fund (EPF) invest in local stocks, and have been Bursa’s loyal and dependable partners for a long time.
The index has not been completely static because of recent entrants like Inari Amertron Bhd in the technology space.
“It’s not been a great year for technology in Malaysia, but I think if you look five years down the road, you’ll see greater tech representation in this index as well and making it a bit more robust and balanced,” Anand said.
Meanwhile, KWAP CEO Nik Amlizan Mohamed said Malaysia is a well diversified economy and is currently the fastest growing economy in the world, with 8.9% growth in the second quarter.
“Malaysia is an exceptionally rich nation. We have crude palm oil, we have gas, electrical and electronics which accounts for more than a third of our exports and we have gloves although going through some challenges currently, as well our talents that are well regarded globally.”
As for what the country can improve, she mentioned investing to attract foreign direct investment and making the process easier.
EPF CEO Datuk Seri Amir Hamzah Azizan said: “This year we are increasing our allocation into equities in Malaysia not only for large cap but also for mid and small caps. In the private equity space EPF has allocated about a billion ringgit to prompt the growth in the sector, because we need a much more robust engine that ultimately will also feed Bursa.”
PNB Private & Strategic Investments CIO Rick Ramli said investing in governance and stewardship will also make Malaysia more compelling. “We need to have policy continuity so investors understand where Malaysia is heading. We (Malaysia) have a lot of plans, but the question is, is there continuity around the plan?”