Malaysian market catching up with regional peers

 KUALA LUMPUR: The local stock market could have a few catalysts going for it in the second half of this year that may push it to catch up with the rest of the region

“We are still bullish on the stock market. The market has gone up by some 7% in the year to date in ringgit terms while in dollar terms it is up by about 12%.

“But when compared to the region, most of the markets in the region have gone up even faster, especially emerging markets, which have gone up by 23%,” CIMB Principal Asset Management Bhd chief investment officer Patrick Chang told StarBiz recently.

“We have been lagging (behind) in the last couple of months.

“What I’m hopeful of is a few catalysts such as second quarter numbers that hopefully will be better than the first quarter numbers. This will give some impetus for both foreign and local funds to put money back into the Malaysian market,” he said.

Chang also said that other catalysts included new contracts that could be announced under the One Belt One Road initiative such as the East Coast Rail Link.

“This will be a major catalyst as well for the construction sector,” he said.

He noted that one of the major sectors that it was overweight on is in the e-commerce and the logistics sector because retail e commerce sales as a percentage of total retail sales is only at 1% at present.

“This is low when compared to China which is at about 18% while some of the neighboring countries such as Singapore is at 2%.

“There are many effects from the rise in e commerce. Whether it will be the first or last mile or whether it will be in logistics companies, they will continue to do very well,” he said.

Chang is also “overweight” on the tourism industry due to the increased arrivals of tourists from China and this could be a major catalyst for some of the companies which are involved in this sector.

Moving forward, he said that the Malaysian market may eventually catch up with the gains seen in the rest of the region as money would eventually need to find a home.

“If the catalysts I mentioned materialise then it may happen.

“The MSCI emerging markets are up by more than 20% now while we are up by some 13%. In the month to date MSCI EM is up 5% while Malaysia is flat. People are just waiting for catalysts,” he said

He said that historically, Malaysia has never been a cheap market due to trapped liquidity in the country, which will always cause valuations to be higher.

The Malaysian market, represented by the benchmark FTSE Bursa Malaysia KL Composite Index, is presently trading at close to 16 times historical earnings.