STOCKS on Bursa Malaysia had their best quarter for the year during the July-Sept period, brushing aside concerns of record oil prices and slower economic growth.
Rising by 4.4% during that time and posting its first quarterly gain for the year, the KL Composite Index's (KLCI) performance had much to do with the switch from the ringgit peg to the US dollar to a managed float, said analysts.
The KLCI is up 2.2% from the end of last year to the end of September 2005.
The removal of the ringgit peg in July lifted the sentiment surrounding stocks, which were already on the way up following the huge slump during the share financing fiasco.
The market reached a multi-year high on Aug 3 when it peaked at 952.59.
Heavyweight stocks on the KLCI put on a good show following the shift in the ringgit's policy but much of that momentum was lost following a dismal quarterly reporting season in August.
“It was disappointing for the market to lose such momentum but at the same time, it is encouraging to see acquisitions taking off for companies on Bursa Malaysia.
“Next year is just a quarter away, so people will be looking ahead rather than in the rear view mirror,'' said an analyst with a local broking firm.
The resilience of the market was somewhat tested during the final weeks of the quarter when three global investment firms downgraded Malaysia on valuation or economic reasons but rotational interest among blue chip stocks managed to keep the CI firmly above the 900-point level.
The biggest gainer from end-Dec 2004 to the end of September 2005 was MISC Bhd. Buoyant demand for liquefied natural gas and expectations of a much bigger tanker fleet, along with the company's foray into the floating production, storage and offloading (FPSO) business, has kept the stock sailing high during the course of the year.
Insurance company LPI Capital Bhd was the second largest gainer in terms of quantum as the stock has chalked up impressive profit levels and dividend rates to grab the interest of investors.
But in terms of percentages, smaller companies such as Yikon Corp Bhd and Intan Utilities Bhd were the biggest winners, rising 202% and 142% from the end of December 2004. Speculative interest also led to stocks such as TH Hin Corp Bhd and Setron (M) Bhd chalking up huge gains for the same period.
For companies listed on the Mesdaq market, UBS Corp and Grand-Flo Solution Bhd came out tops. The list of stocks, however, does not capture some of the better performing Mesdaq stocks of late such as Green Packet Bhd and Carotech Bhd, as those companies were listed during 2005.
In the losers column, The Ayer Molek Rubber Co Bhd fell the most, dropping RM8.20 to RM20.30 during that period.
This was followed by British American Tobacco (M) Bhd, which shed RM7.75 to RM38 on concerns on the impact of lower cigarette consumption and higher taxes on the company's profit.
For the second board, the biggest loser in absolute amount was Lebar Daun Bhd, which dropped RM2.01 to RM4.94. M3nergy Bhd lost about half of its value to RM1.61.
While the newly listed Mesdaq stocks are now the flavour of the day, AKN Messaging Technologies Bhd lost nearly 70% of its value or RM1.25 to 56.5sen. Fast Track Solution Holdings Bhd dropped 62.5 sen over the nine months to 21.5 sen.
The biggest percentage loser across all boards on Bursa Malaysia has to be Fountain View Development Bhd, which lost a staggering 92% during the end Dec 2004 to end Sept 2005 period.
While the KLCI has been holding above the 900-point level, analysts note that the market is increasingly becoming a stock pickers' one.
“There are a handful of stocks that have performed marvellously during the third quarter, and such performances validate that stock picking is the way to go in the immediate term,'' said an analyst.
Apart from Green Packet and Carotech, Pantai Holdings Bhd is a fine example of the right stock pick. Pantai's share price jumped 91% in the third quarter alone while the stock is up 108% since the end of December last year.
Apart from improved financial results and expectations of a big jump in earnings going forward, Pantai shares have also been lifted with the entry of a new controlling shareholder - Singapore's Parkway Holdings Bhd.
With acquisition activities and growth companies catching the eyes of investors, hopes for a broad market lift off would have be looked from a wider perspective.
The broad market at the end of September is considered expensive on a regional basis.
The KLCI is trading at a forward price to earnings ratio of 15.72 times, which is the highest among the major markets in South East Asia.
Singapore's Straits Times Index is at 14.85 times, Jakarta's Composite Index is at 12.12 times and Bangkok's SET Index is trading at 10.9 times forward earnings.
On a dividend yield basis, Singapore's Straits Times Index is slightly higher than what is being offered by stocks on the KLCI. The KLCI's dividend yield of 4.2% is nonetheless among the highest in Asia.
With inflation and price increases being a dominating issue during the past quarter, analysts wonder whether local retail investors would put their money to work instead of maintaining their ongoing preference of keeping their money in banks even with negative real interest rates.
They say the average dividend yield rate of the KLCI stocks was still slightly higher than the inflation rate and they also point out that stocks is one asset class that adjusts for inflation.
“It may be that retail investors prefer not to lose their money in stocks,'' said one analyst.