KUALA LUMPUR: There is a brewing problem in the form of corporate earnings among Malaysian public-listed companies (PLCs).
This has been a concern even before the outbreak of the coronavirus (Covid-19) and the local bourse has come out to say that it is something that needs to be addressed.
Bursa Malaysia chairman Tan Sri Abdul Wahid Omar said between 2015 and 2019, earnings of Malaysian PLCs declined by 5.4%.
He said that over the past five years, the domestic market has been confronted with several challenges, stemming from escalating trade tensions, softer economic growth outlook and lacklustre corporate earnings.
“Will we use this unique period to advance faster or will we go back to the status quo, which brings us to the subject of the importance of PLCs continuing to perform.
“We need to relook and possibly replicate some of the past successes, such as the government-linked company (GLC) Transformation Programme, ” he said in his opening speech yesterday at Invest Malaysia 2020 – Virtual Series 1, themed “Economic Recovery: Policies & Opportunities”.
He added that between 2004 and 2015, many GLCs were transformed into companies with better performance, better governance and enhanced nation-building roles.
This became one of the main topics discussed during a session moderated by Abdul Wahid, which got Khazanah Nasional Bhd managing director Datuk Shahril Ridza Ridzuan saying that declining corporate earnings in Malaysia was quite disappointing as a whole, which he attributed to the lack of focus on what was important.
“I’ve never really been fond of the idea or the term GLC. I think we have to be very careful about what we do as a GLC because most of what we invest in as funds are in perfectly normal corporations which should behave like normal corporations and focus on shareholder returns. That’s hugely important.
“Just talking about where we are with corporate Malaysia, I think basically it’s actually incumbent on the shareholders to work together.
“And Khazanah is working very closely with other government-linked investment companies (GLICs) to address the boards of these companies. We need to drive returns and profitability, ” he said.
Meanwhile, Employees Provident Fund (EPF) chief executive officer Tunku Alizakri Alias said Covid-19 has acted as the “great revealer” for a long-term fund like EPF, as it pointed out assets, companies and types of businesses that will not last and those that do not have strong practices and capabilities.“We take it very positively because in every crisis, there’s always opportunities and I think we can pick up nice stocks that will serve our members very well.
“We still have two more quarters, and hopefully, we’ll be able to see a much better performance, ” he said.
On the selldown by foreign funds and what could be done to attract them back, Shahril, who was also the former CEO of EPF, said market participation was rational and looking at what the corporate earnings were like, it was no surprise that foreign funds were leaving the market.
He said it was down to the fundamentals of corporate earnings, developing resilient companies, making sure they were environmental, social and governance (ESG)-compliant and ensuring companies focused on shareholder returns.
Moving forward, Alizakri said unusual will be the new usual for businesses and from the EPF’s perspective, they will be looking at companies and sectors that accept the new reality, and the fact that any crisis is going to be a norm, so it will be imperative for companies to build up their resilience and infrastructure to ensure long-term sustainability.
“For the type of companies and sectors that actually accord that, that will be the type of investments that EPF will be very interested in.
“So, if any company or management out there thinks that ‘let’s go back to the good old days’, you’re still sleeping, ” Alizakri said.
Retirement Fund Inc (KWAP) CEO Tuan Syed Hamadah Othman said KWAP was positioning itself for 2021, as it believes it will be a good year. The retirement fund is investing RM3bil to RM6bil in the market.
He added that if the FBM KLCI goes beyond 1,600 points in the second half, KWAP will be back on track in terms of its performance.
During an earlier session of the virtual series, Securities Commission (SC) chairman Datuk Syed Zaid Albar said the decision to extend the suspension of short selling of shares by the SC and Bursa Malaysia was to provide market stability.
While there were growing signs of recovery, the regulator felt that it was still very nascent and the market was not completely out of the woods yet, taking into consideration the global and domestic economic situation.
“The decision to extend the suspension until the end of the year is aimed at providing market stability and confidence.
“In this respect, we also account for market conditions to remain volatile, and of course, the re-escalation of the geopolitical tensions, ” he said.