Value Up needs bigger buy-in

WHILE stressing that companies selected under the new MY Value Up initiative could improve investor confidence by adopting more transparent corporate practices and greater accountability, market observers believe quicker impact could be achieved if the government puts more skin in the game.

As the reported list of 88 companies in the programme has yet to be officially released, analysts advise investors to take careful note in identifying firms with strong operating fundamentals whose intrinsic value has yet to be fully recognised by the market.

Mohd Sedek Jantan, investment strategist at IPP Global Wealth, notably points out that listed companies, particularly in the property, construction and industrial sectors, continue to trade at a valuation discount relative to many regional peers.

“A number of fundamentally sound companies are still valued below one time book value or at relatively modest earnings multiples despite maintaining resilient earnings, healthy balance sheets and visible long-term growth drivers,” he tells StarBiz 7.

Crucially, he opines that this suggests the valuation gap is driven not only by financial performance, but also by investor perceptions of governance, capital allocation and long-term value creation.

Mohd Sedek adds: “For example, several property developers continue to trade below book value despite resilient demand and ongoing value-unlocking initiatives, while the construction sector recorded an 8.5% year-on-year increase in work done during the first quarter of 2026, supported by a robust pipeline of infrastructure and data centre projects.”

As such, he says the MY Value Up initiative should not be viewed as a programme to lift share prices, but rather as an effort to lower companies’ cost of equity. The cost of equity is the rate of return shareholders expect in exchange for investing in a company’s stock.

From the company’s perspective, it represents the return that equity-financed investments must generate to satisfy shareholders and support the company’s valuation.

“When investors have greater confidence in management, governance and capital allocation, they demand a lower risk premium. This translates into higher valuations, better access to capital and ultimately a lower cost of funding for future expansion,” explains Mohd Sedek.

The strategist notes that this was also the key lesson from Japan, South Korea and, more recently, Taiwan. Although their respective “Value Up” programmes were introduced to address valuation discounts, their more lasting impact was a change in corporate behaviour.

He says companies in these countries became more disciplined in capital allocation, more transparent in communicating long-term strategies and more accountable to shareholders.

“As investor confidence improved, valuations followed,” he says.

In that context, Mohd Sedek highlights that across the property, construction and industrial sectors, these are companies with resilient earnings, healthy cash flows, valuable assets, visible order books or recurring income streams that can further unlock shareholder value through more disciplined capital allocation, asset monetisation, stronger investor engagement and clearer long-term execution.

“Ultimately, valuation is the outcome, not the objective. If MY Value Up succeeds in improving corporate governance, capital discipline and investor confidence, as we have seen in Japan, South Korea and Taiwan, the narrowing of Malaysia’s valuation discount will follow naturally over time,” he says.

Another analyst with a foreign brokerage observes that Taiwan’s Taiex reached successive record highs in 2024 and through 2026, making it one of Asia’s best-performing major equity markets, following the launch of its own Value Up plan in 2024, which was actively promoted last year.

Interestingly, however, she notes that while the programme coincided with a very strong period for the Taiwan stock market, it was not the sole driver.

“The dominant force behind the rally was artificial intelligence (AI). Companies such as Taiwan Semiconductor Manufacturing Co, Quanta Computer, Wistron and Inventec benefitted enormously from AI server demand and Nvidia-related supply-chain orders.

“Taiwan’s Value Up programme’s direct, isolated impact is hard to quantify precisely because it coincided with a massive AI- and semiconductor-driven bull market,” she says.

Meanwhile, Rakuten Trade head of equity sales Vincent Lau believes that while MY Value Up is a laudable initiative, more needs to be done, especially by government-linked investment companies (GLICs), to take the lead and generate a stronger response from investors.

Pointing to the construction and semiconductor sectors as areas with further growth potential, he tells StarBiz 7 that GLICs such as the Employees Provident Fund could play a more direct role by allocating additional funds to companies they deem suitable, particularly among the mid- and small-cap segments.

“We believe this would not only encourage other local institutional and retail investors to become more active in the market, but also generate more interest among foreign investors as well,” he says.

In the same context, Mohd Sedek acknowledges that initial market reaction to MY Value Up has been relatively muted, with stocks yet to see a meaningful broad-based re-rating or a sustained increase in trading volumes since the guidebook was launched in June.

“Investor sentiment has become more constructive, but the market remains in a wait-and-see mode as companies have yet to publish their Value Up plans.

“That said, it is also difficult to isolate the programme’s immediate impact because its launch coincided with heightened geopolitical uncertainty following the renewed US-Iran conflict. Rising energy prices and increased global market volatility have dominated investor sentiment in recent weeks,” he reckons.

As a small and open economy, he says Malaysia’s equity market remains highly sensitive to external developments, which may temporarily overshadow the positive structural reforms introduced under MY Value Up.

Looking ahead, Mohd Sedek believes the MY Value Up initiative is more likely to influence the FBM KLCI over the medium term rather than in the immediate aftermath of the guidebook’s release.

If the 88 targeted companies deliver credible Value Up plans and demonstrate tangible improvements in capital allocation and shareholder returns, he believes this could support a gradual re-rating of the large-cap segment and provide a structural lift to the benchmark index.

“Similarly, I do not expect an immediate change in Malaysia’s MSCI weighting. MSCI allocations are driven primarily by free-float market capitalisation and liquidity.

“However, if MY Value Up succeeds in improving market valuations, increasing liquidity and attracting sustained foreign institutional inflows, Malaysia’s relative weighting within the MSCI indices could improve over time,” says Mohd Sedek.