Can the Bull Survive?
February 2008
The Bull remained alive and kicking in Malaysian equities as it entered 2008, with the Kuala Lumpur Composite Index (KLCI) breaching the historic barrier of 1,500 points in January before consolidating downwards as nervous investors spooked by US recession fears and lingering subprime woes took profit.
The new milestone was set in the wake of a record-breaking 2007, which saw the KLCI posting a second straight year of double-digit gains and its biggest annual rise since 1999. The index gained 31.8% for the year, while total market capitalisation rose to a record RM1.1 trillion (£0.17 trillion) as of the end of December, up from RM850bn (£133.1bn) a year ago.
Plantation companies were the flavour of the year, riding on the oil palm boom which spurred crude palm oil (CPO) prices to gains of over 50% for 2007. The world's largest palm oil plantation company, Sime Darby Bhd, ended 2007 as the largest listed entity with a market cap of RM71.5bn (£11.2bn).
Traditional heavyweights Telekom Malaysia Berhad (communications behemoth), Malayan Banking Bhd (Malaysia's largest bank) and Tenaga Nasional Bhd (the national power company), however, underperformed the market.
The market punished suspect corporate ethics: Transmile Group lost 81% for the year and erased about RM3.3bn in market cap following allegations of a substantial accounting fraud.
Going forward into 2008, the prevailing mood is one of cautious optimism. Positive drivers for equities include strong domestic expansion, high commodity prices, election fever, the strengthening ringgit and decent dividend yields, but these are leavened by slowing exports, regional and local asset inflation and US weakness.
The Bull remained alive and kicking in Malaysian equities as it entered 2008, with the Kuala Lumpur Composite Index (KLCI) breaching the historic barrier of 1,500 points in January before consolidating downwards as nervous investors spooked by US recession fears and lingering subprime woes took profit.
The new milestone was set in the wake of a record-breaking 2007, which saw the KLCI posting a second straight year of double-digit gains and its biggest annual rise since 1999. The index gained 31.8% for the year, while total market capitalisation rose to a record RM1.1 trillion (£0.17 trillion) as of the end of December, up from RM850bn (£133.1bn) a year ago.
Plantation companies were the flavour of the year, riding on the oil palm boom which spurred crude palm oil (CPO) prices to gains of over 50% for 2007. The world's largest palm oil plantation company, Sime Darby Bhd, ended 2007 as the largest listed entity with a market cap of RM71.5bn (£11.2bn).
Traditional heavyweights Telekom Malaysia Berhad (communications behemoth), Malayan Banking Bhd (Malaysia's largest bank) and Tenaga Nasional Bhd (the national power company), however, underperformed the market.
The market punished suspect corporate ethics: Transmile Group lost 81% for the year and erased about RM3.3bn in market cap following allegations of a substantial accounting fraud.
Going forward into 2008, the prevailing mood is one of cautious optimism. Positive drivers for equities include strong domestic expansion, high commodity prices, election fever, the strengthening ringgit and decent dividend yields, but these are leavened by slowing exports, regional and local asset inflation and US weakness.
posted by Toyers at
1:33 AM
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