Bitter pill: Why are foreign funds shying away from Bursa Malaysia?

Letter to Editor

THE FBM KLCI was around 1,300 points during the 1993 Bull Run and now the benchmark index still hovers in the 1,450-1,500 points region some 29 years later when one would expect it to “have easily exceeded 2.500 points)”.

Valuation-wise, Bursa Malaysia is now trading at a discount to its historical average due partly to net ouflows from foreign and local institutions pushing feeder funds that has drained liquidity from the local market.

Meanwhile, the Indonesia’s equity market benchmark – the Jakarta Stock Exchange Composite Index – has spiked by 600% in US dollar terms over the same period, hence posing the question what has gone wrong with our local bourse?

A myriad of factors – lack of quality listing, inability to hedge currency risk, and foreign investors’ lack of believe in the country in terms of business and political navigation.

Based on my conversations with Amar Gill who was one of the youngest chartered financial analyst (CFA) in the country and former country head at Credit Lyonnaise who is now the managing director and APAC head of investment stewardship for BlackRock in Hong Kong, a few measures can be taken to arrest this very critical situation.

He based his assessment on what transpired in Hong Kong around two months ago during which there was an international meeting of fund managers and analysts which attracted astronomical interests within the Hong Kong capital markets.

One of the low hanging fruit to address this anomaly in Bursa Malaysia is to catapult Malaysia as one of the main destinations of international fund managers meetings immediately.

The new government in Putrajaya could be the catalyst for a change in the perception of the local bourse and more broadly, that of the country’s financial markets. This could spark interest and attract attention towards Bursa Malaysia. If our story of the domestic capital markets is well narrated, the FBM KLCI will go scale new heights with fresh inflows.

We also need to have more quality listings on the local bourse along with the reporting of quality listings be made international.

Closer engagement with foreign investment houses in Malaysia such as JP Morgan and Goldman Sachs is crucial to be ahead of the curve when deciphering the investment patterns of their headquarters. – Dec 16, 2022


Ranjit Singh
Kuala Lumpur


Ranjit Singh is an associate director in Atreus Consulting, a firm specialising in corporate strategy. He was also a former corporate monitoring manager at the Minority Shareholders Watch Group (MSWG).

The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.

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