2010 : Is it a good year for Malaysian stock market?

 A good year for Malaysian stocks - benchmark index up 19%

Plantations, banks and utilities the key market drivers

PETALING JAYA: Bursa Malaysia have had a good year in 2010 despite some volatility experienced in the early months mainly due to concerns over China's credit-tightening policy and deficit worries in the eurozone.

The benchmark 30-stock FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) ended the year up 19.06% largely due to a variety of factors including inflow of hot money, stable economic growth and corporate manoeuvres in the shape of privatisations and mergers and acquisitions (M&As).

The index reached its peak at 1,532 and its highest close this year was on Nov 10 at 1,528.

A broker said plantations, banks and utilities were the key index drivers, with oil and gas counters beginning to see some promise towards the year-end.

Market observers told StarBiz that the credit-tightening policy in China, instituted by Beijing over concerns of asset bubbles and rising inflation, impacted markets worldwide in January.

The worries over sovereign credit-worthiness among periphery members of the eurozone stemming from Greece's near-default again led to another volatile period of trading in May.

TA Securities Holdings Bhd technical manager Stephen Soo told StarBiz that the market consolidated in the first-half of the year and only managed a break-out on Aug 17 at the 1,370-mark.

Before that, he said, the index was trading at between 1,300 and 1,350.

“A strengthening ringgit and a 10th Malaysia Plan rally also helped support the market,” Soo said, adding that Japan's and the US quantitative-easing policy also helped boost markets.

He said the liberalisation of the ringgit also created positive sentiments, which helped boost the currency. The ringgit, as well as most currencies of emerging economies, ended the year stronger against the greenback and the euro.

Soo said the wave of privatisations led by companies under T. Ananda Krishnan Measat Global Bhd and Tanjong plc followed by a wave of M&As, notably of UEM Land Holdings Bhd and Sunrise Bhd, Sunway Holdings Bhd and Sunway City Bhd and the now-aborted Malaysian Resources Corp Bhd and IJM Land Bhd, also created interest in the local market.

The market was also buoyed by the offers to take over PLUS Expressways Bhd. There are now two competing offers to buy out PLUS one by the Employees Provident Fund and UEM Group Bhd and the other by an unknown company, Jelas Ulung Sdn Bhd. The saga is ongoing considering that both parties have to submit a RM50mil deposit and details of how they are going to fund their bid by Jan 10, 2011.

Maybank Investment Bank Bhd retail research head Lee Cheng Hooi, preferring to be cautiously optimistic, said market fundamentals were a mixed bag, coming as it did from a low base in 2009.

For him, the quantitative-easing policy was a key factor, as this policy then shifted investor focus to emerging Asia where growth appeared to be stable compared with the developed markets.

“External factors didn't make a significant impact until the year-end but I've to say that it has been a good year. Some of our clients have made 100% gains,” Lee said.

He said the anticipation created by the hype around the Economic Transformation Programme drove stocks which might not necessarily be based on fundamentals.

“Investors are buying in anticipation when many details have not been worked out yet,” Lee said.

Meanwhile, the co-head of institutional equities at a Kuala Lumpur-based brokerage said the year had turned out to be a good one despite initial misgivings.

“The liquidity flow issue has helped a lot in terms of activity and as a small market which has fallen off the radar screen of investors, their return may mean that they're seeing value in light of the emerging-market story,” he added.

He picked oil and gas as among the best performers sector-wise, especially in the last months of 2010, while property counters have always seen some play despite the Government's attempt to curb prices by instituting tougher loan measures.

He added that plantation stocks actually delivered against the call of most analysts in town.

“2010 has been a good year and most people have nothing much to complain. With sentiment leaning towards a higher market, nobody's telling you when to get out,” he said.