Wednesday, 30 March 2016

Bursa: world's longest bull market

Article from Bloomberg: "World's Longest Bull Market Endures Turmoil as Foreigners Return"

Some snippets in italics, with comments by me:

"Malaysia’s energy exports are tumbling, its prime minister is battling corruption allegations and corporate profits are weakening. With all that, the Southeast Asian nation is also home to the world’s most resilient bull market for stocks."

I have written before about the weakening corporate profits.

"Sentiment remains stubbornly buoyant in Malaysia, home to some of the region’s highest dividends, as the country’s $166 billion pension fund underpins demand for equities with share purchases. Even after the FTSE Bursa Malaysia KLCI Index climbed 12 percent from a three-year low in August, it trades near the cheapest relative to global equities in almost a decade."

To sum up:
  • Corporate earnings of the 30 Bursa heavyweights have been disappointing since 2012
  • Dividends are some of the region highest
  • The KLCI index has steadily climbed without a 20% correction
  • And P/B ratio is one of the cheapest in the world, having come down from about 1.4 (in 2012) to about 0.8 (currently), relatively speaking

"... the country’s $166 billion pension fund underpins demand for equities with share purchases"

“Malaysia’s bull-market run is primarily driven by institutional support, especially government-linked funds,” said Tan. From 2008 till now, the Employees Provident Fund has seen strong inflows, with assets growing by a compounded annual growth rate of almost 10 percent, he said.

This (the support by government linked funds) sounds all quite artificial, there is clearly a lot riding on the performance of Bursa, but the question is if it is sustainable in the long term.

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