Regardless, the fact is that investors can do better — and we have proven this, emphatically, with the Malaysian Portfolio — through selective stock-picking based on fundamental research. And, sometimes, the market, driven by over-riding bearish sentiment, throws the baby out with the bathwater. In other words, opportunities for diligent investors. For instance, we recently wrote about the sudden collapse in Velesto Energy’s share price, triggered by a slew of negative analyst reports following dismal earnings results. The stock has since rebounded by some 30% from its lows in late February.
Bursa Malaysia has been a chronic underperformer. As we noted last week (“The dichotomy of words and actions on the ringgit”, The Edge Singapore, Issue 1082, April 10), the FBM KLCI is the worst-performing benchmark index in the region, down by about 15% since end-2012 — yes, that’s negative 15% returns over the past decade. The local bourse suffered net foreign portfolio fund outflows in seven of the last 10 years. So far in 2023, foreign fund flows have also been negative.
We have discussed the possible reasons for this poor performance in previous articles, including the falling-stagnant profitability and earnings for Corporate Malaysia due, primarily, to underlying structural weakness in the economy. Perhaps it could also be argued that the FBM KLCI is not the best performance metric. After all, we believe, there is some inherent “flaw” in the way the index is constructed, focusing on the 30 largest stocks based on prevailing market capitalisations.
