Why do some stock markets outperform while others struggle? We have asked this question before to explain why Bursa Malaysia — and, to a lesser extent, the Singapore Exchange (SGX:S68
) (SGX) — have been chronic underperformers. The FBM Kuala Lumpur Composite Index (KLCI) Total Return Index (including dividends) has gained a meagre 1% compound annual return in the past 10 years while the FBM KLCI itself has fallen a hefty 22.1%. The returns are far worse than simply leaving your money in risk-free bank fixed deposits.
The Straits Times Index (STI )Total Return Index fared slightly better, gaining 3.7% annually over the same period. But this is still a far cry compared with the US market. The Standard & Poor’s 500 (S&P 500) Total Return Index delivered a robust compound annual return of 11.6% over the same period (see Table 1). Over such a long period, even a small percentage change in returns will make a huge difference to one’s investments. Clearly, a consistently underperforming Bursa is a big problem. A poorly performing stock market cannot attract capital — local and foreign — and investments to support the country’s economic activities.
