GLCs Under Fire? (A Most Important Posting)

Savvy market watchers would have noticed a quite deliberate sell down in GLCs and related counters. Yes, markets are depressed, yes... foreign funds are doing another selling wave. But isn't it a bit out of the ordinary to see GLCs being sold down persistently?





The ones being hammered: Sime Darby (understandably), but others are getting whacked as well, Petronas Chemical, Axiata, MRCB, UEM Land, CIMB, AirAsia (new link up now can be considered as related GLC counter), ... even Kencana, IJM, SP Setia ...


Coffee shop talk would have you believe that it could be an aggregation of various factors:


1) Unpalatable corporate governance issues


2) Cashing up owing to upcoming elections


3) Downgrades in property and oil and gas sectors





Foreign funds vote with their shares. Recent corporate governance issues have been very unpalatable. Some even say that certain parties are trying to push through certain deals prior to the elections, at all costs. Besides the Sime Darby-E&O deal, the AirAsia-MAS deal was a sour note ... not many mainstream media or analysts dared to mention that CIMB was advising both parties??!! What kind of crap is that? Its like a court case where the prosecutor and defending lawyer are from the same firm. Please show me ONE other case in global corporate M&A transactions whereby one investment bank advises both sides.


You'd think there would be more support from local funds, in fact PNB and EPF have been having to up their stakes in indexed stocks over the last 3 years owing to lessening participation of other investing groups (private and foreign investors alike). Take any of the top 20 indexed stocks and mark out how much Khazanah, EPF and PNB collectively hold.


That IS NOT A GOOD THING!!! A vibrant, liquid and transparent exchange is needed for it to fulfil a proper capital markets' objectives. It has now come to a stage whereby local funds control the index ... the flip side is local funds are buying because NOBODY else wants to buy.





Indonesia used to be way behind us in terms of stock market attractiveness, market capitalisation, liquidity, transparency issues .... Now Indonesia has overtaken us on ALL counts, yes, their total market capitalisation is bigger than ours now.


The stranger thing is that the Indonesian market have a very very low participation rate by their local funds. They do not have their PNBs or EPFs ... this is all the more glaring when you line up our markets. 


15 years ago it would have been HK, Malaysia, Singapore, Thailand, Indonesia, Vietnam, Sri Lanka... in that order of attractiveness to investors
5 years ago it would have been HK, Singapore, Thailand, Malaysia, Indonesia, Vietnam, Sri Lanka
Now, its HK, Singapore, Indonesia, Thailand, Malaysia, Vietnam, Sri Lanka ...
I believe 3-5 years from now, if left unchecked ... it would be HK, Indonesia, Singapore, Thailand, Vietnam, Sri Lanka, Malaysia 


We all know the reasons why, I can highlight all those reasons, even those on both sides of the fence know why .... well... do we know where we are headed if we continue this way? If you do, are you doing anything about it?