Know Your Battle Arena First
Bursa Malaysia is the stock market of Malaysia. It is also one of the most active stock markets in Southeast Asia, with about 900 listed companies on the exchange. The total market capitalization of all the listed securities on Bursa Malaysia is more than RM1.8 trillion. The daily average value traded on the exchange can range between RM2.0 to RM3.5 billion. Thus, it shows that Bursa Malaysia (BURSA 10.08 +0.08 +0.80%) is a vibrant exchange with tons of action.
The exchange is tracked by the Kuala Lumpur Composite Index (KLCI), which consists of 30 of the largest companies listed on the main board of Bursa Malaysia. Some of the constituent stocks of the index include:
- AMMB Holdings Bhd (AMBANK 5.00 -0.01 -0.20%)
- Astro Malaysia Holdings Bhd (ASTRO 2.53 -0.03 -1.17%)
- Digi.com Bhd (DIGI 4.74 -0.05 -1.04%)
- IHH Healthcare (IHH 5.96 +0.01 +0.17%)
- Malayan Banking (MAYBANK 9.62 -0.02 -0.21%)
- Tenaga Nasional (TENAGA 14.08 -0.04 -0.28%)
Source: FTSE Russell Bursa Malaysia KLCI Factsheet
Why Should You Invest On Bursa Malaysia?
Bursa Malaysia is home to some of the largest company globally in specific industries. For example, IHH Healthcare Bhd is the second-largest healthcare company in the world, with hospitals in many markets such as Malaysia, Singapore, Turkey, and India.
More interestingly, Bursa Malaysia is one of the few exchanges in the world where you would be able to invest in listed subsidiaries of large multi-national companies. Companies such as Carlsberg A/S, Heineken N.V., and British American Tobacco all have their regional subsidiaries listed on Bursa Malaysia. Their listed subsidiaries are:
- Carlsberg Brewery Malaysia Bhd (CARLSBG 15.14 -0.02 -0.13%)
- Heineken Malaysia Bhd (HEIM 17.70 -0.04 -0.23%)
- British American Tobacco (M) Bhd (BAT 43.88 +0.28 +0.64%)
This is mainly due to a local regulation in Malaysia which required local entities to have a stake in these businesses. In order to fulfill the local regulation, many multi-national companies have chosen to list their subsidiaries on the exchange, giving investors unique opportunities to invest in these companies. These companies offer an interesting prospect for income investors as most of them are companies that generate strong free cash flow and provides a high dividend for investors.
Secondly, Malaysia has a very vibrant economy which depends not just on an export driven model. Its demand from its domestic consumers has also created many great companies listed on the exchange. Exporters like Top Glove Corporation Berhad (TOPGLOV 5.70 +0.02 +0.35%) and Hartalega Holdings Berhad (HARTA 6.80 +0.04 +0.59%) are among the top rubber glove producers in the world.
Bursa Malaysia also houses successful domestic brands such as Padini Holdings Bhd (PADINI 3.76 -0.08 -2.08%) and Bonia Corporation Bhd (BONIA 0.59 +0.01 +0.85%) which have made their name not only in Malaysia but also in the oversea markets.
The exchange is also a forward-looking exchange. It has implemented many new initiatives that use technology to improve the experience of investors. The Bursa Market Place is one such initiative which allows investors to learn more about investing and companies within the exchange. The exchange also uses social media like Youtube to engage in the new generation of investors.
What Do Investors Need To Take Note Of?
For any foreign investors, currency risk is a key factor to consider before you invest in the exchange. Unlike the Singapore Stock Exchange or the Hong Kong Stock Exchange, Bursa Malaysia is still an exchange located in a developing nation. Like most developing nations, its currency could fluctuate quite unpredictably from time to time. For an international investor, that might be a risk to take note of.
However, for a Malaysia-based investor, investing within Bursa Malaysia could be a strategy to hedge against any currency devaluation. This is because some companies within the exchange might can either:
- Rise prices as inflation increase
- Benefit from weakening Ringgit as they are in the export business.
On top of that, investors would need to worry about market manipulation activities within the exchange. Similar to our concerns with both Singapore Stock Exchange or the Hong Kong Stock Exchange, Bursa Malaysia has also seen its fair share of manipulative activities on the exchange. Even reputable brokerage such as Macquarie has been caught for manipulating stock prices on Bursa Malaysia.
We feel that these kinds of activities are unavoidable and can be found in almost all exchanges. However, as long as we are able to learn to identify these illegal activities and distance ourselves from them in the market, we would be less likely to fall into the manipulators’ trap.
Bursa Malaysia offers some great domestic companies with great potential of going global for investors. Income investors might benefit from exploring listed subsidiaries of multi-national companies listed here on Bursa Malaysia as well.
However, the Ringgit will continue to be a risk for international investors. Other than that, Bursa Malaysia has seen their fair share of illegal activities such as market manipulation happening on the exchange. Investors interested in this exchange would need to know how to protect yourself against such risks.