Foreign Shareholdings in Malaysia

Rising redemption, rising recessionary threat, risk aversion in emerging economies and cloudy political environment are among common factors cited why the sell-down in the KLCI will continue for the foreseeable future.

Foreign shareholding falls to 18% from a high of almost 30% as at end 2007. A closer look at the foreign shareholding profile of companies is becoming latest tool to gauge potential selling pressure ahead. Stocks, which still have more than 30% foreign shareholdings are Alliance Financial Group, AMMB, Bumiputra-Commerce, Genting, IJM, Public Bank, SP Setia and Top Glove – and all these names are among the constituencies of the KLCI major.

On the other hand, the local shareholding, government and government-related in particular, is rising. EPF shareholdings in AirAsia, Alliance Financial Group, AMMB, Bumi-Commerce, Dialog, IJM, Media Prima, Sime Darby, TMI, YTL, is showing an uptrend sign. Shareholding of government-liked investment companies (GLICs) stands at an average 39% from 30% in early 2008. So far, the GLICs collectively owns more than 50% of KLCCP (67.8%), Maybank, MISC(80.9%), Proton(70.4%), Sime Darby(64%), TM, Tenaga(65.7%), TMI(65.8%) and UMW(74.1%). This could be one of the key reasons for its relative out-performance of these stocks, except for Protn and TMI.

Some 40-50% has been erased from the share prices of blue chips with high foreign shareholdings such as Gamuda Bhd, SP Setia Bhd and AirAsia (M) Bhd. The valuations of Genting Bhd and its subsidiary Resorts World Bhd have dropped to levels below the level it fell to when the SARS outbreak had hit the region. The list of worst performers includes sectors sensitive to the new political realities such as construction (Malaysian Resources Corporation Bhd, Gamuda and IJM Corporation Bhd), property (UM Land Bhd and SP Setia) and the stock market (Bursa Malaysia Bhd).

Many foreign investors that were heavily overweight on Malaysia earlier in the year due to the country's large exposure to commodities were caught by surprise by the quick turn of events post- general election on Mar 8. The sharp market plunge on the first trading day after the election when circuit breakers were triggered for the first time ever after the Kuala Lumpur Composite Index (KLCI) fell 10% did not allow for a quick exit by foreign investors.

It could take a lot longer for foreign investors to unwind fully their exposure in Malaysia. In the previous peak in 1996, it took four years before foreign shareholding in Malaysia bottomed out.