The Malaysian share market stays above 1,200 from a trough of 836 in mid-March 2009. Yet foreign investors had barely made their presence felt during the run-up. This has been often cited as one of the key reasons why our local market had been lagging its regional peers.
Foreign participation as a percentage of total trading value on the Malaysian stock exchange has dropped from 42% in 2008 to 25% in 2009 indicating inactive foreign participation. Foreign brokers’ market share is declining. Of the six licensed foreign brokers in Malaysia, only three appeared inside the top 15 brokers’ ranking with a combined market share of 11% of total trading value for 2009 versus a 22% market share in 2008. Foreign ownership stands at 21% of overall market capitalization as of September 2009 – the lowest in five years.
There are two key reasons why foreign investors are underweighting Malaysia as an investment destination in recent years. Even though the domestic market price-to-earnings (P/E) earnings is excessively demanding by historical standards, viewed together with slower earnings growth prospects and less appealing relative its peers in the region.
The relatively small size of Malaysian bourse as measured by market capitalization and its low turnover velocity of 39% versus other regional exchanges caused out market to be marginalized as international fund managers could afford to give Malaysia a miss with minimal risk of broad portfolio under-performance.
Hence, it is no surprise that Malaysia is very much been seen as a defensive low-beta market.
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