The Edge Economic Forum Malaysian bourse’s returns still decent

[Cals]

The Edge Economic Forum Malaysian bourse’s returns still decent
Business & Markets 2014
Written by Levina Lim of theedgemalaysia.com
Monday, 10 March 2014 09:57

KUALA LUMPUR: Valuations on the Malaysian stock market may be slightly expensive, but returns are decent due to its superior risk-adjusted returns and lower volatility, according to Lim Suet Ling, chief executive officer of UOB Asset Management (Malaysia) Bhd.

“The Malaysian market has low volatility compared to the rest in the region. From a risk-reward perspective, our market gives quite a decent return,” she said at The Edge Economics Forum.

“Although the Malaysian stock market is at the higher end of the price-earnings ratio (PER), Malaysia offers superior risk-adjusted returns and lower volatility,” Lim said.

“We expect a slowdown in the first half of 2014, because of the pulling back of the QE [quantitative easing] and uncertainty [as the government pushes through with fiscal consolidation], but hopefully momentum will gather pace in the second half of the year.

“We will have some volatility in the short term, but the momentum from the Economics Transformation Programme will continue to keep us going forward. Our corporate activities here are still buzzing, especially in oil and gas,” she said.

According to Lim, stock picking is recommended as the PER is leaning towards the expensive end. “Our PER is currently 16 times, which is slightly above its historical mean, so a little bit on the expensive side,” she said.

Going forward, she said corporate earnings must improve for stocks to improve. “We need earnings from companies to catch up. We are hopeful of seeing positive numbers coming up from our companies in Malaysia.”

Lim was less concerned about a significant sell-off in the Malaysian stock market due to capital outflow, compared with its Asean peers.

“A huge sell-off in Malaysian equities is unlikely unless it is a local selldown. Foreigners own a smaller share in the stock market,” she explained.


This article first appeared in The Edge Financial Daily, on March 10, 2014.