Strong Turnaround for Malaysian Markets in 2024
Political Headwinds Give Way to Recovery
In an impressive turnaround, Malaysian equities and the currency recorded their best performances in years during 2024. After overcoming a prolonged period of political instability that left investors uncertain about the nation’s economic policies, the Malaysian financial market has gained significant momentum. Once labeled as “the world’s worst major market” in 2019, the FTSE Bursa Malaysia Composite Index (FBM KLCI) surged by an impressive 12.58%, marking its best annual performance since 2010. This rally saw the market capitalisation of Malaysian stocks surpass the RM2 trillion mark for the first time in May 2024. Key factors driving this performance included robust corporate earnings reports, renewed foreign inflows, and an optimistic outlook for Malaysia’s economy, highlighted by better-than-expected trade data.
Key Contributors to the Market Surge
The strong performance of the market was bolstered by significant contributions from major corporations including YTL Power International Bhd, Tenaga Nasional Bhd, and CIMB Group Holdings Bhd. The FBM KLCI also recorded a higher valuation multiple, standing at 15.7 times forward price-to-earnings ratio (PER), compared to a three-year average of 14.3 times as of the end of December.
Additionally, the Malaysian Ringgit demonstrated significant resilience, appreciating by as much as 11.4% to reach an intra-year high of 4.124 against the US dollar in September, before settling at 4.472 due to slower interest rate cuts in the US. Despite the dip, the currency was still up 2.84% for the year, enhanced by Bank Negara Malaysia’s push for local businesses to repatriate overseas investment income.
Initial Setbacks Resolved
The year began with considerable turbulence, as stocks linked to investor Datuk Dr Yu Kuan Chon saw dramatic declines, including a staggering 95% loss for Rapid Synergy Bhd and an 85% drop for YNH Property Bhd. This turmoil led to tighter margin financing regulations and an initial decline of 11% in the FBM ACE Index. However, the FBM KLCI reflected relative stability, only losing 0.8% during this period. By February, the market had regained its footing, paving the way for an extraordinary year.
Controversial Privatisation of Malaysia Airports Holdings Berhad (MAHB)
A Shifting Landscape for Airport Management
In a significant strategic move, Malaysia Airports Holdings Berhad (MAHB) announced a proposal for privatisation shortly after securing a 35-year extension on its concession to manage the country’s 39 airports. The offer, proposed by a consortium led by Khazanah Nasional Berhad and the Employees Provident Fund (EPF), valued MAHB at RM11 per share.
This prospective deal has sparked controversy, particularly due to the involvement of Global Infrastructure Partners (GIP) and the Abu Dhabi Investment Authority (ADIA). Protests arose over GIP’s connections to BlackRock, with allegations regarding its political affiliations. However, the government has defended the privatisation as a necessary move to unlock MAHB’s full potential.
Divergent Opinions from Independent Directors
On December 21, independent directors of MAHB issued a circular indicating that the RM11 per share offer did not accurately reflect the company’s potential, given its positive financial momentum and growth strategy. This contrasted sharply with the recommendation from Hong Leong Investment Bank, which deemed the offer reasonable due to MAHB’s historical share suppression.
Despite this divergence, the consortium has reiterated its commitment to maintain the RM11 offer, suggesting that the independent directors may not fully appreciate the challenges facing MAHB.
U Mobile’s Role in Malaysia’s 5G Network
Selecting a Lead for 5G Deployment
In November, the Malaysian Communications and Multimedia Commission (MCMC) selected U Mobile Sdn Bhd to spearhead the deployment of Malaysia’s second 5G network, a decision that ignited widespread debate. The selection of U Mobile, a smaller operator compared to others, was justified by MCMC based on its strong track record in the industry.
However, the involvement of Singapore’s state-owned investment firm, Temasek Holdings, which is U Mobile’s largest shareholder with a 48.25% stake, raised concerns about transparency and foreign influence over Malaysia’s telecommunications infrastructure.
Stake Change Sparks Speculation
Following the announcement, there was a flurry of confusion when Temasek declared its intent to reduce its stake in U Mobile to 20% by selling a majority stake to Mawar Setia, a company owned by prominent local figures. The implications of such a transfer – particularly regarding the foreign shareholding cap of 49% in telecommunications – have prompted speculation about the effective control Temasek holds over U Mobile.
Sarawak Pushes for Greater Control of Gas Resources
The State’s Quest for Autonomy
In 2024, Sarawak’s government sought greater control over its gas resources, aiming to appoint Petroleum Sarawak Bhd (Petros) as the aggregator of gas supplies within the state, currently managed by the national oil company, Petroliam Nasional Bhd (Petronas). This push is closely tied to Sarawak’s strategic economic plans to utilize its gas reserves – accounting for 60% of Malaysia’s total – to facilitate affordable energy for local development.
The proposal has incited heated discussions about the implications for Petronas and the broader federal financial landscape, as Petronas contributes significantly to the federal revenue through dividends.
A Government Statement on the Issue
On December 21, Prime Minister Datuk Seri Anwar Ibrahim clarified that the decision-making regarding gas supply and distribution will remain a collaborative effort, without granting Petros unchallenged authority over gas resources. The situation continues to evolve as local and federal leaders navigate the complexities of their respective interests in the ongoing debate surrounding Sarawak’s gas management strategy.
Teh Family Sells LPI Stake to Public Bank Amid Ownership Changes
A Surprising Acquisition Announcement
Public Bank Berhad announced in October its acquisition of a 44.15% stake in general insurer LPI Capital Berhad from the family of its late founder Tan Sri Teh Hong Piow for RM1.72 billion (RM9.80 per share). This purchase, a significant merger and acquisition since the bank’s previous acquisition of Hock Hua Bank in early 2021, has triggered a mandatory takeover offer for remaining LPI shares.
Reducing Stake to Comply with Regulatory Limits
Diona Teh Li Shian, the Teh family’s youngest daughter, disclosed plans to reduce their holdings in Public Bank from 23.41% to 10% over the next five years as part of compliance with the Financial Services Act 2013, which limits individual stakes in financial institutions. Following this strategy, the Teh family would still remain a major shareholder, albeit in a reduced capacity.
As of December, Public Bank shares reflected minor fluctuations, trading at RM4.57, essentially similar to their price before the acquisition announcement.
Data Centre Investments Signal Growth in Malaysia
An Economic Shift
In a promising indication of Malaysia’s position as a burgeoning data centre hub, global tech giants including Amazon Web Services, Microsoft, Google, and Oracle have committed over RM75 billion (approximately US$16.9 billion) in investments to establish data centre operations. This influx signals a considerable shift in the nation’s economic landscape, likely leading to an increase in land deals and a boost in job creation.
As 2024 progresses, these developments underscore Malaysia’s resilience and adaptability in navigating economic challenges, with emerging sectors showcasing significant growth potential and reinforcing investor confidence in the market.
Share this article:
