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Part 1: Why is Bursa a chronic underperformer? Capital controls imposed

Tong Kooi Ong and Asia Analytica
Tong Kooi Ong and Asia Analytica2/4/2022 09:59 AM GMT+08  • 9 min read
Part 1: Why is Bursa a chronic underperformer? Capital controls imposed
This has to be THE million-ringgit question for long-suffering investors on Bursa Malaysia.
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This has to be THE million-ringgit question for long-suffering investors on Bursa Malaysia. Those of us who lived through, and participated in, the 1990s super bull cycle in Malaysia — back then, the stock market was called the KLSE — can be forgiven for feeling nostalgic and wondering when, or if, those heady days will return. Unfortunately, the answer, we believe, may be “never again”. We intend to detail how we came to this conclusion in a series of future articles — and why we think Bursa may well continue to underperform.

It has been a quarter of a century since the end of the super bull cycle and certainly time enough for us to reflect and do a complete analysis of what had transpired since the onset of the Asian financial crisis (AFC) and thereafter. For some, it may be hard to hear, but we think to continue avoiding or glossing over the subject would simply be intellectual dishonesty

Let’s start with how the super bull cycle came to be. Back in the 1980s to early 1990s, Asia, in particular, Asean, was among the fastest-growing economies in the world. Member countries enjoyed huge inflows of investor money chasing high returns, which, in turn, fuelled asset prices. As a result, their stock markets were given excessive weightage in the MSCI Emerging Market Index, relative to the size of their gross domestic product and total value traded on their exchange. The combined weightage for Malaysia, Thailand and Indonesia in the index came up to 35% in 1994 — compared with their 10% share of total GDP for all countries in the index (see Chart 1).

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