Did we miss out something?

Sometimes, we are engrossed in the matured markets and may miss out chances in some of our emerging markets, in this case - Malaysia? 

Notably Malaysia has been performing relatively well in the IPO markets for this year with homegrown palm oil firm Felda Global Ventures’ ~$3.3 billion listing in Malaysia, IHH (Q0F.SG) dual listing in Malaysia and Singapore on 25 July and the next big IPO to look forward is 1Malaysia Development Bhd, said to plan to raise as high as $2 Billion in its IPO of its power assets (full article here).

Here's an article from Fundsupermart on some insights as well:

Full article here: Malaysia: Near All-Time Highs, What's Next?

While market is on the uptrend, we advocate investors to examine the fundamental factors that support the rally before they jump into the market. Our advice to investors after examining the fundamentals is to consider switching some of their investments to 5 star markets such as China, Hong Kong and South Korea.
 Key Points

• Imports growth for major trading partners has been softening;this indicates that Malaysia’s exports are likely to slow given the poor external demand
• Domestic consumption and private investments are expected to remain as the only major contributors to economic growth
• Sturdier current income, better outlook for income and employment as well as easing in inflationary pressure are most likely to support the expansion in consumer spending going forward
• The roll-out of projects under the Economic Transformation programme is likely to sustain the private investment
• Putting this all together, Malaysia is expected to grow by 4.0%-4.5% in 2012 after expanding 5.1% in 2011
• Bank Negara Malaysia (BNM) is expected to maintain an accommodative interest environment to support the economic growth with Overnight Policy Rate (OPR) remains unchanged at 3.0% for the remainder of 2012
• We believe that the current level of FBM KLCI has priced in the negative impacts of economic slowdown and lower earnings growth
• With forward PE of 15.3x, 13.8x and 12.7x based on consensus estimated earnings for 2012, 2013 and 2014 (data as at 23 July 2012), the upside potential for 2012 seems to have normalised based on a fair PE of 16x
• In the near term, external headwinds from the European debt crisis as well as the uncertainties that may arise from the 13th General Election could create a short-term consolidation, especially given the strong recent run-up in the Malaysian market
• Our advice to investors: rebalance their portfolio and to consider switching some of their holdings into more attractive markets such as the Greater China region and South Korea

Almost 3 Weeks of Fresh All-Time Highs

After the mild correction in May, the Malaysian equity market (represented by the FBM KLCI) regained its momentum and continued to trend up. The FBM KLCI closed at a fresh all-time high on 3 July 2012 and continued its rally to new record highs for almost every trading day. On 19 July 2012, FBM KLCI climbed to its highest level of 1647.94 points on an intra-day basis (refer to Chart 1).

Chart 1: FBM KLCI and trading volume

As at 23 July 2012, FBM KLCI gained 2.3% on a month-to-date basis and the rally was supported by heavy index weighted telecommunication, plantation and banking sectors. Over the same period, these three sectors gained 5.8%, 3.7% and 3.0% respectively. Year-to-date, telecommunication sector surged 23.3%, while plantation and banking sectors gained 7.8% and 7.1% respectively as compared with a 6.9% gain in FBM KLCI (refer to Chart 2 and 3). 

Chart 2: Month-to-Date returns

Chart 3: year-to-Date returns