KLCI end the year 2014 lowest than previous year, the second time since it recorded the low point during 2008-2009 Global Financial Meltdown. Given current falling trend with oil price, anticipation of more negative effect (from falling oil price) for Malaysia economic activities may drive the stock market price lower.
Nevertheless, i still hold on to the view that the ultimate determining factor for the share price is the underlying corporate earnings for the future. As corporate earnings is linked to the economic activities (measured by GDP, when GDP for Malaysia still forecasted to have positive growth (4.7% according to world bank), corporate earnings will be expected to grow. Looking from another angle, current KLCI's P/E ratio (summing of individual components P/E adjusted according to their weightage in KLCI index, calculated by myself) is about 18. I don't have the latest last average 10 years P/E in hand, but it suggested the index are slightly overpriced but not highly overpriced currently (based on average of 16.7x of last figure here)
Furthermore, the KLCI's P/E ratio is particularly tilted higher by IHH Health Care (code 5225 with P/E of 55!) , Astro (6399) and few telco stocks (TM, Maxis, Celcom, Digi). Excluding the effect of 6 stocks with highest P/E, KLCI's P/E ratio will come down to around 15, which looks slighly cheap compare to its historical average. Given the fact that we are not experiencing any financial meltdown yet, there will be some bargain to hunt for now. However if you hold some IHH shares my advice to be to sell as there is no way an industry required huge CAPEX and limited growth can justified a P/E of 55.
Current Return and performance
The estimated holding period return for KLCI in the past period (1st December 2014 - 31st December 2014) is -3.01% (with dividend included). Holding Period return for my portfolio, is -7.09%. Total holding period return for my portfolio since the inception is 8.26%, annualized to be 3.46%, this is far lagged behind KLCI total return of 15.73% (annualized, 6.46%) and almost equivalent to return from Fixed Deposit according to current market rate.
There is no trading activities this month.
Nevertheless, i still hold on to the view that the ultimate determining factor for the share price is the underlying corporate earnings for the future. As corporate earnings is linked to the economic activities (measured by GDP, when GDP for Malaysia still forecasted to have positive growth (4.7% according to world bank), corporate earnings will be expected to grow. Looking from another angle, current KLCI's P/E ratio (summing of individual components P/E adjusted according to their weightage in KLCI index, calculated by myself) is about 18. I don't have the latest last average 10 years P/E in hand, but it suggested the index are slightly overpriced but not highly overpriced currently (based on average of 16.7x of last figure here)
Furthermore, the KLCI's P/E ratio is particularly tilted higher by IHH Health Care (code 5225 with P/E of 55!) , Astro (6399) and few telco stocks (TM, Maxis, Celcom, Digi). Excluding the effect of 6 stocks with highest P/E, KLCI's P/E ratio will come down to around 15, which looks slighly cheap compare to its historical average. Given the fact that we are not experiencing any financial meltdown yet, there will be some bargain to hunt for now. However if you hold some IHH shares my advice to be to sell as there is no way an industry required huge CAPEX and limited growth can justified a P/E of 55.
KLCI Index Component Stocks Info (adjusted to latest available figure)
Current Return and performance
The estimated holding period return for KLCI in the past period (1st December 2014 - 31st December 2014) is -3.01% (with dividend included). Holding Period return for my portfolio, is -7.09%. Total holding period return for my portfolio since the inception is 8.26%, annualized to be 3.46%, this is far lagged behind KLCI total return of 15.73% (annualized, 6.46%) and almost equivalent to return from Fixed Deposit according to current market rate.
There is no trading activities this month.
