1. What is KLCI Index, from the FTSE KLCI Index Factsheet
"Malaysia’s headline index, the Kuala Lumpur Composite Index (KLCI) is now enhanced and known as FTSE Bursa Malaysia KLCI. Part of the FTSE Bursa Malaysia Index Series, the 30 stocks tradable index is representative, liquid and transparent providing domestic and international investors with an enhanced index to access the Malaysian market."
2. The five years return (average per annum, I think is dividend excluded) of KLCI is not good, with data as of 29th November, the return equal to - 3.0%.
3. The estimated dividend yield for KLCI index is 3.53% (when the index is 1572.51)
This is comparable to the best fixed-deposit rate available in the market, but not good enough.
4. The estimated P/E ratio is 20.41, calculated based on
Source Quoted:
FTSE Bursa Malaysia KLCI Factsheet, downloadable here
"Malaysia’s headline index, the Kuala Lumpur Composite Index (KLCI) is now enhanced and known as FTSE Bursa Malaysia KLCI. Part of the FTSE Bursa Malaysia Index Series, the 30 stocks tradable index is representative, liquid and transparent providing domestic and international investors with an enhanced index to access the Malaysian market."
2. The five years return (average per annum, I think is dividend excluded) of KLCI is not good, with data as of 29th November, the return equal to - 3.0%.
3. The estimated dividend yield for KLCI index is 3.53% (when the index is 1572.51)
This is comparable to the best fixed-deposit rate available in the market, but not good enough.
4. The estimated P/E ratio is 20.41, calculated based on
- 26th December 2019 data
- Excluded negative outlier (such as Axiata and Sime Darby plantation that has negative return)
- the stocks past 12 months earning
- Adjusted for the stocks %weightage in KLCI, if unadjusted then the average P/E is 25.42.
In contrast, the S&P 500 P/E ratio is about 24 now.
5. Price earning ratio measures the ratio of stock price to the annual earnings of the companies, lower P/E is usually better, KLCI historical P/E is somewhat around 17, this means with a P/E ratio of around 20.4, KLCI is currently overpriced.
6. There are 11 individual stocks in KLCI that have a P/E ratio below the market average, 7 of them are the banking stocks (Public Bank, Maybank, CIMB, Hong Leong Bank & Financial Group, RHB, Ambank), the rest are Petronas Chemical (5183), Genting (3182), Genting Malaysia (4715) and Sime Darby Berhad (4197).
7. To me, personally, I think the high P/E ratio of certain stocks is unjustifiable. For example, Nestle Malaysia (4707) has a P/E ratio of close to 50. This means if you invest in Nestle now, excluding the growth potential, you need 50 years to recoup your investment through corporate earning. And you will be amazed to see the company with little long term growth potential but have high valuation such as IHH (P/E around 51), Pressmetal (P/E around 37) and Maxis (P/E around 29).
8. For those who like to see the full lists of estimated earnings, dividend, P/B, P/E, the yield for the 30 stocks on KLCI, see table below
Source Quoted:
FTSE Bursa Malaysia KLCI Factsheet, downloadable here
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