Decline in PLCs’ earnings need to be addressed

KUALA LUMPUR: Bursa Malaysia Bhd chairman Tan Sri Abdul Wahid Omar has stressed on the need to address the issue of declining Public Listed Companies’ (PLC) earnings, which experienced a drop of 5.4 per cent between 2015 and 2019.

“Although Malaysia stands out as one of the economic success stories in Asia over the past few decades, there is pervasive conversation today that needs to be discussed.

“Will we use the unique period to advance faster, or will we go back to the status quo? Which brings us to the third subject on the importance of PLCs to continue to perform,” he said in his welcoming speech at Invest Malaysia 2020 yesterday.

Over the last five years, he said, domestic market has been confronted with several challenges, stemming from escalating trade tensions, softer economic growth outlook and lacklustre corporate earnings.

“Given the rapid changes that have occurred, moving forward with the status quo now seems somewhat inconceivable.

“We need to relook and possibly replicate some of the past successes such as the Government-Linked Company (GLC) Transformation Program,” he said, adding that between 2004 to 2015, many GLCs were transformed into companies with better performance, better governance and enhanced nation-building roles.

Abdul Wahid said over the 11 year period, the net profit of 17 GLCs grew by 10.2 per cent per annum from RM9.9 billion to RM26.2 billion, while their combined market capitalisation expanded 2.9 times from RM133.8 billion to RM386 billion.

This represented a total shareholder return of 11.1 per cent annually, while other nonGLCs similarly performed well over the same period as reflected in the improvement in the FBM KLCI from 907.43 to 1,692.51 or a Compound annual growth rate of 5.8 per cent per annum over the same period.

“The time has come for shareholders, including Government-Linked Investment

Companies’ (GLICs), to demand more from the board and management of the PLCs they invest in,” he added.

Abdul Wahid said to aid the recovery of Malaysia’s capital market, Bursa Malaysia and the Securities Commission has introduced relief measures aimed at lessening the financial burden and provide greater flexibility for its stakeholders to navigate through this challenging period.

“Our strong fundamentals have provided some resilience against the volatility in the global economy.

“According to the World Bank, while Malaysia, like many other economies, has been deeply affected by Covid-19, its diversified economic structure and sound track record of macroeconomic management are some of the factors that have contributed to our resilience.

“This makes Malaysia wellplaced to recover from the crisis,” he said.

He noted that this is reflected by the benchmark FBM KLCI index, being the best performing index among the Asean markets, declining by only 5.5 per cent for the first half of 2020 (1H2020) compared to the 19.6 per cent decline in Singapore’s STI and 15.2 per cent in Thailand’s SET index over the same period in 2019.

The local index has also outperformed regional peers during this Covid-19 period.

Abdul Wahid said the healthcare index recorded a stellar gain of 86.9 per cent for 1H2020 as internationally renowned manufacturers continue to attract the attention of investors, building upon the strong momentum, even before the pandemic, as a potential beneficiary of the US-China trade diversion.

The healthcare sector ranked fifth amongst the top traded sectors and the others are technology, consumer products & services and energy, an indication that investors are adopting the forward-looking strategy.

“I am therefore confident that our well-developed financial market will continue to attract investments,” noted Abdul Wahid. — Bernama