Media Statement
by Lim Guan Eng

(Petaling Jaya, Friday): The removal of 10 Malaysian firms from the FTSE Global Equity Index series indicates lack of confidence by foreign investors in the BN government’s handling of the economy and failure to promote transparency, accountability and professional management of Government-Linked Corporations (GLCs). FTSE said the stocks of 10 firms dropped included loss-making Malaysian Airlines, Nestle (M) Bhd, infrastructure firm MMC Corp Bhd, plantation companies Golden Hope Plantations Bhd and Highlands & Lowlands Bhd as well as Oriental Holdings Bhd, DRB-HICOM Bhd, port operator NCB Holdings Bhd, Hong Leong Industries Bhd and UEM World Bhd

Bursa Malaysia and FTSE agreed to create a series of equity indices for the country, aiming to attract domestic and international investors with an interest in Malaysian stocks. By dropping 10 Malaysian firms barely two months after the equity indices were set up shows an alarming loss of confidence by foreign investors in the local stock market.

The changes take effect from March 20 and follows the dampening sentiment with rising inflation, higher interest rates and a perceived stalling of a two-year drive to reform GLCs such as MAS and Proton affected by huge losses and declining market share. Further. Malaysia's stock market is the worst performer in Asia not only for the last 6 months but over the last 5 years.

Returns on the Kuala Lumpur Composite Index (KLCI) last year were negative at 0.8% last year as compared to Korea’s Kospi Indices were a whopping 54%. Compared to the 2005 Morgan Stanley Composite Index (MSCI) of Far East countries, excluding Japan, returns were a 21.8%. The comparison between the KLCI and MSCI over the last 3 and 5 years was even greater.

Malaysians Would Profit More By Investing Overseas.

Returns to MSCI over the last 3 years were 107.7% as compared to KLCI’s 39.9%. Returns to MSCI over the last 5 years were 84.6% as compared to KLCI’s 32.4%. In other words a Malaysian stock investor would double his investment over the last 3 years by investing overseas as compared to only 40% by investing locally. Clearly the Malaysian investor would profit more by following the foreign investors’ action in investing overseas, anywhere in Asia except the KLCI.

What is the government doing to restore confidence in the local stock market? All successful investment and business strategies lies in its execution. Clearly the Finance Ministry has failed to deliver on its promises. The root problem is that we have too few competitive Malaysian companies whose success is not dependent on political patronage or domestic protection, especially the steel and national cars sectors.

Malaysia should learn from South Korea and Taiwan whose commitment towards excellence and cost competitiveness has created world-class companies like ACER, Hyndai and Samsung. Hyundai and Posco Steel Corp of South Korea has succeeded where Proton and the corrupt-ridden Perwaja has failed. 

Instead of promoting transparency, we promote corruption. Instead of merit, we have quotas. Instead of technical “know-how” we have political “know-who”. Instead of good governance, we have black magic. Lack of competitiveness, inefficiency and poor productivity is the price we pay for the government’s failure in executing its promises to reform our economy.

DAP is therefore not surprised why the KLCI is the worst performer over the last 6 months or the last 3 years. Unless the government wakes up and take immediate measures to promote transparency, merit, technical know-how, accountability and good governance, DAP fears that the KLCI will continue to be worst performer this year in the region.

(10/03/2006)