Many prospective investors are looking into initial public offerings after the government moved in to curb property speculation by increasing the Real Property Gains Tax.
by Prem Kumar Panjamorthy
PETALING JAYA: Government measures to curb property speculation in Budget 2014, ample liquidity and political stability in Malaysia post 13th General Election (GE13) is fanning investors interest in initial public offerings (IPOs) which are performing exceptionally well.
With blue chip counters already richly priced, investors now are in a frenzy for IPOs much like what was seen last year when Bursa Malaysia welcomed large listings such as SapuraKencana Petroluem Bhd, Gas Malaysia Bhd, Felda Global Ventures Holdings Bhd, IHH Healthcare Bhd and Astro Malaysia Holdings Bhd.
“Many investors, who were previously interested in property buying, are now having a re-look at the stock market, as a result of the government’s decision to double the Real Property Gains Tax (RPGT) from 15% to 30% for properties disposed within three years of purchase,” said Pong Teng Siew, Inter-Pacific Securities Sdn Bhd head of research.
The RPGT hike was announced by Prime Minister Najib Tun Razak in Budget 2014, aimed at reducing speculative property purchases.
Post May 5 GE13, Bursa Malaysia has witnessed some 12 IPOs coming for listing on the Main Board of the exchange, bringing the year-todate new listing to 14 stocks. The total numbers of new listings last year was 17, including three new stocks on the ACE Market.
Even though the IPOs this year were not as large as last year’s, with the exception of Westports Holdings Bhd and UMW Oil & Gas Corp Bhd, the bulk of them are performing well (see chart on P1).
Pong believes the conclusion of the GE13 is a big relief to investors and companies who were holding back from investing due to uncertainties. Now the held-back liqudity is back in the market, he believes.
“If we look at the recent IPOs, all were oversubscribed from more than five times to an overwhelming 33 times.
This signals extra attention given to the stocks by new attention stream, maybe from the the property buyers.
“Even some stocks on the ACE Market, especially those listed last year, are doing very well now. Some of them are outperforming the south-going composite index. This shows the sentiment is back at high,” Pong added.
The last three IPOs namely UMW, condom maker Karex Bhd and Caring Pharmacy Group Bhd were oversubscribed by 10, 21.76 and 33.66 times respectively.
MIDF Research Sdn Bhd head Zulkifli Hamzah said local investors (both institutional and retail) are awash with liquidity as they have been overwhelmingly net sellers prior to the elections.
“The period post GE13 marks their return into the local bourse. Hence, to again raise their exposures in the stock market, the IPO market is arguably among their preferred buys apart from quality laggard stocks as well as lower liners with relatively cheap valuations,” he said. Zulkifli said in the case of Karex and Caring Pharmacy, the most important factor would be the sectors the companies are involved, namely healthcare and pharmaceutical.
“Healthcare and pharmaceutical sectors are not only vibrant, in view of the burgeoning middle-class population particularly in emerging economies, but also resilient, hence they are less vulnerable to an economic downturn.”
He also said the higher RPGT will almost certainly dampen speculation in the property market, thus some people who previously were only interested in properties are now beginning to look at the stock market as an alternative avenue for investments.
According to market observers, a strong third-quarter (3Q) gross domestic product (GDP) figure, set to be released today by Bank Negara Malaysia, could act as a catalyst to boost investors confidence in the market.
This content is provided by FMT content provider The Malaysian Reserve