(All pictures are courtesy of AnakPerlis.com)
From BARRON'S
By Assif Shameen
While Malaysia's government has prolonged its pitch to sell a 10% stake in the Kuala Lumpur exchange to NYSE Euronext and Middle Eastern exchanges -- in hopes of getting a better price -- Bursa's trading volume has plummeted, and the shares (ticker: Bursa.Malaysia) have been in freefall.
After March 8 elections, in which the government nearly lost the reins of power, shares in Bursa plunged by more than 10%; they're down nearly 50% since an October '07 peak. The benchmark Kuala Lumpur Composite Index fell 9.5% on March 10 alone, shedding $30-billion-plus in market capitalization -- its worst showing since October 1987. And with political unrest plaguing other corners of the region, "the environment for listed exchanges in Asia is rapidly deteriorating," says Arjan van Veen of Credit Suisse in Sydney.
Malaysia, however, may not stay down for long. Morgan Stanley and Goldman Sachs now see emerging value in Malaysia, whose economy is growing almost 6% a year. It has amassed foreign-exchange reserves near $120 billion, is a net exporter of oil and gas, and is the world's largest producer of palm oil, increasingly used for biodiesel.
After March 8 elections, in which the government nearly lost the reins of power, shares in Bursa plunged by more than 10%; they're down nearly 50% since an October '07 peak. The benchmark Kuala Lumpur Composite Index fell 9.5% on March 10 alone, shedding $30-billion-plus in market capitalization -- its worst showing since October 1987. And with political unrest plaguing other corners of the region, "the environment for listed exchanges in Asia is rapidly deteriorating," says Arjan van Veen of Credit Suisse in Sydney.
Malaysia, however, may not stay down for long. Morgan Stanley and Goldman Sachs now see emerging value in Malaysia, whose economy is growing almost 6% a year. It has amassed foreign-exchange reserves near $120 billion, is a net exporter of oil and gas, and is the world's largest producer of palm oil, increasingly used for biodiesel.
Goldman economist Michael Buchanan remains "positive" on Malaysia as its currency, the ringgit -- up 16% in the past two and a half years against the U.S. dollar -- could rise another 10% in '08.Asia has seven of 22 listed global exchanges: Australia's ASX (ASX.Australia), New Zealand's NZX Regulation Exchange (NZX.New Zealand), Japan's Osaka Securities Exchange (8697.Japan), Singapore's SGX (SGX.Singapore), Hong Kong Exchange (HKeX.Hong Kong) Malaysia's Bursa and Philippine Stock Exchange (PSE.Philippines). Two of the region's biggest bourses, Tokyo's and Korea's, are unlisted, but aim to list this year. Also toying with listing: Jakarta and Karachi, following demutualization.
For five years, Asian bourses had produced spectacular returns, as volume and velocity grew, with most stocks clocking seven- to ten-fold rises from their '03 lows. They "have monopolistic positions, are cash-rich, charge some of the highest fees for exchanges anywhere in the world and [have] a pipeline of pending IPOs and secondary issues," says analyst Andrew Hills of Sydney brokerage Wilson HTM. Until a year ago, there was lot of talk of mergers and consolidation of exchanges in Asia following NYSE's acquisition of Euronext. But as global markets reel, investors must wonder: Is the exchanges' party over?
"Far from it," says analyst Bob Leung of Citigroup, Hong Kong, making the case for Asia's potential by noting it makes up just 9% of total global market capitalization, whereas Asian economies produce nearly 30% of the world's output and companies are still mainly private, family-owned or state-controlled.
And there's no shortage of exchanges trying to get a piece of the action. Shanghai threatens to take away the shine of Hong Kong, whose stock has plunged 48% from its November peak and still trades at more than 20 times this year's prospective earnings. Shanghai is aiming to turn itself from an alternative-listing destination for Chinese corporations to a preferred one. Meanwhile, trying to figure out when to buy Singapore-bourse stock, says Merrill Lynch's Andrew Maule, "is like catching the proverbial knife." SGX plunged 9.8% on March 12, after several brokerages cut target prices. SGX stock is down nearly 70% from its October highs.
Yet a future, key growth driver for Asia could be derivatives markets, Leung says. Also, exchange-traded funds are only now starting to take off in Asia, and warrants and options trading have only recently started gaining momentum.
And there's no shortage of exchanges trying to get a piece of the action. Shanghai threatens to take away the shine of Hong Kong, whose stock has plunged 48% from its November peak and still trades at more than 20 times this year's prospective earnings. Shanghai is aiming to turn itself from an alternative-listing destination for Chinese corporations to a preferred one. Meanwhile, trying to figure out when to buy Singapore-bourse stock, says Merrill Lynch's Andrew Maule, "is like catching the proverbial knife." SGX plunged 9.8% on March 12, after several brokerages cut target prices. SGX stock is down nearly 70% from its October highs.
Yet a future, key growth driver for Asia could be derivatives markets, Leung says. Also, exchange-traded funds are only now starting to take off in Asia, and warrants and options trading have only recently started gaining momentum.
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