Learning from Malaysian stock market

Investors look at the share index at a private stock market gallery in Kuala Lumpur, Malaysia, in this file photo taken in 2008. [Photo/icpress.cn]

There are nine listed Chinese companies on the Malaysian exchange: Xingquan International, Multi Sports, XiDeLang, K-Star Sports Ltd and Maxwell International Holdings Bhd are involved in the design and manufacturing of shoes and sportswear; China Ouhua Winery Holdings Ltd produces and distributes wines; HB Global Ltd is a gourmet convenience food specialist; China Stationery Ltd manufactures plastic stationery products; and China Automobile Parts Holdings Ltd makes chassis components used in cars.

They made mostly modest debuts on Bursa Malaysia. Except for China Automobile Parts, which opened 18 percent higher than its IPO price, the others recorded opening price premiums of no more than 10 percent. XiDeLang and K-Star Sports even started below their retail offer prices.

"We had hoped for a better reception. Perhaps the investment community needs more time to understand our company and the market that we are in, and evaluate us differently from the rest," said Wu at Xingquan International.

The companies have also lost considerable value since listing. At closing on Nov 26, their share prices were well below their IPO prices. Xingquan International and China Automobile Parts, for example, were trading at less than half of their IPO prices.

The dismal performance of the entire category has been largely blamed on negative perception and poor investor sentiment, precipitated by accounting scandals involving some Chinese companies listed in Singapore, Canada and the United States.

Some Chinese companies listed on the Singapore stock exchange, for instance, have been implicated in a series of financial irregularities and corporate governance failures. Meanwhile, in the US, investors have lost billions of dollars after the delisting of more than 100 Chinese companies from North American exchanges because of inconsistencies in their books.

HB Global's slide to Practice Note 17 status, which indicates that a company is in financial distress, after its auditors made a disclaimer of opinion in the company's audited accounts, has not done its fellow compatriots any favors either.

Fung Vun Ket from the Malaysian office of Anbound Research, an independent think tank in China, said another reason for the lack of interest in these stocks is due to their small market capitalization of below 300 million ringgit ($93 million).

"They're not on the radars of local institutional investors, and the major players in the Malaysian stock market are the institutions. Small cap stocks typically attract retail investors but they prefer industries like property, banking and oil and gas," Fung said.

Edmund Tham, head of research at Mercury Securities in Kuala Lumpur, can see another reason for their poor stock performance.

"The financial results of some of these Chinese companies have also not been so good," he noted.