You and me and the index named KLCI - part 1

KLCI moves fast and stocks you are holding moves very, very slow, right?
KLCI moved a lot and stocks in your portfolio moved a bit, right?
Then you curse on the KLCI, right?
You are not alone.
I have been asking KLSE participants (investor, trader, punter, remiser, dealer, D.I.Y. analyst) on FBM KLCI compared to old KLCI for the last few weeks. They have a common opinion, "FBM KLCI moves fast" . Those I asked are not fund managers or those dealing with fund managers. They are retail participants and most remisers also deal with retail participants. So, it is not really a surprise that they are not really fond of the new KLCI. Not that they love old KLCI in the first place but they just prefer the good old KLCI.
Why KLCI is important to us? Why not we simply go for other indexes such as FBM100 or FBMEmas?
Checking the index is like checking your portfolios status. Ask your fellow traders, watch the news, read the newspaper, you can easily get the what is the index of the day. When we are informed at lunch time or by evening TV news that  the index gained,  we can reasonably expect our stocks position also gained (at least a bit). We like to have index that 'reflects' our stocks positions even though we are not holding any index-linked counters. Not just day to day monitoring, unit trust investors also monitor the stock market time to time. It is a casual way of monitoring the stock market.
In short, KLCI is our instrument to 'feel' the pulse of the stock market.
Now, your 'feel' could be (already) skewed. 

Five counters have about 55% weightage of KLCI. Half  KLCI gain/loss is because of those 5 counters. True, those five counters could cancel each other on gain/loss but very likely they move in-synced together and so far they seem very good in team working. So, remember when you seeing KLCI, you are seeing those power 5 counters:  Commerce, Public Bank, Sime, Maybank and Tenaga.
Datuk Yusli conveniently said,  "FBM KLCI meant for oversea fund manager". That is, KLCI is NOT  meant for us, the retail participants. Yes, nobody forced us to take KLCI as instrument to 'feel' the market. But after all these years, just like smoking, it is a hard habit to break.
Furthermore we still been shoved everyday with FBM KLCI in the local TV news, in newspaper, in market analysis. You just can't escape KLCI. Just like on the Independence Day, you can't escape the parade. People, TV and newspaper  still talking the overall KLSE in term of KLCI performances. What they don't realized when they talking KLCI, they are about referring  to those five counters' performance. Everybody in mass-media addicted to KLCI.
We also hate it when KLCI moved 120 pt last week, on the news they said "See, foreign investor have confidence in our economy." Or 'That was a good super bullish week for KLSE".  And your portfolio hardly moved. Half of KLSE performance actually the net performance of those 5 counters.

How about the fact that half of the index only show net performance of FINANCIAL and PLANTATION sectors. If you go for construction or property sector's counters, they can way be skewed from KLCI. What does exactly FTSE standard say about SECTOR representation?

If there are 5 weightage-powered counters, shouldn't each counter selected at least representing different sectors? Then we have 5 sector represented. They reflect overall market better than just two sectors. BTW, if you asking for CONSTRUCTION sector to be presented in those power 5, you are asking too much because there is NOT even one single construction counter in KLCI's 30 components stocks, leave alone in the top 5 or 10 weightage counters.  Building materials, construction, hotels, insurance, property, timber and technology are NOT represented AT ALL in KLCI.
BURSA already addressed this issue. According to Datuk Yusli, KLCI changed from an economic barometer that must have all the key sectors represented to a market barometer that measures performance based on the market capitalization of the stocks. This is a hard fact we should know because so long stock market generally accepted as one of economic indicator (to a certain extend it is very true). Stock market in many ways are actually try to anticipate  the economic's future, maybe 3 to 6 months or 1 year  down the road. With FBM KLCI, the value of it as economic indicator will diminished.
We need to listen to Datuk Yusli,  "FBM KLCI meant for oversea fund managers". And we are not oversea fund manager. Need to get familiar with other FBM Indexes.
This is the first part of a series of blogpost on 'reaction'  to FBM KLCI
FBM KLCI weightage and float at KLCI component


How to perform FBM KLCI magic

Do you know what they mean by saying, "Oh, the market is going to do magic after this."
They are jokingly referring to the event when the CI was down, say between -8 to -12 point for the whole day, but when it come to close time, it is on positive side, say +2 pt. 

How to do the same magic? You already know how the tricks is done, anyway here is the refreshment tutorial:
First we need to select certain specific stocks . Be aware that how impressive the magic effect  will be, depends on how much of your fund you willing to allocate.
Now, with smaller no. of component counters in FBM KLCI we can do the magic slightly easier than last time. It used to be 100 now its only 30 to choose from.
Out of those 30 counters, we can narrow down to just 10 counters which give a total 71% index controlling power. Those 10 counters are: Commerce, Maybank, Public Bank, Sime, IOI, Genting, Resorts, Axiata, Tenaga  and MISC.
With limited fund, it still out of reach for us. In that case, we can narrow down to only  5 counters which give us 55% index controlling power. Those 5 giants are: Commerce, Public Bank, Sime, Maybank and Tenaga. Those 5 are the 'sweet spot' to optimize our fund budget.
Now, buy and queue as many lot of those counters at much higher price after 4.39 pm. Make sure many lot of trade done at price higher than the whole day price. We can stop doing that at 4.50 pm, the theoretical closing price already decided after 4.50 pm.
That's how you do magic with FBM KLCI. Smooth and easy.
If you still don't have enough fund, you can try with one counter only. Commerce gives you 10.2% index controlling power. Less index controlling power means the magic effect will not that impressive but still you can try. If 29 other component counter stay at yesterday close price or  they canceling each other gain/loss, a 10 cent gain in Commerce will roughly add 6.5 pt to KLCI . 
What? Your fund still not enough even for one counter?
Too bad, you are not EPF.
BTW, congratulate  yourself for trying to be some smart money. Just like they say, "Dumb money (less informed investor) decides on opening, smart money (well informed investor) decides on closing."


FBM KLCI cheat sheet

Start 6th July 2009,  FBM30 will be adapted as FBM KLCI replacing previous KLCI as the market benchmark.
FTSE Bursa Malaysia KLCI is made up of the 30 largest listed companies by market value, with at least a 15% free float and minimum 10% annual turnover of free-float shares.
Previous KLCI has 100 component stock while the new FBM KLCI only 30.
The components will be revised twice a year, June and December.*

Final list of 30 component stocks is at FTSE Bursa Malaysia KLCI
Top 5 sectors
KLCI                                           FBM KLCI
sector        weightage (%)       sector          weightage (%)  
Banking       25.2                     Banking       33.7         
Plantation    14.8                    Plantation    18.7
Transport     11.1                    Utilities        11.2
Utilities          9.5                     Gaming        9.9
Telco              8.1                     Telco            9.3
5 sector which have  a total over 82% of KLCI weightage: finance, plantations, power, telco and gaming
2 sector which have a total over 52% of KLCI weightage: bank & plantation
7 sectors NOT in FBM KLCI – building materials, construction, hotels, insurance, property, timber and technology. In another way to put it, these 7 sector has a total of  0%  of KLCI weightage.

Top 5 stocks
KLCI                                           FBM KLCI                                      
stock        weightage (%)     stock         weightage (%)  
Sime            7.2                    Commerce  10.2
Maybank     7.0                     Public Bank 10.0
Tenaga       5.6                     Sime              9.8
Commerce  5.5                   Mayban          9.7
IOI Corp       4.9                   Tenaga           7 .8

10 counters which have a total over 71% KLCI weightage: Commerce, Maybank, Public Bank, Sime, IOI, Genting, Resorts, Axiata,Tenaga  and MISC.
Power 5 counters which have a total over 50% KLCI weightage: Commerce, Public Bank, Sime, Maybank and Tenaga.

Highest free float factor : Commerce (100%) and Public Bank (100%)
Lowest free float factor : RHB (25%)
Highest weightage: Commerce (10.1%)
Lowest weightage:  MAS (0.5%)
Highest share price: BAT (RM44.50) close price on 3rd July 09
Lower share price: MMC (RM2.09) close price on 3rd July 09

BTW, Bursa Bhd which initiated the FTSE standard  itself  is NOT in the FBM KLCI list.

I think this post will need updates and I will if necessary.
* Start speculating prior to June and December which new counters will enter the list and which counters will be kicked-out. Buy those speculated new entry and hope index fund manager adjust their portfolio accordingly.  We can make it a semi-annual betting event, more fun than betting which candidate going to win the next pilihanraya kecil.


Skyscraper, Erection Index and Malaysia Triplet Tower

Some call it skyscraper index, some call it tallest building indicator and some call it erection index (to a man, it could mean something else though).  Also some call it tower of babel indicator.
It is actually  a humorous look at the 'relation between large skyscrapers completion and economic cycles".
According to, the indicator was “nearly perfect”, showing “an unhealthy 100-year correlation”, suggesting that the construction of ever-taller buildings was a good warning sign of a looming economic slowdown
KLCC twin towers were completed in time to welcome the Asian crisis in 1998. In 1997 Malaysian stocks had already fallen by 69% in dollar terms.
Shanghai World Financial Center (3rd tallest building in the world) -- Topped on 2007 9/14 -- 1 month before SSEX top (crashed from 6000 to 1600)
Burj Dubai -- Completed on late October 09 --"Dubai announced that it had completed the exterior of the building and within two months, the Dubai government came close to defaulting on its loans"
For Malaysian, we going to have more towering skyscrapers. Not one but at least two 100-storey building and maybe three.
"Even though the actual designs of the three structures have not been finalised, two appeared to have a 100-storey building each. This could rival the highest structure in the country — the 88-storey Petronas Twin Towers, completed in 1997 at a cost of US$1.2 billion (RM4.05 billion)"  Local news
Interesting remark by Phil Anderson ( on huge skyscraper "as any decent architect could tell you (although economists these days seem strangely unaware of the fact), tall buildings are just built to make the land pay. As a general rule, a skyscraper is a speculative project, built mostly by developers with other people’s money."
Just like I recalled it, in the Lord of the Ring movie trilogy, the (just) two towers enough to really gives a lot of problem to the people of the Middle Earth.

check out other commentary :
Further reading:
Pride before the fall :  Malaysia Today
Skyscraper index : moneyweek    
Skyscraper and business cycles: mises    
Tower of babel: safehaven


Banks Are Like A Group of Junkie

Banks think they are too fat to die. And they are like a group of junkie. Not sure? Watch this 50 second clip:

weapons-of-self-destructionA 50-seconds snippet from Robin Williams' stand up
comedy titled: Weapons of Self Destruction

junkie - someone who cannot stop taking illegal drugs


Still Buying Shares? Go for Sport Betting Instead, Malaysia Need More Gambling Addicts.

malaysia-sport-bettingSport Betting must be a really innovative product proposal  from Vincent Tan, not even enough time for a call of tender.

Combine the excitement  of World Cup Football with the adrenaline rush of  betting, you get some potent solution. That the business model to emulate.Those hardcore kaki nombor will buy more and more. Those kaki bola who never place a bet before shall be more easily succumbed to join Berjaya gambling club. Berjaya Toto really know how to wooing new customers .
Malaysia has enough mat rempits,  drug addicts, GROs and samsu addicts but not enough of gambling addicts. Giving bookie license is a smart move to increase the lacking number. Bravo Vincent Tan, that's how you do it. Malaysia really boleh.   

Along-along kota raya and bandar-bandar kecil must be in Cloud 9 now, they already have been grinning for several days after hearing the news. If those along companies listed in Bursa, they should have display bullish 3 white soldiers candlestick signal on chart by now.
Game fixers also have been grinning ear to ear. Their services are back in demand soon. Welcome game rigging to Malaysia Football League.
How Datuk Awang Adek explain the rational behind it in the parliment is so convincing:
Timbalan Menteri Kewangan, Datuk Awang Adek Hussein, berkata jika kerajaan tidak mengeluarkan lesen kepada pihak yang memohon, aktiviti perjudian dan pertaruhan haram tetap berlaku tanpa kawalan dan pemantauan pihak berkuasa.

“Oleh itu sebagai sebuah kerajaan yang prihatin terhadap rakyatnya, kerajaan akan memberi pertimbangan sewajarnya dan sebarang langkah perlu dilakukan secara berkesan bagi menangani masalah bookie tanpa lesen termasuk membenarkan pertaruhan bookie bola sepak dilaksanakan melalui perlesenan sah,”

You see,  if government don't issue license, illegal betting and gambling activities will keep on happening. Government should also  issue license to prostitution den, along-along, mat rempit. and drug pusher, otherwise, those illegal activities will keep on  happening.  By giving license, those illegal activities become legal. Just like magic, presto, our social problems are gone. And that's how you solve problems. Right?
Datuk Awang Adek also said, as a caring government, government need to consider giving the licence. Yes, to consider gambling license it is a sign of a caring government. Forget about what wives of gambling addicts say, just listen to Vincent Tan. As a caring government, maybe the government should consider giving pilihanraya kecil betting license too and what else.

Keep on holding your breath. Come World Cup in June, we don't need to play Bursa Malaysia anymore. After all, Bursa Malaysia seems so dull currently. Let's go  for sport betting. You can even place you bet by telephone. It just a dial away. So convenience  for us to give donation to Uncle Tan, we got no excuse anymore.

Berjaya Corp: To launch user-friendly sports betting system in 3Q10. Berjaya Corp Bhd which will launch the country's first sports betting in 3Q10, will use a system with features that are familiar to the Asian players.They will be distributed in strategic locations in major cities or towns with large urban conurbation and  will commence with about one-third Toto outlets - 220 outlets. Ascot Sport Sdn Bhd senior general manager Ooi Lee Meng said Ascot will introduce the sport betting at the beginning of the next European Leagues season, around the end of August or beginning of September 2010. (Source: Business Times)
Wanna BET that the campaign to increase the gambling addicts in Malaysia will be successful? 
Ascot Sport’s plan is to launch products based on internationally popular sporting events such as soccer, basketball, motor racing, tennis, and golf. For a start, Ascot Sports will offer their products via 220 selected Sports Toto outlets in West Malaysia.
Why stop with Berjaya Toto outlets? Berjaya can utilize it's 7-11 outlets, just place the betting cards beside the condom racks.
"In other words, the system will have user-friendly features that are familiar to the Asian players," Ascot Sport Sdn Bhd senior general manager Ooi Lee Meng told Business Times via email recently.

It user friendly, even your 7 years old kid can do the bet. More user friendly than your ATM.
"They will be distributed in strategic locations in major cities or towns with large urban conurbation. We will commence with about one-third Toto outlets - 220 outlets," he said.

Business 101. It strategically placed in locations where the prospect of  converting people into gambling addicts is very high.  Never far from you.
Ooi said Ascot will introduce the country's first of kind sport betting at the beginning of the next European Leagues season, around the end of August or beginning of September 2010."We will offer the four major leagues namely the English Premier League, German Bundesliga, Spanish Premira Liga and the Italian Serie A. When Champions League, UEFA Cup and FA commences, we will offer them as well," he said.

Isn't  that exciting? Every walks of life that love football will get excited. The excitement of football mixed with thrill of betting.  Don't be surprised if many sports fans will be succumbed.
Asked why the company did not offer football bets back then, Ooi said, "In the 1990s, football betting was not popular yet. It was vitalised in the 2000s due to live-televised matches on television."
Early 90's we don't have Ananda Krishnan's  Astro. Since currently we can expect more and more live-televised matches from Astro, we can expect more and more vitalization of sports betting too.  Imagine Ananda Krishnan hand in hand with Vincent Tan.
Analyst Keith Wee (OSK Research), who maintained an overweight on the gaming sector, believes the liberalisation of the sports betting in Malaysia is a positive step as the government is being pragmatic in acknowledging that there is a sizeable market to be tapped.Otherwise, it would be big revenue loss to the government.
Prostitution ring is sizeable market too,  it a big revenue loss to the government if they don't be pragmatic. We haven't mentioned illegal drug ring yet. The government should take a positive steps by being pragmatic in these matters too.  Otherwise, its  a big revenue loss to the government, isn't Keith?

Ascot Sports would not be able to take bets for the upcoming FIFA World Cup, which kicks off on June 11. This is due to the hardware and software related  set up is not ready yet.. Asco Sports expects to capture the new EPL season at end-Aug/early-Sept.
Yeah, just on time for our Merdeka day. Let's Merdeka ourselves by becoming a sport gambler, for a start.
More political backlash ahead? Meanwhile, it was not entirely unexpected that this latest development has attracted criticism from the opposition. (CIMB Research)
Yeah, sure CIMB, we can expect the criticism from the opposition ONLY and the rakyat are giving undying support to Vincent Tan. ( Is that is CIMB expectation, I need to  think twice before reading CIMB's expectation of the stock market)
MCA Vice-president Gan Ping Sieu proposed that part of the revenue collected from the industry should also go towards public education and raising awareness about the dangers of gambling and the social ills that could result (malaysian mirror)
You see, Mr. Gan thinks that Malaysian public are not aware of the dangers and social ills that could result out of gambling.   I never thought  we are that ignorant, are we?


Free KLSE real-time stock watch software

It's useful to have a real-time quote screen where you can easily monitor stocks, even if you are just a casual trader.

One way is to go for online trading account with local stockbroker. You can access real-time quote and probably charting facility with the online trading platform.

Another way is to get real-time quote screen and various time frame chart is to subscribe to charting service provider such as Nextview  (the one I am using).  Could be unnecessarily costly for non-scalping trader especially if you already have EOD charting software.

For those 'casual' trader there is a free software that provide real-time quote and monitoring tools. It includes portfolio management and brokerage calculator. The name of the software is Jstock.
According to the developer, Yang Cheng Cheok:
JStock is a free stock market software, which supports multiple countries stock market. (23 countries at this moment).  It provides Real-Time stock info, Stock indicator editor, Stock indicator scanner, Portfolio management and Market chit chat features
JStock is a smart and reliable utility which provides KLSE (Kuala Lumpur Stock Exchange) real time monitoring.
JStock is an utility which provides KLSE (Kuala Lumpur Stock Exchange) real time monitoring. It had been integrated with a powerful highly customized stock indicators, which will help you to answer the following wing questions :
· What is all the KLSE stocks with 3 years lowest selling price?
· What is all the Main board stocks with today's volume greater than yesterday's volume?
· What is all the Banking industry stocks with today's buying price lesser than 7 days average buying price?
Stock exchange supported are from these countries:  Australia, Austria, Belgium, Canada, Denmark, France, Germany, Hong Kong, India, Indonesia,  Italy, Korea, Malaysia, Netherlands, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Taiwan, United Kingdom, United States.
The shortcoming is,  it is not exactly real-time, since according to the software developer, Jstock grabs the data from Yahoo! Finance. The data from Yahoo! Finance  for KLSE are 20 minutes delayed. But it 'close' enough for casual monitoring. Hey, it's FREE and I think there is no other free similar software as I can think off. You can read more and download it at Jstock Developer. Alternatively, you can download at KLSE real-time software.
Happy Stock Watching!


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