Showing posts from January, 2014

FBM KLCI Normalizing

After  a  brilliant  2013,  the  FBM  KLCI  may  underperform  its  peers  in  2014Reversion  to  mean  valuation. In  our  Strategy  note  dated  8  January,  we  highlighted  that  the  comparative valuation of the FBM KLCI surpassed all its regional peers and “the glaring disconnect between the valuation of the local  benchmark  vis-à-vis  its  regional  counterparts  leads  us  to  believe  that,  going  forward,  there  is  a  greater tendency for the FBM KLCI to revert back towards its mean PER, rather than otherwise.”…has  arguably  beginning  to  take  hold. Based  on  latest  weekly  data,  the  mean  reversion  tendency  has  in  fact beginning to take hold as  the market valuation of regional indices is already showing an early sign of normalizing. From the Table above, it is rather apparent that equity benchmarks which were trading at levels below their longterm mean PER, i.e. SD of less than zero, recorded week-on-week expansions with regard to their current year PER valu…