Romance of the Stock Market Indices: Singapore and Malaysia

The Kuala Lumpur Composite Index (KLCI) is the main index for the stock exchange in Malaysia, the Bursa Malaysia.

In a similar fashion to Singapore’s own stock market benchmark, the Straits Times Index (SGX: ^STI), the KLCI is also made up of 30 large-cap companies that are listed on Bursa Malaysia.

But what some of us on both sides of the Straits of Johore may not know is that the two indices actually have much in common. For example:

1) Both indices have heavy representation from the financial and telecommunication sectors

The financial sector has a 34.3% weighting in the KLCI (as 30 November 2015; subsequent weighting data for the KLCI are given as of this date); meanwhile, banks make up 35.3% of the STI (as 31 December 2015; subsequent weighting data for the STI are given as of this date).

As for the telecommunication sector, it makes up 15.9% and 12.5% of the KLCI and STI, respectively.

2) The largest constituents represented on both indices are banks

For the STI, DBS Group Holdings Ltd (SGX: D05), which is also Singapore’s largest bank by total assets, has the largest presence with a 12.8% weighting. As for the KLCI, Public Bank Berhad (KLSE:1295.KL) comes out tops with a 11.7% weighting.

3) Malaysian stocks are big owners of some constituents of the STI

Some of the STI’s 30 constituents are actually subsidiaries of or majority-owned by Malaysia-listed stocks. Integrated resort owner Genting Singapore PLC (SGX: G13) is a good example – the company is actually majority owned by Genting Berhad (KLSE.3182.KL), a major constituent of the KLCI.

Elsewhere, the PPB Group Berhad (KLSE.4065.KL) is one of the major shareholders of Singapore-listed Wilmar International Limited (SGX: F34); as of 10 March 2015, the latter owns 18.3% of the former.

I’ve just looked at the similarities between the KLCI and STI. Let’s now have a glance at some interesting businesses in the former that investors in Singapore might not be familiar with.

One such interesting business is Malaysia’s national electricity grid provider, Tenaga Nasional Berhad (KLSE.5347.KL). The company is the sole electricity distributor in Peninsula Malaysia. To relate Tenaga Nasional to a Singapore context, it is akin to having Singapore Power as a listed company that investors can invest directly in via the stock market.

Another interesting company in the KLCI is British American Tobacco (M) Berhad (KLSE.4162.KL). As the listed Malaysian subsidiary of global tobacco giant British American Tobacco Group, British American Tobacco (M) is the largest tobacco company in Malaysia – it controls 61.7% of the nation’s tobacco market. No such company is listed in Singapore.

The long and shared history of Singapore and Malaysia goes beyond just culture, languages, and food. The strong bond between the two nations can still be felt even in the financial markets, such as in the structure and composition of their respective market indices.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns shares in Wilmar International.