INDUSTRY ANALYSTS describe it as a price war, ignited by the Organization of Petroleum Exporting Countries (Opec) to frustrate US shale oil producers, and it has had a profound impact on the Malaysian stock market.

The local benchmark FBM KLCI was down 10.34% for the year (as at Dec 16), reflecting investors’ deep concerns about the adverse impact of oil prices on federal government revenue, which is closely tied to oil receipts. Expectations of a prolonged period of cheap oil will also dent capital spending by Petroliam Nasional Bhd (Petronas), which local oil and gas firms are largely reliant on.

The present circumstances do not bode well for the listed oil and gas firms which, unsurprisingly, make up six of the 20 worst-performing stocks on Bursa Malaysia’s Main Market this year.

Notably, offshore vessel operators and drilling rig companies were among those worst hit, with big names such as SapuraKencana Petroleum Bhd, Perisai Petroleum Teknologi Bhd and Alam Maritim Resources Bhd in the top decliners list (see accompanying table).

As Brent crude prices shed 40% year-to-date (as at Dec 16), Malaysian oil and gas stocks experienced even greater declines, the biggest of which was Perisai, which lost 74% of its value. Similarly, upstream players such as SapuraKencana and Alam Maritim saw their share prices decline by 57% and 66% over the same period.

Isolated from crumbling oil prices, however, sportswear manufacturer Xidelang Holdings Ltd turned out to be the worst performing stock on Bursa this year, with the stock falling by 80%. The extreme decline came as Xidelang reported sharply lower profit in the third quarter ended Sept 30, as sales slowed in mainland China due to stiff competition, as well as on lower demand.

On the other hand, the 20 top performing stocks on Bursa’s Main Market for the year are companies that experienced major shareholding changes as well as mergers and acquisitions activity.

For instance, Damansara Realty Bhd and Lay Hong Bhd saw takeover offers by their respective major shareholders, Seaview Holdings Sdn Bhd and QL Resources Bhd, at a substantial premium to market prices.

Interestingly, developer Perduren (M) Bhd had become the object of takeovers twice in 2014, first by its substantial shareholder Tan Sri David Law in January, and recently by parties led by Datuk Kamaluddin Abdullah.

Meanwhile, firms such as Takaso Resources Bhd have attracted interest by venturing into the construction industry via the acquisition of a private entity, in this case, Dynavance Construction Sdn Bhd.

Nevertheless, ACE Market-listed software firm IFCA MSC Bhd is the clear winner for the year, with its stock gaining 670% to date. The IT firm, with its GST-related software offerings, was one of the main beneficiaries of the impending implementation of the Goods and Services Tax (GST) on April 1.

Notably, private investor Brahmal Vasudevan, who runs private equity firm Creador, made major gains from his investments in three technology firms that were among Bursa’s top gainers over the year — IFCA MSC, SMRT Holdings Bhd and Scicom (MSC) Bhd.

Among ACE market counters, technology firms dominate the top rankings, possibly due to favourable sentiment towards the local software industry as well as GST.

Aside from IFCA MSC, other technology firms among the best performing ACE market stocks include SMRT Holdings (software consultancy), MMS Ventures Bhd (industrial automation) and Nova MSC Bhd (e-business solutions).

Outside Malaysia

In what was a challenging year for equity markets in developed countries, Asian stocks managed to deliver the biggest returns globally, with 19 making up the world’s top 30 gainers.

The number one stock, Thailand’s Asset Bright Plc, gained more than 3,000% this year. The company has dual exposure in the real estate and e-commerce businesses in Thailand.

As with last year, European stocks continued to disappoint, with only four companies making the top 30. Likewise, only one company listed in the US made the cut, in spite of the Dow Jones and S&P 500 hitting all-time highs this year.

Eight companies from India made the list, largely due to newly elected Prime Minister Narendra Modi’s pro-business approach. Modi had proposed a slew of financial reforms as well as new measures to streamline India’s bloated bureaucracy with the intention of boosting local businesses.

Overall, stocks with strong fundamentals were the clear winners this year compared with growth stocks whose earnings have underperformed previously lofty expectations. This is evident in the sheer number of manufacturing firms that make up the top global gainers list, riding on the better economic prospects in the US, the largest consumer market in the world.

This article first appeared in The Edge Malaysia Weekly, on 22 - 28 December 2014.

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