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Buy Bursa, Brokers to Tap Malaysian Stock Rally

Investors should buy shares of Bursa Malaysia Bhd. and brokerages that benefit from rising trading volumes as the nation’s stock market has “come back to life,” Credit Suisse Group AG said.

“This market activity is sustainable given that 62 percent of the 936 stocks listed are trading below book value,” according to a report by Stephen Hagger, an analyst. “There are two ways of playing this liquidity: buy the stock exchange and buy one of the stockbrokers.”

Daily trading volume on the Kuala Lumpur stock market has been above 1.3 billion shares this week, near the 1.7 billion share level reached on Sept. 24, which was the highest mark since Jan. 5, according to data compiled by Bloomberg. The daily average rose to 850 million shares in the third quarter, from 788 million in the second quarter.

Malaysian Prime Minister Najib Razak said in his Oct. 14 budget speech that the government plans a 100-floor tower and a mass rail project to boost spending and spur growth. The benchmark FTSE Bursa Malaysia KLCI index has surged 17 percent this year, surpassing levels before the start of the global financial crisis in 2008.

Bursa, Malaysia’s stock exchange operator, has “underperformed and is the blue chip way to play the sector,” given that most of its profit is linked to trading volume, Hagger said.

OSK, TA Enterprise

Hagger, whose team was ranked second for Malaysian research in Institutional Investor’s 2010 Asian poll, said investors should also consider buying retail brokerage stocks such as OSK Holdings Bhd. and TA Enterprise Bhd., being the two “more liquid” securities companies, he said.

There’s “plenty of action among second-line stocks,” Hagger said, referring to the smaller companies that have been among the most active shares on the Kuala Lumpur stock exchange this week. “If liquidity and pre-election confidence grow, this could sustain due to low valuation.”

Hagger said last week the government’s budget was also focused on garnering political support ahead of general elections that must be held by 2013.

Among the heavily traded stocks this week are Karambunai Corp. and Time dotcom Bhd. Karambunai, a resort operator, was the most active stock today with 44 million shares traded.

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