SEVENTH ANNUAL PACIFIC RIM REAL ESTATE SOCIETY CONFERENCE

SEVENTH ANNUAL PACIFIC RIM REAL ESTATE SOCIETY CONFERENCE -...

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SEVENTH ANNUAL PACIFIC RIM REAL ESTATE SOCIETY CONFERENCE Christchurch, New Zealand 21 - 23 January 2002 LISTED PROPERTY COMPANIES IN MALAYSIA : A COMPARATIVE PERFORMANCE ANALYSIS Ting Kien Hwa Department of Estate Management Faculty of Architecture, Planning & Surveying University Technology MARA 40450 Shah Alam, Selangor Malaysia Tel : 603 – 5544 4217, Fax : 603 – 5519 6641, e-mail : [email protected] Keywords : Listed property companies, Malaysian House Price Index, risk-return analysis The author gratefully acknowledges the funding provided by the Bureau of Research & Consultancy, University of Technology MARA (UiTM) for this study
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2 LISTED PROPERTY COMPANIES IN MALAYSIA : A COMPARATIVE PERFORMANCE ANALYSIS Ting Kien Hwa Department of Estate Management Faculty of Architecture, Planning & Surveying University Technology MARA 40450 Shah Alam, Selangor Malaysia Tel : 603 – 5544 4217, Fax : 603 – 5519 6641, e-mail : [email protected] Abstract This paper measures and analyses the investment performance of listed property companies for the 1991 to 2000 period. The investment performance is compared with shares (represented by Kuala Lumpur Composite Index, EMAS Index, Second Board Index, the Property Trust and Plantation Sector Sub-indices) and direct residential property (represented by the Malaysian House Price Index). The aims of this study are to determine :- (a) whether listed property companies achieved higher risk adjusted return than shares and direct investment in residential properties; (b) whether listed property companies could offer portfolio diversification potential when included in an investment portfolio; (c) whether listed property companies could act as substitute for direct residential property investments. The results show that on a broad sector basis, property shares represented by the Property Index do not perform better than shares on a risk adjusted basis. But selected individual property development company shares perform better than shares. For property investment company shares, the performance is mixed. Overall, listed property shares could not offer diversification possibilities due to high correlation with shares and do not act as substitutes to direct residential investment due to negative correlation. Keywords : Listed property companies, Malaysian House Price Index, risk-return analysis
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3 1.0 Introduction Since the property market recovery in 1988-89, the number of listed property companies have doubled in numbers on the Property Sector of the Kuala Lumpur Stock Exchange (KLSE). Despite the increase in the number of property companies, the market captalisation of the Property Sector has increased by a mere 13.8% over 1989 (refer Figure 1). This is in contrast with the pre-currency crisis of RM57.8 billion market capitalisation of the Property Sector in 1996. Among the property asset intensive sectors, the market capitalisation of the Property Sector is about the same size as the Plantation Sector as at end 2000 (refer Figure 2). It is interesting to note that the market
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SEVENTH ANNUAL PACIFIC RIM REAL ESTATE SOCIETY CONFERENCE -...

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