In essence, the BMQ is intended to represent Bursa’s “high flyers” — companies with superior profitability, healthy balance sheets and strong cash flows. This group of companies, according to Bursa, materially outperformed the FBM KLCI over the past decade, delivering an 86.6% gain over 10 years versus a 0.7% decline in the benchmark index over the same period.
By highlighting the outperformers, Bursa aims to change the narrative of the local bourse as a chronic underperformer, enhance its appeal to investors as well as encourage companies to improve governance and earnings quality (to be selected into and to remain in the index). The BMQ index could also provide a performance-based benchmark for funds and unit trusts to measure against, track and develop derivative products such as exchange-traded funds (ETFs) — all good intentions.
Meritocracy matters. We repeat, meritocracy matters. Since 2010, The Edge Billion Ringgit Club (BRC) (members must have a market cap of above RM1 billion) has presented awards that recognise corporate success based on transparent methodology, publicly available information, verifiable and universally accepted measures. This recognition was later expanded to mid-caps (market cap between RM100 million and RM1 billion), with the introduction of The Edge Centurion Club Corporate Awards in 2019. In a nutshell, awards are given to companies that achieve the highest growth in profit after tax, highest return on equity and highest returns to shareholders over a three-year period for each of the Bursa Malaysia sectors. For the award winners, the recognition and validation are motivation for the continued pursuit of excellence. And for many of these companies, their share price goes on to outperform the broader market in the subsequent years.
Bursa’s BMQ, along with The Edge BRC and Centurion awards, is proof that while storytelling and narratives can drive share prices higher in the short term, sustained long-term outperformance must be underpinned by fundamentals. This is further evidenced by the significant outperformance of Tong’s Malaysian Portfolio — total portfolio returns of 210.3% since inception versus the FBM KLCI, which is down 4% over the same period — as well as Asia Analytica’s Quality Portfolio (+154.7% since inception versus -0.1% for the FBM KLCI), Income Portfolio (+249.7% versus -3.9% for the FBM KLCI) as well as annual Top 10 stock picks (22.9% average annual returns since 2015).
See also: Base MHIT plan by Bank Negara Malaysia — a step in the right direction
You can follow all these portfolios by subscribing to AbsolutelyStocks at www.absolutelystocks.com. To further enhance our range of merit-based tools, The Edge and AbsolutelyStocks are working on showcasing companies with improving fundamentals over time. We expect that, soon, you can simply AskEdge the relative fundamental performances of all companies listed on Bursa at any time and receive the analysis immediately. Watch this space for more updates.
