KUALA LUMPUR, Oct 1 — Today is the first day of the last quarter of this year. Wonder where Bursa Malaysia’s benchmark FBM KLCI would be heading for the next 60-odd trading days?

Throughout the year, the index has been moving between 1,621.04 and 1,752.77, and mostly in tandem with its regional peers.

The highest closing point so far this year was at 1,862.80 on Apr 21, 2015.

But what about individual stocks’ performances? For most research houses, they are undervalued.

Bursa Malaysia is home to about 900 listed companies with prices ranging from a sen to RM70 a share. 

The reactivation of ValueCap Sdn Bhd with RM20 billion to be invested in underperforming stocks has somewhat put a smile back on the faces of investors.

Prime Minister Datuk Seri Najib Razak announced it early last month as part of the government’s pro-active measure to support the Malaysian economy.

In response, ValueCap welcomed the announcement as it saw value in the market.

Retail investors, who are mostly ‘aunties and uncles’, would have by now prepared to fill up the stockbroking firms’ trading arena.

The injection of RM20 billion could be seen as ‘complementary’ to the ongoing ‘share repurchase’ programme carried by some listed companies.

It is a programme in which a company buys back its own shares to reduce the number of outstanding shares.

Share repurchase has been encouraged by the government after the local stock market was badly hit during the Asian financial crisis 17 years ago.

Most shares did not reflect their own values at that time.

As the stock market recovers, some companies are still continuing the programme as and when they think it is necessary.

One way or another, it is an indication that the company’s management thinks that the shares are undervalued.

It can be done by buying their shares directly from the market or offer its shareholders the options to sell their shares directly to the company at a fixed price.

Through Bursa Malaysia’s website, it can be seen that about 300 listed companies were actively buying back their shares in September alone.

They must have good reasons for doing that.

Theoretically, by reducing the number of shares outstanding, it increases earnings per share and indirectly lifts the market value of the remaining shares.

The higher market value should indicate a ‘buy’ call for the company.

Nonetheless, share buyback can also act as a protection to one company.

By reducing the number of shares, it could avoid any threats by shareholders who may be looking for a controlling stake.

As investors, whether institutional or retail, let’s draw our own trading path for the last quarter of 2015 and beyond, by tracking ValueCap.

We don’t need Wall Street to show us direction on how to make money.

ValueCap has proven to have given handsome returns to shareholders like Permodalan Nasional Bhd, Retirement Fund Inc and Khazanah Nasional Bhd.

ValueCap, formed in October 2002, is an investment holding company that is involved in investments in listed securities on Bursa Malaysia.

With an initial fund of RM5.1 billion, ValueCap’s assets under management grew to over RM17.2 billion in size in 2010.

It also paid out dividends to shareholders amounting to RM8.4 billion. — Bernama