Forget about TMT stocks, here come the Replacements

For a very long time, foreign investors were fed with the limited choice of TMT whenever stocks investing are concerned in Malaysia. The abbreviation of TMT means Telekom, Maybank and Tenaga. The best of practice for foreign fund managers then was you must invest in these three heavyweight stocks since they constituted the biggest percentage in terms of Kuala Lumpur Composite Index (KLCI). And when these three musketeers move; the KLCI move. TMT was like the Great Wall of China and you can’t and shouldn’t claim to have been to China if you haven’t visited the Great Wall.

In layman term, it’s quite easy to justify TMT as the leader in the stock exchange. Telekom Malaysia Berhad (KLSE: TM, stock-code 4863) was the biggest and the only player who monopolized the telecommunication sector. Before the emerging of mobile or cell phones, the land-lines were the cash-cow of Telekom. Telekom ruled the land of the nation's telecommunication.

Malayan Banking Berhad (KLSE: MAYBANK, stock-code 1155) being the largest bank with the most number of branches throughout the country is synonym with national bank status of a nation. With limited and near to impossible for other banks to expand their branches, Maybank monopolizes the domestic market. Tenaga Nasional Berhad (KLSE: TENAGA, stock-code 5347) is the only electricity provider and the monopoly is obvious in the energy sector.

The latest report from theStar which picked the source from Bloomberg shows that foreign investors are slowly shifting the decades old choice from TMT to new candidates. The catalyst was indeed the surging prices in palm-oil. IOI Corporation Berhad (KLSE: IOICORP, stock-code 1961) appears to have beaten all the TMT candidates when its market capitalization has ballooned to RM47 billion compared with Maybank’s RM43.2 billion and TNB’s RM40 billion. Public Bank Berhad (KLSE: PBBANK, stock-code 1295) further put the TMT to shame when the company took the fourth place with market capitalization of RM39 billion.

IOI Corp which is headed by its founder Tan Sri Lee Shin Cheng has a weighting of 6.24 percent on the benchmark KLCI should thank global palm-oil prices for the wealth created. On the other hand the Malaysian version of Warren Buffett, Public Bank founder Tan Sri Teh Hong Piow, has shown that good management and the practice of meritocracy in running the banking operation will ultimately win the hearts of investors. Of course his latest expansion to China contributes to the soaring stock price of his baby Public Bank.

So, you’ve seen two examples of great companies run by great leaders. Why the TMT suffered and its performance deterioted over the time in spite of sitting on the throne of monopoly? Remember Malaysian Airline System Berhad (KLSE: MAS, stock-code 3786)? The company that despite the monopoly accorded had made multiple quarters of losses before the bleeding stopped recently. So what are the similiarity with TMT and MAS? All of them are GLC (government-link-companies). All of them have so-called social responsibility to put on gigantic number of employees on its payroll, regardless of the staffs’ productivity and performance. All of them are protected, one way or another by the government. And the moment the profits stop growing or in the red, all of them will scream and cry demanding price hike. . If only doing business and generating profits are so damn simple and easy.

If the other banks are given the liberty of setting up more branches, Maybank would surely disappear from the banking map. Take for example a real case of a customer who reported that his Maybank credit card was used for unauthorized transactions worth hundreds of dollars. Long story short, the customer was asked to pay the “unauthorized transaction” nevertheless because Maybank couldn’t trace the culprit despite numerous appeals. Out of frustration, the customer paid and cancelled all business relationship with the bank.

Now the same situation happened to another customer whereby his credit card was being cloned for various transactions from multiple petrol stations. This time the bank’s (Citibank) system somehow detected abnormal transactions within one of its customers and alerted the respective officers. The customer service called the customer to verify the transaction and advised the customer to destroy and wait for the new credit card to be issued thereafter. The difference is this "lucky" customer was never asked to pay the unauthorized transactions, which is the only right thing to do, not that the customer purposely ask for his card to be cloned in the first place. So you’ve a frustrated and a happy (loyal) customer based on same scenario but from different banking institution.

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