The Upside of Blood in the Water – The Need for Corporate Shark Attacks
EM Public Equities have underperformed DM, but the inverse is true for Private Equity.
Malaysian Public market tend to be dominated by asset-heavy, Old Economy industries that result in low single-digit returns. Malaysia’s top 30 constituent companies have not changed from 10 years ago. This stagnant nature of Malaysian equity index signals that the country has not created or diversified its economic drivers over time.
The Public market has failed as a provider of capital in ASEAN.
The lack of shareholder activism in this region has led to complacency within Management. Public companies must also battle with the issue of capital hoarding which can hurt shareholder returns.
Private Equity investors can provide the flexibility and technical expertise for business to grow.
Many family-run businesses in ASEAN are slow in innovating and evolving even in the face of disruption. Private equity can help them re-pool and reallocate capital from non-performing core assets to growth areas.
Malaysia has the potential to be a more attractive hunting ground for Private Equity firms.
Corporate Malaysia needs to grow the footprint of our international business.
Malaysia should look outside for more cross-border business and increase trade exposure to China to ride their wave of growing consumer demand.
We also need to rethink the structure of our supply chain.
Malaysia needs greater downstream integration to extract more value from our economic activities. This calls for Malaysians to draw on each other’s strengths to bring together different parts of the value chain.
ASEAN firms should aim for greater regionalisation and cross-border diversification.
ASEAN businesses need to think regionally and not just focus on their individual domestic markets.
Historically, companies within ASEAN countries have failed to capitalize on the opportunities provided by regional expansion. Instead, our own undoing comes from our tendency to view other member countries as competition. Corporate leaders must look regionally to replicate business models across ASEAN and capture the synergy across regional markets.
Corporate Malaysia can look to the rest of ASEAN for drivers of growth.
As the average GDP per capita of ASEAN approaches $4000 (with Malaysia standing at $10,000), the rest of ASEAN is experiencing a shift in consumption toward higher-end goods. This presents an opportunity for Corporate Malaysia as these neighbouring countries might not have sufficient capacity to meet their growing demand.