The significance and performance of Malaysian listed property companies in international mixed asset portfolio strategies

Abstract

The Malaysian listed property companies (MLPCs) are now penetrating the global market, thus playing a significant role in the country’s economic growth. The property sector in Malaysia is now also able to attract foreign investors which helps to make Malaysia one of the major property investment destinations. Moreover, property investment has proved to be a hedging against inflation as well as financial crises. Consequently, it is important to analyse the significance and performance of MLPCs to identify its added value to mixed asset portfolio. The research aim is to analyse the significance and performance of MLPCs are important to provide strategic investment allocation for investors. This study used the time series data of price indices for all asset classes such as shares, bonds and property. The countries involved in this analysis vary from developed to less emerging property markets. The research methodology has employed several statistical techniques such as risk adjusted performance analysis, correlation analysis and efficient frontiers. In order to assess the level of volatility of MLPCs, advanced statistical techniques have been used; these include: Granger causality test and ARCH family model. This analysis covers a 20 year period from January 1994 to December 2014. The performance of MLPCs has been segmented into three different property markets, namely: Malaysian, Asian and developed countries mixed asset portfolio. The findings have revealed that MLPCs have low performance, less diversification and do not add value within local mixed asset portfolios. However, it shows some hedging benefits during the Global Financial Crisis (GFC) period as they were less affected by the GFC. In addition, MLPCs also have low performance and do not add value to the property portfolio of other Asian countries. However, they provide diversification benefits with several Asian countries. With regards to volatility, it was found that Japan could cause MLPCs to become a risky asset. In the context of an international market, MLPCs have inferior risk adjusted performance except during the GFC period. During the GFC, MLPCs outperformed several developed countries which indicated that they were able to show sustainable performance. With regards to volatility, several developed countries caused MLPCs to become a risky asset. Conclusively, MLPCs are seen to be less significant in mixed asset portfolios especially when compared with local, Asian and developed countries portfolio. MLPCs can bring about improvements in order to gain returns and can reduce risk in a portfolio in a certain situation. Nevertheless, MLPCs need to revolutionize in order to become more competitive compared to other assets. This study provided useful information for LPCs players for making more informed investment decision, while understand the implications.