Jewellery firms in Malaysia soar 400% as retail chases gold rally

[KUALA LUMPUR] After helping boost a glove maker to the top of this year's Asian stock-performance charts, Malaysia investors have recently been driving up the nation's gold-related equities on the back of a rally in the precious metal.

Shares in little-known Malaysian jewellers including Niche Capital Emas and Tomei Consolidated have more than doubled in the past few weeks.

The small caps related to gold are seen as another way to play the yellow metal, which climbed to a record this month on inflation worries following massive central bank easing to fight the pandemic, and a drop in real interest rate.

The gains have been aided by a boom in individual investing in the South-east Asian country. Their participation has partially fuelled the benchmark FTSE Bursa Malaysia KLCI Index to outperform its South-east Asian peers. Top Glove's nearly 500 per cent jump this year is by far the best on MSCI's broadest Asia equity gauge.

With stock trading volumes rising to record levels, Malaysia is preparing measures to curb excessive speculation by retail investors. While glove makers have started to see strong earnings due to a virus-fueled focus on health and hygiene, investments like gold stocks are seen as somewhat more risky bets.

"These gold stocks are up due to a lot of speculative buying by retail investors," said Danny Wong, chief executive officer at Areca Capital. "One should buy physical gold not gold stocks if the view is that the yellow metal's price will rise."

Mr Wong's not alone in sounding a note of caution. Delbrook Capital Advisors, a Canadian hedge fund specialising in metals and mining, has begun trimming its gold stock exposure amid high valuations. Areca Capital's Mr Wong doesn't own the Malaysian jewellery stocks.

Niche Capital has seen its market capitalisation skyrocket more than 400 per cent since July 16 to about US$50 million. It's trading at more than six times book value, compared with 1.3 times for the Bursa Malaysia Consumer Product Index.

BLOOMBERG