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ASSIGNMENT CORPORATE FINANCE Paper

Words: 1704, Paragraphs: 109, Pages: 6

Paper type: Assignment , Subject: Banking And Finance

1.0 INTRODUCTION

The purpose of this report is to conclude evidence regarding the implications of the securities market. The shape of the market efficiency helps investors to contained useful information on share prices and dividends in the capital market (Fama, 1970). Specifically, the objective of this report focus on the three forms of securities market in efficiency namely weak, semi – strong or strong form efficiency related to the findings of the listed companies such as Petronas Gas Berhad and Hong Leong Financial Group Berhad. Petronas Gas Berhad (PETGAS) are Malaysia’s leading Gas Infrastructure and Utilities company who owned by PETRONAS and institutional investors and retail shareholders as for the remaining shares. PETGAS main headquarter are located at the PETRONAS Twin Tower in Kuala Lumpur and also operated by other subsidiaries in Peninsular Malaysia and East Malaysia. PETGAS conduct a business line in Gas Processing, Gas Transportation and Regasification consistently attributed natural gas e.g. petrochemicals, steam, power, industrial gases e.g. nitrogen and oxygen, electricity and etc. Second, Hong Leong Financial Group Berhad (HLFG) presenting as a lead provider for Hong Leong Group’s business, allocates in Malaysia and throughout Asia towards interpreting various banking solutions commonly for conventional and Islamic banking. Moreover, HLFG operates financial services accounted for subsidiaries and associates company. The services pointed out as this offers personal financial services, business banking, treasury, transaction banking and wealth management e.g. capital markets, stock.

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2.0 EMH EXPLORED

2.1 Definition Of Efficiency Market Hypothesis

According to Poshakwale (1996), efficiency is a concept that related to a fair game. Stock market efficiency is considered as an explanation to characterize the functions of capital markets. In addition, Kendall (1953), efficiency market hypothesis is related to random walk theory, e.g. stock prices and raw materials. In this discovery, random walk are known for market price changes as the value were unpredicted for its patterns in each week and does not related to any trends in the market. Since the relevant information reliable to the market price or dividends are hard to attained, investors have to based on their accounting skills to decide and estimate the future performances of a company.

2.2 Efficient Securities Markets

According to Fama (1970 and 1991), clarifies the market efficiency contained three levels which is Weak form Efficiency, Semi – Strong form Efficiency and Strong form Efficiency. The future share price and dividends might be overreact, investors could conclude which state of efficiency was realized according to the company’s performances. Weak form Efficiency represent as the first level in the capital market that attributes all information are measured on the record of past prices. According to Kendall (1953), continuation of profits in the weak sense of market are reliable to the study of past prices are generally impossible as the the price will follow a random walk. Semi – strong form Efficiency represent as the second level in the capital market that attributes all information are measured on the record of past prices and reflectively in public. The theory has been tested (Fama, Fisher, Jensen & Roll, 1969). Strong form Efficiency represent as the third level in the capital market that attributes all information reflectively based on private and public.

Semi – Strong Market Efficiency

If markets are semi-strong efficiency then prices will adjust immediately to public information such as the announcement of the last quarter’s earnings, a new issue of stock or a proposal to merge two companies.

Strong Market Efficiency

The third level of efficiency, prices reflect includes all information, public and private (Fama, 1965). Therefore it is expected that any type of information that may be relevant to the value of stock, even if it is only known by one investor, will already be adjusted in the market.

3.0 EXAMINING EVIDENCE FOR AND AGAINST THE EMH

3.1 Petronas Gas Berhad

According to Intan (2018), Petronas predicted that the company’s net profit in the second quarter has raised its dividend payment to the Government to RM 24bil. Petronas had earlier guided pay to pay RM 19bil in dividends to the government this year.

3.2 Hong Leong Financial Group Berhad

4.0 CALCULATION ON THE AVERAGE AND STANDARD DEVIATION OF MONTHLY TOTAL SHAREHOLDER RETURN (TSR) OVER FIVE YEARS

APPENDIX 1 Month End Stock Price Dividend Payment Monthly Total Shareholder Return (TSR)

Date Petronas Gas Berhad Hong Leong Financial Group Berhad Market Index Petronas Gas Berhad Hong Leong Financial Group Berhad Petronas Gas Berhad Hong Leong Financial Group Berhad Market Index

1 31-Jul-14 23.48 17.16 1,871.36 2 31-Aug-14 22.80 16.74 1,866.11 -0.028961 -0.024073 -0.002805

3 30-Sep-14 22.92 17.29 1,846.31 0.20 0.014035 0.032909 -0.010610

4 31-Oct-14 22.48 17.79 1,855.15 -0.019197 0.028391 0.004788

5 30-Nov-14 22.72 17.39 1,820.89 0.010676 -0.022097 -0.018468

6 31-Dec-14 22.16 16.23 1,761.25 0.20 0.13 -0.015845 -0.059223 -0.032753

7 31-Jan-15 22.20 16.63 1,781.26 0.001805 0.024211 0.011361

8 28-Feb-15 23.06 16.53 1,821.21 0.038739 -0.005895 0.022428

9 31-Mar-15 23.02 16.67 1,830.78 0.15 0.004770 0.008350 0.005255

10 30-Apr-15 22.72 15.92 1,818.27 -0.013032 -0.044824 -0.006833

11 31-May-15 21.90 15.19 1,747.52 -0.036092 -0.045672 -0.038911

12 30-Jun-15 21.26 14.90 1,706.64 0.14 0.25 -0.022831 -0.002962 -0.023393

13 31-Jul-15 22.08 15.58 1,723.14 0.038570 0.046187 0.009668

14 31-Aug-15 21.32 13.72 1,612.74 -0.034420 -0.119802 -0.064069

15 30-Sep-15 21.96 13.76 1,621.04 0.14 0.036585 0.002843 0.005147

16 31-Oct-15 22.98 13.91 1,665.71 0.046448 0.011413 0.027556

17 30-Nov-15 22.92 14.00 1,672.16 -0.002611 0.006253 0.003872

18 31-Dec-15 22.70 13.96 1,692.51 0.15 0.13 -0.003054 0.006429 0.012170

19 31-Jan-16 22.88 13.80 1,667.80 0.007930 -0.011461 -0.014600

20 29-Feb-16 22.18 13.98 1,654.75 -0.030594 0.013043 -0.007825

21 31-Mar-16 22.00 15.52 1,717.58 0.17 -0.000451 0.110157 0.037969

22 30-Apr-16 22.00 14.94 1,672.72 0.000000 -0.037371 -0.026118

23 31-May-16 21.64 14.88 1,626.00 -0.016364 -0.004016 -0.027931

24 30-Jun-16 22.00 14.68 1,654.08 0.14 0.25 0.023105 0.003360 0.017269

25 31-Jul-16 22.18 15.22 1,653.26 0.008182 0.036785 -0.000496

26 31-Aug-16 22.20 16.08 1,678.06 0.000902 0.056505 0.015001

27 30-Sep-16 21.84 15.42 1,652.55 0.14 -0.009910 -0.041045 -0.015202

28 31-Oct-16 22.00 15.72 172.46 0.007326 0.019455 -0.895640

29 30-Nov-16 20.98 15.00 1,619.12 -0.046364 -0.045802 8.388380

30 31-Dec-16 21.30 14.22 1,641.73 0.15 0.13 0.022402 -0.043333 0.013964

31 31-Jan-17 20.88 14.70 1,671.54 -0.019718 0.033755 0.018158

32 28-Feb-17 20.02 15.06 1,693.77 -0.041188 0.024490 0.013299

33 31-Mar-17 19.76 15.90 1,740.09 0.19 -0.003497 0.055777 0.027347

34 30-Apr-17 18.48 16.88 1,768.06 -0.064777 0.061635 0.016074

35 31-May-17 18.56 16.76 1,765.87 0.004329 -0.007109 -0.001239

36 30-Jun-17 18.54 16.80 1,763.67 0.15 0.25 0.007004 0.017303 -0.001246

37 31-Jul-17 18.74 17.12 1,760.03 0.010787 0.019048 -0.002064

38 31-Aug-17 18.40 16.90 1,773.16 -0.018143 -0.012850 0.007460

39 30-Sep-17 17.90 16.60 1,755.58 0.16 -0.018478 -0.017751 -0.009915

40 31-Oct-17 18.04 16.70 1,747.92 0.007821 0.006024 -0.004363

41 30-Nov-17 15.88 16.06 1,717.86 -0.119734 -0.038323 -0.017198

42 31-Dec-17 17.48 17.88 1,796.81 0.16 0.13 0.110831 0.121420 0.045958

43 31-Jan-18 17.90 18.56 1,868.58 0.024027 0.038031 0.039943

44 28-Feb-18 17.62 19.10 1,856.20 -0.015642 0.029095 -0.006625

45 31-Mar-18 17.84 19.26 1,863.46 0.19 0.023269 0.008377 0.003911

46 30-Apr-18 17.82 19.48 1,870.37 -0.001121 0.011423 0.003708

47 31-May-18 17.58 18.90 1,740.62 -0.013468 -0.029774 -0.069371

48 30-Jun-18 17.30 18.00 1,691.50 0.16 0.27 -0.006826 -0.033333 -0.028220

49 31-Jul-18 18.74 18.08 1,784.25 0.083237 0.004444 0.054833

50 31-Aug-18 18.70 19.62 1,819.66 -0.002134 0.085177 0.019846

51 30-Sep-18 18.90 19.30 1,793.15 0.16 0.019251 -0.016310 -0.014569

52 31-Oct-18 18.28 18.38 1,709.27 -0.032804 -0.047668 -0.046778

53 30-Nov-18 18.94 19.28 1,679.86 0.036105 0.048966 -0.017206

54 31-Dec-18 19.20 18.56 1,690.58 0.18 0.13 0.023231 -0.030602 0.006381

55 31-Jan-19 18.08 19.70 1,683.53 -0.058333 0.061422 -0.004170

56 28-Feb-19 18.08 19.70 1,707.73 0.000000 0.000000 0.014375

57 31-Mar-19 17.62 19.18 1,643.63 0.22 -0.013274 -0.026396 -0.037535

58 30-Apr-19 17.68 19.22 1,642.29 0.003405 0.002086 -0.000815

59 31-May-19 17.66 18.98 1,650.76 -0.001131 -0.012487 0.005157

60 30-Jun-19 17.36 18.54 1,672.13 0.16 0.29 -0.007928 -0.007903 0.012946

61 31-Jul-19 16.08 17.98 1,634.87 -0.073733 -0.030205 -0.022283

Monthly Average TSR -0.002948 0.003608 0.123250

Variance 0.001193 0.001711 1.191341

Standard Deviation 0.034533 0.041366 1.091486

4.1 Petronas Gas Berhad Of Monthly Total Shareholder Return (TSR)

4.2 Hong Leong Financial Group Berhad Of Monthly Total Shareholder Return (TSR)

4.3 Market Index Of Monthly Total Shareholder Return (TSR)

5.0 CONCLUSION

6.0 REFERENCES

Poshakwale, S. (1996) ‘Evidence On Weak Form Efficiency And Day Of The Week Effect In The Indian Stock Market’. Finance India. [Online]. X(3) September. pp. 605-616. Available at: HYPERLINK " [Accessed: 15 October, 2019]

Brealy, R.A., Myers S.C. & Allen F. (2011) ‘Efficient Markets And Behavioral Finance’. In Kendall, M. (eds.) Principles Of Corporate Finance. 10th edn. New York: Mc Graw Hill/Irwin. pp.312-340.

Scott, W.R. (2009) ‘Efficient Securities Markets’. Financial Accounting Theory. 5th edn. Toronto: Person Education Canada. pp.99-104.

Malkiel, B. G. (2003) ‘The Efficient Market Hypothesis And Its Critics’. Journal Of Economic Perspectives. [Online]. 17(1) Winter. JSTOR. Available at: HYPERLINK " Market Hypothesis and its critics.pdf" [Accessed: 18 October, 2019].

Bursa Malaysia Berhad (30632-P) (2019) Petronas Gas Berhad [S] (6033). Available at: HYPERLINK " [Accessed: 15 October, 2019].

Bursa Malaysia Berhad (30632-P) (2019) Hong Leong Financial Group Berhad (1082). Available at: HYPERLINK " [Accessed: 15 October, 2019].

Petronas Gas Berhad (2016a) Stock Information. Available at: HYPERLINK " [Accessed: 15 October, 2019].

Petronas Gas Berhad (2016b) Gas Processing. Available at: HYPERLINK " [Accessed: 17 October, 2019].

Petronas Gas Berhad (2016c) Gas Transportation. Available at: HYPERLINK " [Accessed: 17 October, 2019].

Petronas Gas Berhad (2016d) Utilities. Available at: HYPERLINK " [Accessed: 17 October, 2019].

Petronas Gas Berhad (2016e) Regasification. Available at: HYPERLINK " [Accessed: 17 October, 2019].

Petronas Gas Berhad (2016f) Third Party Access. Available at: HYPERLINK " [Accessed: 17 October, 2019].

Hong Leong Financial Group Berhad (a) About Us. Available at: HYPERLINK " [Accessed: 17 October, 2019].

Hong Leong Financial Group Berhad (b) Careers. Available at: HYPERLINK " [Accessed: 17 October, 2019].

Malaysiastock.biz (2019a) PETGAS Share Price Movement. Available at: HYPERLINK " [Accessed: 16 October, 2019].

Malaysiastock.biz (2019b) HLFG Share Price Movement. Available at: HYPERLINK " [Accessed: 16 October, 2019].

Malaysiastock.biz (2019c) FBMKLCI Technical Analysis. Available at: HYPERLINK " [Accessed: 16 October, 2019].

Fusion Media Limited (2019) Petronas Gas Berhad Historical Data – Investing.com. Available at: HYPERLINK " [Accessed: 16 October, 2019].

Dow Jones & Company, Inc (2019a) Petronas Gas Berhad Advanced Charting – Wall Street Journal. Available at: HYPERLINK " [Accessed: 16 October, 2019].

Dow Jones & Company, Inc (2019b) Hong Leong Financial Group Berhad Advanced Charting – Wall Street Journal. Available at: HYPERLINK " [Accessed: 16 October, 2019].

MarketWatch, Inc (2019a) FTSE Bursa Malaysia KLCI – Market Index. Available at: HYPERLINK " [Accessed: 16 October, 2019].

MarketWatch, Inc (2019b) Petronas Gas Berhad – Stock Price. Available at: HYPERLINK " [Accessed: 16 October, 2019].

MarketWatch, Inc (2019c) Hong Leong Financial Group Berhad – Stock Price. Available at: HYPERLINK " [Accessed: 16 October, 2019].

Figlewski, S. (1978) ‘Market Efficiency In A Market With Heterogeneous Information’. Journal Political Economy. [Online]. 86(4) August. pp. 581-597. Available at: HYPERLINK " [Accessed: 23 October, 2019].

Gersdorff, N.V. & Bacon, F. (2009) ‘U.S. Mergers And Acquisitions: A Test Of Market Efficiency ’. Journal Of Finance And Accountancy. [Online]. pp. 1-8. Available at: HYPERLINK " [Accessed: 23 October, 2019].

Fama, E.F. (1970) ‘Efficient Capital Markets: A Review Of Theory and Empirical Work’. Stock Market Price Behaviour. [Online]. pp. 383-417. Available at: HYPERLINK " [Accessed: 26 October, 2019].

About the author

This paper is written by Sebastian He is a student at the University of Pennsylvania, Philadelphia, PA; his major is Business. All the content of this paper is his perspective on ASSIGNMENT CORPORATE FINANCE and should be used only as a possible source of ideas.

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