‘Foreign funds favour Malaysian equities in Asia’

by **Cals** Sat 07 Nov 2015, 02:24

‘Foreign funds favour Malaysian equities in Asia’

By Ahmad Naqib Idris / The Edge Financial Daily | November 6, 2015 : 10:13 AM MYT

This article first appeared in The Edge Financial Daily, on November 6, 2015.

KUALA LUMPUR: [size=16]MIDF Amanah Investment Bank Bhd said foreign fund managers are favouring Malaysia’s stock market over other bourses in the region, as stock prices have fallen sharply, making them more affordable.

MIDF senior vice president and head of research Zulkifli Hamzah noted that foreign investors have been net buyers in the local market in the past few days.

He also pointed out that there have been more foreign inflows in the Malaysian market compared with Indonesia, Thailand and the Philippines since the beginning of October.

“A lot more money has been going into Malaysia, compared with Indonesia, Thailand and the Philippines,” he told reporters after a MIDF luncheon talk on “KVMRT Underground Works: Challenges and effect on Klang Valley dynamics” by MMCT-Gamuda KVMRT (T) Sdn Bhd yesterday.

“[The] Philippines and Indonesia have already seen a [foreign] outflow. Generally, the ringgit seems to be back in favour of investment funds. That to me is quite positive,” he said.

Zulkifli said Malaysian stock prices have fallen so much that foreign investors now find it a good time to re-enter the market as they see upside potential in their investments.

He believed that between July and October was a good period to buy and accumulate Malaysian equities.

However, foreign buying is still comparatively weaker than in the past, Zulkifli said, amid the uncertainty over the US Federal Reserve’s (Fed) impending interest rate hike.

“We are in a period of quite an intense uncertainty because the Fed had just made the announcement of a likely rise in interest rates in December. Globally, in terms of the direction of flow of funds, fund managers are getting a bit more risk averse,” he said.

As foreign investors remain cautious, Zulkifli said local funds have stepped in, accounting for most of the recent buying activity.

“We believe that most of the buying of late has been local, which is a very interesting phenomenon. Locally, there is still a lot of liquidity in the system,” he said.

Zulkifli noted that there has been more interest in small capitalisation (cap) stocks rather than big-cap stocks, noting the climb in small caps over the past week.

“We have to look beyond the 30 components stocks in the FBM KLCI, and look at the small caps. These stocks have been enjoying a rally for the last week or so. That’s where the action is,” he said.

“It appears as though the current momentum is sustainable. However, from now until December, when the Fed is expected to raise interest rates, anything can happen.

“Fundamentally, the country is doing fine. Everybody agrees that the ringgit is not where it’s supposed to be. It does not reflect our fundamentals. It’s only a matter of time before prices rebound,” he said.

MIDF currently has a year-end 2015 baseline target of 1,650 for the KLCI, with an upper and lower range of 1,700 and 1,600 respectively. For end-2016, the research house’s target is 1,800 points.
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