Foreign net stock buying spills into November

by **hlk** Thu 03 Nov 2011, 08:33

Kuala Lumpur: Foreign funds were net buyers of local stocks in October, helping the benchmark FTSE Bursa Malaysia KLCI record its biggest monthly gain in more than two years.

This is the first time in three months that foreign funds have turned into net buyers of equities traded on the stock exchange here.

In October, foreign funds were net buyers of RM1.5 billion worth of shares. They bought RM7.1 billion and sold RM5.6 billion worth of shares during the period.

"Many stocks hit or were trading near their year-low levels over the past few months. That had made valuation somewhat attractive and drove the funds into a buying spree. Also, there were less worries on the global front, which helped investment sentiment," said Mercury Securities head of research Edmund Tham.

The FBM KLCI index rose 7.6 per cent in October, its highest monthly gain since July 2009. The index, which started the month at 1,387.13, had a five-day consecutive gains to end the month at 1,491.89 points.

During the month, the component stocks on the FBM KLCI rose by about 6 per cent on average. The top five gainers were Gamuda Bhd, MISC Bhd, Genting Bhd, Tenaga Nasional Bhd and Petronas Dagangan Bhd, which rose more than 10 per cent.

However, analysts remained unsure if the foreign funds' buying spree will slow down in November.

"It all depends on how the global market performs. If it does well, Malaysian stocks will get its fair share of foreign funds' inflow," said Jupiter Securities head of research Pong Teng Siew said.

So far in November, foreign funds were net buyers of Malaysian stocks, with a net purchase of RM50 million.

However, analysts remained sceptical on the sustainability of the foreign buying trend.

"Stock valuations are not so friendly anymore. In fact, our market is one of the most expensive in the region," said Pong.

Currently, the index is trading at a PE (price-earnings) ratio of more than 15 times. In contrast, Singapore's benchmark index is trading at less than eight times PE.