Bursa on radar of foreign funds

KUALA LUMPUR: Foreign participation on Bursa Malaysia breezed past the 50 per cent mark on Tuesday, reinforcing market vigour that foreign funds are beginning to show interest in local stocks.


For the month just ended in May, data obtained from Bursa Malaysia shows that foreign funds were net buyers of Malaysian stocks when the market was dipping.

In May, the FTSE Bursa Malaysia Kuala Lumpur Composite Index was up by 24 points, largely helped by Tuesday's 15.45 point surge.

While local funds and retail interest mellowed in May, the foreign funds were quietly buying up stocks here. Information obtained from the stock market shows that in May, they bought RM10.3 billion worth of stocks, and sold RM8.7 billion during the month.

At the same time, the local funds were net sellers of RM1.3 billion worth of stocks, while retail investors were neutral on the market.

This trend seems to be continuing, as fresh data obtained from the stock exchange shows that even yesterday, foreign funds were net buyers of RM103.34 million worth of stocks, while local funds and retailers collectively were net sellers of RM103.34 million worth of stocks.

If Tuesday's data is anything to go by, indications are that the foreign funds are once again looking at equities here, as the 50.3 per cent in terms of value traded by the foreign funds, was a steep jump when compared with their average 30 per cent participation in the market for the entire month of May.

"I think foreign funds are readjusting their portfolio and giving higher weightage to Malaysian stocks," OSK Research head of research Chris Eng said when contacted by Business Times.

Late last month, the UK's Financial Times reported that Malaysia may benefit from greater investor interest as the shine comes off more established emerging markets whose growth was outpaced by developed economies this year.

The daily reported that more fund managers were now shifting focus to the "next level of emerging market countries" over worries that inflation, poor corporate governance and currency devaluation will slash earnings in Brazil, Russia, India and China (BRIC).

"I believe that foreign funds like Malaysia, partly because it is able to handle the inflationary pressure," said an analyst from a local brokerage.

Analysts said oil and gas, plantation, property and renewable energy sector will be the main focus of investors wanting to diversify their portfolios.

Malaysia's plan to enforce a Renewable Energy (RE) Act soon, and plans outlined this week for the creation of an RE Fund and Feed-in Tariffs, were core reasons why foreign funds were looking at buying renewable energy stocks here.