Feb 21, 2012

Money Flow - A positive week except for KLCI

MARKET SNAPSHOT
•  The rally in global equity prices continued in the week ended 17 February despite signs of edginess among investors in the week before. All 16 world’s major indices which we track recorded positive gains during the week under review, excepting KLCI which succumbed to profit taking during mid-week.
•  The markets advanced on rising expectations that Greece will obtain the much needed bailout this week coupled with further indications that the US economic recovery is gathering steam.
•  Japan's Nikkei 225, top performer of the week, rallied by nearly 5% to hit a fresh six-month high. It was buoyed by brightening earnings prospects particularly among Japanese exporters as the Yen tumbled against the US Dollar, Euro and most other major currencies. The Japanese currency retreated after Bank of Japan announced that it would raise the size of its asset-purchase fund.
• Wall Street had a positive week, a reversal to the negative performance a week before, as both the Dow Jones and S&P500 rose by 1.2% and 1.4% respectively. Stocks rose last week as the numbers on jobless claims and housing start boosted optimism on outlook of the economy. The weekly gain put the broader benchmark merely 0.2% away from recouping all its losses since April last year.
• Likewise, the European markets also performed stronger last week, in contrast to a weak performance in the previous week. The DAX added 2.3%, while the CAC and FTSE advanced by smaller 2.0% and 0.9% respectively last week. The European stocks ended the week higher as Germany expressed optimism that the €130 billion rescue for Greece is on track.
•  Most Asian markets had an all around positive week. There were profit taking activities in these markets during the week but prices generally held up. However, China stocks closed the week mostly off its highs as investors feared that a spike in money market rates will make borrowing costlier. Consequently, the CSI300
index rose by a mere 0.1% for the week. 
•  Finally, The KLCI which succumbed to profit taking in mid-week ended the week -0.3% lower and was the only loser among all the major indices.  

TRACKING MONEY FLOW
•  The streak of global funds inflow into Asian equity markets continued unbroken for the ninth straight weeks. Last week, there was an aggregate net inflow of foreign equity investment amounted to USD2.1b to the seven markets that we track (Korea, Taiwan, Thai, Malaysia, Indonesia, Philippines and India). These markets, for which fund flow data is publicly available, are our proxy for Asia.  
•  Except for Indonesia which recorded a slight net outflow of –USD19.4m, all other markets recorded positive inflow last week. There was nonetheless a 63% reduction in net inflow into Thailand at USD155m as compared to the previous week. Conversely, foreign funds returned to Malaysia with weekly net inflow of USD117m last week vis-à-vis net outflow of –USD20.1m the week before.  We reckon there could be a rotational play among Emerging South East Asian markets. Thailand is still the preferred market currently but Malaysia may be the next favoured one.
•  There was also marked ebb of portfolio capital into Korea as the net inflow dipped to USD568m, down from the billion-dollar figures of previous weeks. Similarly, Taiwan attracted USD440m, the third consecutive weeks of reduction in its net inflow of foreign fund into equity. Even so, until last Friday, Korea and Taiwan had recorded a cumulative inflow of USD11.4b this year, compared with an aggregate of only USD1.7b that moved into the TIPs + Malaysia markets.

 MALAYSIA
•  Foreign investors returned as net purchasers of shares listed on Bursa Malaysia, after recorded an outflow in the week before. It was a positive reversal that could signal a rotational play into our market.
•  Foreign investors purchased, on net basis, Bursa-listed shares amounted to RM357.7m last week. They were net buyers in four out of five trading days of the week.
•  The purchase was however accompanied by a reduced level of participation. Foreign daily average gross trade (purchases + sales) declined to RM3916m, from RM4211m the week before.   
•  Local investors’ participation rate, in contrast, surged last week. 
•  Local retailers turned marginal net seller for the first time since late January. However, their participation rate surged to RM7.43b, the highest so far this year.  
•  Local institutions, likewise, turned net seller with the largest deficit this year at RM302.8m. Their average participation rate was the highest so far in year 2012 at RM9.53b.

THE WEEK AHEAD
•  While the current liquidity-driven rally may have got legs to drive the KLCI higher, nonetheless it may seek a pause in the immediate term as the urge to take profit sets in among market investors.
•  We expect the market to be heading for a brief consolidation hence the KLCI shall continue to be vulnerable to profit taking this week.

by MIDF