Jul 19, 2011

Malaysia Foreign Fund Flow - bucking the trend again

Stock market Snapshot
Asian markets actually performed better with a mixed outcome. Markets in China, Indonesia and the Philippines actually closed higher. The developed Asian markets actually felt the brunt of selling, with the Hang Seng the worst performing losing -3.7%, followed by Singapore’s STI at -2.1% and Taiwan’s Taiex at -2.0%. The KLCI closed the week lower by -1.1%, only the second weekly decline in 10 weeks.

MALAYSIA STOCKMARKET
• In the local market, foreign investors surprisingly remained net buyer last week. Foreigners have now been net buyer of Malaysian equity in 14 out of the last 17 weeks.
• The buying however eased last week. Net purchase of equity amounted to only RM171.5m compared with RM0.7b - RM1.2b a week in the preceding four weeks. Foreigners were net sellers on Mon-Tue, but turned buyers on WedFriday.
• The participation rate or gross trade (purchases + sales) of foreign investors dropped to RM4.1b, the lowest in five weeks.
• Retailers surprisingly turned net buyers, albeit marginally, after four consecutive weeks of selling. Local institutional investors remained net sellers last week, unloading RM3.7b and bought RM3.5b worth of equity last week. However their participation rate was still high at >RM7b.  

malaysia-foreign-fund-flow

above: Malaysia Daily Foreign Fund Flow (click to enlarge)

MALAYSIA EQUITY MARKET: WEEK AHEAD
• Despite weak sentiment last week, we expect the situation to improve this week in line with the mild rebound in U.S markets on Friday.
• There was positive development as Italy’s parliament on Friday passed a 48b-euro austerity budget aimed at slashing the public defi cit by 2014. However, it will still be a crunch week as Eurozone leaders will hold an emergency summit on July 21 try to agree a second international bailout for Greece. The EU and International Monetary Fund bailed out Greece in May 2010 with a package worth 110b euros (USD160b) in exchange for a
series of drastic austerity measures to stabilise its public fi nances.
• Coincidentally, July 21 is also the listing of Bumi Armada IPO, Malaysia’s biggest IPO this year. We have a fair value of RM3.62, but the share price may trade closer to RM4 if global sentiment towards equity improved.
• The economic report card season for the second quarter kicked off last week. China’s 2Q11 GDP decelerated slightly to 9.5%yoy from 9.7%yoy in 1Q11, easing concerns over accelerating infl ation. Singapore’s 2Q11 GDP decelerated sharply to only +0.5%yoy, from +9.3%yoy in 1Q11, warning the market to expect an ugly set of numbers for the rest of countries in the region.  We are looking at 4.0% growth for Malaysia in 2Q11. There is no official GDP release scheduled for this week in this region.
• Foreign shareholding on Bursa Malaysia shot up to 22% at the end of June, based on data released by Bursa last week. That was an increase from 21.4% at the end of March. During that period, an estimated RM7.5b of net foreign funds moved into listed Malaysia equity. That is in line with out estimate that a 1%-point increase in foreign shareholding is equivalent to an infl ow of about RM10b

Research by MIDF Invetsment Research