Foreign investors find gems in Malaysian stocks

By Goh Thean Eu
gohtheaneu@nstp.com.my
2012/04/02

Overseas investors were net buyers of Malaysian stocks for 31 consecutive trading days, a sign that the current stock market rally might still have legs to run, said analysts.
Based on Bursa Malaysia data compiled by Business Times, it was revealed that foreigners were consistent net buyers since February 17 – during which foreign fund managers bought over RM13.72 billion and sold RM9.34 billion worth of stocks, which represented a net buying of about RM4.3 billion.

Last month, foreign fund managers were net buyers of more than RM3.4 billion worth of stocks, making them the net buyers for the
sixth consecutive month.

“This basically means improved risk appetite by foreign investors in anticipation of stronger emerging market economy and stronger ringgit in the second half this year,” said Dr Nazri Khan, vice-president and head of retail research of Affin Investment Bank.

Over the past 31 trading days, overseas investors’ interests have helped to push the stock market by almost three per cent – from the opening of 1,550.49 on February 17 to the alltime high of 1,596.33 point last Friday.

During the period, 195 companies saw their share prices rise to their 52-week high, of which 53 companies had market capitalisation of more than RM500 million. In the same period, 46 stocks were traded at their 52-week low.

Five FTSE Bursa Malaysia Kuala Lumpur Composite Index component companies, namely Maxis Bhd, Telekom Malaysia Bhd, Bumi Armada Bhd, British American Tobacco Bhd and Sime Darby Bhd, also hit their 52-week high over the past 31 trading days.

None of the major banks hit its 52-week high during the period.

The benchmark FBM KLCI has risen by 4.28 per cent so far this year, which is far below what the region has performed.

The stock markets in Singapore, Thailand, Indonesia and the Philippines have rose by between seven per cent and 16 per cent this year. The MSCI Asia ex-Japan Index has gained 12 per cent year-to-date.

“I believe overseas investors are expecting Malaysian stocks to do some catching up after under-performing for some time,” said OSK Research Sdn Bhd head of research Chris Eng.

Although the benchmark index has hit the all-time high, analysts believed that stock prices were still reasonable. Currently, the FBM KLCI is trading at about 16.5 times price earning ratio. It is higher than Singapore’s market of about 10 times PE.

“I think we are still reasonably priced. Indonesia used to trade at about 30 per cent discount to our market, but it is now more expensive than us,” said Eng.

Indonesia’s Jakarta Stock Index is currently trading at about 21 times PE, while Thailand’s benchmark index is trading at about 15 times and the Philippines benchmark index at about 18 times.