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China slowdown, Ukraine tension affect regional stocks, M'sia players wait-and-see

Publication Date : 13-03-2014


Renewed political tensions in Ukraine and concerns about an economic slowdown in China continue to cloud global equities, as investors become increasingly risk-averse.

However, local market players are adopting a wait-and-see approach and not making any changes to their investment stance for now.

“We are not making any changes to our portfolio for now, as fundamentally, not much has changed,” said Areca Capital fund manager Danny Wong.

Wong, who manages assets valued at close to 1 billion ringgit (US$304 million), of which the majority are Malaysian stocks, said China’s March export figures would be a better reflection of the condition of the world’s second-largest economy.

“We think these (external issues) will have a short-term impact on markets, but will continue to monitor as things are still unravelling,” he said.

China’s exports had fallen the most in February since 2009, recent data showed, outpacing expectations and suggesting a weakness in the country’s economy which has Malaysia as its number one trading partner amongst Asean countries and its sixth largest globally.

In February, China recorded a trade deficit of $22.98 billion against a surplus of $14.8 billion for the same month a year earlier.

“Still, January and February figures are often distorted by the long Lunar New Year holidays, so March will be a better indication,” said Thomas Yong, chief executive officer of Fortress Capital Asset Management (M) Sdn Bhd.

Yong is not making any adjustments to his holdings for now, adding that in the current risk-averse environment, Malaysia was unlikely to see any major selling pressure, backed by solid support from local funds.

Data from MIDF Research revealed on Monday that although foreign investors had resumed their selldown of Malaysian stocks last week after making a “surprise” purchase the week before, the amount of outflow was relatively insignificant and was well absorbed by local liquidity.

Local institutional funds supported the market last week, mopping up 226.4 million ringgit net worth of shares, the research house told clients, adding that local institutional participation had exceeded the 2 billion ringgit mark in the last nine weeks.

At Wedneday's finish, the 30-stock gauge, the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) finished 0.54% lower at 1,818.60 points, while most markets in Asia were also down.

Japan’s Nikkei took a big hit, finishing 2.59% lower following a stronger yen which will affect the country’s exporters who do not sell in the local currency.

Among the winners on Bursa Malaysia, oil and gas (O&G) services firm Yinson Holdings Bhd reached a new high, closing up 2.43% to 9.07 ringgit, while property firm MKH Bhd and O&G outfit Deleum Bhd ended 4% and 6.21% higher to 4.27 ringgit and 5.80 ringgit, respectively, on proposed bonus issue plans.

Notwithstanding external factors, analysts pointed to the local market’s lack of catalysts.

“The FBM KLCI has been stuck inside the existing rectangular box for almost four weeks now and will continue to be trapped until a clearer picture emerges,” said a technical analyst.

He has pegged initial support for the index at 1,810.

Despite being down year-to-date, the FBM KLCI is currently trading at a forward price earnings of about 16 times, relatively high going by historical data.

“It’s definitely not strikingly cheap, even the Singapore market has lower valuations,” remarked Fortress’ Yong.

“It’s becoming increasingly difficult to recommend shares, the pickings are slim,” said Pong Teng Siew, head of research at Inter-Pacific Securities Sdn Bhd.

Areca’s Wong likes O&G as well as plantation stocks supported by ongoing government economic transformation projects for the former’s industry and improving crude palm oil prices for the latter.

*US$1 = 3.28 ringgit


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