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Overseas investors bullish on Malaysian stocks
Publication Date : 31-07-2014
Investors are hungry for stock ideas and appear to be looking for reasons to be more bullish on Malaysia, said CIMB Research head Terence Wong in his Asia Marketing report yesterday.
While Malaysian investors have turned less bullish, overseas investors have gradually turned more bullish on Malaysian stocks.
Wong said that with most foreign funds underweighted in Malaysia and even local funds relatively neutral, downside selling pressure was limited while inflows into the market could give the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) a boost.
Wong has made no changes to his end-2014 FBM KLCI target of 2,030 points, which is based on a bottom-up basis.
Having spent many weeks in June and July marketing to investors in Asia, Wong observed a strong appetite for stock ideas, particularly for companies in the small to mid-cap range.
Wong and his team have been marketing their second-half outlook to investors in Kuala Lumpur, Hong Kong, Singapore, Taipei and Tokyo.
He said while investors were generally neutral to underweighted in Malaysia due to the FBM KLCI’s relatively flat performance on a year-to-date (YTD) basis, they were hungry for ideas.
Wong said he was surprised at how underweighted investors were in general, including Malaysian investors.
“This is a big change from the mood earlier in the year when investors closer to Malaysia, including Singapore and Hong Kong, appeared more optimistic.
“We attribute the lukewarm view of Malaysia to the FBM KLCI’s uninspiring YTD performance and the need for investors to chase higher beta markets,” said Wong.
Surprisingly, there is strong interest in the Malaysian property market from Taiwanese investors.
The interest is not for property stocks but in buying physical properties either in Kuala Lumpur, Penang or Iskandar Malaysia.
Apparently, there has been a strong push by Malaysian developers to attract buyers from Taiwan.
Malaysian property is relatively cheap to the Taiwanese, while Malaysia’s large Chinese population and the availability of a similar cuisine and cultural familiarity is a big attraction.
On the stocks front, Wong said that investors were still keeping an eye on opportunities in Malaysia and were keen on CIMB Research’s Salcon Bhd and Bonia Corp Bhd stock ideas.
Salcon is exciting to investors because its fibre optic business holds strong promise if executed well. Bonia is a simple story of buying a consumer stock with regional ambitions at relatively attractive valuations.
“We continue to prefer the Economic Transformation Programme (ETP) winners, for example, the oil and gas (O&G), construction and property sectors. We also like smaller-cap stocks and expect their discount valuations to narrow further,” he said.
Wong said that 2014 was a stock-picking year, and despite the FBM KLCI’s lacklustre YTD performance, many smaller-cap stocks have performed well.
Its preferred bigger-cap stocks are Gamuda, SapuraKencana Petroleum and YTL Corp, while its preferred smaller-cap stocks are Bonia Corp, TH Heavy Engineering and Tune Ins Holdings.
CIMB Research is replacing Perisai Petroleum Teknologi Bhd with TH Heavy as its top small-cap O&G pick.