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Foreign buyers pushing up M'sian stocks
Publication Date : 08-10-2012
Foreign investors continued to buy into Malaysian stocks in September, continuing the strong unstoppable upward charge of the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) which has reached its record all-time highs of late.
According to Interpacific Research head of research Pong Teng Siew, this continued buying into the Malaysian stocks by foreign funds was probably due to the lack of alternatives to run to on the backdrop of the dire economic situation in the West – the United States and eurozone.
“Yes I noticed that foreign funds continued to flow into the country. Well it is not a big amount but it is enough to keep the upswing so far seen in the FBM KLCI.
“They have perhaps increased their allocation into this region which could explain why these funds are still flowing in,” Pong told StarBiz over telephone.
According to statistics recently unveiled by Bursa, foreign institutions were net buyers of stocks listed on the local bourse with net purchases of 1.3 billion ringgit (US$424.63 million) recorded in September.
This scenario contrasts to local institutional investors who were net sellers on Bursa selling 500 million ringgit of worth of stock holdings last month.
A foreign fund manager based in Hong Kong who wished not to be named said that the continued perceived stability in Malaysia could be the prime reason why foreigners were still buying into stocks locally here but added that the market could see “a meaningful correction at some point in time”.
Meanwhile, Pong noted that he was “somewhat surprised” at this continuing trend in which foreigners appetite for local stocks are still continuing despite certain sectors trading at expensive stock valuations.
“However there are sectors such as the banking stocks which have not moved up that much and are trading around their mean five-year average share price levels,” Pong said adding that this scenario could change in the months ahead.
He noted that telecommunication and consumer stocks were presently trading at “hefty valuations” and highlighted that investors were not yet taking profits but still “seemingly hanging on to their stock holdings”.
Case in point, MIDF in a recent report noted that a telco stock in its coverage – DiGi.com was a good performer but its share price had “moved ahead of fundamentals”. It had downgraded the stock to “neutral” with a price target of 4.60 ringgit.
It stated that DiGi was trading at a price to net asset ratio of 35.9 times, had an expected dividend of 24 sen in the financial year 2015 and a terminal value of 3.93 ringgit.
Meanwhile, Kenanga in a research report issued last week said that it expected the retail sales growth to moderate next year as consumers remain cautious amid the slowing economy.
Kenanga had downgraded the consumer retail sector to “neutral” from “overweight” while it had a “market perform” call on big cap consumer stocks such as Aeon Co Bhd with a target price of 10.70 ringgit and Parkson Holdings Bhd with a target price of 4.86 ringgit.