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Foreign-buying of M'sian stocks may persist in near term

Publication Date : 23-10-2012


The buying trend by foreign investors into Malaysian stocks may continue in the near term on the backdrop of economic worries in the West, including that of in the United States and eurozone, according to Aberdeen Asset Management managing director Gerald Ambrose.

“Perhaps concerns on the potential general election may hit redemptions on the stock market. However, should there be any about-turn in flows, Malaysia will not be hit as extreme as countries such as the Philippines, Thailand and Indonesia, which have higher foreign buying,” Ambrose told StarBiz.

“You have to remember that Malaysia is a low-beta economy and the country is still offering the highest dividend payout rate in Asia on a net-adjusted basis.

“Investors are hungry for yields today. They are even buying country bonds such as Italian and Greek ones for their high yields,” he said.

Foreign funds have been buying into the stock market.

According to MIDF Research, based on available statistics offered by the stock exchange operator, the net inflows of foreign funds to local equities rose to 12.6 billion ringgit (US$4.13 billion) in the year-to-date until the end of last week.

This was almost 6.6 times the net inflows of 1.9 billion ringgit recorded last year while the net purchases of local shares by foreigners topped 29.8 billion ringgit since 2010, the brokerage said.

MIDF head of research Zulkifi Hamzah said it was difficult to predict possible fund flows in the medium term but noted that there had been a torrent of money moving into markets including Malaysia due to the third round of quantitative easing (QE3) by the United States' Federal Reserve.

“These are fresh money but the earnings season in the United States may beckon some volatility on the stock markets, especially on the Dow Jones Industrial Average.

“But this may be a positive impact for Asia as global fears prompt investors to search for relatively safer, risk-free assets. These are fresh money moving in due to the impact of the QE3,” he said.

Meanwhile, Zulkifi said the average mean price disparity between index-linked stocks and the rest of the local equity market could imply a positive nett price differential opportunities for the other tiered stocks.

“The FTSE Bursa Malaysia 70 (FBM70) could be a beneficiary since there will be rotational flows out of composite index-linked stocks due to the mean share price disparity between both of these indices.

“The FBM70 could benefit from local buying, moving forward, as they are made up of a lot of good quality companies,” he said.

*US$1= 3.05 ringgit


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