RM400 million funds pour into local stocks, bucking trend since 2019

After almost two years of foreign investors pulling out of Malaysian equities, more than US$97 million (RM400 million) has flowed into local stocks in the last three weeks, according to Bloomberg’s market analysis.

The report contrasts the inflow of the funds this month with a combined withdrawal of US$1 billion from four other Southeast Asian markets, according to Bloomberg.

It also comes as the valuation of Malaysia’s main equity gauge, the FBM KLCI, is among the cheapest in the region with a dividend yield of 3% seen as the highest among major Asia Pacific indexes behind Singapore.

The report said that foreigners turning into net buyers is significant for Malaysia as billions of dollars were pulled out of funds last year, when Malaysia faced a double crisis of politics and public health caused by the Covid-19 pandemic.

“There’s a thematic play for Malaysia in a sense that it has underperformed,” Geoffrey Ng of Fortress Capital Asset Management told Bloomberg.

“Part of why there was so much foreign selling earlier was because of political uncertainty, which is fading now,” Ng said, cautioning however that this was based only on data for a month.

In January, Prime Minister Muhyiddin Yassin declared a state of emergency to tackle the surging infections, amid threats from several Umno leaders to withdraw support for his Perikatan Nasional coalition which had been ruling with a thin majority ever since the collapse of the Pakatan Harapan government last year.

The emergency was primarily seen as a move to suspend parliament in order to prevent snap polls caused by the fall of the government in the midst of its battle to contain the pandemic.

Experts had advised the government that any election during the pandemic would trigger a fresh and major outbreak of new cases that would break down Malaysia’s health system.

Bloomberg said as of last month, foreign shareholding in Malaysian companies was near the lowest in more than a decade, citing figures from CGS CIMB Research.

“Ending March with a positive number would snap the longest run of foreign monthly withdrawals since at least 2009,” the report added.

The Bursa Malaysia KLCI Index was up 1.1% in March. Bluechips such as Genting Bhd, as well as banks and utility companies, led the gains as new Covid-19 infections slowed and vaccines were rolled out, the Bloomberg report said.

Meanwhile, a survey by Standard Chartered (SC) ranked Malaysia as the second most favourable Southeast Asian country for foreign investments, in a list topped by Japan, China and Australia.

Respondents made up of business leaders in Europe and the US in SC’s Borderless Business report placed Malaysia second after Singapore among Asian markets with the most promising growth, above Thailand, Indonesia and the Philippines.