Malaysia Equity Market

During the week (June 26-July 2), the FBM KLCI rose 47.08 points or 3.16% to 1,536.28 points, significantly outperforming the Dow Jones Industrial Average (DJIA) and MSCI Emerging Markets Index that only edged up by 0.3% and 1.9%. This was on the back of Covid-19 cases in the United States setting new records, prompting investors to pile further into producers of personal protective equipment, including glovemakers listed on Bursa Malaysia.

The US markets held up as fears of another round of lockdowns were offset by a steep jump in DJIA component stock Boeing on its 737 Max’s certification flight testing with the US aviation authority, promising results from a vaccine jointly developed by Pfizer and German biotech firm Biontech and optimism on the US June nonfarm payrolls.

Nonetheless, foreign investors remained net sellers in the local market. For the week, foreign investors sold a total of Rm0.5bil worth of Malaysian equities, bringing the YTD net outflow to Rm16.5bil. However, the selling was well absorbed by local institutional and retail investors, with a participation rate in June of 47.8% (vs. 45.8% in May) and 37.0% (vs. 36.8% in May) respectively. Meanwhile, as foreign investors stayed passive, their participation rate in June fell to 15.2% (vs. 17.5% in May).

Meanwhile, foreign investors turned net buyers of Malaysia Government Securities (MGS) with a net inflow of Rm1.9bil in May 2020 (latest available number), compared with a net outflow of Rm0.4bil in April 2020. However, YTD, foreign investors remained net sellers of MGS with a total net outflow of Rm14.8bil.

Trading activities remained robust with average daily value traded rising in June to Rm4.6bil (vs Rm4.3bil in May) while turnover velocity inched up to 71% (vs. 70% in May).

Over the week, 12 out of 13 sectors in Bursa Malaysia ended in the positive territory. The top performing sector was Healthcare (+11.7%) driven by glovemakers as mentioned. The worst performing sector was Telecommunications & Media (-0.7%) as players undercut each other in unlimited prepaid data plans.

In the coming week, investors will keep a close eye on:

> US ISM Non-manufacturing PMI (June) on July 6;

> Reserve Bank of Australia interest rate decision on July 7;

> Bank Negara’s monetary policy statement on July 7;

> China’s Consumer Price Index (June) on July 9; and

> Malaysia’s Industrial Production

Index (May) on July 10.

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