World's long­est bull run en­dures tu­mult as for­eign­ers re­turn

The Pak Banker - - 6BUSINESS -

Malaysia's en­ergy ex­ports are tum­bling, its prime min­is­ter is battling cor­rup­tion al­le­ga­tions and cor­po­rate prof­its are weak­en­ing. With all that, the South­east Asian na­tion is also home to the world's most re­silient bull mar­ket for stocks.

Overseas funds are pil­ing in at the fastest pace in South­east Asia. Kuala Lumpur's bench­mark eq­uity gauge has more than dou­bled from its 2008 lows with­out suc­cumb­ing to a 20 per­cent drop. Tan Ming Han says he knows its se­cret: the lowest volatil­ity among the re­gion's mar­kets. It's an en­vi­ron­ment where a grow­ing army of in­vestors are will­ing to miss out on the highest highs if that means they also avoid the big­gest crashes.

"Some­times, too much ex­cite­ment can cause a panic at­tack -- es­pe­cially with volatile mar­kets," said Tan, se­nior in­vest­ment man­ager at Amundi Malaysia. "Bor­ing is some­times beau­ti­ful." Sen­ti­ment re­mains stub­bornly buoy­ant in Malaysia, home to some of the re­gion's highest div­i­dends, as the coun­try's $166 bil­lion pen­sion fund un­der­pins de­mand for eq­ui­ties with share pur­chases. Even af­ter the FTSE Bursa Malaysia KLCI Index climbed 12 per­cent from a three-year low in Au­gust, it trades near the cheap­est rel­a­tive to global eq­ui­ties in al­most a decade. All that is boost­ing the ap­peal of the mar­ket for off­shore in­vestors, said Tan, who man­ages the KAF Vision Fund that has beaten 95 per­cent of peers over the past three years with a 21 per­cent re­turn.

The stock gauge climbed 0.2 per­cent at the close, poised for its big­gest monthly gain in more than three years. The mea­sure formed a golden cross for the first time in a year, seen as a bullish sign when its 50-day mov­ing av­er­age climbed above the 200-day line. No­mura Hold­ings Inc. raised Malaysia to neu­tral, cit­ing it as a "pre­ferred de­fen­sive mar­ket" and the least volatile among emerg­ing eq­ui­ties, strate­gist Mixo Das wrote in a re­port Wed­nes­day.

For­eign funds have poured about 4.4 bil­lion ring­git ($1.1 bil­lion) into Malaysian eq­ui­ties in 2016, top­ping South Korea and South­east Asian mar­kets, ac­cord­ing to MIDF Amanah In­vest­ment Bank Bhd., cit­ing stock­ex­change data. In­flows for this month are at the highest level since April 2013, ac­cord­ing to the re­port. The move comes af­ter last year's big­gest out­flow since the 2008 global fi­nan­cial cri­sis.

Money is re­turn­ing amid a back­drop of re­bound­ing eq­ui­ties across South­east Asia, as ac­cel­er­at­ing eco­nomic growth and calmer cur­ren­cies at­tract in­vestors seek­ing refuge from the volatil­ity rock­ing mar­kets in China and Ja­pan this year. Philip­pine shares en­tered a bull mar­ket this month. In­done­sia's bench­mark index is up 16 per­cent from last year's lows, while Thai­land eq­ui­ties have jumped 14 per­cent from a Jan­uary low.

"In terms of price to book, Malaysia def­i­nitely looks at­trac­tive, es­pe­cially rel­a­tive to its peers," said Sin­ga­pore-based RHB As­set Man­age­ment Chief In­vest­ment Of­fi­cer Lee Kai Yang, who helps over­see S$2 bil­lion ($1.5 bil­lion) of as­sets in­clud­ing the RHB Asean Fund, which has re­turned 5.5 per­cent an­nu­ally in the past five years. "We have po­si­tioned our­selves in line with the struc­tural story of Asean."

The Malaysian gauge's 100-day his­tor­i­cal volatil­ity is at a seven-month low at 11, ver­sus 15 for the MSCI All Coun­try World Index and 17 for the MSCI South East Asia Index, data com­piled by Bloomberg show.

Global mar­ket tur­bu­lence last year al­most ended Malaysia's bull run as prospects for higher U.S. in­ter­est rates sent eq­ui­ties plung­ing. The bench­mark Malaysian index fell as much as 18 per­cent, while a gauge of South­east Asian stocks dropped more than 28 per­cent. The MSCI All-Coun­try World Index en­tered a bear mar­ket in Fe­bru­ary. While the Stan­dard & Poor's 500 Index is still in a bull mar­ket, that run started in March 2009, four months af­ter Malaysia's.

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