World's longest bull run endures tumult as foreigners return

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.