Retailers scoop up bargains on Bursa

Bursa remains buoyant even as foreigners dump equities

PETALING JAYA: While foreign funds dumped more than RM2.5il in local equities following the unexpected outcome of Malaysia’s 14th General Election (GE14), the FBM KLCI has remained buoyant as local institutions and retailers scoop up bargains.

Despite the sell-off by global funds for the week ended May 18, the FBM KLCI ended the week 0.43% higher to 1,855. Local institutions bought a total of RM1.48bil, while retailers also picked up RM991.9mil in stocks. Hence, this only resulted in net selling of US$625.3mil for that week.

The sell-off continued yesterday as foreign funds reduced their holdings of stocks by another RM125mil, wiping out the net inflow before the GE14.

“From our observation, a lot of this selling was related to the politically-linked and construction stocks. These stocks were related to the previous government, so we feel that it is not surprising, and we reckon it to be a one-off exodus of foreign funds,” said MIDF Amanah research analyst Adam M. Rahim.

The sell-off yesterday had pushed foreign interest in Bursa Malaysia into negative territory. Foreigners bought a net amount of RM2.52bil since the start of the year, but all of that evaporated following the surprise results of GE14.

Thailand has a year-to-date outflow of US$3.1bil, Indonesia has an outflow of US$2.9bil and the Philippines, an outflow of US$885mil.

“We are cautiously optimistic that this cumulative figure may gradually pick up as more political clarity comes about. Despite recording the largest weekly outflow among the four Asean markets we monitor last week, Malaysia is still the major beneficiary of foreign inflows,” said Adam.

He added that foreign participation remains strong, as the foreign average daily trade value soared by almost 100% to RM2.39bil, the highest in 24 weeks.

Separately, most of the construction stocks have fallen between 20% and 50% on fears of likely cancellation or deferment of some mega projects, potential contract renego- tiation of ongoing mega projects, and toll road concessionaires being compromised

In his report, UOB Kay Hian research head Vincent Khoo said while investors had become overly bearish, he foresaw shares rebounding from their historically low valuation levels.

He, however, has downgraded the construction sector to “market weight” for its lack of growth drivers.

The market closed down 0.92 points to 1,853.58 on a volume of 2.78 billion shares.

Market observers have pointed out that beyond the volatility and selldown of political stocks, what is more positive is that the reform agenda has brought renewed interest to the market. Investors are watching to see the new Pakatan Harapan government set the policies over 100 days.

“With the new government, democracy can be established again. Let us see how serious they are in fighting corruption and being transparent. It will take time for foreigners to be convinced. However, this is a good start,” said one analyst.

Statistics-wise, MIDF Research pointed out that the foreign selldown of RM2.48bil was the heaviest weekly selldown since the week ended Aug 23, 2013 which saw a net outflow of RM2.9bil.

Foreign investors had been net sellers for 10 straight trading days as of last Friday.

“The first trading day after GE14 saw a net outflow of RM682.6mil. Nevertheless, the trading value on Bursa Malaysia was the highest ever recorded on the same day at RM7.3bil. Foreign selling on Tuesday then swelled to RM837.3mil, the largest in a day since early February,” said MIDF.

The first two days also coincided with the heaviest and most drastic fall in many of the political and construction stocks.

Most players had anticipated the FBM KLCI to fall should Pakatan Harapan win. However, that is not the case.

Fisher Investments MarketMinder said markets don’t have preset reactions to geopolitical events and often do what few expect.