FOREIGN institutional investors and fund managers are expected to stir more excitement in the local stock market in August, after the summer holiday ends, says a securities industry official.
TA Asset Management Sdn Bhd general manager Mohd Hasnul Ismar said the market's current price/earnings ratio of about 14 times was expected to return to its late March level of between 17 and 18 times in the next three months, after prevailing negative sentiments subside and foreign investment return after the holidays.
Most funds have taken a beating lately, as the market is currently oversold following the outflow of foreign investors, coupled with negative vibes prevailing among local investors, he said.
He said after the launch of the TA High Growth Fund in Kuala Lumpur yesterday that the risk of oil prices remaining high, expectations of aggressive interest rate rises by central banks worldwide, escalating geopolitical issues, and slowing of China's growth were being discounted by the global market.
These issues or risks are perceived to be very negative, and investors have highly overreacted in their investment strategies. Asset allocation changes are being made in favour of cash, money markets, and short-term bonds rather than equity. As a result, global equity markets have suffered, Hasnul said.
According to Hasnul, in the first quarter ended March 31, some RM6.8bil of about RM10.3bil of foreign funds in Malaysia were liquidated out of the exchange. That, in part, caused the oversold condition.
The fundamentals remain very strong even after the recent fall in the equity market. We see the consolidation as healthy. Investors are adapting themselves to the surrounding risks in investment markets, he said.
We believe that once this temporary period of negative perception and overreaction by investors pass, fundamental issues will again prevail; and this is when investors will realise that equity markets have fallen to attractive levels, and warrant bargain-hunting, he added.
Meanwhile, TA Unit Trust Management Bhd chief executive officer Richard Chua said depending on market conditions, the new fund should outperform the Emas Index and give an average return of 25%, or better, by next June.
Chua said: The main criterion for stock selection of the fund was companies with high expected earnings growth, operating in high-growth industries like the banking and financial, technology, and property sectors.
Excluding the new fund, total assets under management by TA Unit Trust stand at about RM500mil. Funds currently managed include TA Growth Fund, TA Comet Fund, TA Income Fund, TA Islamic Fund and TA Small Cap Fund.