A foreign analyst is of the view that the Malaysian stock market had matured over the years.
He said Bursa Malaysia was very different now compared with 10 years ago.
“The current market is more resilient. Many listed companies on the exchange are now deriving their revenues outside of the country,” said the foreign analyst, citing IJM Corp Bhd as an example whereby over 60% of its revenue is derived from abroad, especially India.
He said the quality of stocks on Bursa Malaysia had improved significantly over the years, thus attracting more foreign investors in recent years.
He said foreign investors were also drawn to the local exchange because of the Government's strong pump-priming activities under the Ninth Malaysian Plan which were worth billions of ringgit, especially on infrastructure.
“The economy looks stable,” said the analyst, adding that any stock exchange required a good dose of foreign participation to prop the market, noting that the level of foreign institutional participation in the market reflected the state of health of the exchange. The analyst said on many occasions, foreign institutional participation acted as the initial catalyst to sustain market momentum in the exchange, especially in Asia.
“We see this happening a lot (foreign participation in the stock market) before local investors decide to enter the market but this also implies that the local retail investors are seeking opportunities at the tail-end of the run and taking greater risk,” he noted.
An analyst based in Singapore said: “We expect more volatility in global equities throughout the year due to a host of reasons like the softening of the US economy and more erratic fluctuations in the Asian markets.” He said other factors such as overseas developments and fund flows would likely influence the movement of regional bourses, as these bourses were now more closely interlinked due to international capital flows.
“When the Shanghai Composite Index fell 8.8% in February, it wiped out US$600bil of the US stock exchange within two days,” he said, adding that investors and even analysts were surprised how vulnerable the US stock exchange was to China's economic well-being.
“In this market environment, it might be wise for novice investors to park their money in unit trusts for stable returns over the medium to long-term,” he said, adding that the market today was more likely for the experienced investor and the brave at heart.
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