Trading volume down on waning interest

PETALING JAYA: Trading volume on Bursa Malaysia yesterday fell to its second lowest level since March, amid waning interest from investors to chase up pricey stocks as the benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) heads into its fifth month of straight gains.

Total volume yesterday was 538 million shares compared with more than four billion during the bull run in 2007.

“We’re expensive and our growth prospects are not as attractive as other regional markets,” said OSK Research head Chris Eng.

The FBM KLCI rose 4.34 points yesterday to close at 1,176.90 points. The index had surged 35% from a low in March, but continued to trail most regional markets due to lack of foreign participation.

It was estimated that foreign ownership for Malaysian shares had dwindled to a low of 20.7% as at end-June, against 23.6% a year ago and a high of 27.5% in April 2007.

MIDF Research head Zulkifli Hamzah said the Malaysian market had never been a beneficiary of foreign funds due to the “age-old” reasons of low liquidity and “lack of world-class companies”.

Earlier this week, CIMB Research said foreign funds’ holding in Malaysia had fallen 40% from February last year, compared with declines of between 3% and 15% seen in other regional markets.

It also noted that foreign funds were net sellers of local stocks in July, but were buyers in Hong Kong, Singapore, Indonesia and Thailand.

Indonesia, which is the top pick of international fund managers for the region, according to a Merrill Lynch survey last month, saw its benchmark stock index surging 73% year-to-date to 2,350 points yesterday.

Even more spectacular was the returns calculated in US dollar. Bloomberg data show that US dollar funds that bought Indonesian stocks would have recorded a gain of 93% since the start of the year (see table).

The Indonesian rupiah has appreciated 9.4% against the US dollar since January, and jumped a cool 18.1% since the worldwide equity rally began in March.

Foreign investors also made a double killing in South Korea this year. They would have doubled their money from March, as the main Kospi Index climbed 57% while the won surged 25.7% over the same period.

At the same time, the ringgit advanced 5.5% against the greenback over the past six months, and was probably the worst performer among all regional currencies.

The local unit eased 0.26% against the greenback yesterday at 3.5316, extending its decline for the third consecutive day.

A recent Bloomberg survey of 19 banks showed the average estimate was the ringgit would end the year at 3.48 against the US dollar, which would put it back to where it was at the start of 2009.

In an Aug 20 note to clients, J.P. Morgan said there would be a “better time” to have a more aggressive Malaysian portfolio.

“At one end, we would be positioned in stable-earnings, high-dividend-yield plays that have underperformed (year-to-date) such as Tanjong plc and Bhd while at the other end, we would stay in stocks that continue to have very strong earnings growth outlook,” it said.

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