Foreign funds buying into local stocks ahead of Budget 2016
PETALING JAYA: MIDF Research calls it the phenomenon of the year.
Foreign funds have been net buyers of local stocks for the past two consecutive weeks, which is something that the market has not seen this year.
“In our opinion, Budget 2016, to be unveiled on Friday, is a cause for optimism,” the firm said in a report yesterday.
As of Friday, overseas investors were net purchasers on Bursa Malaysia in the last eight straight days, snapping up RM411.7mil in net purchases in the open market last week. That added to the RM783.4mil bought by foreigners the week before. The recent purchases helped buoy the Malaysian stock market, as Bursa Malaysia outperformed the region in attracting foreign funds.
“The market still has the fuel to maintain the pace until the end of October,” MIDF said.
The local bourse has had a good run so far in October, up 5.9% at 1,718 points yesterday.
Executive Chairman of Templeton Emerging Markets Group, Mark Mobius had said last week that the ringgit was “very, very attractive” at present levels.
“Market movements have been positive in net terms for the local currency and stock market from a fortnight ago. This is a strong reversal of the overly undervalued nature of Malaysian assets now and the net positive trend is poised to sustain in the near term,” a dealer with a local brokerage said.
In a separate note, Kenanga Research said that the FTSE Bursa Malaysia KL Composite Index was holding well above the 1,700-point psychological level, which went against the odds, given the anticipation of a pullback after a strong performance in the previous weeks.
Kenanga noted that expectations of a retracement could be counterbalanced by the Budget 2016 announcement, as it believes it may possibly be a market-friendly one, being the first budget after the implementation of the goods and services tax in April.
For 2015, MIDF said that last week’s heavy buying reduced further the cumulative net foreign outflows to RM17.1bil, compared with the RM6.9bil outflow for the entire 2014. “Foreign ownership as a percentage of market capitalisation on Bursa Malaysia was 22.2% at the end of September, the lowest since October 2011. Since 2008, the lowest incidence of foreign ownership on Bursa was 20.3% in November 2009. It indicates that foreign liquidity in the system is low,” MIDF said.
“Despite a holiday-interrupted week, the foreign participation rate was maintained at an elevated level. The average daily gross volume was RM1.38bil, higher compared with RM1.35bil the week before,” it added.