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KUALA LUMPUR: While the impact of the 12th Malaysia Plan (12MP) on the market remains muted amid the lack of any immediate catalyst, the return of foreign investors could flag stronger support for the key index moving forward.
The FBM KLCI was up 0.83 points to 1,547.65 at yesterday’s close.
Analysts expect the bourse to remain in trading mode for now as sentiment may be cautious in view of external factors.
“The market will continue to be very much trading-oriented, though it is encouraging to note that foreign investors have been net buyers in recent weeks, suggesting regional investor flow potentially picking up momentum as the country’s growth prospects continue to strengthen,” PublicInvest Research said in a report.
The brokerage added that the market appeared attractive in the mid to longer-term as it is currently trading at around one-standard deviation below the price-earnings averages.
The FBM KLCI was up 0.83 points to 1,547.65 at yesterday’s close.
Post the release of the 12MP report, the market’s attention could be trained towards the announcement of Budget 2022 on Oct 29.
Despite the nascent return of foreign portfolio funds, foreign shareholding of Malaysian equities was unchanged month-on-month, at its all-time low of 20.2% as at end-August 2021, according to CGS-CIMB Equities Research.
It noted that the declining trend in foreign shareholding started in May 2018 after the 14th General Election.
Since then, the foreign shareholding level has fallen four percentage points, from its peak of 24.2% in March 2018, to 20.2% in August 2021.
“Foreign investors have also been net sellers in the market since July 2019. In year-to-date Sept 24, 2021, foreign investors have net sold RM3.6bil of Malaysian equities,” it said.
Last week, the FBM KLCI fell 1.1% week-on-week due to concerns surrounding the fate of debt-ridden China property developer Evergrande Group as well as concerns that the Malaysian government is studying a capital gains tax and a one-off higher tax rate on companies that have performed well during the pandemic.
Notably, the potential taxes, as well as the goods and services tax, were not mentioned in the 12MP.
However, they could be addressed during the tabling of Budget 2022.
Likewise, the lack of details on the prospects of new mega project rollouts in 2022 may also be addressed.
“Local institutional investors and proprietary investors were the largest net sellers in the Malaysian equity market last week. Foreign investors, local retail investors and local nominees were net buyers of the Malaysian equity market last week.
“Retail investors’ share of total trading value was 35% last week, while that of institutional investors was 34%, proprietary’s 14%, and nominees’ 17%,” CGS-CIMB said.
PublicInvest advocated buying on weakness, in anticipation of a rebound in the fourth quarter.
It maintained its FBM KLCI year-end closing at 1,590 points.
