Identifying winning market positions

The biggest buyers on the local bourse in the form of market participants are the retail investors with a total net inflow of approximately RM11.7bil as at Nov 24, 2021.

BASED on the statistics provided by Bursa Malaysia, year-to-date, the biggest buyers on the local bourse in the form of market participants are the retail investors with a total net inflow of approximately RM11.7bil as at Nov 24, 2021.

While we have witnessed net buying among foreign institutional investors over the past three to four months, the net inflow is still not significant to reverse the year-to-date net outflows, which presently stands at RM1.8bil.

With that, the local institutions have emerged as the largest net sellers in the market with an outflow of RM9.9bil.

The above is just a snapshot of market flows and it does not show or is able to exhibit to what extent the inflows/outflows have been proven to be the right investment decisions by the respective market participants, especially in relation to individual stocks.

Overall, we know that the benchmark FBM KLCI has underperformed with the index down by 6.7% so far this year, but does that mean that investors have not been making profitable trades?

Have investors been able to generate positive returns, or have they been catching falling knives?

To answer this sixty-four-thousand-ringgit question, one would need to have a greater and more powerful tool to identify who in the first place is a better market participant among the three groups of investors.

And second, which particular company has been the greatest provider of positive returns to investors.


Bursa Malaysia’s data analytics and commercialisation arm, partnering with a little-known fintech startup, DIBots IT Solution Sdn Bhd (DIBots), has been at the forefront of this revolutionary data-based platform that provides detailed trade demographics and insight into the market and stocks.

DIBots Intelligence, as the subscription-based service is called, can provide market data that identifies the trend and helps investors make better investment decisions.


While this is not a marketing or promotional material for the company, this column was rather impressed looking at the data that DIBots can provide, and applauds Bursa Malaysia’s effort to provide more transparency and insights that can assist investors to make more informed investment decisions.

Institutional investors get it

Let’s first look at the fund flows among foreign investors, including those carried out via nominees.

Table 1 shows the top 10 net inflow and outflow by this group of market participants based on data from DIBots. For net inflow, we can observe that except for Nestle, net buying interest among the rest of the top ten stocks is positively correlated to the performance of the underlying shares.

For net outflow, we can conclude that due to the persistent selling pressure in companies like Hartalega Holdings Bhd, Gamuda Bhd, Dialog Group Bhd, Tenaga Nasional Bhd, and Genting Plantations Bhd, the performance of these companies has been negative year-to-date, and investors would be sitting on mark-to-market losses or potentially even realised losses.

In this instance, one can conclude that foreign fund managers did a good job in taking profit in these companies, as the respective share prices are weaker year-to-date.

However, for companies like Public Bank Bhd, MISC Bhd, Genting Malaysia Bhd, Telekom Malaysia Bhd and Genting Bhd, although foreigners were net sellers in these companies too, their decision to take profit was probably missed time as the underlying shares are positive outperformers year-to-date.

Overall, out of the 20 stocks on the net inflow/outflow list, foreign fund managers got it right in 14 of them, or a success rate of 70%. Interestingly, they got it right mostly on their net buying decisions.


Mixed performance among local institutions

Similar to the analysis done on foreign fund flows, a similar picture can be observed among local institutions too as seen in Table 2, which also include trades carried out via institutional nominee accounts.

Out of the 20 stocks that local institutions had the heaviest net inflow/outflows year-to-date, the local institutional funds managed to get it right on just nine of them or a success rate of 45%.

For net inflow by this group, they only got it wrong by being net buyers in companies like Gamuda, Dialog, Hartalega and Genting Plantation, while in net selling, the local institutions got it wrong in selling stocks like Petronas Chemicals Group Bhd, Malayan Banking Bhd or Maybank, Inari Amertron Bhd, CIMB Group Holdings Bhd, Public Bank, IHH Healthcare Bhd and Press Metal Aluminium Holdings Bhd.

Effectively, we can also observe that what was right for foreign institutions in terms of net buying/selling were wrong trades for local institutions in terms of net selling/buying.

Access to data is key

Since the implementation of the first movement control order (MCO) in Malaysia in March 2020, retail investors have been the biggest net buyers of the market.

Due to the lack of trade statistics and data available to this group of investors, they are in fact either sitting on huge losses or have missed the opportunity to make better returns as stocks sold by them continue to have a good run.

Table 3 summarises retail trade flows year-to-date, which also includes trades done via retail nominee accounts. Based on the top 10 net inflow/outflow among retail investors, retail investors only got it right on being net buyers of Public Bank and Maybank, as the year-to-date, these two companies provided positive returns.

However, while these data points may not look encouraging, retailers can subscribe to the DiBots Intelligence platform as mentioned earlier, to obtain more meaningful insights to help them make better investment decisions and to improve their investment strategies.

The current scenario also serves as a timely call-to-action for the industry.

Led by Bursa Malaysia, the stockbroking community as ecosystem partners can provide greater support for retail investors by reducing the information gap which often cripples the investment decisions of these investors.

This starts by gaining deeper insights into the retail investors’ customer experience in the marketplace, such as differing investment styles or trading behaviour, which can lead to the development of targeted financial literacy campaigns or digital solutions to cater to varying investment needs.

By making the right foray into using technology and big data to create intelligence, Bursa Malaysia, together with the brokers’ participation, will see positive results with a more vibrant and educated retail investor segment.

A word of caution

As the above data is based on the individual stock’s performance year-to-date, the return performance, which is based on the inflow or outflow of funds, may or may not be reflective of the actual individual group of investors’ actual realised or unrealised positions.

For example, in the case of Hartalega, retail investors may have still made a capital gain if they had sold their investments much earlier on and may have turned net buyers just recently.

Similarly, the selling in the same stock by foreign institutions is just the cumulative net selling by all foreign investors in the stock.

Individually, the selling or buying could have occurred over a period of time and some could have been profitable or loss-making trades as well.

Hence, while the flow of funds tells one story, there is another element that makes a winning or losing trade, which is timing.

To help investors to track the flows, a better way is to identify the flows on a shorter time horizon, for example, the daily, weekly, or even monthly flows.

Hence, just like how investors deploy technical charts to gauge entry or exit points, data provided by DIBots too can be used to enhance an investors’ market entry or exit points.

Pankaj C Kumar is a long-time investment analyst. The views expressed here are his own.

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