Bursa Malaysia and other bourses in south-east Asia are poised to be the prime beneficiary of funds flowing given the defensive attributes it offers with the local FBM KLCI likely to see 1650 to 1670 by year-end, analysts told Business Today.
They said that contrary to many who suggest that the local market is set to take a beating on account of heightened risks of further rate hikes in the US and the ongoing war between Russia and Ukraine, the local market instead might be the beneficiary of this.
Malacca Securities head of research, Looi Low told Business Today that Malaysia’s geographically distant proximity to Russia and Ukraine coupled with the fact that we are a commodity-based economy might bode well for Malaysia.
He said that Malaysia and other southeast Asian bourses with limited trade and business ties with Russaia and Ukraine coupled with soaring crude oil and palm oil prices offer some defensive attributes.
Low said that the flow of funds into the region would bode well for the local market and expects FBMKL to reach 1650 points by year-end.
He told Business Today that the flow of funds into the region comes at a time when Malaysia is easing border restrictions and there is a rise in global macroeconomic risks in North Asia which is likely to see more funds flowing into the southeast Asian bourses like Malaysia
RHB research in its strategy report said that Asean, Thailand, and Indonesia have enjoyed the biggest foreign inflows YTD, with net inflows of MYR6.5billionn into Malaysia, marking a reversal from a net sell of MYR3.2billionn in 2021.
It said that predictably the reversal in foreign portfolio flows has been on the larger-cap names centered in the financials, industrials, consumer, and plantation sectors but were net sellers of technology and healthcare stocks.
We believe the challenges in North Asia markets, coupled with the Ukraine crisis, have drawn foreign investors back to Malaysia equities as a shelter from global volatility, given their underweight stance – having sold MYR50.5bn over 2018-2021.
Going forward, RHB Research said that Malaysia’s safe-haven status could continue to draw foreign inflows if geopolitical tensions in Europe remain protracted.
Conversely, it said that a quick resolution of the Ukraine crisis could see a reversal of foreign portfolio fund flows. Domestic institutions remained resolute net sellers, with a YTD 2022 cumulative net sell of MYR6.7billion that comes on the back of the MYR8.9billion net sell in 2021
Low said that another factor that bolsters investor interest would be the impending general elections that suggest that it would be held sooner than later.
He said that Barisan Nasional’s recent victory In Johor might embolden the leaders to dissolve parliament soon and this is likely to stir investors’ interest in the local market.
An analyst in a bank-bases broking firm sums it up by saying that the local bourse might just be the “silver lining” amidst the gloom and doom elsewhere
