The FBMKLCI rose 4.0% mom to 1,513 pts in Jan 24, the fourth consecutive month of gains following the 0.1% gain in Nov 23.
Foreign investors stayed net buyers for the third consecutive month with net buy flow of RM0.5bn in Jan 24, having also net bought RM0.3bn in Dec 23, CGSCIMB cited in its Strategy Note today (Feb 5).
The FBMKLCI outperformed all other Bursa indices, MSCI Emerging Market Index, MSCI All Country Asia ex-Japan Index as well as the other MIST markets.
KLCI rises for fourth month in a row in Jan 24 at a strong 4.0%
The KLCI rose 4.0% mom to 1,513 pts in Jan 24, making it the fourth consecutive month of positive gains.
With the strong gain, the KLCI outperformed both the MSCI Emerging Market index -4.7% mom) and the MSCI All Country Asia ex-Japan Index (-5.5% mom) in Jan 24. KLCI also outperformed all the other MIST (Malaysia, Indonesia, Singapore, and Thailand) markets, with Indonesia’s JCI (-0.9% mom), Singapore’s STI (-2.7% mom), and Thailand’s SET (-3.6% mom) all posting losses in the first month of 2024.
The index outperforms all Bursa key indices, driven by YTL and YTLP In Jan 24, the KLCI (+4.0% mom) outperformed all of Bursa’s other key indices. All Bursa Malaysia’s 13 sectorial indices posted gains, except for the Technology sector (-2.2% mom). The three best-performing sectorial indices in Jan 24 on a mom basis were Utilities (+17.3%, led by YTL Power), Energy (+9.5%, driven by O&G Services) and Construction (+9.4%), while the three worst-performing sectors were Technology (-2.2%), Industrial Production (0.1%), and Consumer (0.7%). Among KLCI constituents, 22 companies posted share price gains, with the three best performers on a mom basis being YTL Power (+61.8%), YTL Corp (+23.8%), and Axiata (+14.7%).
Foreign investors increase net buy flow in Jan 24
Foreign investors continued to be net buyers in Jan 24 for the third consecutive month with net buy flows of RM678.4m, which was 164.9% higher than the buy flow of RM256.1bn in Dec 23.
In terms of value, local institutional participation fell 0.6% pts mom to 31.9% in Jan 24. Foreign investors’ participation also fell 2.3% pts mom to 28.9% in Jan 24. Meanwhile, local retail and local nominees’ participation rose 0.3% pts mom and 2.6% pts to 26.3% and 12.9%, respectively.
In 1M24, local retail and foreign investors’ trading participation (in terms of value) fell to 26.3% (2022: 26.8%) and 28.9% (2023: 29.5%), respectively, while local institutions’ share stayed flat at 31.9%.
Foreign investors stayed net buyers of RM0.7bn for third consecutive month in Jan 24
Foreign investors stayed as net buyers for the third consecutive month in Jan 24 with net buy flows of RM0.7bn, which was 164.9% higher than the buy flow of RM0.3bn in Dec 23. Foreign investors’ net buy flow in Jan 24 further reduced cumulative net foreign outflow since 2010 to RM33.8bn.
Foreign shareholdings in the Malaysia equity market fell by 0.1% to 19.5% as at end-Dec 23 despite the net buy flow in Dec 23.
Local institutional investors returned to being net buyers in Jan 24, with a net buy flow of RM189.9m compared to a net sell flow of RM56.3m in Dec 23.
Local retail investors recorded a net sell of RM663.0m in Jan 24 compared to a net sell flow of RM92.2m in Dec 23. Local retail investors bought RM17.3bn (+42.3% mom) and sold RM17.9bn (+46.6% mom) during the month. This also marked the seventh consecutive month where local retail investors were net sellers.
Healthcare sector gains for the fifth straight month
In Jan 24, all of Bursa Malaysia’s 13 sectorial indices posted gains, except for the Technology sector (-2.2% mom). The Healthcare sector continued to gain for the fifth consecutive month.
However, this was no longer driven by optimism for the glove stocks, but from KPJ, with investors likely looking forward to strong 4Q23 results.
During Jan 24, the three best performing sectorial indices (on a mom basis) were Utilities (+17.3%), Energy (+9.5%) and Construction (+9.4%). The three worst performing sectors were Technology (-2.2%), Industrial Production (0.1%), and Consumer (0.7%).
Key movers in Jan 24
CGSCIMB said Jan 24 saw strong gains for Utilities (+7.3% mom), Energy (+9.5% mom) and Construction (+9.4% mom).
The Utilities sector gains were mainly by YTL Power, driven by growing optimism around the value creation potential from the group’s planned 500MW data centre project which was accompanied by the signing of the Johor special economic zone (SEZ), which piqued interest further given the location of the facility in Kulai Johor.
Towards month end, the company also announced that it had secured a new 600MW hydrogen-ready gas plant in Singapore which further bolstered the share price.
Meanwhile, the O&G services names, namely Dayang and Wasco, saw renewed interest in Jan on the back of the rebound in oil prices during the month. The outlook for the domestic listed O&G names has improved alongside the pick-up in spending plans by the oil majors which, in CGSCIMB’s view, should translate into sustained higher work orders for the services companies, following the strong recovery in earnings they have seen in recent quarters.
In the construction space, CGSCIMB reckon Sunway Bhd’s share price likely rerated on the back of its landbank in Johor which may benefit from the SEZ and stronger institutional buying.
CGSCIMB thinks that further rerating will come from more clarity on the zoning of the SEZ and better performance from Sunway Healthcare Group.
Further, CGSCIMB thinks YTL Corp’s share price rerated on potential inclusion in MSCI Asia Pacific Index, more newsflow on YTL Power and the potential KL SG HSR. Further rerating could come from better earnings delivery, potential new construction wins and higher dividends, in their view.
CGSCIMB thinks that investors are also starting to acknowledge IJM’s positioning as a larger cap construction proxy and its potential participation in the KL-SG HSR with MRCB, KTM and Berjaya Rail. CGSCIMB thinks further rerating could come from better capital management, a turnaround of Pestech’s fortunes and new contract wins.
Axiata continued its monthly gains (+14.7% mom), which CGSCIMB believes stems from some shift in investor sentiment towards its monetisation efforts.
Reports out of Indonesia on potential M&A activity may be contributing to the movement. Restructuring of Linknet, including the potential entry of new shareholder in Linknet, was highlighted by management at Axiata Investor Day 2023.
Affin Bank saw its share price jump 26.4% in Jan 24 following the increased market expectations for the Sarawak government to increase its stake in Affin Bank.
CGSCIMB thinks that the emergence of the Sarawak government as a key shareholder of Affin Bank will be positive for the bank as it could catalyse its business growth in Sarawak (through closer working relationships with the Sarawak government). However, CGSCIMB thinks that it will take time (more than one year) for any positive benefits to materialise, as Affin Bank needs to formulate a plan, expand its network, and strengthen its operations in Sarawak.
To achieve this, Affin Bank would have to incur additional costs (larger number of branches and employees in Sarawak) while revenue would only increase gradually over time, in their view.
For Genetec, CGSCIMB believes the share price decline was driven by concerns over the potential softness in the EV segment, which may translate to weaker orderbook outlook for the group. The recent call with management, however, suggested otherwise, as Genetec looks to ramp up its orderbook size with its EV customer over the next 12-15 months.
Berjaya Food’s share price also saw a decline of 10% in Jan 24, caused by prolonged local consumer boycott of Starbucks since early-Nov 2023 to protest the ongoing Israel-Hamas conflict. CGSCIMB expects FY24F to be a washout year for Berjaya Food as a prolonged Israel-Hamas conflict will likely extend the boycott period.
However, they think that Berjaya Food could see strong EPS recovery in FY25F/26F, driven by a reacceleration in sales on the assumption that the boycott effects will ease by end-FY24F, and a more favourable input cost environment.
