KUALA LUMPUR (Jan 3): Foreign investors are still interested in Malaysia with an increasing focus on other asset classes, particularly the bond market, which saw foreigners flocking to the bond market to the tune of RM8.1 billion in November 2019, according to MIDF Amanah Investment Bank Bhd Research.
In a strategy note today, MIDF said international funds sold RM11.4 billion of local equities from Malaysia in 2019, but this was no match for the more than RM15 billion foreign net outflow seen in 2015.
The research house noted despite the small change in total foreign net outflow in 2019, Malaysia remained the country with the largest outflow amongst the Asean markets monitored by MIDF. This, however, was no match for the massive foreign net selling of RM19.49 billion seen in 2015.
"Nevertheless, the percentage of foreign investors' participation from the total value traded in the market averaged at 29.8% in 2019 versus 27.4% in the preceding year of the same period," it said.
"Likewise, the percentage of volume traded by foreign investors out of the total market also inched higher by 2.3 percentage points," it added.
MIDF stated that the latest MSCI rebalancing exercise which took place on Nov 26, 2019 saw value and volume traded surge to RM4.2 billion and 3.4 billion shares respectively.
According to the research house, another perspective to look at is the foreign ownership on stocks listed on Bursa based on market capitalisation that remains resilient by hovering at 23% since May 2019 to the latest available data point in September 2019.
International investors accumulated US$23.65 billion worth of local equities in the seven Asian markets that MIDF tracks (South Korea, Taiwan, India, the Philippines, Thailand, Indonesia, Malaysia), the second highest in the past five years (from 2015 to 2019).
"Overall, international investors were net buyers in nine out of 12 months during 2019 with April recording the highest monthly foreign net inflow of US$10.33 billion in the seven Asian markets under our coverage," MIDF said.
Assuming a baseline scenario in which the US-China trade dispute fails to achieve full closure and the East Asian region continued to be beset by the relative lack of liquidity-induced macro reflationary prospects, MIDF foresees a situation whereby equities valuation would remain depressed going into 2020.
"As the EPS (earnings per share) for 2020 is forecasted at 101.8, we reiterate our year-end 2020 baseline target for the FBM KLCI at 1,680 points," the research house said.