KUALA LUMPUR (July 31): Bursa Malaysia Bhd chairman Tan Sri Abdul Wahid Omar expects foreign shareholdings' level in the local bourse to improve in the second half of this year, underpinned by the attractive valuation of the listed equities and the country's solid economic fundamentals.

Speaking at a press conference after announcing the exchange’s second-quarter (2QFY2023) results, Abdul Wahid said the current valuation of the local equity market remains attractive and presents opportunities for investors, including foreign investors, to reap benefits from the potential upside. 

Abdul Wahid’s optimism also takes cue from the prospect of peaking interest rates globally, which will likely benefit emerging markets like Malaysia, as this would draw renewed interest and foreign fund inflows to this region.

“As interest rates peaked in the US and UK, Europe and other developed economies, towards the end of this year, we are beginning to see a reversal of the flows coming back to emerging markets. For the month of July, we have seen RM1.1 billion of net inflows, therefore lowering the net outflow for the year to about RM3 billion. As foreign investors come back into our market, we expect foreign shareholdings to increase from the current 20% level,” said Abdul Wahid.

On whether the momentum could be sustained, Wahid believes the country’s long-term economic growth prospect will continue to attract foreign investors.

The FBM KLCI closed 0.63% or 9.08 points higher at 1,459.43 on Monday (July 31). The benchmark index has recovered from this year's low of 1,374.64 in June this year, but is still down 2.41% year-to-date, from 1,495.49 on Dec 30, 2022. 

Meanwhile, Abdul Wahid opined that the ringgit has been oversold.

“Fundamentally, the ringgit should be stronger than what it is today. Many analysts’ reports [showed that] in terms of the real effective exchange rate for ringgit, it should be below the RM4 level. So, I think the ringgit does not deserve to be where we are today from an economic fundamental perspective.

“The point I want to make here is that the potential for the ringgit to strengthen is significant.  What we need is actually for Malaysians to have more confidence in ourselves. If we can all be constructive and support further the economic agenda of the country — it is all about making a better and more sustainable nation and making sure that we continue to prosper from an economic perspective in an inclusive and sustainable manner — I think this country will progress,” Abdul Wahid added.

Year-to-date, the ringgit has depreciated 2.5% against the US dollar to its current 4.51 level. 

Meanwhile, Bursa chief executive officer Datuk Muhamad Umar Swift is aiming for the trading of smaller share lots and fractional shares to take effect by the end of this year.

The policy was introduced by Prime Minister Datuk Seri Anwar Ibrahim at the launch of Madani Economy last Thursday (July 27).

Bursa Malaysia's shares closed four sen or 0.6% higher at RM6.71 on Monday, giving the local bourse operator a market capitalisation of RM5.43 billion.