Foreign funds are attracted to the relative stability and safe haven status of the Malaysian stock market because of the perception that it is relatively sheltered from the global economic turmoi l, according to fund managers surveyed by Star Biz.
Aberdeen Asset Management Sdn Bhd managing director Gerald Am brose said that Bursa Malays ia was a low beta stock market which also hosted companies that offered the highest dividend payout in Asia.
“A low beta market is one that does not rise too much nor fall too much. Presently, Malaysian equities offer the highest dividend payout ratios in Asia. Foreign funds like these yields, ” he said.
Ambrose said that for eign funds were focused on big cap index-linked funds and the ir interest was seen in newly-listed IHH Healthc are Bhd as it was being fast-tracked into the MSCI Malaysia Index Fund.
“The volumes are mostly concentrated in larger blue chip stocks which have liquidity. I expect equities (here) may continue to perform in line or outperform but you have to note that they are not cheap anymore and this may cap prices moving forward,” Ambrose said.
Another foreign fund manager based in Singapore, who invested some of his portfolio locally, said that the safe haven percept ion on Malaysia was due to the stable economic growth it recorded despite the problems around the world.
“People like a shelter f rom these problems, it seems that Malay sia offers this in its stock market. Election risks have also been factored into prices while the macro theme presently is that hot money is unwinding from Europe into Asean equities as well,” he said.
“The upcoming initial public offering of Astro Malaysia Holdings Bhd is an endorsement that the super bulls are favouring equities in the Malaysian stock market. This performance could have a positive spillover on the ringgit's performance due to yielding carry trends. We are on the cusp of an Asian Renaissance' in equities and the society at large looking at democratic developments in Myanmar,” he added.
The FTSE Bursa Malaysia KL Composite Index (FBM KLCI) closed at fresh record high yesterday at 1,646.32 after it touched an intraday high of 1,650.42 in the first half of the trading session. It had exceeded the previous record high of 1,645 set last month.
The unabated performance in the stock market is in contrast to equities around the world. Bloomberg yesterday reported that hedge funds were unwinding their bets against European stocks at the fastest pace in three years after speculation that policy makers would step up the fight against the debt crisis.
MIDF Research, however, said in a note that the rate of inflow of foreign funds into Bursa Malaysia decelerated last week indicating that foreign buying might finally be tapering off.
“Although foreign investors bought Malaysian stocks for the eighth consecutive week, the amount was the lowest in the two months.
Foreign funds were net buyers during the first four trading days last week before selling on Friday. The rate of participation surged 18% week-on-week to RM1.02bil the first time it exceeded RM1bil in 10 trading days. This is considered active,” MIDF said.
UOB KayHian's Vincent Khoo was unconvinced on the local market stating in a report that foreign institutional funds that it had met were mostly underweight on Malaysia and continued to be “wary” of Malaysia's index components' high valuations.