TheStar
Analyst: They are focused on blue-chip stocks
PETALING JAYA: The main grouse of retail investors is that Bursa Malaysia is not attracting enough foreign funds and has under-performed regional markets such as Hong Kong, China and Singapore.
TA Securities chartist Stephen Soo said while foreign funds had returned to the local bourse, they had been relatively cautious.
“There are positive inflows although foreign funds are still nibbling,'' he said, adding that the funds were currently showing some interest in construction stocks.
Relatively speaking, the KL Composite Index has not recovered as much as the Hong Kong, Singapore or Jakarta markets.
“Malaysia is less sensitive to US funds flows than these markets,” Soo said.
In addition, the US subprime woes continue to hover in the background, acting as a “cap” on the interest of US-based foreign funds, he said.
On asset allocation, Soo said globally, there had been a move into equities as the downward pressure on US interest rates was expected to bring down the value of US Treasuries and corporate bonds.
OSK Investment Bank head of equity research Kenny Yee concurred that foreign funds were back in the Malaysian market but added that they were invested in blue-chip stocks.
“They are definitely in Malaysia but are concentrated on the blue chips,” Yee told StarBiz.
A broad-based buying of lower liners had not taken place in a big way, he said.
On Bursa's relatively weaker performance versus the regional markets, Yee said the comparison was not justified.
As these key markets go up, “we will benefit from the spillover,” he said.
On the asset allocation of foreign investors, Yee said a further cut in US interest rates would mean the greenback would weaken more and a potential flight of funds from America to other markets.
“Investors would then be looking at bonds, other assets and equities but on the whole, the interest will present itself as flows into equities,'' he said.
Singular Asset Management Sdn Bhd chief investment officer Teoh Kok Lin, when contacted, said the perception that the flow of foreign funds was weak could be due to the fact that a segment of funds – particularly large hedge funds that had been badly affected by the US subprime crisis – was now “missing” in action.
He expects the local bourse to be volatile over the next few weeks, as both foreign and domestic investors remained uncertain over external factors and their impact on the market.
Over six to 12 months, however, funds would be attracted to Asia post-subprime, Teoh said.
“As long as the US does not go into a deep recession, economies in the region are strong enough to grow under their own steam over the next four years, which should attract investors,” he added.
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