Asian markets up on weak US$, foreign funds flow into Bursa

KUALA LUMPUR: The ringgit’s spurt against the US dollar is lifting foreign appetite for local equities as higher crude oil prices and the weakening dollar boosts buying interest in the local stock market.

The demand for emerging market stocks has shot up to a 10-year high as foreign funds have scoured through markets that have benefitted from better global grow prospects and the weaker dollar.

The FBM KLCI was up 3.2 points to 1,825 after a bout of profit-taking following a steep increase in the benchmark index in the first week of trading. The local bourse has gained 1.62% year to date.

Amid a strengthening ringgit, the local bourse’s rise would translate into a gain of about 4% in US dollar terms.

The US dollar has been weakening, with the currency’s index now hovering at a three-year low against major currencies. As at time of writing, the benchmark, which measures the greenback against a basket of peers, fell around 0.4% to 90.622, as euro rallied to its highest level since late 2014 at 1.2256 against the US dollar.

Meanwhile, other emerging markets in the region also saw gains since the beginning of this year, with the Shanghai Composite Index up 3.12%, India’s S&P BSE Sensex Index up 2.31, South Korea’s Kospi up 1.47%, Stock Exchange of Thailand SET Index up 3.93%, Jakarta Composite Index up 0.42%, Philippine Stock Exchange PSEi Index up 3.5% and Vietnam’s Ho Chi Minh Stock Index up 8.05%.

Buying interest in emerging markets saw foreign funds continue to increase their holdings in stocks listed on Bursa for the third uninterrupted week.

“Based on preliminary data from Bursa which excluded off market deals, international investors acquired RM772.2mil net of local equities last week, lower than the RM915.5mil net mopped up in the preceding week,” MIDF said in its weekly fund flow report.

The research house noted that foreign investors were net buyers in four out of five trading days.

Foreign investors entered heavily into Bursa last Monday with net buying totalling RM369.2mil, the highest acquisition in a day since April 28, 2017.

“We ascribe the intense foreign buying on Monday to the ringgit strengthening to a 16-month high of 3.9975 to the dollar and firmer oil prices,” MIDF said.

Thereafter, the foreign inflows began to gradually taper until Wednesday where it went below RM100mil net, in tandem with the decline of the FBM KLCI from 1,832 points on Monday to 1,823 points on Wednesday.

Foreign investors then turned net sellers on a marginal scale on Thursday as they sold off RM16.8mil net, snapping the buying streak of 12 trading days.

Risk on mood was hampered on Thursday following the losses suffered by Wall Street on Wednesday due to concerns over the rapid rise in US treasury yields.

Nonetheless, MIDF said foreign buying regained its momentum on Friday with a net inflow of RM182.3mil which coincided with the 0.32% gain in the FBM KLCI.

“Sentiment on Bursa improved as Malaysia’s IPI grew by 5% year-on-year in November 2017.

“Looking at stocks, shares of Kuchai Development Bhd
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soared by 30% to an 11-year high of RM2.28 per share after news reporting that the company may be the biggest beneficiary from the listing of Great Eastern’s insurance arm in Malaysia,” MIDF said.

Foreign participation remained vibrant as the foreign average daily trade value (ADTV) stood above the RM1bil mark at RM1.38bil.

The retail ADTV was also impressive, reaching RM2.13bil last week, a level not seen since February 2012.

Last week, Tenaga Nasional Bhd
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registered the highest net money inflow of RM23.42mil.

Sime Darby Bhd
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recorded the second highest net money inflow of RM10.64mil while Nestle (M) Bhd
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saw the third highest net money inflow of RM5.29mil.

On the other hand, Public Bank Bhd
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saw the largest net money outflow of RM28.83mil last week.

Maybank recorded the second largest money outflow of RM25.73mil and Petronas Chemicals saw RM20.72mil of net money outflow.

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