Bursa decline may end soon, says fund manager

gan-peng

PETALING JAYA: Has the Malaysian stockmarket bottomed out? That seems to be the case, according to a local fund manager, though he cannot explain why foreign funds have not started pouring in as yet.

Comparing the regional bourses with the Bursa, Gan Eng Peng, equities head at Affin Hwang Asset Management, says that both Indonesian and Thai shares are up at least 16 per cent this year and the Philippines has gained 11 per cent, and Malaysian equities, which are down 1.5 per cent, may soon catch up, Bloomberg reported today.

“After nine quarters of earnings disappointment, we could be reaching the end of the downgrade cycle.

“Foreign funds are on the hunt for ideas in Malaysia. So, the strong outperformance of Indonesia, political issues in Thailand and Philippines, could drive some re-balancing of monies into Malaysia,” Gan was quoted as saying by Bloomberg.

He added that the ringgit, being the worst performer in the region, compared with its regional peers, could also be a factor in attracting the foreign funds to spur a rebound in the Bursa.

According to Bloomberg, the inflow of foreign funds in the local bourse has been erratic, hitting a peak of RM6.4 billion in April, but with more than half of that being sold since, leaving it at RM2.2 billion as of last week.

Official data shows that foreign funds have taken out RM26.4 billion from the local market over the last two years.

“Recent investment conferences, including one in Hong Kong, have seen packed participation for Malaysia strategy meetings, which is unusual.

“The big caveat is that all these have not turned into stronger foreign flows yet,” Gan told Bloomberg, adding however, that with the undervalued ringgit, it may prompt foreigners to consider buying again.

Gan also admitted speaking to foreign brokers who have expressed unusual interest in Malaysia.

According to Bloomberg, Bursa Malaysia’s KLCI is currently valued at 18 times its current earnings, the cheapest since 2009, when compared with overseas markets.

With the low oil price that has affected the government’s earnings via Petronas, and the 1MDB scandal, besides the potential risks that come with the currency’s weakness, the Bursa’s benchmark index is also looking at a decline for the third consecutive year.

A Singapore-based money manager differs with Gan however, on the optimistic outlook.

“The negative news flow surrounding 1MDB is a drag to foreign funds,” Clive McDonnell, Singapore-based head of emerging-markets equity strategy at Standard Chartered Plc told Bloomberg, adding: “Malaysian stocks are certainly attractive by its value, however, cheap stays cheap without a catalyst.”