Tide Appears To Be Turning For Malaysian Stocks As Biggest Exodus Of Global Funds Since 2015 Dissipates

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New Delhi: Bloomberg-compiled data show that tide appears to be turning for Malaysian stocks as the biggest exodus of global funds since 2015 dissipates. Overseas investors poured a net $84 million into the nation’s stocks last week, the most since late January,.

The FTSE Bursa Malaysia KLCI Index has clawed back about half of this year’s more than 5% loss that had made it the world’s worst major market. Areca Capital Sdn. says it’s time to buy, and company earnings are unlikely to get any worse.

“There is a bottom in earnings downgrades if you look at results, too-low expectations and low base,” said Danny Wong, chief executive officer at Areca Capital Sdn. “We started to nibble in stocks two weeks ago after raising cash since the start of the year,” he said. Wong has been buying stocks with exposure to glove makers and companies tied to consumer and digital services.

A market turnaround would be a boost to Prime Minister Mahathir Mohamad’s struggle to win over investors since his historic election victory a year ago. Since then, more than $3 billion of foreign funds have flowed out of the market amid a public spending clampdown. Now, the government is showing signs of easing its austerity drive and reviving large state projects.

Hope of more interest rate cuts and earnings surprises at companies including Telekom Malaysia Bhd. and Tenaga Nasional Bhd. have also aided investor sentiment.

So has the US-China trade war to some extent, with the nation’s equities seen as a safety trade by some investors seeking to escape global volatility. Finance Minister Lim Guan Eng said last week Malaysia has benefited from the spat via trade diversion and business relocation. Recent trade data signals “robust” economic growth for the second quarter, he said.

Not everyone is optimistic. Alan Richardson, a regional fund manager at Samsung Asset Management Co. in Hong Kong, said he’s underweight on Malaysia stocks on concern over the government’s lack of fiscal flexibility to tackle a slowdown amid the external challenges. He still holds some Malaysian shares that have low correlation to the macro issues.

 

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