• Foreign inflows are expected to sustain well in 2024, albeit intermittent profit taking activity

• Expect FBMKLCI to have a leg up, thanks to positive news flow and lower risk premium

• Cherry on the cake is political calmness, a much-needed tonic for the local bourse

Bursa Malaysia has been at the positive receiving end of foreign investors amid a steady equity capital inflow, the envy of regional peers. Our bourse has been netting a total month-to-date inflows totaling USD301mn or RM1.41bn, a sharp contrast compared to regional peers like Jakarta Stock Exchange (-USD17bn), Philippines Stock Exchange (-USD14.5bn) and Thailand Stock Exchange - TSE (-USD92bn). Note that the selling pressure faced by TSE gained in intensity since the government completed its recent general election. Political uncertainty in Thailand has been a bane and will continue to be a major killer for foreign investors. The change of fortune for Bursa Malaysia is highly appreciated amid the local bourse that has been shunned by foreign investors since 2009 (note: quantitative easing measures due to US’s Sub Prime Crisis of 2008/2009). It was further intensified during our political folly from 2018 until 2022 where Malaysia changed 3 prime ministers in a 5-year period. Foreign investors return has been largely expected amid Malaysia that has been able to produce political calmness post 15th General Elections. On that score, the current government is expected to last well until the end of 2027 if not early 2028, with no major threat that can affect their control of the lower house (i.e., Dewan Rakyat). Based on direct and indirect support, PMX has a comfortable majority of the lower house, more than two-third. The upcoming state elections (Sabah, Sarawak, Melaka and Johor) are quite a distance away (end 2025, 2026, 2026, 2027), suggesting continuing political tranquility. Unexpected political storm is also unlikely given the fast-approaching installation of Malaysia’s 17th Yang Di Pertuan Agong in late January 2024. In sum, Malaysia’s risk premium is expected to reduce markedly and hence, our positive rating by foreign investors.

Bursa Malaysia is expected to remain in the radar of foreign investors well into 2024, thanks to our solid growth prospects (GDP 2024F: 5.0%; 2023E: 3.7%), undervalued Ringgit, low political risk, positive news flow amid PMX reforms efforts that are expected to gain in traction in 2024. Foreign investors may also cheer if PMX appoints the second finance minister where Datuk Seri Johari Ghani, a season hand at Finance Ministry, is tipped to be the main contender. All in, we expect little that can affect investors’ confidence amid the government that is set to restore its shine via economic reforms particularly with the implementation of targeted subsidy which is currently being undertaken gradually but surely by the government. This will be the icing on the cake that will delight investors as the government’s expenditure will be lean and nimble post targeted subsidy. The only worry is if the government dial back of its words, which the damage can be big and long lasting.

Source: BIMB Securities Research - 26 Nov 2023