• Foreign investors week-on-week accumulated net buy surged 73.2% despite shorter trading days

• Sentiment may be unfettered by FOMC policy decision this Thursday

Accumulated foreign net trading position surged to RM632mn month-to-date last week, a marked improvement compared to RM365mn the week before. This is impressive by any standard despite the uncertainty over the US’s policy decision. Note that US’s central bank will announce its 1st policy decision of the year this Thursday (1st of February). The steady return of foreign investors has been largely expected by us amid Malaysia’s prospects that will be boosted by political calmness, stronger growth prospects, resilient oil price and undervalued Ringgit. Among the catalyst in hand, politics carries the biggest weight amid Malaysia that was shunned by investors since 2018 due to political crisis. Over the last 5 years the country’s Prime Minister changed 3x, unheard of for Malaysia that enjoyed political premium since independence. It is this very reason that the country will reclaim back the political premium and hence, risk premia that will reduce markedly. Note that the current government enjoys more than 2/3 of Dewan Rakyat support whilst the earliest state election could be 2 years away (Sabah state election; 4Q25). The solid majority the Unity Government is enjoying means that there can carry out reforms efforts seamlessly without succumbing to political pressure, of which Malaysia sorely needs. This has started earnestly with the floating of several key item prices including chicken (1st October 2023) and electricity (1st January 2024), which will soon expanded into chicken eggs, sugar, petrol and diesel – 2H24. The government proved its mettle recently after it abolished pension-scheme for its newly hire, timely given the bloated fiscal burden. Though the government received a lot of brick bat but the world is watching its perseverance and tenacity to correct the distortion. Will the pension of the YBs will be next in line to be pulled out? We hope so following the high-income nation like Singapore which offers no pension scheme for its parliamentarian in the spirit of ‘national service’ by those who are keen.

It is going to be another shorter trading week for FBMKLCI though this may not deter foreign investors from accumulating the local stocks. Though US’s FOMC is due to release its 1st policy decision this Thursday but the outcome is largely expected where the US’s FFR is likely to remain status quo at 5.50%. On the same breath, investors will also turn its focus on US’s January labour market condition, which will be released on the 2nd of February. The details of this may shape or break sentiment for the following week. Investors may also get excited with the changing of guard amid Malaysia that will receive a new YDPA this Wednesday. Our new YDPA which is known to be a strong proponent of stability and prosperity will excite the market amid Malaysia that may enter into a period of tranquility and economic prosperity in the next 5 years. The out going YDPA will be greatly missed amid his steady hands that navigated the country well during the COVID-19 pandemic and political crisis. For that, we say thank you to Al-Sultan Abdullah Ri'ayatuddin Al-Mustafa Billah Shah for his great wisdom. Daulat Tuanku!

Source: BIMB Securities Research - 29 Jan 2024