• Foreign investors sold a whopping RM503mn of local stocks ahead of US policy meeting in March
   
• Will this continue?
   
• March is an important month amid Malaysia and US’s policy meetings and the release of BNM 2023 Annual Report

Investors are looking for convincing catalysts to hold on to local stocks. This may not come so soon however given struggling Ringgit and the yet-to-be released BNM 2023 Annual Report. The latter will be released on 20th of March. Foreign investors are also locking in their profit ahead of fasting month where it is usually a slow trading period for 4-5 weeks until the full resumption of business post Hari Raya holiday. This trend is expected to continue particularly when there is lack of visibility in US policy strategy. In sum, much is at stake and until that is cleared, investors may take their profit and stay at the sideline. On that score, what’s up with Ringgit? Ringgit is facing headwinds on multiple fronts which cap its reversal and by extension, its rise. Its biggest challenge is the US’s policy direction as the central bank has not shown a firmed commitment to moderate it though it is understandable given its strong labour market and sticky inflation. Secondly, investors need an assurance that our growth prospects remain intact in 2024 particularly after our dismal 4Q23 where GDP growth was only at 3.0% against the projection of 3.3%-3.5%. Investors could be nervous on our growth potential and therefore, the profit taking activity. Could Malaysia produce a strong GDP growth above 5.0% in 2024 or within expectation of 4-5%? All these are weighing on investors’ mind. Secondly, will Ringgit drop further to test the historical low of RM4.88 per Dollar particularly when the currency has touched RM4.80 per Dollar recently. If there a downside risk, might as well wait for the support level to be breached coz it could drop further. More importantly, the local currency may remain hurt by China’s dimming economic might no thanks to its struggling property market and heavily indebted local government. All these could hurt the solvency of China’s banking system including its huge shadow banking system. It doesn’t help that we depend a lot on China, not only on the economy but also for investment and trade amid the country that emerged as our biggest trade partner since the last few years. The rising toxic asset in China property sector could bring its economy down and the global economy on that matter no thanks to China’s standing as the world’s second largest economy. Next week is an important week for Malaysia given BNM’s second policy meeting of the year. Consensus is expecting a no change in policy rate, marking a status quo in OPR since last year. This could hurt the Ringgit however and therefore, the currency that could test above RM4.80 per Dollar in the near term. Having said that, the speculative activity on Ringgit will only improve post release of BNM 2023 Annual Report. Investors will also have greater comfort on the Ringgit post US’s March policy decision which is scheduled from 19-20 March. In sum, March could be a challenging month for Bursa Malaysia due to our peculiar trading trend where fasting month is usually a bearish month for the local bourse. Though this is usually the case but we hope that 2024 fasting month is a new dawn where it could be change for the better.

Source: BIMB Securities Research - 4 Mar 2024