CGS-CIMB: Foreign investors record highest monthly net buy of Malaysian equities since Jan 2018

KUALA LUMPUR (April 4): CGS-CIMB Securities Sdn Bhd said on Monday (April 4) that foreign investors posted their highest monthly net buy value of Malaysian equities since January 2018 in March 2022 when their net purchase value of local shares rose to RM3.3 billion from RM2.8 billion in February 2022.

The March 2022 figures brought foreign investors' Malaysian equities net buy value to RM6.5 billion in the first quarter of 2022 (1Q22) from a net sell value of RM1.7 billion in 1Q21, CGS-CIMB analyst Ivy Ng Lee Fang wrote in a note.

"We note that 65% of the net buying [in March 2022] occurred after Russia invaded Ukraine on Feb 24, [2022] as Malaysian commodity plays benefited from higher commodity prices," Ng said.

She said the March 2022 figures represented the third consecutive month of net buying of Malaysian equities by foreign investors.

According to her, the March 2022 figures brought the cumulative foreign money net inflow into Malaysian equities to RM6.5 billion in 1Q22 and lowered the cumulative net foreign money outflow from local shares since 2010 to RM28.4 billion.

"This is a positive start in terms of foreign interest in Malaysian equities after four consecutive years of net selling by foreign investors post GE14," Ng said.

GE14 refers to Malaysia's 14th general election, which was held on May 9, 2018.

Meanwhile, local institutional investors' net selling of Malaysian equities rose 28.5% to RM3.6 billion in March 2022 from a month earlier, according to Ng.

She said the March 2022 figures represented local institutional investors' highest monthly net sell value of local shares since March 2017.

"This brought the 1Q22 net selling by local institutional investors to RM6.9 billion (+44% y-o-y) vs 1Q21 net sell of RM4.8 billion.

"Local retailers’ net buying rose to RM321 million in March 22 (from RM98 million in Feb 22), raising its 1Q22 net buy to RM506 million, a 91% decline from local retail investors’ 1Q21 net buy of RM5.4 billion," she said.

Meanwhile, AmInvestment Bank Bhd said on Monday it had raised its end-2022 base-case FBM KLCI target to 1,745 points from 1,651 previously on expectations that ample liquidity and the reopening of Malaysian borders will support the country's economic recovery amid volatile commodity prices.

In a note, AmInvestment analyst Alex Goh said volatile commodity prices are due to anticipation of further supply-chain shocks "from Russia being shunned by the global economy and political noises running up to [Malaysia's] 15th general election (GE15)".

"As a net oil exporter, Malaysia is partially buffered from higher crude oil prices compared to Indonesia and Thailand.

"While still exposed to imported inflation, driven by commodity prices and supply chain disruptions, we believe Malaysia remains an attractive equity destination vs the Asean region," Goh said.

According to him, the Malaysian equity market is likely to remain range-bound in the near term within a 1,500-1,600 point threshold given the volatility in commodity prices, supply chain disruptions and geopolitical shocks.

He said AmInvestment's 2022 KLCI companies' earnings per share (EPS) forecast is projected to contract 5.6%, "largely from glove manufacturers, dampened by declining unit prices, supply chain disruptions and labour constraints on manufacturing together with the 33% corporate prosperity tax on income above RM100 million".

"Hence, local institutional selling [of Malaysian equities] has offset foreign equity purchases by RM500 million YTD.

"Towards the end of the year, we expect the market to reach an inflection point as local institutional funds switch to long positions on probable window-dressing activities amid clearer visibility to our KLCI 2023 EPS growth recovery [forecast] of 14.9%, which will be the fastest expansion since 2012, excluding the 2021 sharp rebound of 31% y-o-y from Covid-19 lockdowns," he said.