Persistent Foreign Net Inflows to Cushion Healthy Profit Taking

KLCI: 1552.4 (-3.2)

DOW: 38612.24 (48.4)

MSCI Asia: 171.13 (-0.2)

FCPO (RM): 3857 (-6)

BRENT (USD): 83.13 (0.79)

USDMYR: 4.7943 (-0.004)

SGDMYR: 3.567 (-0.001)

EURMYR: 5.1778 (-0.004)

AUDMYR: 3.1422 (-0.003)

GBPMYR: 6.0463 (-0.002)

US: 10-yr yield (%) 4.3187 (0.043)

BNM: 10Y MGS (%) 3.87 (0.01)

Asia/US. Tracking lower Wall St, most Asian markets ended mixed as investors awaited further insights from the FOMC minutes and key earnings from NVDA. However, the SHCOMP gained 0.97% to 2,951, as policymakers implemented more forceful measures to bolster investor confidence. Ahead of the highly-watched NVDA results, the Dow slid as much as 226 pts before ending +48 pts at 38,612 as investors digested the latest FOMC minutes, revealing concerns among members regarding premature rate cuts. After the bell, NVDA surged 7.4% amid upbeat earnings and bullish outlook guidance.

Malaysia. In line with the mixed regional markets, KLCI lost 3.2 pts on profit taking after rallying 27 pts in the last three consecutive sessions. Market breadth was negative at 0.59 vs 1.45 a day ago, with daily trade value declined 7.8% to RM2.71bn. Foreign investors recorded their 14th consecutive net inflows (+RM71m, YTD: +RM2.06bn) followed by the local retail investors (+RM5m, YTD: -RM944m). Meanwhile, the local institutions sustained their net selling for the 11th straight session (-RM76m, YTD: -RM1.12bn).

Outlook Foreigners’ underweight position on Malaysia is one of the largest in the past decade but we believe this has bottomed amid recent persistent net inflows by foreign investors (4th consecutive month), supported by an uptick in foreign shareholding at 19.6% in Jan (from all-time low Dec 23: 19.5%) and YTD foreign net inflows amounted to RM2.06bn (a reversal from -RM2.6bn in 2023).

Moreover, risk appetite for EMs should resurface with the (i) Fed’s eventual pivot; (ii) stronger Malaysia GDP growth (2024: 4.8%, 2023: 3.7%) in line with global GDP growth of 3.1% in 2024 (IMF 2023: 3.1%); (iii) a more stable political climate domestically; and (iv) expectations of more aggressive measures from China to revive its slowing economy. Hence, we believe continued robust buying interests from foreigners would cushion downside (support: 1,522-1,533; resistance: 1,570-1,580-1,600) from a healthy profit taking pullback after rallying 97 pts YTD.

Source: Hong Leong Investment Bank Research - 22 Feb 2024