Are Foreign Investors Back Yet?

Apparently, foreign interest in Malaysian stocks been felt over the past few months. Even so, analysts believe domestic equities are still not the priority for such investors.

This is because the defensive nature of the large cap stocks on Bursa Malaysia is perceived as a handicap for investors whose interest has been to seek out growth from the broad-based economic recovery globally.

TA Investment Management chief investment officer Choo Swee Kee told StarBiz that interest is there at all times. The keenness differs.

Choo, however, said there had been a return of interest to the Asia-Pacific region and Malaysia was seeing an increase in activity.

The interest by foreigners is reflected in the trading participation by them in the purchase of stocks in Bursa Malaysia.

As a percentage of trading by value, foreign participation has increased gradually since June when it accounted for 21% of the value of stocks bought for the month.

That percentage rose to 23% in July and 24% in August but was some way off the peak in December last year when foreign institutional investors accounted for 43% of the value of trade done in the stock market.

Local institutions had the largest share of trading with 46% of the value of trades in August. Retailers was next with 30%.

While Bursa Malaysia is seeing a rekindling of some foreign interest, the benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI), however, is still a long way off in performance compared with the rest of Asia.

The FBM KLCI is the second worst performer so far this year in Asia after Japan. The index has gone up 39%, the second lowest percentage rise after the Japan’s Nikkei, which has risen a modest 17%.

Choo said the anaemic interest from foreign investors could be due to their preference in markets that were battered by the financial crisis on Wall Street and also the global recession.

“When they invest based on a recovery theme, they would prefer countries that have recovered more,’’ he said, giving examples such as China, Singapore and South Korea. Those markets are up 59%, 52% and 52% respectively this year.

While there is no broad-based foreign investor interest in stocks on Bursa Malaysia, which had recently attracted an “underweight” rating from Bank of America Merrill Lynch’s fund manager survey of emerging markets, specific stocks are nonetheless bucking the trend.

Perennial favourites such as Genting Bhd, CIMB Group Holdings Bhd, Public Bank Bhd, Axiata Group Bhd and a host of other blue chips, especially in the plantations sector, would find favour among foreign investors.

“There are buying but volumes are not indicative of their presence,’’ said OSK Investment Research associate director Chris Eng. “They are buying selectively.’’

Will we see a mini tsunami interest from foreign funds in Bursa? The best may yet to come.