SINGAPORE – The tide seems to be turning to Malaysian stocks, as the biggest exodus of global funds, since 2015, has subsided.
Foreign investors poured $ 84 million into the nation's stock last week, the highest since late January, according to data compiled by Bloomberg.
The FTSE Bursa malaysia KLCI Index has recovered half of the loss of more than 5% this year which made it the worst market in the world.
Areca Capital Sdn. says it's time to buy, and the company's profits are unlikely to get any worse.
"There is a drop in profit declines if you look at the results, very low expectations and low base," said Danny Wong, executive director of Areca Capital Sdn. "We started stock valuations two weeks ago, after raising money from
the beginning of the year, "he said. Wong has bought shares with exposure to glove manufacturers and companies linked to digital and consumer services.
A market turnaround would be a boost for Prime Minister Mahathir Mohamad's fight to win investors since the historic electoral victory a year ago. Since then, more than $ 3 billion in foreign funds have
a restriction of public expenditure. Now the government is showing signs of easing its austerity effort and reviving major state projects.
Hope for further cuts in interest rates and profit surprises at companies such as Telekom Malaysia Bhd . and Tenaga Nasional BDD . has also helped investor sentiment. Thus, the US-China trade war is to some extent with the country's actions seen as a security negotiation by some investors seeking to escape global volatility.
Finance Minister Lim Guan Eng said last week that Malaysia benefited from the discussion through trade diversion and business reallocation. Recent Trade Data Signals "robust" economic growth for the second quarter, he said.
Not everyone is optimistic.
Alan Richardson, regional fund manager at Samsung Asset Management Co. in Hong Kong, said he is underweight in Malaysia's shares, worried about the government's lack of fiscal flexibility to face a slowdown amid external challenges. It still has some Malaysian stocks that have low correlation with macro issues.
Other investors seem to be looking beyond well-known economic concerns. The stock index rebounded 3.5% from the low of 2015, on May 24. The index is valued at 16.2 times projected 12-month earnings, below the 16.5-point peak in March, according to data compiled by Bloomberg.
Reforms in state-run companies, more political clarity and stimulus could push the index to an increase of 1,800 in the base scenario, or up to 1,900 in the optimistic case, analysts at Macquarie Group Ltd. said in a note on April 26. The index fell 0.1% to 1,653.45 at 9:32 am in Kuala Lumpur.
There is a "fund being formed" and we are buying shares, which show signs of recovery of profits, said Areca's Wong. Bloomberg