This article first appeared in The Edge Financial Daily on March 12, 2018

KUALA LUMPUR: The steady climb of super big-cap stocks, which have market capitalisation (cap) of RM10 billion and above, have added some RM35 billion to Bursa Malaysia since the start of the year.

Based on Bloomberg data, currently there are about 40 super big-cap companies, compared with 38 companies a year ago.

Among the 40 stocks that have climbed to fresh peaks so far this year include Nestle (M) Bhd, Public Bank Bhd, Petronas Chemicals Bhd, Top Glove Bhd, Tenaga Nasional Bhd and Fraser & Neave Bhd.

In the recent semi-annual review of Bursa Malaysia index series, Nestle (M) Bhd was added to the benchmark FBM KLCI. Nestle’s share price performance has outshone its big-cap peers. It has jumped 40% year-to-date (YTD), and 96% from RM74 a year ago.

The steady climb among the super big-cap stocks is in contrast to others on the local bourse, among which the big-cap counters, which market cap is between RM1 billion and RM10 billion, are the worst performing category, followed by small-cap category in which there are 640 companies that have market cap less than RM500 million. (see table)

A total of RM37.5 billion in market cap was erased YTD in three other categories of listed companies on Bursa.

There are some 139 big-cap companies based on last Friday’s closing. Some RM23.23 billion in market cap has been wiped out since the beginning of the year, an evidence of them being the selling targets, according to Bloomberg data. It is a near 5% drop against the closing as at Dec 31, 2017.

For mid-cap counters, a market cap of RM5.05 billion has evaporated since January, while some RM9.2 billion in market cap was lost in the small-cap category.

Judging by the share price performance across the board, investors’ buying interest has shifted towards the super big-cap companies from the big-cap and small-cap companies. The selling pressure on small-cap stocks could be an indication of waning retail interest ahead of the upcoming election.

The shortfall in earnings growth is one factor that has drawn investors, namely institutional funds, to the heavyweight blue chips, which are relatively more resilient.

“A drop of RM5 million in net profit would be a significant fall for small-cap companies’ earnings, but not for the super big-cap companies,” said an analyst.

Foreign interest has also lent support to the super big-cap counters.

RHB Research director and head of Malaysia Research Alexander Chia explained that foreign flows have stayed positive so far.

“They (foreign fund managers) are putting in large amounts of money into Malaysia and the usual tendency is for them to focus first on big-cap stocks, which tend to be more liquid.

“The foreign portfolio flow this year is still positive, as there is more money coming into Malaysia,” explained Chia, pointing out that the mid- and small-cap stocks are mainly traded by retail investors. However, he noticed that retail investors have somehow turned cautious ahead of the GE.

Malacca Securities Sdn Bhd head of research Victor Wan points out that the large pool of local institutional funds has also been the main source of buying interest in large-cap counters.

“Right now the interest (in big-cap stocks) is being supported by local institutions,” said Wan, noting that many of the mid- and small-cap stocks are not on institutional funds’ radar.

Foreign investors bought RM160.9 million of Malaysian equity last week, lower than RM190.9 million in the prior week, according to MIDF Amanah Investment Bank Bhd Research.

In a report dated March 5, MIDF Research analysts Danial Razak and Adam M Rahim said the month of February recorded an outflow of RM1.12 billion net, the first monthly outflow since November 2017.

Meanwhile, on a YTD basis, Malaysia has attracted RM2.21 billion worth of foreign funds compared to RM1.57 billion in the corresponding period last year.