Foreign funds sold RM1.35b in September

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KUALA LUMPUR: Foreigners were net sellers of Malaysian equities last week at RM449 million, making it the fourth consecutive week of net selling, according to Maybank IB Research.

Maybank IB Research head Wong Chew Hann said in a note yesterday that September’s foreign net selling had lifted the year-to-date (YTD) net sell position to RM2.99 billion, completely reversing out the net buy of RM2.4 billion in 2013.

She said end-August’s market foreign shareholding was 23.6%, stable from end-December 2013’s level of 23.5%.

Wong added that the FBM KLCI had been the weakest performing market in Maybank IB Research’s coverage, down 1.1% YTD.

“Despite hitting a new high this year (1,893 points on July 8), the FBM KLCI has since reversed all its gains, and dipped into the red.

“Disappointing and weak corporate results, especially in the recent results reporting season, have contributed to the mild derating, besides weak external news flow,” she said.

Wong maintained her 1,940 end-2014 FBM KLCI target, which implies 16.7 times 12-month forward earnings, which is one standard deviation above its long-term mean.

She said that at its 1,840 close on Sept 26, the FBM KLCI trades at 17.1 times/15.9 times price earnings ratios (PERs) on 2014/15 and 16.2 times on 12-month forward earnings.

On a trailing price-to-book value basis, the FBM KLCI is trading at 2.25 times versus its five-year mean of 2.25 times, she said.

Wong said Maybank IB Research maintains “overweight” on construction and oil and gas, with news flow expected to remain positive in the near term.

She said the upcoming Budget 2015 on Oct 10 and the 11th Malaysia Plan, which will be unveiled by May next year, are likely to focus on building up the rail infrastructure in Peninsular Malaysia and rural developments especially in Sarawak as the Sarawak Corridor of Renewable Energy development moves into the interior.

“We are also “overweight” on the automotive sector [on a bottom-up stock selection approach], also a beneficiary of the weaker yen due to its imports,” she said.

Wong said Maybank IB Research maintained its “top buy” list with Tenaga Nasional Bhd as the top pick.

“Beyond that, we have recently upgraded Genting Malaysia Bhd to a “buy” as we are upbeat on it clinching a New York casino licence soon.

“We have also rejigged our auto portfolio, lifting MBM Resources Bhd (MBMR) as a “top buy” in the sector, taking over from Berjaya Auto Bhd whose share price has doubled YTD. MBMR is one of the “cheapest” stocks in our universe, trading at just 7.5 times 2015 PER,” she said.

This article first appeared in The Edge Financial Daily, on October 1, 2014.