Hang Seng exuberance, muted local bourse

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KUALA LUMPUR: Malaysian stocks are unlikely to see any spillover effect from the exuberance seen in the Hong Kong market where the Hang Seng Index broke through the psychological 28,000 mark for the first time in more than seven years on Monday.

For Maybank Investment Bank Research regional chartist Lee Cheng Hooi, Singapore would be the beneficiary of the positive investor sentiment in the Hong Kong and China markets. “For Malaysia, there are concerns about oil prices, government deficit and the weaker ringgit. So, [it] is quiet and muted for now,” he said.

According to Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew, investors here would be content to adopt a “wait-and-see” attitude. “For the moment, foreign investors here seem to have stopped selling, but the FBM KLCI climb is slowing down. There seems to be a natural limit to the amount institutional investors can boost the market,” he said.

“The KLCI is essentially earnings- driven [but] much of the market seems to be headed towards flat or falling corporate earnings,” he added.

On Monday, the Hang Seng closed 2.7% higher at 28,016.34 points, making gains after it was reported that the Chinese government said investors would be allowed to have up to 20 stock accounts.  This means multiple accounts could be opened at different brokerages, which is meant to promote competition among broking houses, and protect the interests of clients.

It was also earlier reported that Chinese investors have been opening stock trading accounts on the mainland at a near record pace in recent weeks, including 1.56 million accounts in the week to April 3.  Also, in late March, mutual funds from China were allowed to invest in Hong Kong stocks under the Shanghai-Hong Kong connect scheme launched late last year.

Additionally, China’s Premier Li Keqiang announced in March that there would be prudent monetary management reforms put in place, as the country deals with slower growth and decelerating domestic demand.

In a recent note, DBS Group Research said China’s central bank had been offsetting temporary liquidity crunches with a combination of short-term operations, standing lending facilities, and medium-term lending facilities, and also lowered the reserve requirement ratio for some banks to boost lending to rural and small businesses.

In light of these measures, an economist who declined to be named told The Edge Financial Daily that Malaysia was unlikely to see any bene-

fit arising from the easing measures in China.  “In Malaysia, to see any impact or excitement from any quantitative easing exercise would be more likely to come from the euro or the yen. There wouldn’t be much impact from what China is doing,” he said.

However, a local fund manager disagreed and said generally there would be a positive impact from any easing measures taken by a central bank.

“The FBM KLCI is likely to benefit due to the lower valuations and the fact that among regional markets, we are underperforming, but still better in comparison to some of our neighbours. However, the current political environment could be a deterrent for investment,” he said.

Yesterday, Singapore’s Straits Times Index (STI) closed 36.69 points or 1.05% higher at 3,521.08 points, while the FBM KLCI ended 2.47 points or 0.13% lower at 1,839.61 points. Meanwhile, the Hang Seng closed 454.85 points or 1.62% lower at 27,561.49 points on profit-taking.

Year to date, the Hang Seng Index has gained 16.76%. In contrast, the KLCI and STI have added 4.45% and 4.63% respectively.

 

This article first appeared in The Edge Financial Daily, on April 15, 2015.