October a good run for the bourse, says analyst

0

KUCHING: There had been sustained foreign buying in the last two weeks on Bursa, which is a phenomenon this year, and something the market has not seen since March 2014.

MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) noted that as of Friday, foreign investors had been net purchasers on Bursa last week for the last eight straight days. Foreign funds bought RM411.7 million net in the open market last week, keeping pace with the RM783.4 million amassed the week before.

The week opened on an auspicious note as foreign funds bought RM221.2 million, the tenth highest in a day this year, which reflected buying momentum from the preceding Friday. The intensity eased on Tuesday and the momentum was put on hold by the public holiday and a dip in regional sentiment.

On Friday, foreign funds were still buying, albeit marginally by only RM0.2 million. They were net sellers in Seoul, Jakarta and Manila on the day.

The research house added that for 2015, last week’s heavy buying reduced further the cumulative net foreign outflow to RM17.1 billion, compared with the RM6.9 billion outflow for the entire 2014.

Foreign ownership as a percentage of market capitalization on Bursa was 22.2 per cent at the end of September, the lowest since October 2011.

Since the 2008 Financial Crisis, the lowest incidence of foreign ownership on Bursa was 20.3 per cent, which was in November 2009. It indicates that foreign liquidity in the system is low.

Despite a holiday-interrupted week, foreign participation rate was maintained at an elevated level said MIDF Research with the average daily gross volume at RM1.38 billion.

“For the second consecutive week, local investors took opportunity of foreign inflow to offload some position. Local institutions sold RM394.3 million on active trading as the week’s average daily volume exceeded RM2.5 billion for the fifth time this year.

“Retail investors sold RM17.4 million, much less compared with RM187.6 million the week before. Trading volume remained moderate, averaging RM824 million,” it said.

The local bourse has had a good run so far in October. As of Friday, the KLCI and FBM70 indices had gained 5.9 per cent and 3.7 per cent respectively, the best October so far since 2011. The big question is whether the market still has the fuel to maintain the pace until the end of October, or is it the case that the market is running on fume? It is, after all, budget week.

“In our opinion, Budget 2016, to be unveiled on Friday, is a cause for optimism. We previewed the Budget in our report of Wednesday 7, 2015, expecting another year of expansionary fiscal operations, with heavy allocations for expenditures directly benefitting the rakyat, specifically the bottom 40 per cent.

“The market, however, will be more interested in the headline deficit number, which we expect to be 3.2 per cent of nominal GDP in 2016,” it added.

The local market has not had a good budget week for a few years now, certainly not in the last three years. Last year, the KLCI and FBM70 lost 1.7 per cent and 2.9 per cent during the budget week.

The Smallcap index lost a whopping 5.6 per cent.

A good Budget is expected to buoy ther, which was doing well last week until Friday. The loss of 1.37 per cent on Friday more than erased the week’s gain hitherto.