Yesterday, I had lunch with a successful insurance agency branch manager who’s semi-retired and his ex-team lead. Of course the conversation could not run away from election and the stock market. It was a volatile Monday as it was the opening of a market after the change of government. I said that it will take a while for market to normalise and the foreign funds would most probably be the ones selling while the local funds would be going into the market. He said actually it may be possible that foreign funds are entering the market in a big way since this new government is a very positive sign that Malaysia will become stronger in the future. I told him that I do not doubt the positive sentiment brought about by the new government. However, when we are looking at all these foreign funds, they are not the investors themselves but they are merely the fund managers. Without a clear direction yet (even the cabinet ministers are not yet announced in full), the unknown elements are considered a risk.
Here’s an article today in TheStar speaking about the exit of foreign funds from Bursa. Full article here. Within just 2 days, the foreign funds have been selling. The net selling surged to RM1.51bil and this is reflected in the prices of blue chips. All these selling has been absorbed by local institutions and retail investors. The analysts say that the selling could be due to them awaiting more details how the new Pakatan Harapan-led Federal Government would put the economy on a stronger footing. Some stats. On Monday, foreign funds were net sellers at RM682.6mil but local institutions were net buyers at RM238.2mil and retail investors at RM444.4mil. On Tuesday, the trend continued with foreign funds as net sellers at RM837.3mil but local institutions were net buyers at RM661.7miil and retailers at RM175.6mil. Please do read more for some details on the stocks that went up or come down. In fact, some politically connected stocks dropped tremendously. As far as announcements are concerned, nothing much has happened to their busineses yet. Here’s that article for reference.
I personally believe that many of these foreign funds would have to exit the market and re-enter once everything normalises. It should be okay because the local funds know the situation much better and they are closer to the ground too. When would the funds be back in force? Well, at the very least, all the ministers are already working and managing their ministries. Plus we get a full set of recommendations from the Team of Eminent Persons (TEP) and the government likes it, the analysts like it and even the international rating agencies like it too. I know, there are some funds which are much more bullish than the rest. However, this still do not mean they will invest without having the full picture yeah. Actually this is likely to be the same with the property market. Foreigners thinking of buying would most probably be holding back but when we look at the locals the buying of good properties would definitely continue. We will soon know what has happened in Q2 in terms of overall property transactions in 2-3 months time and then we can compare it to Q3 2018 to know if the positive sentiment has pushed the transactions up. Fundamentally, we are okay but I look forward to an even stronger footing. Happy following.
written on 16 May 2018
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