Analysts: Malaysia Stock Market May Remain Attractive to Foreign Investors

KLCI Above 1,720 Point Plateau

The Malaysia stock market reportedly gathered 3.3% or 55 points which caused it to close higher in the fifth consecutive session. The Kuala Lumpur Composite Index is now slightly above the 1,720 point plateau and the Index is projected to open even higher on Monday. Analysts have stated that breaking the 1,750 points connotes that the key index would become stronger and this would enable it keep up with the recent recovery.

The Kuala Lumpur Composite Index is now slightly above the 1,720 point plateau and the Index is projected to open even higher on Monday

On a global level, it is forecasted that the Asian market would have a mild gain due to the surge in prices of crude oil as well as general optimism about quarterly earnings. The Asian markets are reportedly following the leads of the U.S and European markets that surged higher last week Friday. The Kuala Lumpur Composite Index also closed higher on Friday as it recorded gains in the financial, plantations and telecoms sector. On the trading day, the index reportedly surged 1.08% or 18.36 points and finished at a high of 1,721.93 from a prior low close of 1,706.61. The volume was pegged at 3.3 billion shares that were worth 2.9 billion ringgit. Reports also indicate that there were 315 decliners and 605 gainers.

YTL Corporation had the highest surge with about 5.83 percent. Telekom Malaysia also surged by 4.62%. Axiata sharply increased by 2.71%. Petronas Chemicals added 1.06% , IOI Corporation sharply increased by 0.89% and Maybank added 0.11%. On the other hand, some other stocks such as Astro Malaysia Holdings and Public Bank remained unchanged.

On Wall Street, NASDAQ reached a new record high and the S&P 500 had its best closing level in about five months. The Dow increased by 0.38 percent or 94.52 points to close at 25,019.41, the NASDAQ surged higher by 0.03 percent or 2.06 points to 7,825.98 while the S&P 500 gained 0.11% or 3.02 points to 2, 801.31. For that trading week, the Dow added 2.3%, the NASDAQ climbed 1.8% and the S&P surged 1.5%.

Hesitations Due to Market Volatility

Sources claim that the trading records came after a period when traders were holding back on making major moves as a result of the volatility of the market in the past trading sessions. The Federal Reserve reportedly referred to the economic growth recorded in the first half of 2018 as solid, and maintained that there would be a continued increase in the interest rates. Also, the University of Michigan stated that there was a reduction in consumer sentiment for this month as a result of concerns about the likely effects of the trade tariffs.

The Labor Department also expressed that there was a decrease in import prices last month, but a slightly higher than anticipated increase in the prices of exported products. The sectors that recorded the most visible weaknesses were the banking and telecom sectors, while the energy sector gained owing to the surge of the crude oil price.

Analysts’ Opinion On Market Situation

Some analysts have opined that foreign investors are going to stage a major comeback because key index stocks currently offer cheap valuations. The cheap valuations is attributed to trade concerns about the effect of the trade disputes between the U.S and China.  Nazarry Rosli, a stock market analyst, stated that the FBM KLCI was currently trading at a cheap valuation as compared to other regional markets.

The weak prices of stocks that pay dividend, including Telekom Malaysia Bhd would be deemed attractive by those investors who were on the look-out for defensive stock

According to Nazarry, this was because the forward PER of the index was still below the 10-year moving verage price-earnings ratio. Data from Bloomberg also reveals that the index’s forward PER was at 16.09 times while the average was at 19.24 times. Nazarry further added that the index could proceed on an uptrend to test the 1,750 resistance level points in the light of the current cheap valuation.

Redza Rahman, the MDIF head of Research, stated that the weak prices of stocks that pay dividend, including Telekom Malaysia Bhd, would be attractive to those investors who were on the look-out for defensive stocks. Other defensive stocks include, Malayan Banking Bhd, AirAsia Group, Public bank Bhd and CIMB Group Holdings. Redza, however, added that investors would likely still maintain caution on internal and external developments.

JP Morgan Asset Management also told media outlets that there is still time to remain optimistic about Asian stocks because valuations are currently very reasonable. However, Richard Titherington who is the Asia Pacific’s chief investment officer for emerging markets , stated that a full-blown trade war would likely not happen and there was still normalcy in the global economic cycle.