Foreign shareholding II - Time to accumulate after hollowing out (CIMB)

Foreign funds have been persistent net sellers of Malaysian equities over the past 12 months. Based on EPFR, foreign funds sold down 40% of their Malaysian positions or close to US$4bn over the past year. This is much higher than the 11-16% net disposals in other regional markets. The selling in the local market, however, appears to have let up over the last couple of months. A reversal of the trend could be a big boost to the market given the very high cash holdings of all funds. We maintain our NEUTRAL stance on Malaysia and our end-09 KLCI target of 1,013. We continue to hold the view that 2H performance will be better and that 2Q is the time to begin accumulating. Stocks prominent on foreign investors’ radar screen could enjoy the biggest bounce when the selling subsides and interest returns. Our top-3 picks are AirAsia, Gamuda and Resorts.