Foreigners turn net sellers again (CIMB)

July 09 foreign flows - Foreigners turn net sellers again. Much to our surprise, foreign funds turned net sellers of Malaysian equities in July after three straight months of net buying. Statistics from EPFR revealed a net outflow of US$121m in July. With the selldown by foreign funds, Malaysia’s weighting continues to fall. All its regional peers including Hong Kong, Singapore, Indonesia and Thailand enjoyed foreign fund inflows in July. One possible reason is that Malaysia continues to lag behind its regional peers and foreign funds will switch to higher-beta markets if risk appetite has increased. In view of the greater volatility in August and China’s significant pullback during the month, Malaysia may see a return of inflows in August. We make no changes to our OVERWEIGHT stance on Malaysia or our year-end KLCI target of 1,220 points which is based on a mid-cycle P/E target of 15x.