MALAYSIAN stocks lured net foreign purchases in April for the first time in 13 months, giving the market a “big fillip,” CIMB Investment Bank Bhd said.
“The foreign boys have returned,” Terence Wong, an analyst at CIMB said in a report today. He rates Malaysia “overweight” with a year-end index target of 1,060 points. “The return of foreign funds is even more significant,” given that the “long exodus was unprecedented,” he said.
Foreign funds were net buyers of US$36 million worth of Malaysian shares last month, which is “still small and pales in comparison” with January 2007’s US$847 million, Wong said, citing statistics from Emerging Portfolio Fund Research, which collects data from more than 600 foreign funds.
Even as foreigners returned in April, the Malaysian market remains the most “heavily sold market” in the region, he said.
Compared with February 2008, foreign funds have reduced their Malaysian holdings by 41 per cent compared with 3 to 16 per cent for regional peers, he said.
Malaysia’s weightings in emerging markets in Asia have also shrunk more than any other country in the region, by 40 per cent from almost 4 per cent to 2.4 per cent, a record low, he said. The benchmark index has risen 5.3 per cent so far in May.
As “relative valuations” in Malaysia have improved, “this increases the odds that foreign funds will remain net buyers in the coming months,” he said. - Bloomberg
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