KUALA LUMPUR: Bursa Malaysia seems to be expecting greater liquidity and vibrancy as foreign fund flows have turned steady of late, said analysts.
Things could also get rosy for the local stock market following a small-and mid-cap listed company research scheme and a RM3 billion fund from government-linked investment companies (GLICs) proposed in the 2017 Budget.
Inter-Pacific Securities Sdn Bhd research head Pong Teng Siew said stock market liquidity is gradually improving, supported by foreign funds.
“Some foreign funds are flowing in as we stem our outward investment flows,” he told Business Times yesterday.
This was partially reflected by the Employees Provident Fund’s (EPF) recent move to borrow in a major currency to fund its investment abroad.
“The EPF has borrowed sterling pound to invest in the United Kingdom even though it has plenty of funds, and it does not need to use the country’s reserves,” Pong said.
MIDF Research noted that foreigners had returned last week as the ringgit stabilised and strengthened to 4.179 against the US dollar.
Foreign investors bought RM211.1 million of local shares after disposing of RM227.4 million in the previous week. Foreigners had alternated between buying and selling on a weekly basis in the past eight weeks.
Year-to-date cumulative net foreign inflow expanded to RM2.4 billion from RM2.19 billion in the preceding week. In retrospect, foreigners had offloaded RM19.5 billion last year and RM6.9 billion in 2014.
Bursa Malaysia yesterday fell flat as investors took profit after the benchmark FTSE Bursa Malaysia KLCI rose 7.78 points on Monday.
The key index cut losses to end 0.33 point lower at 1,677.43 as investors anticipated a near-term United States interest rate hike. Earlier, the index rose to an intra-day high of 1,679 points before touching a low of 1,673.18 points.
MIDF Amanah Investment Bank Bhd chief economist Dr Kamaruddin Mohd Nor said there is ample liquidity in the market. However, market participants are cautious in view of rising expectations of a US interest rate hike.
US interest rate hikes do not bode well for Asian shares as investors will shift their money to US dollar-denominated assets.
Meanwhile, the Securities Commission (SC) said the introduction of the research scheme for small- and mid-cap listed companies and the RM3 billion GLIC fund will help promote more liquidity and trading vibrancy in the sector.
“The small- and mid-cap sector comprises many companies that can benefit from more research coverage and investor interest,” it said yesterday.
The efforts are expected to result in increased interest from a wider cross-section of investors, enhance diversity of investment strategies in the market and create better value recognition of small- and mid-cap companies, it added.
A working group comprising the industry, the SC and Bursa Malaysia will implement the initiatives.