PETALING JAYA: Investors seem to be divided over the outlook for the market in the immediate term, with foreigners “playing it safe” and having mostly been net sellers post-election, while locals have stepped up to be net buyers on Bursa Malaysia.
The refreshed political environment after the 14th General Election (GE14) is reflected in the action being seen in the stock market over the past few days, according to observers.
“What we have seen from market data is that foreigners have been selling some RM800mil worth of shares on Bursa on Tuesday following a round of selling on Monday when the markets reopened,” Pong Teng Siew, Interpacific Research’s head of research, told StarBiz.
“However, in the midst of the selling by the foreigners, we are seeing locals filling up the gap and being net buyers on Bursa as they believe that the future of the country has immediately brightened following the installation of the Pakatan Harapan government.
“I think we are seeing some kind of tug-of-war in terms of sentiment happening here,” he added.
The FBM KLCI, which comprises 30 large-capitalised stocks, continued to stride upwards, gaining 0.54% or 10.06 points to 1,858.26 yesterday.
The broader market was more mixed with 492 gainers and 486 losers, 368 counters remaining unchanged and 535 counters untraded.
Some three billion shares worth RM2.91bil changed hands.
Stocks that attracted attention were MyEG Services Bhd and George Kent (M) Bhdafter Bursa froze the lower limit price for these stocks after they hit limit down for two consecutive days.
The regulator said in an announcement that the lower limit price for MyEG was RM1.27 and George Kent, RM1.94.
While local investors and the institutions were still enjoying the feel-good sentiment since May 9, the same can’t be said of the foreigners who had expected the status quo in terms of the outcome of GE14.
“Local investors are very optimistic on the possible reforms that would come about with Pakatan. They are buying big time and so the market is able to climb.
“For example, on Tuesday, the market was positive for most of the day. Only at the end of the day did foreigners decide to sell.
“The foreigners allowed the locals to exhaust their buying action until near market close,” Pong said.
The good sentiment continued when Datuk Seri Anwar Ibrahim was pardoned and released from prison followed by an announcement by the Finance Ministry that the goods and services tax (GST) would be zero-rated from June 1.
Earlier reports had quoted former Bank Negara governor and member of the Council of Eminent Persons Tan Sri Dr Zeti Akhtar Aziz as saying that a strategy would be formulated within 100 days to remove the GST.
Analysts and observers were also expecting more details from the governemnt on improving the country’s overall fiscal position in the absence of the GST.
“The statement by Zeti helps assuage some of the fears that the foreigners have as they would like to know how the budget gaps would be filled.
“A hundred days can be a long time for the stock market and key ministers including the Finance Minister have not yet been formally installed,” Pong said.
“The reason behind the apprehension by foreigners is mainly due to the promise to remove the GST and pare down spending on mega projects.
“Overall, it is good for the economy to reduce the country’s indebtedness and borrowings, but foreigners are probably thinking that it would affect the country’s growth prospects.
“They bought into the market earlier for the country’s growth story,” he added.
Other observers said that the growth story appeared to be mostly funded by debt, which would entail interest payments.
Pong noted that foreign investors wanted more clarity on how gaps in the country’s budget would be filled.
He also said that repairs on the country’s finances could take time.
“We can’t say how big or difficult it would be, but there are indications that a lot of work would be involved and the damage to the country’s finances by the previous administration is extensive. Thus, repairing the finances of the country would take time,” Pong said.
“I believe the market would laud measures that would give the country the most bang for our buck. So, we need to find new revenue sources.
“It’s still early days but in the meantime, bond markets have also weakened somewhat and the Malaysian bond yields have climbed. The new government needs to take wise measured moves as quickly as it can to instil confidence among investors,” he said.