General election sentiment to decide equity market movement
Kenanga IB

The general thinking is that there will be more excitement in the market next year, says group MD

By NG MIN SHEN / Pic By Ismail Che Rus

The upcoming general election, economic fundamentals and capital market robustness are the drivers that will chart the movement of the local share market.

Kenanga Investment Bank Bhd (Kenanga IB) group MD Datuk Chay Wai Leong said the fundamentals of Malaysia’s economy and the capital market remain robust.

He said besides the two drivers, one of the biggest factors that will influence investors’ sentiment is the general election.

“For the stock market, the excitement will be caused by the general election, which will be held next year.

“The general thinking is that there will be more excitement in the market,” he said at Kenanga IB’s third KenTrade Trading Challenge prize presentation ceremony in Kuala Lumpur yesterday.

The mandate for the present government ends in August next year.

Speculations about the 14th General Election have been swirling over the last few months. Some market watchers believe election spending will boost certain counters.

The economy posted a strong 5.8% growth in the second quarter this year, while inflation has been kept at a reasonable pace.

Export-oriented sectors like electronics and commodity have benefitted from higher demands and rising prices. However, consumer spending remains questionable.

Meanwhile, Chay said the outflow of foreign funds from the local stock market should not be a cause for concern as it is part of the valuation cycle, rather than a reflection of poor fundamentals.

He said the drop in foreign participation in the local equity market is largely due to the relative valuation.

“These are global or regional funds. When certain stock prices rise and reach a targeted valuation, the funds move out to other markets in or out- side the region. They will come back when the companies’ earnings return to growth again.

“They’re not exiting due to doubt about the fundamentals of the Malaysian economy or stock market,” he said.

“I’m not concerned about foreign participation moving in and out — it’s not a negative thing, it’s just a valuation issue.”

On the improved performance of initial public offerings (IPOs) this year, he said it would continue to be positive.

“There were more IPOs this year because fundamentals and sentiment were better than last year. I think it will continue,” Chay said.

Global investors offloaded RM967.3 million of local shares during the last week of September, more than doubling the previous week’s year-to-date foreign selling high of RM477.7 million.

According to data compiled by MIDF Amanah Investment Bank Bhd, foreign outflow of nearly RM1 billion in the last week of September was the highest weekly attrition recorded since the week ended on Nov 18 last year.

Foreign selling then slowed to RM82.9 million last week. The research house said the lower outflow could be attributed to the spillover effect from record gains in US stock exchanges as US President Donald Trump’s tax plan makes progress.

Meanwhile, — a joint-venture mobile retail investment app between Kenanga IB and Japan-based Rakuten Securities Inc — has garnered some RM100 million in assets since its launch in May this year.

“We’re very happy with the performance. Close to 5,000 people have signed up with and they have put up close to RM100 million in shares and cash with us,” Chay said.

Rakuten Securities and Kenanga IB had earlier this year invested RM30 million (RM15 million each) to form Rakuten Trade Sdn Bhd, an online stock trading company which offers the platform.