Impending GE14 will not hold back investors

The strengthening of the ringgit has also renewed confidence among investors


Anticipation of the country’s 14th general election (GE14) may leave a minor group of investors cautious, yet the majority will not stop ploughing money into the local stock market, according to analysts.

The prospects of the looming event have seen the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) making a roaring start to the New Year — gaining some 1.68%, or 30 points, to close at 1,826.9 points as of yesterday.

According to Gan, consensus views on our stock market are broadly positive

AmInvestment Bank Bhd executive VP and head of equity markets Gan Kim Khoon believes market sentiment has picked up as the FBM KLCI sailed past the psychological 1,800 mark and the ringgit breached the RM4 level against the US dollar in the first few days into 2018.

“Besides the impending GE, the strengthening of the ringgit has renewed confidence among investors,” he said.

“Consensus views on our stock market are broadly positive and the volume of investment since the start of this year suggests that people are not holding back,” Gan told The Malaysian Reserve (TMR).

The ringgit’s break below the psychological level of 4.00 to the US dollar on Jan 5, 2018, on the back of bullish Brent crude oil prices also played a part in sustaining the optimism among investors.

The ringgit has advanced since Bank Negara Malaysia signalled that it is prepared to normalise monetary policy with the market pricing in a hike in the Overnight Policy Rate at the upcoming monetary policy meeting on Jan 29, Gan said.

JP Morgan on its Malaysia strategy flash report noted its analysis of the previous four GEs (GE10 to GE13) revealed no specific broad market trend from the dissolution of Parliament to the polling date, or even one and three months after polling.

“Three months prior to polling, the FBM KLCI was up 3.7% to 16.7% in the GE11 and GE13, and down 2.8% to 9.6% in the GE10 and GE12.

“In the case of the GE12, the 9.6% decline in the FBM KLCI was partly due to the global financial crisis.

“The FBM KLCI was up 0.6%-2.9% between the dissolution of Parliament and polling for the GE10, GE11 and GE13, but fell 8.9% during the GE12,” it noted.

Gan added that foreign funds were net buyers in December 2017 and the first five days of the year, which helped push the stock market higher.

“We have been seeing good foreign fund participation since December last year and it had peaked during the first week of 2018,” he told TMR.

According to MIDF Amanah Investment Bank Bhd’s research report on Monday, foreign investors were net buyers on all four trading days last week, extending the buying binge to nine trading days from Dec 22, 2017, to Jan 5, 2018.

The net acquisition of Malaysian equity by foreign funds surged to RM915.1 million in the first week of 2018, up from RM165.1 million the prior week.

“It was the biggest weekly net inflow recorded since March 2017 and this coincided with Bursa closing above the 1,800 level for the first time in more than 2.5 years,” Gan said.

Gan believes the latest trade numbers — where Malaysia’s exports rose to an all-time high of RM83.5 billion in November 2017, up 14.4% year-onyear — also boosted the local stock market into an overdrive.

“Since the local market was the worst performing in the region last year, it is playing catch up to key regional markets that have continued to move up,” he said.

AmInvestment’s year-end target for the benchmark FBM KLCI is 1,900 points, but the research outfit expects the target to be met before the second half of the year, Gan said.