Foreign investors continued to be net sellers for the fifth consecutive month on the local stock exchange, with KLCI emerging as the worst performer among neighbouring peers in Indonesia, Singapore and Thailand (MIST) in January 2023.

KLCI traded in a tight range of 1,469 to 1,500 points last month, as concerns over potential overnight policy rate (OPR) rate hike as well as policy changes were offset by potential boost from China’s reopening, according to CGS CIMB Research.

The KLCI gained following the surprised decision by BNM to pause the OPR hike in the recent meeting on 19 Jan. However, KLCI gave up all the gains during the last day of trading on 31 Jan, due possibly to rebalancing exercise and foreign selling. Overall, KLCI fell 0.7% month-on-month (m-o-m) to 1,486 pts in Jan 2023, the report said.

It noted that foreign investors continued to be net sellers for the fifth consecutive month, but their net sell flow fell 85% m-o-m to RM201 million. Local institutional investors were the only and largest net buyer in the same month, but their net buying fell 45% m-o-m to RM916 million of local equities.

In February 2023, the report said investors’ attention will be on a number of issues concerning the economy, corporates and politics.

On the economic front, all eyes will be trained on the 4Q GDP numbers scheduled to be released on Feb 10 and potential new measures in Budget 2023 slated for retabling on Feb 24.

Investors will also keep an eye on monetary policy directions of various countries to see if the rates have peaked and new developments from the next Parliament session from Feb 13 to March 30,  the report said.

On corporations, it said the market will be tracking the 4Q earnings season this month. 

Also in focus will be the government’s push for targeted subsidies, plug leakages and lower cost of living. Investors will also be keen to see recent moves to relax the hiring of foreign workers in five key sectors, it added.

On politics, it said investors will be monitoring the outcome of Umno elections to be held on March 18.

“They will also be tracking the potential dates of upcoming state polls (expected in mid this year) and latest news that MACC has frozen the opposition party, Bersatu account, over a money-laundering probe,” it said.

CGS CIMB Research said it has maintained its view that market was likely to stay challenging in 1H23 as Malaysian corporates’ earnings will likely be negatively impacted by rising costs (electricity costs could rise by as much as 41% in 1H23F for some players, higher labour costs due to tight supply and an increase in minimum wage by up to 25% to RM1,500 per month on May 1, 2022 and higher interest rates), slower global growth and policy uncertainties.

However, it said project downside could be capped by expectations of strong KLCI earnings growth of 13% for 2023F, additional liquidity available for domestic institutional funds due to the absence of EPF withdrawal schemes, potential return of foreign investors and KLCI’s undemanding valuations. – TMR