Foreign funds inflow reach daily high on May 13, MISC drops six stocks

DAILY foreign fund inflows surged to a record-high RM796.1 million on 13 May, a day after the US and China agreed to lower tariffs on each other’s products for the next 90 days, marking a de-escalation in the ongoing trade war between the world’s two largest economies.

Since the reciprocal tariff de-escalation on April 10, CIMB Securities said it has observed a net inflow of foreign funds.

To put things in perspective, it said foreign funds’ net buy of RM2.6 billion from April 10 to May 14, representing only 21% of the total net sell from Jan 1 to April 9 of RM12.4 billion.

“This suggests there is room for foreign funds to return to the Malaysian equity market, especially in light of the low foreign shareholding of 19.4% and improving market sentiment,” it said in an equity strategy report released today.

It said potential sectors that could benefit include those with the largest net foreign outflows year-to-date (YTD) in financial services (with its top picks being Public Bank Bhd, RHB Bank Bhd and Alliance Bank Malaysia Bhd), utilities (its top pick: Tenaga Nasional Bhd) and consumers (its top picks: 99 Speed Mart Retail Holdings Bhd and Farm Fresh Bhd).

In the same report, CIMB Securities said MSCI’s move to remove six stocks from its Malaysia Small Cap Index but keeping the main index constituents unchanged, is expected to have minimal market impact.

“We estimate the affected stocks accounted for 4.4% of the small-cap index’s free float-adjusted market cap, with low non-strategic foreign shareholdings. We estimate potential passive fund outflows from these stocks at around RM146 million,” it said.

The MSCI Malaysia Index is designed to measure the performance of the large and mid cap segments of the Malaysian market. The index covers about 85% of the Malaysian equity universe.

It is tracked by fund managers and foreign investors, with some funds pulling out investments from counters that are no longer featured in the index.

The six stocks impacted are British American Tobacco (Malaysia) Bhd, D&O Green Technologies Bhd, Dayang Enterprise Holdings Bhd, Pentamaster Corp Bhd, Berjaya Sports Toto Bhd and UWC Bhd.

The development is negative for the excluded stocks, as it could trigger selling by passive funds that closely track the index, the report added. — TMR