RISING foreign holdings and a growing number of wealthy individuals are among factors that make Malaysia’s stock market a rising star, says Affin Investment Bank.
Its head of retail research Dr Nazri Khan said the level of foreign shareholding in the country, especially in local banks, has been rising noticeably.
For example, over the last two years, CIMB Group’s foreign shareholding has increased to 40.2 per cent (from 33.1 per cent), Public Bank to 28.1 per cent (from 24.9 per cent) and Maybank to 16.4 per cent (from 11.2 per cent).
“We think that this trend is likely to continue,” he said in his presentation at the 17th Malaysian Capital Market Summit here yesterday.
Foreign investors appear to have a renewed enthusiasm for key Asian markets, including Malaysia, he observed.
“Investors are now less focused on China and expect India and Asean to be the next hot bed, with Malaysia as a low-beta high-yield play,” he said, explaining that Malaysia stood out as a defensive market in the region.
His comments come as the benchmark index FBM KLCI rose to an all-time high of 1,679.37 during intra-day trade yesterday, before easing to end at a fresh record close of 1,672.56.
Nazri believes 1,700 points is within the index’s immediate reach. His year-end forecast for the index is 1,720.
“Valuation-wise, the KLCI is still expensive, with its price-to-earnings ratio of 14.8 times and price-to-book value of 2.2 times. The best strategy is to wait for a pre-general election (GE) correction to get into equities,” he remarked.
He said the upcoming 13th GE, which he speculated could be held in the first quarter of 2013, can be a short-term opportunity for investors to accummulate stocks.
During the elections, however, he expects the market to correct mildly by about five per cent.
Meanwhile, he noted that the growing number of rich people in Malaysia and products available for them to invest in, will also help boost the market’s attractiveness.
As it is, Asia has emerged as the region with the highest number of rich people.
In Malaysia, the number of high net worth individuals is expected to increase to 68,000 (with assets of US$329 billion) in 2015 compared with 32,000 (US$143 billion) this year, according to the 2012 World Wealth Report released by RBC Wealth Management.
“It is just a matter of time before investors become more sophisticated and more aware of what is available in the market,” he remarked.
Warmer bilateral ties between Singapore and Malaysia, which may usher in more investments from Singapore-government-linked companies, including wealth funds, could also help push up the market, he said.
The Asean Trading Link, which currently links up the stock exchanges of Malaysia, Singapore and Thailand, giving them a collective market size of US$1.4 trillion also helps put the country on investors’ radar.
Still, there are downside investment risks, and these include the eurozone sovereign debt crisis and a slowdown in the Chinese economy, he added.