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June 29, 2017

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Hot money returns to Asia, Malaysia poised for growth

PETALING JAYA, Malaysia--Hot money is flowing back into Asian economies driven by investors' appetite for risky assets and higher returns, as tension in the Ukraine subsides while the prospects of a slowdown in China raise hope for fresh stimulus.

This could set the stage for the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) to test recent its high of 1,862 points reached on April 7.

"The biggest bull factor would have to be the de-escalating tension in Ukraine," MIDF Research head Zulkifli Hamzah said.

"Combined with the favorable liquidity flows, the improvement in fundamentals could be a potent driver of the market this week," he told StarBiz.

Foreign investors poured 1.3 billion ringgit (US$400 million) into Malaysian equities in three weeks leading to April 11. Zulkifli said the trend remained positive last week.

The pent-up demand for stocks could provide a big lift for smaller counters on Bursa Malaysia. One stock in particular is primed for a re-rating.

Datasonic Group Bhd announced last Friday that it had been awarded two contracts worth a combined 292 million ringgit from the government to supply raw MyKad to the National Registration Department until June 30, 2016.

The stock had had a solid run-up from a recent low of 2.85 ringgit on April 16 to end the week at 3.62 ringgit ahead of the news.

RHB Research Institute on Thursday said it valued the stock at 4.05 ringgit, partly on expectation that the company would secure the MyKad contract.

"We expect an explosive week ahead for the second and lower-liners," Zulkifli said.

Investors' interest on Bursa Malaysia appeared to be confined to the more agile smaller capitalized stocks, as big blue chip companies struggle to churn out exciting growth numbers.

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