Stock market increase is not because of foreign money inflows

Even though the FBM KLCI is presently standing at 1,261.49 (a 16½-month high), our domestic stock market increase is not because of foreign money inflows. More likely, the positive performance is chiefly attributable to local institutional funds buying.

Through the first nine months of this year, foreigners made up just 25% of total trading value in the Malaysian stock exchange (the ratio was the same in the first half) while retail investors accounted for 35% (versus 36% between Jan and Jul this year), according to data provided by Bursa Malaysia last week. Capturing the limited presence of overseas money in Malaysia, foreign ownership as a percentage of overall market capitalization stood at 20.8% as of end-Sep 09, almost similar to end-Mar’s 21.0% and end-Jun’s 20.7%.

Investors at home will be eagerly watching the Budget 2010 presentation to be unveiled on
Friday, 23 Oct. As usual, talks of new policy measures and changes will be heard in the run-up to the budget speech. But in reality, amid the variety of expectations – which sounds more like a long wish list – I think we will tend to see pockets of disappointments while in most other cases, any impact from the policy implementations will likely be felt only in the longer run. (Perhaps of a bit more newsworthy will only be the government’s official forecasts on economic growth and budget deficit for next year). Therefore, in terms of direct stock market effects, it will probably be broadly neutral generally speaking.