Foreigners have returned in 2017.
Stocks with big change in foreign shareholdings and top stock ideas
Stocks with big change in foreign shareholdings and top stock ideas
● The latest release of fund flows data showed that foreign institutions added another RM0.4 bn (US$0.1 bn) to their holding in Malaysia in July 2017. We have now seen US$2 bn of net
foreign buying in Jan-July 2017. Foreign ownership of the market has recovered to 23.0%.
● Stocks which have seen the biggest increase in foreign shareholding (as a % of share capital) in 2017 so far are MAHB (+13.7 pp), GAM (+8 pp), MAY (+5.4pp), CIMB (+4.8 pp) and SIME (+2.7 pp). Foreigners reduced holdings in AirAsia (-9.6 pp), Karex (-3.0 pp), Tenaga (-2.4 pp), IOI (-0.5 pp) and TM (-0.5 pp).
● When comparing current foreign ownership levels with the post- GFC average, we find that foreign shareholding levels for MAHB, PBK, Tenaga, MAY and GENM are above post-GFC average. Stocks with foreign shareholding below post-GFC average include
Axiata, IJM, AirAsia, SP Setia, and CIMB.
● Stocks that are under-owned by foreigners where we have OUTPERFORM calls include CIMB, IJM, AirAsia and SP Setia. As for stocks that are over-owned by foreigners where we have UNDERPERFORM calls, we highlight Tenaga and Public.
foreign buying in Jan-July 2017. Foreign ownership of the market has recovered to 23.0%.
● Stocks which have seen the biggest increase in foreign shareholding (as a % of share capital) in 2017 so far are MAHB (+13.7 pp), GAM (+8 pp), MAY (+5.4pp), CIMB (+4.8 pp) and SIME (+2.7 pp). Foreigners reduced holdings in AirAsia (-9.6 pp), Karex (-3.0 pp), Tenaga (-2.4 pp), IOI (-0.5 pp) and TM (-0.5 pp).
● When comparing current foreign ownership levels with the post- GFC average, we find that foreign shareholding levels for MAHB, PBK, Tenaga, MAY and GENM are above post-GFC average. Stocks with foreign shareholding below post-GFC average include
Axiata, IJM, AirAsia, SP Setia, and CIMB.
● Stocks that are under-owned by foreigners where we have OUTPERFORM calls include CIMB, IJM, AirAsia and SP Setia. As for stocks that are over-owned by foreigners where we have UNDERPERFORM calls, we highlight Tenaga and Public.
Figure 1: Current foreign shareholding vs post-GFC average
Foreigners have returned in 2017
The latest release of fund flows data showed that foreign institutions added another RM0.4 bn (US$0.1 bn) to their holding in Malaysia in July 2017. Having seen consistent net foreign fund outflows over 2014-16 amounting to US$7.5 bn (RM29 bn), we have seen US$ 2bn of net foreign buying in Jan-July 2017. Foreign ownership of the market declined from a peak of 24.4% in 2012 to a low of 22.3% in Feb-17 but has recovered since then to 23.0%. However, foreign ownership remains below the levels recorded in 2012-15 prior to the emergence of news over 1MDB scandal (mid-2015).
The latest release of fund flows data showed that foreign institutions added another RM0.4 bn (US$0.1 bn) to their holding in Malaysia in July 2017. Having seen consistent net foreign fund outflows over 2014-16 amounting to US$7.5 bn (RM29 bn), we have seen US$ 2bn of net foreign buying in Jan-July 2017. Foreign ownership of the market declined from a peak of 24.4% in 2012 to a low of 22.3% in Feb-17 but has recovered since then to 23.0%. However, foreign ownership remains below the levels recorded in 2012-15 prior to the emergence of news over 1MDB scandal (mid-2015).
Stocks with big change in foreign shareholdings
By value. Stocks which have benefitted most from foreign buying YTD in 2017 (ranked according to USD of net inflows) are MAY, CIMB, SIME, MAHB, Gamuda and Maxis. Meanwhile, foreigners have sold down their holdings in Tenaga, Air Asia IOI, TM and Karex.
By value. Stocks which have benefitted most from foreign buying YTD in 2017 (ranked according to USD of net inflows) are MAY, CIMB, SIME, MAHB, Gamuda and Maxis. Meanwhile, foreigners have sold down their holdings in Tenaga, Air Asia IOI, TM and Karex.
Changes in foreign shareholding in stocks (% of share capital). Looking at movements in foreign shareholding (change in % ownership, pp), the stocks which have seen the biggest increase in foreign shareholding (as % of share capital) in 2017 so far are MAHB (+13.7 pp), GAM (+8 pp), MAY (+5.4 pp), CIMB (+4.8 pp) and SIME (+2.7 pp). On the other hand, foreigners reduced holdings in AirAsia (- 9.6 pp), Karex (-3.0 pp), Tenaga (-2.4 pp), IOI (-0.5 pp) and TM (-0.5 pp). Surprisingly, we have not seen a pickup in foreign shareholding in Genting Malaysia despite the improvement in earnings outlook and a marked pick-up in requests from foreign clients to visit Genting Highlands in recent months.
Deviation of foreign ownership from historical average. When comparing current foreign ownership levels with the post-GFC average, we find that foreign shareholding levels for MAHB, PBK, TNB, MAY and GENM are above post-GFC average. Stocks with foreign shareholding below the post-GFC average include Axiata, IJM, AirAsia, SP Setia, and CIMB.
Crowded trade and foreigners weightings
We now examine the percentage breakdown of foreigners' aggregate holdings in Malaysia into the various stocks and compare it with MSCI's prescribed weighting to gauge if foreigners are overweight or underweight on each stock.
OVERWEIGHT stock positions. Not surprisingly, this list is dominated by banks (Public, Maybank, CIMB), construction (Gamuda), high yield stocks (BAT, Astro) and PNB restructuring stocks (Maybank, SIME). Foreigners had a bigger overweight position on Tenaga in 2016 but have since trimmed to just a touch above MSCI weight. Top five stocks where foreigners' weighting is above MSCI weight are AirAsia, Genting Malaysia, Genting Bhd, BAT and CIMB.
UNDERWEIGHT stock positions. Again it is no surprise that this list comprises mostly sectors with bleak earnings outlook such as plantation stocks (IOI, KLK, FGV, Genting Plantation), oil and gas (Dialog, Sapura) and telecommunication stocks (Axiata, Maxis, DIGI).
We are somewhat surprised to see IJM in the list given the positive outlook for the construction business.
Crowded trade and foreigners weightings
We now examine the percentage breakdown of foreigners' aggregate holdings in Malaysia into the various stocks and compare it with MSCI's prescribed weighting to gauge if foreigners are overweight or underweight on each stock.
OVERWEIGHT stock positions. Not surprisingly, this list is dominated by banks (Public, Maybank, CIMB), construction (Gamuda), high yield stocks (BAT, Astro) and PNB restructuring stocks (Maybank, SIME). Foreigners had a bigger overweight position on Tenaga in 2016 but have since trimmed to just a touch above MSCI weight. Top five stocks where foreigners' weighting is above MSCI weight are AirAsia, Genting Malaysia, Genting Bhd, BAT and CIMB.
UNDERWEIGHT stock positions. Again it is no surprise that this list comprises mostly sectors with bleak earnings outlook such as plantation stocks (IOI, KLK, FGV, Genting Plantation), oil and gas (Dialog, Sapura) and telecommunication stocks (Axiata, Maxis, DIGI).
We are somewhat surprised to see IJM in the list given the positive outlook for the construction business.
Top stock ideas
Stocks that are under-owned by foreigners – In this category, we highlight OUTPERFORM calls which are under-owned (either vs historical average or vs MSCI weight). Stocks that we like where foreign ownership is below the post-GFC average include CIMB, IJM, AirAsia and SP Setia. Incidentally, foreigners' estimated weighting on IJM is also below the prescribed MSCI weighting.
Stocks that are over-owned by foreigners. In this category, we highlight UNDERPERFORM calls which are over-owned (either vs historical average or vs MSCI weight) where there could be potential catalysts that could trigger further selldown by foreign investors. We highlight Tenaga and Public as stocks where foreign ownership is above the post-GFC average and also foreigners' estimated weightings are above the MSCI weighting.
Stocks that are over-owned by foreigners. In this category, we highlight UNDERPERFORM calls which are over-owned (either vs historical average or vs MSCI weight) where there could be potential catalysts that could trigger further selldown by foreign investors. We highlight Tenaga and Public as stocks where foreign ownership is above the post-GFC average and also foreigners' estimated weightings are above the MSCI weighting.
source: Credit Suisse – 04/08/2017
