Best November so far for Bursa since global crisis

PETALING JAYA: The local stock market is bucking historical trend and the FBM KLCI is having its best November so far since the global financial crisis with a gain of 1.6%, according to MIDF Research.
“Our prognosis last week of a hazy November is proving to be wrong. The underlying resilience of the market has been remarkable. A cast in point was how the market reacted to the gyration in oil prices last week,” it said in its fund flow report on Monday.
Last Tuesday, the price of Brent crude shot up from an intraday low of US$48.46 (RM211.77) per barrel to US$50.91 (RM222.47) per barrel, which is the first time it broke the US$50 mark in 11 trading days. It swiftly fell back to below US$49 the next day.
“A few months back, that would have caused a bit of agitation in the markets. Yet we note that equity prices continued to climb on Wednesday and Thursday. The ringgit meanwhile had a mini rally, appreciating 435 basis points from the opening US$/RM4.295 on Monday to as high as US$/RM4.2515 on Wednesday. Is the market losing some sensitivity to oil price movement?”
MIDF Research expects market sentiment to continue to be mildly positive this week, ahead of Q3’15 gross domestic product (GDP) numbers.
It does not expect the GDP numbers to disappoint due to the relatively buoyant monthly trade figures from July till September and recommends investors to take positions on quality laggards.
Moving forward, it expects positive sentiment towards corporate earnings to be an enduring catalyst for the market.
While earnings have been disappointing in the last six result seasons, it said the current ongoing reporting season has been “very promising” and seems to be signalling an end to “earnings recession” on Bursa.
“While it may still be early, the ongoing Q3’CY15 season might fare comparatively better as there has been only one underperformer against three outperformers out of 11 results released,” it said.
Statistics released last Friday showed a net foreign purchase of RM7.7 billion in ringgit bonds in October, the highest since July 2014. Most of the purchases was in Bank Negara bills/notes while purchase of MGS was marginal.
MIDF Research said the numbers reflect the confidence of foreign investors in the fundamentals of the economy and partly reflect their conviction that the ringgit is undervalued.
On Bursa, foreign investors turned net buyers again last week after briefly selling the week before. Foreigners have now been net buyers in four out of the last five weeks.
“The buying was moderate though, as most of the international capital investing in Asia was diverted to Greater China. Foreign funds bought an aggregate RM62.8 million, net of purchases, in the open market last week, after offloading RM600 million in the preceding week,” it said.
For 2015, last week’s purchases reduced the cumulative net foreign outflow to RM17.4 billion, compared with the RM6.9 billion outflow for the entire 2014.
Bursa Malaysia went off to a flat start this week. At the close on Monday, the FBM KLCI gained 0.41 point to end at 1,686.11. The broader market was mixed with losers beating winners 469 to 434. The market was closed yesterday for Deepavali.