Cheap Malaysian Stocks But Nobody Wants Them
According to Bloomberg, the Pakatan Harapan government have left investors underwhelmed by a cut in public spending, a lackluster ringgit and question marks over the succession of power.
Asia’s worst-performing major stock market is getting cheaper by the day but not that’s not enough to lure investors back.
Malaysian equities aren’t ripe for a re-rating even as valuations drop to near the lowest in a decade, according to investors. Political risks and a weak earnings outlook have undercut appetite for local shares, which are heading toward a second year of losses, extending 2018’s worst showing since the global financial crisis.
“Malaysia remains an perennial underweight position for foreign investors,” said Michiel van Voorst, chief investment officer for Asian equities at UBP Asset Management Asia. Local stocks have fallen substantially “but valuation without a catalyst is not enough. The profit cycle needs to improve on an incremental basis.”
Global funds have yanked more than US$2 billion (S$2.7 billion) from Malaysian stocks in 2019, the biggest outflow among emerging Asian equity markets. More than a year after Prime Minister Mahathir Mohamad took office pledging to boost the stock market, investors have been left underwhelmed by a cut in public spending, a lackluster ringgit and question marks over the succession of power.
The FTSE Bursa Malaysia KLCI Index’s 12-month forward earnings estimate has declined more than 12 per cent since the Pakatan Harapan coalition assumed power in May 2018, according to data compiled by Bloomberg. Business sentiment took a beating after the government shelved several large infrastructure projects and slashed spending to rein in its debt.
