Published March 20, 2009

Foreign exodus wipes RM25b from KL bourse

But RHB Research also notes a jump in foreign interest in certain stocks

By S JAYASANKARAN
IN KUALA LUMPUR

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THE stock market began sliding well before last September's collapse of Lehman Brothers, triggered primarily by the outcome of the March 8 general election that saw the ruling Barisan Nasional fare dismally. Since then, it has continued to drift lower - worsened, analysts say, by non-stop foreign selling.

Power drop: Foreign holding sinks to 13% from 30%

Well, yes and no. According to a March 17 report by RHB Research, many foreign investors have indeed fled; but, excluding strategic holdings by foreign-owned companies such as Nestle or Digi Telecommunications, they still hold around RM67 billion (S$27.6 billion) worth of stock or 15 per cent of the market capitalisation of the stock exchange.

There is no doubt that foreign investors - many of them Western mutual funds sold down many stocks both after the election and the global crisis. National power utility Tenaga Nasional saw its foreign shareholding drop to 13 per cent in March from almost 30 per cent previously while oil and gas company KNM, once an institutional favourite, saw its foreign presence plummet to 6 per cent from nearly 35 per cent previously.

Indeed, RHB estimates that portfolio investment in the local bourse declined by between RM25 billion and RM30 billion last year. That and similarly robust sales in the bond market was the reason the ringgit depreciated from RM3.15 to the greenback to RM3.60 or thereabouts last year.

Over half of the RM67 billion holdings are held in the Top 10 stocks by market cap including heavyweights such as Sime Darby (13 per cent), Public Bank (29 per cent) and Bumiputra-Commerce Bank (31 per cent), the research unit says.

However, there was also strong foreign interest in less well known stocks such as Sunway City, a RM667 million integrated resort that includes a theme park, healthcare and educational facilities, which is 34 per cent owned by foreign interests in early March.

Only four other companies beat that record. They were infrastructure company Gamuda (45 per cent), budget carrier AirAsia (42 per cent), power, gaming and entertainment company Tanjong plc (40 per cent) and gaming company Genting (35 per cent).