Foreign investments set to boost Bursa Malaysia's market performance

Bursa Malaysia is poised for a notable uplift as foreign fund inflows continue to strengthen the market. According to UOB Kay Hian (UOBKH) Research, Bursa's annual average daily trading volume (ADV) is projected to reach RM3.92 billion in 2025, up from an estimated RM3.4 billion this year. This surge is attributed to the increasing interest of foreign investors in the Malaysian stock market, driven by robust economic indicators and growth prospects.

UOBKH Research notes that the significant inflows are a testament to the growing confidence among foreign investors in Malaysia's economic stability and potential. "The inflows are expected to sustain, given the positive economic outlook and the government's ongoing efforts to attract foreign investments," the research firm stated.

In recent weeks, Bursa Malaysia has witnessed a steady stream of foreign investments. For instance, foreign investors remained net buyers for the fourth consecutive week, with a net inflow of RM873.9 million, as reported by MIDF Research. This trend has reversed the year-to-date foreign outflows, resulting in a net inflow of RM4.9 million. The sectors that experienced the most significant net foreign inflows include transportation and logistics (RM223.6 million), utilities (RM189.1 million), and healthcare (RM183.3 million).

The positive momentum is further supported by Malaysia's impressive GDP growth, which recorded a 4.2% year-on-year increase in the first quarter of 2024, surpassing the 3.9% growth forecast by a Reuters poll. This economic optimism is a key driver behind the sustained interest of foreign funds in the local market.

Local institutions and retailers, however, have shown a contrasting trend. Local institutions continued their net selling streak for the third consecutive week, with a total outflow of RM379.7 million. Similarly, local retailers have been divesting domestic equities for ten consecutive weeks, amounting to a total of RM494.1 million in net selling.

Despite these local outflows, the overall market participation has seen an uptick. The average daily trading volume increased for local retailers (+27.1%), local institutions (+18.0%), and foreign investors (+8.5%). This indicates a broad-based engagement in the market, further bolstering its performance.

The inflow of foreign funds is not only a sign of confidence in Malaysia's economic prospects but also a catalyst for future growth. With sectors like transportation, logistics, utilities, and healthcare leading the charge, Bursa Malaysia is set to benefit from diversified investment interests. As UOBKH Research highlights, the market's positive trajectory is likely to continue, driven by favorable economic conditions and strategic initiatives aimed at enhancing market attractiveness.

The influx of foreign investments into Bursa Malaysia is a promising development that underscores the resilience and potential of the Malaysian economy. As foreign investors continue to pour funds into the market, Bursa Malaysia is well-positioned to achieve new heights, benefiting from increased trading volumes and sectoral growth.